Earnings call transcript: Guararapes Confeccoes Q3 2025 beats revenue forecast

Guararapes Confeccoes SA (GUAR3) reported a robust third quarter for 2025, surpassing revenue expectations and demonstrating strong financial performance. The company reported earnings per share (EPS) of $0.1447, while revenue reached 2.45 billion USD, exceeding the forecasted 2.12 billion USD by 15.57%. Following the earnings announcement, Guararapes’ stock price increased by 2.88%, closing at $10.4, reflecting investor confidence in the company’s growth trajectory.

Key Takeaways

• Revenue of 2.45 billion USD exceeded expectations by 15.57%.
• EPS reached $0.1447, showcasing strong profitability.
• Stock price rose by 2.88% post-earnings announcement.
• Continued focus on sustainability and innovation in product lines.
• Expansion plans include opening 15-20 new stores annually.

Company Performance

Guararapes Confeccoes demonstrated significant growth in Q3 2025, marked by a 7.6% year-over-year increase in apparel net revenue, reaching BRL 1.5 billion. The company achieved a consolidated adjusted EBITDA of BRL 402 million, with a margin of 16.4%. Net income rose by 63% to BRL 74 million, driven by nine consecutive quarters of same-store sales growth and a gross margin expansion of 2.5 percentage points to 57.3%.

Financial Highlights

• Revenue: 2.45 billion USD, up 15.57% from forecast.
• EPS: $0.1447, indicating strong profitability.
• Gross margin: 57.3%, a 2.5 percentage point increase year-over-year.
• Net income: BRL 74 million, up 63% year-over-year.

Earnings vs. Forecast

Guararapes Confeccoes surpassed revenue expectations, reporting 2.45 billion USD against a forecast of 2.12 billion USD, marking a 15.57% surprise. This performance highlights the company’s ability to capitalize on market opportunities and effectively manage its operations.

Market Reaction

Following the earnings release, Guararapes’ stock price increased by 2.88%, closing at $10.4. This positive market reaction reflects investor confidence in the company’s strategic direction and financial health. The stock is currently trading near its 52-week high of $10.9, indicating strong market sentiment.

Outlook & Guidance

Guararapes Confeccoes plans to continue its expansion efforts, targeting 15-20 new store openings annually. The company aims to further improve gross margins and expand its financial services product portfolio. An investor day is scheduled for December 11th to discuss these strategic initiatives in more detail.

Executive Commentary

CEO André Farber emphasized the company’s growth and sustainability efforts, stating, "We are creating a company with greater musculature." Highlighting the brand’s impact, he added, "Our fashion is impact. It is sustainable." These statements underscore the company’s commitment to innovation and market leadership.

Risks and Challenges

• Supply chain optimization remains a focus, with potential disruptions posing a risk.
• Market saturation in the Brazilian fashion retail sector could impact growth.
• Macroeconomic pressures, such as inflation, may affect consumer spending.
• Dependence on domestic production could limit flexibility in responding to global trends.

Q&A

During the earnings call, analysts inquired about the potential for further gross margin expansion. Management indicated they are "halfway through the journey," suggesting room for improvement. Questions also focused on the cautious approach to winter collection production and the consistent growth of e-commerce margins.

Overall, Guararapes Confeccoes’ Q3 2025 performance reflects a solid strategic position in the Brazilian fashion retail market, with a clear focus on sustainability, innovation, and expansion.

Full transcript - Guararapes Confeccoes ON (GUAR3) Q3 2025:

Moderator/Host: Good afternoon, everyone. Thank you for joining us for our third quarter 2025 earnings conference call. We have released another very consistent quarter, and to tell you a bit more about the evolution of our strategy and the main highlights, we have André Farber, CEO, Miguel Caffarelli, CFO, and also Francisco Santos, Head of Midway Finance Data. We are going to start with the company remarks, and then we will open for questions from the audience. Should you wish to pose a question, please click on the Q&A icon or on the raise your hand button. Before we get started, some housekeeping announcements. This event is being recorded and simultaneously translated into English. The slides shared are in Portuguese, but the English version is available for download on our IR website.

