Brazil’s Largest Footwear Exporter Reported Net Profit of R$ 613 Million in 2022

Despite a Stronger Than Expected Result in the Last Quarter of 2022, the Corporation Is Hopeful for 2023.

Grendene’s gross revenue in 2022 was R$ 3.1 billion, an increase of 9.6% compared to R$ 2.8 billion in 2021. The company’s annualized net profit rose by 13.2%, to R$ 613 million. Sales totaled 148.2 million pairs, a decrease of 3.8% compared to the previous year.

In the last three months of 2020, gross sales totaled R$ 938 million, a decrease of 0.9% compared to the fourth quarter of the previous year. Regular net profit was R$ 209 million, 10.8 percentage points lower than the previous year. According to Alceu Albuquerque, head of Investor Relations at the company, the numbers below expectations at the end of last year can be explained by some components of the macroeconomic scenario. The government states: “We suffered impacts from poor conditions, including rising prices, high interest rates, high unemployment, political and economic concerns, and temperatures below the historical average for the period in the South and Southeast regions.

Grendene overcame the difficult scenario by taking measures to increase domestic sales (75% of the total) and inventory turnover. As a result, gross revenue from the domestic market reached R$ 710 million, 2.5% higher than the previous quarter. Between October and December, sales totaled 34.2 million, a decrease of 13% compared to the same period in 2021.

Separated by category, women’s lines stood out as the highest performers in the quarter, increasing gross revenue by 50.2% and unit sales by 20.3% compared to the same period last year. The children’s product line, along with the EVA technology used in Zaxy products, contributed to the success of the results.

The conditions in the global market were comparable to those in Brazil. The main market for Grendene’s products is South America, but the region was severely impacted by global unpredictability, pressure on the exchange rate, high loan rates, and high inflation, which dampened consumer spending. The Covid-19 outbreak and the war between Russia and Ukraine were not the only causes of inflation worldwide.

In this context, the quarterly gross revenue from exports, at R$ 228 million, was 10.3% below the corresponding period in 2021. There were fewer shipments (20.9% less) of footwear, with 9.4 million pairs leaving the warehouses.

In the last three months of 2022, recurring EBIT (earnings before interest and taxes) reached R$ 132.1 million, a drop of 25% compared to the same period of the previous year. Pressure from workers on the cost of goods sold (COGS), advertising and publicity expenses, rapid growth in e-commerce, and strategic investments in technology and innovation contributed to a decrease in the company’s recurring EBIT margin, which is now at 17.3% (-5.0 p.p.).

Compared to the same period in 2021, the quarterly financial performance increased by 3.8%, totaling R$ 56.9 million. The quarterly recurring net profit of the company fell by 10.8%, dropping from R$ 234.2 million to R$ 209 million.

Albuquerque is looking forward to 2023, despite the difficulties of the previous year. Ongoing efforts are paying off, increasing the company’s revenue, volume, and profits. With the organizational setup of Grendene Global Brands, for instance, “we can operate in the global market more directly, developing our brands and building distribution networks,” he explains. We also foresee the expansion of our brand’s e-commerce business. Today, the channel accounts for about 2.5% of our sales in the domestic market, but this number has the potential to grow to over 10% in the near future. The recent internalization of Melissa’s operations should be beneficial, allowing for more direct oversight and a closer relationship with franchisees and customers.

Grendene Details

Grendene, in the market since 1971, is the largest Brazilian exporter of footwear and a significant global producer. Its proprietary and exclusive technology is used in the manufacture of women’s, men’s, and children’s shoes, with brands including Melissa, Grendha, Zaxy, Rider, Cartago, Ipanema, Pega Forte, and Grendene Kids.

With a total of four factories in Ceará and Rio Grande do Sul, it has the capacity to produce 250 million pairs per year. The products are sold at over 65,000 points throughout Brazil and more than 45,000 points in other countries through a network of sales representatives, distributors, direct export, and the American subsidiary Grendene USA, Inc. The company also operates two “Galeria Melissa” stores, one in São Paulo and one in New York. It had a recurring net profit of US$ 613 million in 2022.