Guararapes Confecções (RIAA3) Q2 2024 earnings summary

Executive summary

• Record consolidated EBITDA of R$360 million in 2Q24, up 50.6% year-over-year, and R$571 million in 1H24, up 75.1% year-over-year, with net income of R$57 million reversing a prior year loss.

• Retail net revenue grew 10.5% year-over-year in 2Q24, with same-store sales up 9% and 18% volume growth, reflecting strong consumer demand and effective value proposition.

• Midway Financeira EBITDA was R$89 million in 2Q24, four times higher than 2Q23, with improved portfolio quality and reduced delinquency rates.

• Free cash flow generation reached R$137 million in 2Q24 and R$334 million in 1H24, the highest for the period in recent years.

• Strategic focus on product obsession, democratization of fashion, multi-channel experience, and operational efficiency, driving improvements in product quality, assortment, and customer experience.

Financial highlights

• Consolidated net revenue reached R$2.3 billion in 2Q24, up 8.2% year-over-year, with retail segment growing 10.5%.

• Apparel gross margin reached 55.4%, the highest in seven quarters, and retail EBITDA margin improved to 14.4%.

• Merchandise segment revenue was R$1.72 billion in 2Q24 (+10.5% YoY), and Midway Financeira revenue was R$569 million (+2.3% YoY).

• Consolidated EBITDA margin was 15.5% in 2Q24, up 4.3 p.p. year-over-year.

• Net income was R$57 million in 2Q24, reversing a loss of R$17.6 million in 2Q23.

Outlook and guidance

• Management expects continued margin expansion, operational efficiency, and leverage reduction in the second half of 2024.

• Ongoing focus on inventory reduction, cash generation, and deleveraging, with further debt repayments planned.

• Strategic focus on strengthening core business and capital allocation discipline.