Azzas 2154 (AZZA3) Q2 2026 earnings summary

Executive summary

• Gross revenue in 2Q26 was BRL 3.4 billion, down 7.1% year-over-year, mainly due to a 13.6% decline in higher-margin sell-in channels.

• Operating cash generation surged to BRL 356.5 million, over three times higher than the prior year, driven by inventory reduction, working capital improvements, and a 31-day reduction in the financial cycle.

• EBITDA for 2Q26 was BRL 379.6 million, down 29.1% year-over-year, with margin contraction due to operational deleveraging.

• Recurring net income was BRL 106.5 million, a 62.5% decrease year-over-year, with a net margin of 4.0%.

• Strategic focus on brand strength, inventory normalization, franchisee health, and ongoing turnaround efforts in underperforming segments.

Financial highlights

• Net revenue for 2Q26 was BRL 2.66 billion, down 8.2% year-over-year; gross profit was BRL 1.52 billion, with gross margin up 1.3 p.p. to 57.2%.

• Recurring EBITDA totaled BRL 379.6 million, down 29.1% year-over-year, with margin at 14.2%.

• Recurring net income was BRL 106.5 million, down 62.5% year-over-year, with a net margin of 4.0%.

• Expenses rose year-over-year, mainly due to fixed costs and international expansion, while variable expenses grew below inflation.

• Operational cash conversion reached 115% of EBITDA, with post-CAPEX conversion at 90%.

Outlook and guidance

• Management expects normalized sell-in and sell-out in the second half, with profitability and cash generation as priorities.

• Strategic review of FARM Rio is ongoing, with Morgan Stanley engaged to explore alternatives and unlock brand value.

• Hering's turnaround is advancing, with a strong order book for Summer and improved margins.

• Anticipated positive results for the Vans brand by December and renewed growth in 2027.

• Focus remains on sustainable growth, margin expansion, and consistent long-term value creation.