Azzas 2154 (AZZA3) Q2 2024 earnings summary

Executive summary

• Completed merger with Grupo Soma, forming the largest fashion group in Latin America, with LTM gross revenue over R$12.7B and EBITDA of R$1.7B.

• Achieved 8.5% year-over-year growth in 2Q24 gross revenues, reaching R$1.54B, and 7.1% growth for 1H24 to R$2.9B.

• DTC sell-out reached R$1.3B in 2Q24, up 10.1% year-over-year, with e-commerce growing 22.4%.

• Board of Directors restructured post-merger, with new governance and advisory committees.

• Multi-channel and omni-channel strategies, including own stores, e-commerce, franchise, and B2B, are driving over 50% of revenues.

Financial highlights

• 2Q24 gross revenues: R$1.54B (+8.5% YoY); 1H24: R$2.90B (+7.1% YoY).

• Gross margin at 54.9% in 2Q24; recurring gross earnings of R$677M, up 9% YoY.

• Recurring EBITDA: R$203M (+2.6% YoY); EBITDA margin: 16.5%.

• Recurring net income: R$135M (+19% YoY); net margin: 10.0%.

• Net debt at R$649M–R$650M, with net leverage at 0.8x post-IFRS EBITDA.

Outlook and guidance

• Focus on omnichannel and digital transformation, with digital sales representing 58.4% of physical store sell-out.

• Continued investment in brand expansion, new store openings, and integration of Grupo Soma.

• Efficiency and margin improvements are expected as integration and restructuring costs normalize.