The difference between the debt and the money saved is R$ 3.3 billion; only Renner has more availability than debits
The giants of Brazilian fashion retail (HERE, Renner, Guararapes, sum group It is Marisa) have a sum of debts greater than the cash on hand. There are BRL 10.7 billion in debts and BRL 7.4 billion in cash in the 1st quarter of 2023. The difference leaves the brands with a negative balance of BRL 3.3 billion.
O Entrepreneurial Power raised the data from the financial statements of the companies, all publicly traded in B3the country’s Stock Exchange.
The companies, with the exception of Renner, recorded a debt greater than cash availability. Guararapes (owner of Riachuelo) is the one with the biggest difference: R$ 1.7 billion. C&A (R$800 million) and Grupo Soma (R$700 million) come next.
Guararapes is also the brand with the highest gross debt: R$4.3 billion. Renner (R$ 2.4 billion) and C&A (R$ 2.2 billion) close the top 3.
Compared to the 1st quarter of last year, 3 of the retailers (C&A, Grupo Soma and Guararapes) had debt growth. Renner reduced debts by 35% and Marisa had an insignificant reduction of 1%.
C&A was the company that most increased its debt in 1 year: 28%. Guararapes and Grupo Soma tied with 4%.
Of the 5 corporations analyzed, 3 ended the quarter at a loss from January to March:
- Guararapes –BRL 176 million;
- Marisa – BRL 149 million;
- HERE – BRL 126 million.
Except for C&A, the first two companies recorded high losses in 2023.
Renner made a profit (BRL 47 million), but with a significant drop of 76% compared to BRL 192 million in the first 3 months of 2022. Grupo Soma had an increase of 15% – from BRL 43 million to BRL 49 millions.
INFLATION, INTEREST AND SHEIN
According to fashion retail adviser Marco Murarowho worked on the commercial board of Marisa and Riachuelo, the negative results of the fashion giants reflect the economic situation in Brazil at the beginning of 2023.
The expert stated that high inflation reduced purchasing power, especially of social classes B and C. This is the majority public of fashion companies. Consequently, sales dropped.
In Muraro’s view, a proof of this analysis is that Grupo Soma – owner of stores such as hering, Maria Filo It is Off Premium– There was a slight increase in profit in 1 year. The corporation’s target audience tends to be people from the richer class A.
Another point that negatively influenced the scenario of the companies were the sales of winter collections, he said. In 2022, retailers were able to sell warm clothing well because of the weather. There was not as much reduction in temperature in the first months of the following year, which made winter clothes less attractive to consumers.
The damage was also pulled by the payment of debts. With Selic – the basic interest rate – at 13.75% per year since September 2022, the cost of paying debts has increased.
The debts, assessed the advisor, were due to loans taken during the pandemic. With the stores closed, companies needed to seek loans to keep operating.
Many of the debts were not paid because the companies expected to make the so-called rollover, that is, they waited for the interest rate to fall to pay the credits at cheaper costs.
The Brazilian giants still had to compete with foreign online stores that sell products at cheaper prices, pay different taxes and have virtually no physical establishments in the country. A Shein it is an example.
the minister Fernando Haddad (Tax) even proposed the taxation of international purchases. However, the government was criticized on the internet and took a step back.
A change that could change the impacts of national retailers with foreign companies came on Thursday (Jun 22, 2023). State Treasury Secretaries signed an agreement that will charge 17% of electronic purchases from companies abroad. The 26 States and the Federal District reached a consensus on charging ICMS at the time of purchase in the digital environment.
To contain spending in the 1st quarter, brands reduce investments in new stores. C&A cut these costs the most. They avoid opening new points and still close. Marisa, for example, announced that it will discontinue 91 stores in 2023.
Muraro declared that the effects of the economy did not affect only the giants, but also the small fashion retail businesses: “Everyone is suffering”.
In the expert’s analysis, the financial statements of companies should start to show recovery in the 2nd half of 2023.
The 5 companies mentioned in the article release their financial statements for the 2nd quarter at the beginning of August. It’s waiting to see what the numbers will signal.
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