Forward-looking statements that may be made during this conference relate to the company’s business perspectives, but they are no guarantee of future performance. That’s all. I turn the floor over to you, Farber. Thank you. It’s a great pleasure to be with you today to talk about our third quarter 2025 earnings results. We’re very proud of these results. They show once again that we have chosen the right strategy that shows the strength of our integrated model. We have had growth plus margin expansion, which improved our bottom line. We’ll give you more highlights about our financial performance and about Midway. We have our executives here with us. Let’s get started.

André Farber, CEO, Riachuelo/Guararapes: In the beginning of our conference calls, I always tell you that we are undergoing a transformation process. I took over in mid-2023, and there have been many changes. Quarter after quarter, we’ve been making decisions, some of them really hard, others that lead to changes in our business, changes in our structure. We went through organizational changes back in 2023. In the beginning of our journey, we continued with them throughout 2024, and now in 2025, we’ve been doing quite a lot as well. At the end of Q1, we launched our culture platform. This is called Nossos Fios, our threads. It is key that we work in an aligned way, all on the same page with a team that lives our values. In September, we had the relaunch of our Pool brand.

have been making many investments here, and this shows how we believe in our brand and in product development. This shows the importance of our Pool brand, a young brand full of jeans and life. We have also just issued a new debt, replacing all of our previous debt. This has been a long and well-planned process. We worked on this throughout the year, and the day before yesterday, we issued Quar 17, which will make our capital structure even better. There is a lot happening, and this shows the consistency and the hard work we have been doing throughout these two and a half years. Let me give you a summary of our results now. This has been a record quarter, the best third quarter in our history ever since we started looking at our results in this way. Our EBITDA closed at BRL 402 million.

Same store growth up 7.3% in apparel. We had a very long winter. We’re still seeing some cold weather in the south and southeast, and we were a bit more conservative in our winter purchases, so we didn’t have as many products. In spite of that, we were able to sustain solid, robust growth, over 7% in apparel. Retail is usually heated on some celebratory dates, so we’ve been seeing robust growth. If we had had a shorter winter, we believe our numbers would have been even better. The growth we achieved in recent quarters, we actually had nine consecutive quarters of growth, and this growth has been happening with very strong margin expansion, and we saw yet again a robust apparel margin growth. In the combination of growth and margin, this improves our bottom line significantly.

This is due to a better management of our integrated chain, starting with the factory, with our threads. With our fashion planning, collection planning, price planning. When this is well done at high scale, this leads to this amazing margin expansion that affects our EBITDA margins as well, which also achieved an all-time record, 14.2% in retail EBITDA margin, up 1.6% year over year. Our second core is the financial services. This is a very important business in our portfolio. Our first core business is fashion, so these are the results you see on the column on the left, but we also have very solid results in the financial business unit. The magic here comes from combining the power of these two businesses that are different from each other but that support each other and generate value.

We continue growing with an EBITDA of BRL 119 million, up 6.5% year over year for Midway. And consolidated EBITDA, since we are doing really strong in both businesses, we also achieved a record EBITDA of 16.4%. An all-time record for us. Net income grew by 63%, achieving BRL 74 million in net income. This shows the evolution of the company and how solid we are right now. Yet another quarter of net income generation, and we will see later how this accumulated income will take us to a whole new level in terms of robustness. When all these levers are combined, this is extremely powerful. We are moving on to a whole new level. We have been evolving quite a lot. Let’s start talking about apparel gross margins. In the last two years, we had an increase of 4.7 percentage points, going from 51.5% to 56.2%.

