Guararapes Confecções (RIAA3) Q1 2025 earnings summary

Executive summary

• Achieved record consolidated EBITDA for a first quarter at R$258 million, up 22% year-over-year, with all segments contributing to growth and the highest first-quarter EBITDA margin for merchandise in nine years (7.0%).

• Net revenue grew 10.6% year-over-year to R$2.2 billion, with retail net revenue up 11.7% to R$1.56 billion and same-store sales (SSS) up 10.7%, apparel SSS up 12.8%.

• Net loss narrowed sharply to R$26.7 million, a 77.2% reduction from 1Q24, with net margin improving by 4.7 p.p. to -1.2%.

• Underwent significant organizational transformation, with over 60% of C-level executives and 45% of senior management new in the last two years, and new leadership driving strategic priorities.

• Continued investment in brand rejuvenation, product development, and supply chain modernization, with a focus on consumer experience, operational efficiency, and capital structure improvement.

Financial highlights

• Consolidated gross profit rose 14.4% to R$1.34 billion, with gross margin expanding 2.0 p.p. to 60.6%.

• Apparel gross margin expanded by 2.2 p.p. to 53.7%, retail gross margin reached 50.5% (highest in seven years), and retail EBITDA margin hit 7.0%.

• Consolidated EBITDA margin improved to 11.7%, up 1.1 p.p. from 1Q24.

• Free cash flow was negative R$389.6 million, mainly due to inventory buildup for future demand.

• CapEx investments increased to R$134.1 million in Q1 2025, up 48.7% year-over-year, mainly for technology and new stores.

Outlook and guidance

• Management expects continued growth and margin expansion, with ongoing transformation projects, investments in digital and store expansion, and a focus on operational efficiency and capital structure.

• Confident in maintaining and improving margin gains through better use of the factory, smarter pricing, and data-driven markdown management.

• Emphasis on accelerating ROIC, improving capital structure, and maintaining financial strength.

• Anticipates further deleveraging and a path to profitability in upcoming quarters.