The Brazilian parent company of Ipanema, Melissa, Rider, Grendha and other footwear brands reported a record first-quarter net profit of 136.9 million reais (€39.8m-$43.6m) for the first three months of 2015. It was 41.8 percent higher than in the year-ago period and came after increases of 4.6 percentage points in the gross margin to 46.9 percent, of 6.2 percentage points to 23.0 percent in the operating margin before amortization (Ebitda) and of 5.8 percentage points to 20.5 percent to 20.5 percent in the operating margin after amortization (Ebit).
Grendene attributed this strong performance to the wise measures it has taken to navigate in a difficult economic environment, balancing the portfolio of its products, applying correct pricing, improving processes and striving to improve relations with retail clients. The depreciation of the national currency helped to boost the value of its exports in the quarter, which tend to be greater than other quarters because of the seasonality of the sandals business. Its negative impact on the raw material costs was neutralized by the lower price of major commodities in dollars, resulting in higher profit margins.
The group's total net sales grew by 7.8 percent to R$532.3 million (€154.9m-$169.4m) in the quarter. Gross revenues before discounts were 3.7 percent higher at R$638.4 million (€185.7m-$303.2m), with an increase of 5.2 percent in domestic revenues to R$471.0 million (€137.0m-$149.9m) and a drop in exports of 0.2 percent to R$532.3 million (€154.8m-$169.4m).
Grendene remained Brazil's biggest shoe exporter in the quarter, although its share of total exports declined to 39.2 percent in terms of volume and to 24.1 percent in terms of dollars. The group exported a total of 12.4 million pairs in the quarter, 21.3 percent less than in the year-ago period, but their average price in reais went up, partly because of the devaluation of the national currency and partly because of an ongoing trading-up policy. The average export price in dollars increased by 4.2 percent to US$4.69.
In terms of volume, Grendene's sales in Brazil increased by 11.0 percent to 34.3 million pairs. Footwear consumption in Brazil is estimated to have been stable during the quarter, but growing unemployment and continued strong inflation apparently led people to go for lower-priced shoes.
The financial situation of the group remained solid, with net cash equivalents rising by 29.1 percent from last Dec. 31 and representing 52.8 percent of revenues as of March 31. The company is maintaining its long-term targets. It predicts that the macroeconomic situation will improve in the second half of this year.