Impressive results. We continue working hard on this. I will tell you about the levers of the future soon. Now, retail EBITDA margin, we were hardly hit by the pandemic, but we decided to work really hard on the business, on the structure to improve our EBITDA margin. In Q3, we had an almost 4 percentage point increase compared to two years ago. Same for our consolidated EBITDA, which is fashion plus financial businesses together. This number more than doubled. We are reaching a whole new level indeed. When it comes to net income, year to date, the first nine months of 2025 compared to the first nine months of 2024 and of 2023, the numbers speak for themselves. We are closing the first three quarters with BRL 119 million. We had a loss of BRL 264 million in 2023 and a break-even in 2024.

This is a very solid trajectory, and we’re very proud of this. When we look at the first nine months of 2023, 2024, and 2025, we see consistent improvements. We do not have many ups and downs, you know, from one quarter to another. We have improvements quarter after quarter without any hiccups. We are very happy about this. As I usually tell the team, this is just part of the job. There is still a lot to be done. Okay, now let’s look at the bottom line and net income. In the last 12 months, we had a profit. In 2023, we had minus BRL 162 million. In 2024, BRL 215 million, and now in 2025, we have reached BRL 440 million in the last 12 months of 2025. This shows the robustness of our results.

We are creating a company with greater musculature so that we can keep on investing in the right things and to keep on paving the road to our future. Now let’s talk about strategy. What have we been doing and what will we continue to do to keep on adding value? I usually tell my team that everything we do aims at improving customer experience. Without that, we’re nothing. We have the opportunity of offering a better product, a better experience, a better journey to customers, and this will bring us a lot of value. Our first pillar is experience. This hasn’t changed. We have already shared this with you in previous calls, so this will continue, but there is room for improvement here. This is a new pillar we have, footprint. We see an opportunity to expand our footprint, opening up new stores.

We see an opportunity to renovate our current park and to open new stores. This is a new pillar that is here to sustain our top-line growth. Now we keep on working on the integrated fashion chain. This pillar is what we have been calling efficiency fashion or fashion efficiency. This is one of the pillars that help improve our business, improve our profitability, and that can make our company more efficient, more profitable, and prepared for the future. The fourth pillar is about the continuation of our financial business development. We already have a robust business.

We’re very proud of what we have already created, but now that we have this platform, these results with 4.5 million active cards and robust systems, we have to keep on creating value, and we need to devise a deep and well-defined strategy to keep on growing from the perspective of top-line and value generation. Last but not least, we also see opportunities in our capital structure. I started the call talking about improvements in our debt profile. This is an opportunity we had already identified, and I will tell you more about this in a minute. The utmost goal is to have an addition of our top-line improvement, improved efficiency, better business financial results, and better capital structure to be added to maximize value generation per square meter.

This is a very powerful platform, especially when these two businesses are combined, fashion and financial services. Now let’s dive into each one of those levers. When it comes to experience, we talk about the revitalization of the Riachuelo brand and of the Pool brand. This connects to the second pillar in which we are investing in some few brands like Pool. Our experience will be improved once we improve our products. I’m wearing Riachuelo here today, and product is what customers buy, what they take home. We have a very strong focus on improving product quality and product value proposition. This requires understanding the key products and the core categories. I know I’m being repetitive, and I’ve said this before, but it’s all the same. This has shown value, and companies that realize this in the long run deliver differentiated products.

This is our first pillar, and we’ve been investing in bringing more and more fashion. This is related to an integration of our chain. We want a faster fashion with more innovation for customers, and this is also about responsiveness. Last but not least, the game happens at the point of sales, either digital sales on e-commerce or in brick-and-mortar stores. We have room for improving customer experience here. Customer journeys and customer lives when they’re in contact with us. We think that we can provide an even better customer experience in stores and on the e-commerce. Now, let’s talk about the brand. The Riachuelo brand. We’ve been taking a deep dive in what the brand means and where it wants to get. We’re very proud of being a Brazilian company founded in the northeast of the country.

