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 are progressing, with a focus on capital allocation and efficiency for 2025.

• Portfolio review led to discontinuation or sale of low-return brands, with legal actions underway to potentially reverse non-recurring tax impacts.

Financial highlights

• 2024 gross revenue reached R$14.2B, up 10.8% year-over-year; 4Q24 recurring EBITDA was R$443M, margin 13.0%; recurring net income for 4Q24 was R$168.9M.

• Recurring gross margin in 4Q24 was 55.5%, 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.

• SG&A/Net Revenue rose to 40.6% in 4Q24, reflecting higher variable expenses and investments in brand growth.

• CAPEX in 4Q24 was R$195.2M, mainly in technology, store openings, and logistics.

Outlook and guidance

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

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

• Growth expected in B2C channels, with continued expansion of Farm and Hering brands and new store concepts.

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

• Operational efficiency initiatives include corporate cost reduction, shared services center creation, and process simplification.