Azzas 2154 (AZZA3) Q4 2024 earnings summary

Executive summary

• Completed the merger of Arezzo & Co and Grupo Soma, forming a diversified leader in Brazilian fashion with a R$71.8B addressable market and accelerating growth opportunities.

• 4Q24 gross revenue grew 15.1% year-over-year to R$4.2B, with strong performance in Women's (+22.9%), Men's (+20.7%), and Democratic Apparel (+17.6%).

• Integration of major brands and operational synergies progressed, with portfolio review leading to discontinuation or sale of low-return brands and a focus on capital allocation and efficiency for 2025.

• Sell-out channels represented 55.6% of revenue in 4Q24, growing 17.9% year-over-year, with owned stores up 19.1%.

• Exceeded digital channel revenue targets for Hering, but incremental gross revenue for Footwear, Bags, and Accessories fell short due to supply delays.

Financial highlights

• 2024 gross revenue reached R$14.2B, up 10.8% year-over-year; recurring EBITDA (pre IFRS-16) was R$1.56B (+4.3%).

• 4Q24 recurring EBITDA (pre IFRS-16) was R$443M (+4.0%), margin 13.0% (-1.2pp); recurring net income was R$169M, or R$242M excluding Law 14.789/23 impacts (-8.1%).

• Consolidated net operating revenue reached R$8.38B in 2024, up from R$4.85B in 2023.

• Gross margin remained stable at 55.5% in 4Q24, slightly reduced by inventory normalization and markdowns on discontinued brands.

• Net debt at 4Q24 was R$1.75B, with Net Debt/EBITDA (pre IFRS-16) at 1.1x.

Outlook and guidance

• 2025 will focus on operational efficiency, SG&A reduction, capital allocation optimization, and maximizing cash generation.

• Revenue synergies from the merger, especially in footwear launches at Hering and Farm, are expected to continue.

• Projected incremental gross revenue for 2025, 2026, and 2027 is R$214M, R$462M, and R$672M, respectively.

• Plans to operate 121 megastores by 2027, with 42 company-owned and 79 franchised.

• Non-recurring expenses and impacts from discontinued brands are expected to be minimal in 2025.