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Investing.com - UBS initiated coverage on Guararapes Confeccoes SA (BVMF:GUAR3) with a Buy rating and a price target of R$12.50, citing expected earnings growth driven by higher store productivity and margin expansion.
The Brazilian mass apparel retailer, ranked third-largest in the country by 2024 market share, benefits from in-house manufacturing that provides margins approximately 6-7 percentage points above outsourced items, according to UBS.
The firm projects solid margin expansion in 2026 as efficiency gains and improved product execution materialize, with the company now positioned to resume store expansion at a pace of 15-20 openings annually through 2026-29 following improved leverage control.
UBS believes the market currently underestimates Guararapes’ gross margin potential, pricing in margins approximately 2 percentage points below the firm’s estimates for the long term.
The investment bank forecasts net income of R$440 million, R$578 million, and R$706 million in 2025, 2026, and 2027 respectively, representing growth at approximately 17% CAGR from 2026 to 2029.
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