That has always invested in Brazil and that has always supported Brazilian causes. Our brand has been evolving more and more in that direction, celebrating Brazil and being proud of being Brazilian. I would like to share a video with you that shows how we have been working on our brand evolution. Seventy-eight years ago, in Rio Grande do Norte, a dream arose, a dream of creating new possibilities for Brazil and for Brazilians. Now it is time for a new beginning. Riachuelo is finding what it has always been. Theirs, celebrating our country, plural, vibrant, creative. Our future is here in our truth, our roots, our people. Thirty thousand people dreaming together is strength that makes us the greatest fashion employer in the country. Our fashion is impact. It is sustainable, and it reaches the land and the hands of those that plant responsible Brazilian cotton.

We believe in the creative power of our country and fashion culture, sports, and arts. Our truth is being a country that looks at itself. Dressing is more than expressing yourself, but showing your identity and creating a new time. Incredibly inspiring, incredibly beautiful, incredibly Brazil. Riachuelo believes in Brazilian’s creative power, and our brand is here to celebrate this. Throughout our journey, we want to focus on this. We have been doing that in recent months, and starting now, we are going to invest in this more and more. We believe this will make our company stronger, and it will create a differentiated brand. You saw just a flavor of everything that we are planning to do. There is a lot to be shared with you in the coming months to create this differentiated brand. Okay, moving on, still talking about our strategy.

I talked about the investments in our Pool brand. The Pool brand is our young brand. It’s for young people. We have a lot of jeans and a lot of fashions. We’ve made a lot of investments. We sponsored the town. We invested in jeans with sustainability. I want to show you another video so that you can get to know a bit more about all of these investments and developments that we’ve been making in the Pool brand. The Pool brand has gained even more strength in our 2025 strategy. With over threefold growth in investment, we have new products, and we have advanced in sustainability. All of the Pool jeans are made with top technology that uses 60% less chemicals and 70% less water. This is due to innovation in analyzer, ozone, and laundry processes.

This year, we launched two lines with the most sustainable cotton in the Pool family. Pool Regen, made with regenerative cotton, with 40% lower chemical burden and a collection that is 100% traceable with the blockchain technology. With Loop, our recycled jeans. Made with 9.4 tons of textile pieces, create a circular fashion. Our items are made with 25% recycled cotton and 75% responsible Brazilian cotton. You wear it, it goes, and it comes back. This is an innovative concept to accelerate sustainability. This is the new fashion that inspires Brazil. Like you saw, this is the fashion that inspires Brazil. Most of the Pool items are made in our factory. We do have many suppliers, but we also use our own factory, and we’ve been investing a lot in sustainability and in new models that enable us to create increasingly sustainable jeans with a lower environmental footprint.

This is only the beginning. Let’s continue with our second pillar. This is new. This is the footprint pillar. We see some opportunities here to improve the quality of our distribution in general. We see opportunities to expand our stores. We stood still for some years because of the pandemic impacts, and now we’re resuming growth. Riachuelo opened one store last year and seven new stores this year, and we believe that we can reach a level of 15-20 stores opened per year. As the brand grows, we need to renovate our stores and improve the experience. We have a strategy to renovate our stores, and we are still working on the model to be used. This is one of the levers because once this model is calibrated, we can provide better experience, and this can also help us grow same-store sales.

Finally, we have a network that has 50 years of operation because Riachuelo was acquired by Guararapes. We see opportunities of relocation that can also help our growth. This is part of our footprint pillar, and we believe that when we add up these different initiatives together, we have a major value generation potential. Now let’s talk about fashion efficiency. I tried to summarize the ideas into a few bullets, but this is about increasingly integrating our factory with mobile products that can use our factory with greater speed and responsiveness. As we mature the processes with our fashion team and factory team, we see opportunities to improve efficiency as well. Some of the elements of our fashion efficiency generation fit into here.

Logistics, which is very important for our business, how we distribute our products from DCs to stores, product availability, product access, and the algorithms behind all of that are in the center of our strategy. We have been investing a lot in this, and we keep on investing to update our algorithms. We also want to update the infrastructure to have products available in stores faster. We see opportunities to cluster the supply by store, depending on customer needs and store consumption. This is all supported by a robust data and analytics strategy. This helps us in many parts of our chain: planning, distribution, but also pricing and markdowns. We are using increasingly sophisticated models and AI to help us with that. This is something that actually mixes the first and the third pillar: store efficiency and fashion efficiency. In mid-2024, we.

