Earnings call transcript: Grendene Q3 2025 sees revenue growth amid challenges

Grendene SA (GRND3) reported a 10% increase in gross revenue for Q3 2025, reaching 1 billion BRL. However, the company faced a 1.5% decline in gross profit, amounting to 353 million BRL, due to domestic market challenges and high interest rates. Despite these hurdles, Grendene’s export market showed resilience, with US exports growing by 40%. The company’s stock saw a 4.79% decline following the earnings release, closing at 4.97 BRL.

Key Takeaways

• Gross revenue increased by 10% to 1 billion BRL.
• Domestic market challenges impacted gross profit, which fell by 1.5%.
• US exports grew significantly by 40%.
• Stock price fell by 4.79% post-earnings.

Company Performance

Grendene SA demonstrated robust revenue growth in Q3 2025, driven largely by its export market, which offset domestic challenges. The company’s focus on premium product development and the resilience of its Melissa brand contributed to its performance. However, inflation and competition from imported products posed significant challenges in the domestic market, impacting overall profitability.

Financial Highlights

• Revenue: 1 billion BRL, up 10% year-over-year
• Gross Profit: 353 million BRL, down 1.5% year-over-year
• Gross Margin: 46.5%, down 1.4 percentage points
• Net Recurring Result: 184 million BRL, down 5.7% year-over-year

Market Reaction

Following the earnings report, Grendene’s stock decreased by 4.79%, closing at 4.97 BRL. This decline reflects investor concerns over the company’s declining profit margins and domestic market challenges, despite positive export growth. The stock remains within its 52-week range of 4.82 BRL to 5.98 BRL.

Outlook & Guidance

Grendene plans to continue focusing on premium product development and is exploring potential early dividend distribution. The company is also studying potential tax implications for 2026 and aims to maintain a strategy of minimal finished product inventory.

Executive Commentary

Alceu Albuquerque, CFO, highlighted the challenges faced in the domestic market, stating, "Q3 has been presenting a very challenging scenario, especially in the internal domestic market." He also emphasized the company’s strategy to mitigate risks, noting, "We do not have inventory of finished products. We reduce significantly risks of carrying inventory."

Risks and Challenges

• Persistent inflation and high interest rates in the domestic market.
• Increased competition from imported products.
• Potential tax implications for 2026.
• Market saturation in the domestic footwear industry.

Q&A

During the earnings call, analysts inquired about the financial result reduction due to the previous year’s real estate project and the potential early dividend distribution. The company also addressed differences in gross-to-net revenue, particularly in external markets.

Full transcript - Grendene SA (GRND3) Q3 2025:

Conference Moderator: Good morning, everyone, and thank you for joining us. Welcome to the video conference for the release of Grendene Q3/25 results. Before we begin, we would like to remind those who require simultaneous interpretation that this feature is available on the platform. To access, please tap on the Interpretation button, the globe icon at the bottom of your screen, and select your preferred language: Portuguese or English. If you’re watching the conference in English, you may also mute the original Portuguese audio by tapping on Mute Original Audio. Please note that this video conference is being recorded, and it will be made available on the company’s Investor Relations website, ri.grendene.com.br, where the full earnings release and accompanying materials can also be accessed. The presentation deck is available for download through the chat icon, including the English version.

During the company’s presentation, all participants will have their microphones muted. After the presentation, we will open the Q&A session. We would like to emphasize that you’ll have to click on the Q&A to ask questions to join the queue. If you are announced a prompt to activate your microphone, it will show up on the screen, so you have to activate your microphone, unmute that to ask questions. We would like to ask you to kindly ask all your questions at once. We emphasize that the information in this presentation, and along with any statements made during the video conference regarding the business prospects, projections, operations, and financial targets of Grendene, are based on the beliefs and assumptions of the company’s management, as well as information currently available. Future considerations are not guarantees of performance.

