The growth in Alpargatas' net revenues softened in the second quarter to 5.2 percent as domestic sales rose by only 0.4 percent to 550.9 million Brazilian reais (€181.00m-$241.72m) as compared to the same period a year ago. Its sales of Havaians and Dupé sandals in the country were off by 7.3 percent to 43.7 million pairs in terms of volume, but in terms of value they were up by 7.5 percent and the Havaianas retail stores posted increases of 38.7 percent in volume and 43.8 percent in value on a same-store basis.
Sales in Argentina fell by 8.7 percent in terms of reais, but rose by 44.5 percent in other markets to a level of R$178.3 million (€58.61m-$78.28m), with increases of 22.5 percent in the U.S. and 45.7 percent in Europe. The company sold 12.5 percent more sandals outside Brazil and Argentina, with higher sales to important European customers such as Décathlon and the Sonae Group and significant increases in Italy and the U.K. For the first six months of the year, international sales of sandals were up by only 1.9 percent to 21.4 million pairs because of a contraction in some Latin American markets.
In Europe, Alpargatas launched a massive “Welcome to Brazilian Territory” campaign in the digital media and in the magazines. It conducted media campaigns using urban boards and on public transport in Spain, Greece, Turkey, the U.K., Italy and France. It was particularly active in European hotspots such as Ibiza in Spain.
Total sales reached R$874.3 million (€287.46m-$383.98m) in the quarter, up by 5.2 percent from a year ago. The overall gross margin fell by 1.8 percentage points to 40.6 percent in the quarter, with a severe drop of 6.9 percentage points in Brazil, down to 36.6 percent of sales. However, the export business and the subsidiaries in the U.S. and Europe generated a high gross margin of 66.3 percent, 3.3 percentage points higher than a year ago.
The group's operating margin before amortization (Ebitda) plunged to only 8.4 percent from 15.7 percent in the same quarter of last year, and net earnings were down by 67.7 percent to R$22.8 million (€7.50m-$10.01m). The group blamed foreign exchange losses, non-recurring marketing expenses related to the World Cup in Brazil and the diversification of the Havaianas brand into apparel, with first collection launched on the domestic market in May, focusing on beachwear and casual sportswear. Excluding these items, the Ebitda margin was at a healthier level of 17.9 percent.
For the full first half of 2014, Alpargatas reported a lower drop of 14.4 percent in net earnings to R$139.4 million (€45.84m-$61.22m) on 9.5 percent higher revenues of R$1,747.6 million (€574.63m-$767.51m).
The company is projecting growth of between 5 and 7 percent in the volume of sandals that it will sell in Brazil for the full financial year, indicating an increase in market share. In July alone, they were 25 percent higher than in the corresponding month of 2013. Further progress is expected in overseas markets. The ramp-up of a new factory in Monte Claro is expected in October.
On Aug. 1, the group concluded its acquisition of a 30 percent stake in Osklen at more favorable conditions than originally projected.