Understood that we had a great potential to improve store experience and waiting lines. We wanted to make our business more efficient with better flow. We invested in a new checkout and self-checkout model, so either operated by our own employees or by the customers. The technology is new, the equipment is new, and I want to show you a video about what this has been like and what kind of experience we’re already offering in our stores. We want to have this system in 100% of our stores by the end of next year. Investment in technology and innovation were priorities throughout 2025. To improve the purchasing experience in stores, we implemented the PDX system in all checkouts, simplifying the sales process and reducing the training time of our store teams. We also developed the new self-checkout with RFID and a friendly interface.

We reduced the average transaction time by 55.6%. Now we have shorter waiting lines and great purchasing experience. By 2026, we’ll have 450 new self-checkouts implemented, leading to a 36% productivity gain, a 44% shorter purchasing journey, and a 67% faster product reading. Efficiency is our commitment. You see how excited I am with this project, right? I even operated a checkout. I think that we can improve this model, but this is something I have embraced, an idea I have embraced since I joined the company. We saw an opportunity to reduce checkout waiting lines, especially on holidays. When we launched the product, I did live streams with the team. I operated the checkouts. It is a great video. Let’s keep on talking about our strategy. The fourth pillar is related to Midway.

Our business gets stronger and gets much more powerful when we combine fashion with financial services. Midway has shown excellent results in recent quarters, but we see an opportunity to keep on developing this. The question is, how? The main elements of Midway’s strategy are mentioned here. We see an opportunity to keep on strengthening the products we already offer, generating cash at Riachuelo stores. We have a personal loans business and insurance. This is about evolving what we already do. At a certain point in time in our history, we started offering new products like insurance and personal loans. We feel now it’s time to expand even more our portfolio because there are products that have great synergy with our business and that can add value to customers and that can add a lot of value to our business as well.

We can use this platform, and we have a reduced cost because the Riachuelo stores are already there. The CAC is almost zero. Therefore, we can offer new products to customers at a very low cost. We also see Midway and the card as a way to strengthen our ecosystem and the relationship with our customers. We have a new loyalty program with clear benefits. We think that when we add everything up, we come out stronger. This generates more value to customers and to shareholders. This is Midway’s pillar. The last pillar is about capital structure. On our first slide today, I told you about the reprofiling of our debt. We reduced our cost of debt significantly, CDI plus 2.4 to CDI plus 0.95.

We told you earlier that we were working on our capital structure and the reprofiling of our debt. You can see the results now. Another topic that can be evolved is Midway’s funding structure. We can work in smarter ways to bring in capital inflow. We’re a company that has always invested in its own infrastructure to grow our business. We have our own factory. We have a factory in Fortaleza that is inactive. We have 47 properties. We have a mall, the largest mall in Natal, Midway Mall. We are always discussing what to do with our assets and how to make them more profitable. These are also discussions that we’ve been having. All of that together forms our capital structure pillar. Once that is all done, we can focus on value generation per square meter.

In dark green, you can see our financial services, and in light green, our fashion business. In the last two years, we grew by 40%. Solid and robust evolution, two years in a row, as you can see. We believe that we have opportunities here to evolve in our two core businesses, fashion and financial services. Now, Miguel is going to offer you more details about our numbers, and I will be back at the end for the Q&A session and the closing remarks. Miguel, good luck. I will be right back. Thank you, André. Hi everyone. Like André said, it is a great pleasure to be here with you again. In yet another quarter with solid results. Let us start by talking about net revenue from apparel in the main fashion categories.