They involve risks, uncertainties, and assumptions because they refer to future events and therefore depend on circumstances that may or may not occur. Investors should be aware that general economic conditions, market conditions, and other operating factors may affect the future performance of the company and result in substantially different outcomes from those stated in such forward-looking statements. Today, we have the following company executives with us: Rudimar Dall’Oglio, the Chief Executive Officer; Gelson Luiz Rostirola, Chief Operating Officer; Alceu Albuquerque, CFO and Investor Relations Officer, as well as all the company’s key managers. I will now give the floor to Mr. Alceu Albuquerque. Please, Alceu, you can go on. Good morning, and thank you for your participation on our video conference for the results of the Q3/25 of Grendene.

Our Q3, just like we have been observed throughout the whole year, has been presenting a very challenging scenario, especially in the internal domestic market, where a persistent inflation environment, especially related to food, impacts highly and significantly the power of acquisition of people with lower income. And they have a great share in acquiring products from Grendene. We have high interest rates. We have families getting into debt. We have an intensification of competitors with domestic players and international players, products, imported products. The purchase of these products, they grew a lot. The imports grew like 30% in this quarter, and that also made a very challenging scenario this Q3. Besides that, low weather, low temperatures in the southern region of Brazil also compromised sales in the Q3. So how was the performance of Division One brands, except Melissa, in this Q3?

The gross revenue decreases 38%, volume 16.2%, and the volume here has a more significant fall in the entry products, those products that are cheaper and they are destined, as I mentioned before, for the population with low income. This share of population that have been suffering with the inflation and high rates. So we can see a major impact of these factors in the consumption of these products with cheaper products. Gross revenue per pair increases 9.7%. It’s connected to the price readjustment because of the commercialization of products with higher added value. Here, the e-commerce share grew 1.3% when we compare to the same period last year. When we see the performance by business line, we can see that all the segments of Division One, as I mentioned before, all the brands, except for Melissa, they present a retraction in revenue and volume.

On the other hand, all the other lines, they have a growth of gross revenue per pair, except for the female segment. Selling decreases 16.2%. It is above the downfall we had in the sellout, which went down 7.3% when we consider the channels of specialized stores, the retail, and distributors. What we have observed is the level of inventory of our clients. It is below average historical levels, 30-40 days below. These levels of storage, they are a reflex of a selling that is smaller than the sellout. When we observe selling and sellout accumulated in the year, the selling decreased more than sellout. It went down 12.3%, and the sellout 6.4%. When we talk about Melissa, the scenario is a little bit different. In Melissa, we have observed a growth of gross revenue of 16.7% and a small decrease of 2.1% in volume.

This increase in the revenue, even with the volume decrease, it’s because of a gross revenue per pair of 19.2% above the one in the Q3 of last year. Melissa has continuously, since the Q2/2023, growing constantly. Melissa has been registering positive results. This growth of 19.2% of the gross revenue per pair, it’s a reflex of the development of products that are premium, products with more added value. When we look at the sellout of the Melissa Clubs, they represent 60% of our selling. Sellout of Melissa Clubs decreased 5.7% in the quarter. It’s above the selling we observed of 2.1%. In the year, the selling of Melissa decreases 1.6%, while the sellout decreases 6.4%. Here in Melissa, we observe more and more integration between the brick-and-mortar stores and the digital ones.

Today, online sales of Melissa, they represent 12.8% of the total sales of Melissa in the domestic market. That is because of the growth of almost 29% of gross revenue in the e-commerce. We ended the Q3/25 with 425 Melissa stores, Melissa Clubs, when compared to 413 stores in the same period of last year. When we look at the external market, it registered a gross revenue of 86.1% with 17.1% in volume. That is a reflex of the growth of gross revenue per pair of 59%. Here, it counts the impact of GGB since we acquire 100% of GGB operation. The numbers, the figures are consolidating our DRE lines and GGB sales. They are to end customers. They are sellout. The value is much superior when compared to selling.

