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Parent Company of Havaianas Posts Profit Loss
Abstract: The Brazilian Alpargatas reported fourth quarter and full year results below expectations, with inflation eroding consumers' purchasing power notably in Brazil
“In 2022, our operational performance was disappointing. Cost and operational challenges put pressure on our financial results, which fell short of our expectations”, commented Roberto Funari, CEO of Alpargatas. “In Brazil – he continued - high inflation affected consumers' disposable income, and we saw a significant drop in the demand for flip flops in the grocery channel. The spring and summer seasons were cooler and rainier than the historical average in the South and Southeast, which caused additional pressure on the sell-out, causing our customers to start the high summer season with higher. (…) Due to this scenario, inventories for raw materials and finished products accumulated, generating additional storage costs (including the rental of external DCs) and provisions for write-offs of old collections and raw materials”.
Alpargatas posted full year net revenue of 4.18 billion Brazilian reais (808.8 million US dollars), which reflects an increase of 6% (10% in constant currency), as compared to 2021. The company's recurring net income, instead, declined by 23.1% in 2022 over the prior year, totalling 437.8 million Brazilian reais (84.7 million US dollars).
Moreover, in the fourth quarter of 2022 alone, the company's net revenue amounted to 1.10 billion Brazilian reais (2.13 billion US dollars), growing only by 3.2%, on a comparable basis to the previous year. But net income in this period fell sharply by 46.2% to 80.6 million Brazilian reais (15.5 million US dollars), year-over-year.
Over 2022, the company sold 247 million pairs of shoes, which reflects a decline of 5% year-over-year. Havaianas' net revenue reached 4.12 billion Brazilian reais (797.2 million US dollars) over the last year, up by 5% (by 9% in constant currency), as compared to 2021, with domestic revenue growing by 9.3% to 2.66 billion Brazilian reais (514.7 million US dollars) and international revenue rising by 9.5% to 1.02 billion Brazilian reais (197.4 million US dollars).
In the fourth quarter alone, the volume of pairs sold fell by 11% to 214 million, “mainly due to the drop in demand in the grocery channel” in Brazil. The brand's fourth-quarter net revenue ended up totalling 1.08 billion Brazilian reais (209 million US dollars), up by 3% on a comparable basis to the same period of last year.
Alpargatas reported that, in the last quarter of 2022, domestic revenue amounted to 896.9 million Brazilian reais (173.5 million US dollars), up by 2.2% year-over-year, and international revenue added 188.9 Brazilian reais (36.5 million US dollars), up by 18.6% year-over-year, to the brand's total revenue. Concerning international markets, results still reflect the impact of the COVID-19 restrictions and China (fourth quarter sales fell by 37%) and an operational restructuring and ongoing business model review in the US (where sales dropped by 20%).
The native digital brand acquired by Alpargatas at the end of 2021 posted a fourth quarter net revenue increase of 10%, reaching 54 million Brazilian reais (10.4 million US dollars), and full year net revenue of 183 million US Brazilian reais (35.4 million US dollars), up by 26% over 2021. The company noted that investments in marketing and operations of retail stores to accelerate growth and gain efficiency in the acquisition of new customers were steady at 17 million US dollars.
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