We had another quarter of growth, up 7.6% in the net revenue from apparel year over year, reaching BRL 1.5 billion. Compared to BRL 1.4 billion in 2024. We already had major growth in 2024 compared to 2023. This shows how robust our growth has been. Our net revenue is up almost 8%, as you can see, year over year. We have had nine consecutive quarters of apparel same store sales growth. We have had nine consecutive quarters with robust results. We keep on being very consistent and aligned with our strategy. Okay, now let’s talk about apparel gross profit. We are giving you some broken down numbers to be very transparent. Apparel gross profit this quarter reached a bit over BRL 856 million, up 12.5% year over year against a strong baseline in 2024 that had already grown 20% as compared to 2023.

Robust growth. Against a very strong baseline, which shows sales expansion and margin expansion. For gross margin, we have eight consecutive quarters of gross margin growth. We have very strong levers in the first nine months of 2025. We are up 2.5 percentage points and 57.3% against 54.1% in 2024. You can see how consistent we’ve been. Nine quarters in a row of margin expansion. This quarter, we have had growth of 2.5 percentage points of margin expansion, reaching 57.3%. In fashion retail, we always hear that the second quarter is the quarter of greatest margins because of the winter season. We know about that. In the second quarter of 2024, we reached 55.4%. There is a lot of sales in the second quarter. Then our levers gained relevance and delivered more and more results. We were able to protect this.

Very strong level that we had in the second quarter. In the third quarter, we sold less winter items than in the second quarter, but we kept the same margin with a 2.5 percentage points increase. This shows how strong our business strategy is. Now, this slide that you liked seeing last quarter gives clarity about how we have achieved this margin expansion. The third quarter of 2025 against the third quarter of 2024 had a 1.9 percentage point increase. We are expanding our core categories. We’ve been investing in brand, product, and modal products, which brought us 0.3 percentage points of margin expansion. Most of the gain, almost 2 percentage points, comes from better factory efficiencies and an enhancement of our operational model. We have also started to work with fewer markdowns. We have a better pricing strategy now. And this.

Led to a 0.3 percentage point apparel growth margin expansion this quarter. Now, retail adjusted EBITDA, we’re very proud of these numbers. This is an all-time record for us: 14.2% of retail adjusted EBITDA. Looking at our history, we have a 1.6 percentage point increase year over year. Going back a bit more, we see even stronger expansions against 2023 or the previous year. We reached BRL 256 million of retail EBITDA, 14.2% margin. The third quarter is not traditionally strong, but we have reached a very robust number and a solid record for us. All right, now we’re going to give you further details about our second core business, financial services. Let’s start talking about our portfolio. Since early 2025, we have had impact of the 466 here in the dark bar.

Now, in lighter green, we see that the portfolio reached BRL 5.7 million, a 2% growth, and we keep on a very healthy level of revenue over portfolio. In recent quarters, we’ve been navigating around 11%. This shows how we’ve been able to extract more and more value from our portfolio. Our delinquency levels are great, both in cards and personal loans. For the gray lines here, 15-90 days overdue, this is quite consistent. The credit scenario was more challenging in the beginning of the year. We had delinquency levels that were showing a few setbacks, but we’re actually happy because the delinquency levels are actually going down. For personal loans, we had accelerated credit granting in the beginning of the year, so the delinquency went up, but then we regulated our appetite, and we’re back to a very healthy level for long-term overdue.

I mean, the short-term debt becomes long over here, but with this trend. This tends to go back down in the future. We keep on working with great diligence. This slide was a novelty that we shared with you for the first time in the second quarter of 2025. This is one of the most important indicators for us, and we’re very proud to share this. Which is how new customers are great payers. You can see how they behave when they come back hiring personal credit from us. We have solid historical levels, and we have reached around 4% this quarter. This number had already gone down last quarter, but we were able to reach 4% of first payment default in new loans. This shows how diligent we’ve been in granting credit and the high quality of the new portfolio.