When we exclude the GGB data out of the figures of exports, the gross revenue presents a decrease of 2.3%. A volume continues growing. It grows 14.7%, and the gross revenue per pair goes down 14.7%. As exports of Brazilian footwear had an inferior performance of Grendene exports, we gained Grendene is gaining 3.5 percentage points on the share of exports. On the Q3, the exports of Grendene, they represented 30.5% of total exports in Brazil. What we have seen in this Q3, it’s a normalization of international logistics. We can predict better the deliveries in our shippings. We exported for over 52 countries, and in Latin America, stood out in the period, even with some countries going through political and economical and social situations that compromised consumption.

Despite that, we had a very robust growth, just like the United States with the tariffs that were imposed. We could grow 45% of our exports, 40% of exports to the US. We also have a maintenance of sales in the country. GGB sales continue growing, even with the higher prices and higher tariffs imposed. We observed in the Brazilian market more the entry of competitors from China. They had to sell products that used to be sold, exported to the United States. That situation kind of impacted the diverse markets that we are present. Because of this domestic and foreign scenario, the volume on the shipped volume decreased to 36.3 million pairs, minus 10.2%. It is concentrated in the domestic market that receded 15.3%. It also grew 17.1% in the foreign market. Gross revenue grew 10%, reaching BRL 1 billion.

There is a decrease of 2.4% in the domestic market and external market, a growth of 86.1% because of consolidation of GGB numbers. Gross profit decreases 1.5%, reaching BRL 353 million, and gross margin decreases 1.4 percentage points to 46.5%. This retraction of the gross margin is concentrated in the indicator labor that I’m going to talk about later, recurring a bit. It’s almost BRL 108 million, a decrease of 21% and a decrease of 4.4 percentage points, 16.7%. Net recurring result reaching BRL 184 million, going down 5.7 percentage points, 1.3 percentage points more than the recurring EBITDA because of financial result that’s a little bit smaller than the Q3 last year. We had a real estate enterprise that added BRL 3.7 million to us last year. Here, I’m going to show the impact of GGB in the revenue numbers so we can actually compare.

In the previous year, on the Q3, all the numbers of GGB, they were fitting in only one line, the equity asset. The numbers of GGB this year, they are impacting all our DRE. So our gross revenue grew 10.6%. Excluding the GGB data, it would have receded 2.4%. Gross revenue, net profit 1.4%, excluding GGB, it would have grown 6.0%. COGS 4.1%, excluding GGB, would be decreased 2.7%. Gross profit decreased 1.5%. It would have decreased 9.6%. Our operating expenses and GGB expenses, they grew 30.2%. They would have grown 3. They would have decreased. They would have grown, sorry. The operating expenses that grew 30.2%, if we had eliminated the effects of GGB, it would have grown only 3.1%. It would be below the inflation of the period. Our recurring EBITDA, it was 47.9%. Excluding the GGB figures, it would decrease 25.6%.

The same thing in the net result. It decreased 38%. Excluding GGB data, it would have decreased 22.9%. Here, a little bit of our e-commerce numbers. Quarter after quarter, it is growing constantly. Our GMV grew 24.5%. Volume grew 27.5%. The number of sessions, it was 15.2 million sessions, grew 1%. The gross margin of the e-commerce reached 70.3%. The recurring EBITDA reached BRL 1.8 million, a growth of 34%. The recurring EBITDA margin in the e-commerce, 10.3%. Our share, our total share in the online sales of Grendene in relation to the domestic market sales reached 4.4% when compared to 3.4% in the same Q3 of the previous year. When we isolate Melissa’s sales online, they represent 12.8% of total sales of Melissa in the domestic market when compared to 10.9% in the same period last year.

Here, what added revenue to Grendene was the volume of the internal market. It reduced our revenue in BRL 120 million and BRL 101 million in domestic market. External market added 23.2 million, BRL 98.4 million in price and mix. The real, that is 1.8% than the dollar, reduced our revenue in 4.5%. Here, looking at the COGS components, as I mentioned before, the gross margin decreases 1.4%, going to 46%. A component that is concentrated in the raw material. We have three factors, three main factors considering that explain this variation of 2.0 percentage points. The most relevant one is the remuneration of our payroll since January this year. We started to have in January, we are going to have the first increase. We have effects in less volume. With that, we can decrease less than our labor costs and volume.

