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Marisa Plans to Close Stores Due to Profit Decline. 92 Units to Be Closed by Year-End, Causing Thousands of Job Losses.
In about two months, the Marisa fashion chain has started to reorganize its financial business arm, conducting write-offs and accounting revisions of failed classifications and has developed a restructuring plan for its operations and debts, which is still ongoing, with the aim of turning the page. The actions are expected to be completed by the end of this year, but the largest impact from the expense revisions is expected to affect the balance sheet starting next year, particularly with store closures, leading to thousands of mass layoffs.
Marisa Announces Closure of 92 Stores
According to Marisa’s CEO, João Nogueira Batista, who has been in the position since February, in an interview following the disclosure of the fourth quarter data from last year, the company must do its part, which is this effort in expenses.
Marisa is expected to emerge healthier from this process, as it is unsustainable to continue burning cash and not paying any dividends. The company’s stock closed down 6.25% on B3 this Monday (3).
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The ongoing project, led by the new management in partnership with Galeazzi Associados, involves the closure of 92 of the 334 stores in the coming months, including 20 by April, leading to hundreds of layoffs.
The initiative is expected to generate nearly R$ 70 million in profit before interest, amortization, taxes, and depreciation per year. This assumes that current market conditions impacting performance remain unchanged. The store closures represent 27% of the total.
The Marisa project identified 25 units with negative contribution margins, with no conditions for maintenance. Excluding these units, the total would be 309. However, the consultancy identified another 67 stores that would not be able to revert to positive Ebitda, thus arriving at the closure of 92 stores.
Marisa to Have R$ 100 Million in Ebitda in 2024
After the store closures, which will result in several layoffs, the annual revenue is expected to drop to around R$ 2.1 billion, down from R$ 2.78 billion in 2022 for Mbank and retail (financial arm), and R$ 2.23 billion just in retail. There is also a forecast for an additional R$ 20 million to R$ 30 million in annual operational expense reductions related to the closures.
The CEO states that there will be R$ 100 million in new Ebitda for the next year, with potential for generating, by the end of this year, Ebitda of R$ 15 million. The indicator is still negative for the chain, despite a recent improvement.
The chain reported adjusted Ebitda in retail of R$ 17 million against a net debt of R$ 560 million for the year. In reports, analysts warned that there is a risk of the chain breaching “covenants,” the indicators related to Ebitda that must be respected in agreements with creditor banks.
Closures Require R$ 50 Million in Expenses
The closure of Marisa stores will require expenses of R$ 50 million; however, Nogueira understands that the pace of the closures will be gradual, especially considering the origin of the funds.
According to the executive, the company has no funding issues regarding the expense reductions from store closures, but it is logical that if Santander and other banks do not return to businesses in the future, Marisa may have to slow down SG&A reductions. However, the company is counting on completing everything by the end of this year.
To realize the benefits from the closures, it is necessary to spend on severance pay and ending lease contracts, for example. Nogueira is in the position with the goal of implementing the necessary adjustments, according to the approval of the Goldfarb family, which controls the store chain.
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