The delinquency levels will probably remain at a very healthy level. Now, let’s talk about the EBITDA from financial services. This quarter, we reached BRL 119 million, up 6.5% year over year. I want to show you how we’re reaching a new level here. Year to date, or in the first nine months of each year, we went from around BRL 100 million in 2023 to a very robust level. 16% increase of financial services in 2025 against 2024. BRL 356 million now in 2025 against BRL 306 million in 2024. Once again, an increase of 16%. This shows how consistent and diligent we’ve been with our financial services. Now, let’s talk about the consolidated performance. Looking at the company as a whole. First, let’s talk about our operational leverage. We show a lot of consistency going from 37.5% in 2022 to 36.8% in 2023, 36.2% in 2024.

We have now reached 36.5%. We keep on investing in the future of the company, and we are at a very stable level. Now, consolidated adjusted EBITDA: BRL 402 million in the third quarter of 2025. An all-time record in margin: 16.4%, up 1.2 percentage points against the third quarter of 2024 when we reached BRL 350 million. Once again, we see how consistent we’ve been. This is a record EBITDA for the company. We’re very proud of these results and confident that we are undergoing a great transformation. This is supported by the net income slide. We’re very proud to share this with you. In the first nine months of 2024, we were still navigating at a loss of BRL 15 million in the first nine months of 2024. We are now at BRL 190 million in income in the first nine months of 2025.

Looking at the quarter-after-quarter performance, we see a record profitability: BRL 74 million in the third quarter of 2025 against BRL 45 million in 2024, up 63%. This shows that we have indeed reached a whole new level when it comes to net income. Now, cash generation. We generated BRL 47 million this quarter in free cash flow. We have working capital consumption. We invested BRL 154 million this quarter. We have been talking a lot about resuming investments, accelerating renovations, investing in PDX, self-checkout. This quarter, we had a cash generation of BRL 47 million. In addition to net income and EBITDA, our free cash flow generation was also great. Consolidated investments, we invested 6.4% of the revenue this quarter. We are resuming historical levels. In the last two years, we focused a lot on deleveraging, using the cash to pay our debt.

Historically, we had a higher level, a level that we think is right for the future. In recent calls, we told you that this number would go back to 6, 6.5, or even 7. This is what we got this quarter: BRL 158 million invested in the third quarter of 2025, against BRL 113 million in 2024. We have opened seven Riachuelo stores. We’re investing in technology, replacing PDX, self-checkout, investing in DC and in the factory. We are at a very healthy and controlled level and still generating cash. We think this is a very healthy level. We had some atrophy in 2023 and 2024, and our goal was to pay out our expensive debt. We are now back to healthy levels. Financial leverage, our net debt closed at BRL 840 million against BRL 817 million in September 2024. In the second quarter of 2025, I mean.

Numbers were a bit lower. We had some increase in 2025 because in August 2025, we paid BRL 58 million in dividends. Our financial leveraging continues on a downward trend. In 2023, we had a financial leverage of almost 2.8% in the pre-IFRS metric, and we are now at 0.5 times EBITDA, slightly lower than the same quarter of 2024. To wrap up, I’d like to give you further details about the debenture issue that we did this week. We replaced the most expensive debt with a more efficient one with greater duration. This is going to give us efficiency that will be recognized in our P&L in the coming quarters. Our debt of DI plus 2.35 is now in the past. We are now at DI plus 0.95%. We’re very excited about this. In recent quarters, we have had tighter cash.

We were using our capital to pay out our debts, the most expensive debts that we still had in our balance sheet. Now we have this additional proceeds of BRL 1.4 million. BRL 800 million was to pay out the ventures, and the rest will be in our cash. We have efficient cash to pay the next two years of our debt. That is all. We would like to make a special invitation to you. We are going to hold our first investor day on December 11th. You will soon get further details about what this event will look like. We are very happy. This is the first investor day of our company. We have been listed since the 1970s at B3 since 2022, but this is the first investor day that we are going to hold. We want to invite you all to join us.