We have observed that we have been receiving orders from clients are coming in the end of the month and sometimes below what we expect. That leaves us in not a lot of time to adjust labor, manpower, because we receive orders in one month and we produce in the other month. We do not have inventory of finished products. We reduce significantly risks of carrying inventory of finished products with this strategy. As you know, in the fashion world, if you have a stock, if you have inventory, it is worth less and less every day. This increase in the representativeness of our COGS, production of more complex products with higher added value that demand the use of more labor. Now mentioning net revenue per pair, it increases 13%, COGS 15.9%. The indicator here that is kind of hindering us is labor per pair, really impacted because of payroll.

Now here, looking at our operating expenses, operating expenses, they grew 30.2%. When I exclude the data of GGB, it grows 3.1%, as I mentioned before. The commercial expenses, they grew almost 35%. When we exclude GGB, the growth is 1%. Administrative expenses grew 35.4%. When we exclude GGB, the growth is 12.3%. This growth, part of it is explained by the payroll remuneration payments. The lines that have impacted our recurring EBITDA started with BRL 158.4 million to BRL 117.9 million, a decrease of 25.6%. The EBITDA decreased almost 48%, leaving BRL 145 million to BRL 75.7 million. On this Q4, we have BRL 42 million of non-recurring items. Out of this, BRL 35 million are derived from the GGB operation.

Looking at our financial result here, it reached BRL 95.4 million, 40% less than last year because on the Q3 of last year, we had a result of one of our real estate projects that alone added BRL 37 million for the company. Today, we have in our portfolio the investment, alternative investments. We have BRL 903.7 million of balance in our portfolio for real estate. This portfolio, since its launch, it kind of brought a profit of 300%. Today, we have investments in the real estate portfolio, and they have a historical profitability of 233% of CDI. We do not have any asset, any allocated value for this kind of asset and variable income. We had that before in our portfolio. We do not have anything. We had a profit of almost 582% in the period.

Looking at the accumulated results of the year, the volume decreases 7.1%, reaching 88 million pairs. This decrease is concentrated in the domestic market with 11.5% decrease, while external market grows 13.5%. Gross revenue grows 13.3%, almost BRL 3 billion. In the internal market, it grows 2.1%. External market, 70%. Gross profit, 5.8% increase, BRL 850 million. Gross margin is stable, a smaller decrease of minus 0.2 percentage points, reaching 45.2%. Recurring EBITDA goes down 15.8% to BRL 244.8 million. The recurring EBITDA margin has a decrease of 2.0 percentage points compared to the year to date, while the net recurring profit grows 18%, reaching BRL 529.8 million, with a net margin of 25%, a growth of 5.1 percentage points because of the growth of our financial result. Here is the same table. For the Q4, I will show the year to date. Gross revenue grew 13.5%.

It would have grown 3.1% if it wasn’t consolidation of GGB. Gross net profit, excluding GGB, COGS grows 6.2%. It would have decreased 6.0%. Gross profit grew 5.8%. It would have decreased 3.4%. Total operational costs, we have 13.1%. They would have grown 3.6%, not to mention the GDP expenses. In our a bit, that was 34.9%. We have 15.8% withdrawal. The net result that we drew 2.2% would have grown 18% if it weren’t the GDP data. In this slide, we have our margin, gross margin and COGS. It withdraws 0.2 percentage points. We can also see a drop both in other expenses, like in raw material. The only component that grows in this period is labor, and it’s highly impacted by payroll. When we look at the ROL, at the net sales and COGS per pair, it grows 14.4%, whereas COGS grows 8%.

Looking from a different perspective, we can see that labor per pair has been harming our, has impacted our COGS in this same time. When we look at operational expenses, we had 21%, excluding GGB, would have grown 3.6%. Commercial expenses, we have 34.5%. It would have grown 1.7%. Total admin expenses, we have 35.5%. It would have grown 12.8%. There is a lot of payroll influence. Last but not least, our net financial revenue, that was 49.8%, that was higher than the same period last year. It reaches BRL 324.8 million because of the growth and the results of our investments. Grows around 47%. Also, we have the growth of our development projects per area that reached BRL 61.6 million.

When compared to R$ 11.2 from the same period last year, with the accumulated results of the previous year of R$ 395.4 million, we have here in this result 158.8% in incentives, in tax revenue, and net sales to the calculation of balance available for distribution of R$ 3.6 million. We have destined R$ 11.8 million for legal reserve. For dividends proposed, we have R$ 224 million. Given that we had an anticipation of distribution of R$ 160 million, we still have the balance for distribution, almost R$ 64 million, that we will distribute as follows. R$ 60 million gross and others R$ 11.5 that is dividend, that is like R$ 0.11 per stock. R$ 3.89 million that is for dividend, R$ 0.04 per share. This value will be paid by December 10, 2025, for those shareholders that were with us a year before. November 24, 2025, we are going to make the distribution of our dividends.

This is just to show the dividends and interest on equity cumulative. They have corrected around the CDI and JCP dividends. We have distributed BRL 14.4 billion. If we corrected with the IPCA, we have BRL 9 billion. In nominal values, we have BRL 6.5 billion. What I had to mention about the Q3 was that. Now I open for Q&A. If you have any questions, feel free to ask. For now, we are going to start with our Q&A. Just as a reminder, to ask your question, you have to tap on the Q&A icon on the lower part of the screen and wait until your question joins the line. When we have your question, please open your microphone and feel free to ask your question. We kindly request that your questions can be asked at once. Let’s go for our first question. It is from the investor Julius Cesar.

First of all, good morning. Congratulations on your results. Even challenging these scenarios, the company is still resilient. I would like to understand what caused the drop in the financial report. Could you please tell us a little bit more about that? Thank you. Good morning, Julius Cesar. Let me come back to the slide here so that I can give you the correct information. Financial result withdraws 14.4% from BRL 11.4 million to BRL 95 million. This reduction, so to speak, it is justified because in the first quarter last year, can you see that line of results of financial applications? That shows, along with the asset, it shows the results of our development projects in the area. As you can see in the Q3 last year, that line is the result of other financial assets. We have a result of BRL 45.9 million.

That is a result of one single project in the area that we had in Jurerê that added BRL 37 million in our results. This withdrawal in time is explained by a strong result from our projects. When we look at the yearly result, in time we had other projects that bring good results and sales happen, we can see that we have a growth of almost 50%. This growth is explained both by the traditional investment with CDI that is higher, but also with the results of other real estate projects that are under development. We capture these results. Thank you for your answer. The next question is from Tadeu Heron. Good morning. Given the confirmation of the taxation as from 2026, I would like to know if the company has any kind of studies to anticipate these results in 2025.

Good morning, Tadeu. Thank you for your question. Given the approval in the Congress this year, this week, we are running studies to assess the possibility of distributing dividends still in this year. We do not have a final answer for now, but we have studies under development. Thank you for your answer. Our next question is from Marília, an analyst. Given the significant difference in the growth in gross and net margin, can you give more details of the dynamics that led to this expressive increase year by year of discounts and returns? How should we think about these dynamics from now on? This significant difference between the gross and net revenue, it is connected to the external market because of GGB. When we check, for instance, in China, there is a culture, a strong culture in China of devolution. It is the online segment.

For every 10 products that are sold online in China, 6 are returned. That is a return rate that is quite high. As the GGB numbers are consolidating this year with us, our GGB was equivalent to the asset. We did not see, so to speak, this high level of returns in between the gross and net revenue, even though we had the GGB in the TRE. We have that as equivalent to assets. From now on, we are going to consolidate these numbers. In the external market, we should start to have a higher level of difference between gross and net revenue because of that effect. A suggestion for us would be in the future that we open this internal market so that you can capture these movements. Thank you for your answer. We now close the question and answer.

I would like to call Mr. Alceu Albuquerque again to his final remarks. I wish you all a great day. Once again, thank you very much in our video call. See you next time. The results conference regarding Q3 in 2025 is closed. The RP Department is available to answer any other questions and matters. Thank you very much for the participants and have a great day.

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