We’re going to give you further details about our strategy. You’ll be able to get to know other executives in our company. We want to invite you to join us on December 11th for our first investor day. Thank you again for joining us today. Let’s get started with our Q&A session now. Isa, over to you. Thank you, Miguel. All right. Let’s start our Q&A session now. The first question comes from Ruben Couto with Santander. Hi, Ruben. Your mic is enabled. Go ahead. Deixa eu passar para a nossa próxima pergunta, tá bom? Se ele quiser mandar. Okay, we’re going to move on to our next question. Rodrigo Gastin, do Itaú. By Rodrigo Gastin with Itaú. Hi, Gastin. Good afternoon, everyone. This is Vinícius with Itaú, and I want to talk about gross margin. This was a highlight in your results.

Looking ahead, where do you think you are when it comes to gross margin capture, and do you see greater opportunity to grow? Hi, Gastin. Obrigado pela pergunta. Obrigado por estar aqui conosco. Thank you for your question. Thank you for joining us once again. We have talked about this a few times already. Historically, where we are in our journey? We believe there is still a lot to be done. We would say we are halfway in our journey. We have progressed a lot already, but I would say we are still halfway in this advance in gross margin. We talk a lot about our transformation journey. First, we filled up our factory, then we started changing the processes of the factory with retail. We started changing our planning teams. We created a supply chain department back in September last year.

We brought a new sourcing expert to the company in March, April this year. All these people come with new ideas and new work fronts. Some things are happening and others are yet to come. We do not know exactly how much is coming in the future because we believe in the work we are doing and in the future we are building. To give you a more concrete answer, I can tell you about price. We worked hard in the last two years to improve the way we did our markdowns. Our markdowns were done at the end of the season. Now we are doing in-season markdowns, changing prices every two weeks or even every week. This has led to the results that you saw. We are now starting a new phase. We have organized the data with that analytics pillar related to fashion efficiency.

We break this down into stores and colors. This can also generate a lot of value to our gross margin. A nossa próxima pergunta. Okay. Our next question is by Danny Jagger with XP. Hi, Danny. Hi, guys. Thank you for taking my question. Congratulations on your consistent results once again. I have two questions on my side. The first is related to what André said about the new stores, expansions, and renovations. Can you give us more color into this and also about the timing of the renovations? When will we see the first one? What is the concept like? Are you going to share the new concept on the investors’ day? What are the possible levers that may come from this model? E aí a minha segunda, pouquinho. I appreciate anything you can add to that topic.

Now, the second question is about capital structure. We heard a lot about a possible divestment of the mall. Not only that, but also the dividend dynamics. We see many companies talking about paying dividends early because of the new tax reform. Can you tell us about what we’re planning to do, you know, when it comes to the company’s capital structure? Thank you. Thank you, Danny. Great question. When it comes to new stores, we’re working on several fronts at the same time. Let me start talking about expansion. Regardless of the model, we started intensifying this, and we have already seen the first results. In 2023, we opened only one store because we had a lot of debt and that musculature was a bit atrophic. We’ve changed things slowly. Now this year, we already opened seven Riachuelo stores.

This is a major evolution that brings great results to our bottom line. That is one part about opening new stores. The second part is about evolving our store model and evolving experience to achieve increased same-store sales. Because if you have a store with a better experience, a better journey, customers will buy more. I believe that good stores come from good brand planning. That is where everything starts. We told you today about the evolution of the Riachuelo brand and about believing in the power of Brazil, being proud to be Brazilian, everything we do differently with our integrated chain and being more sustainable. In the last 18 months, we invested quite a lot in refining where we wanted to get. Now that this is clear, we start a new chapter.

To see how this brand can live within the four walls of a store with all the journey improvements that we can offer. We’ve been working hard on that. I think you’re right. In our next interactions, we are going to share news with you. Now, moving on to the dividend question. What is our belief of André, the family, and the shareholders? A good company is a company that grows and a company that is profitable, that invests in the future to keep on growing and being profitable. A company that, whenever possible, pays out dividends to their shareholders in order to share the value with the stakeholders, but always respecting the previous premises. Let me give you an example of something that just happened. We are deleveraging the company, but we already paid out dividend worth BRL 60 million recently.

As the results improve, we’ll look at the future strategic projects and potentially pay out dividends, always respecting our long-term plans and a capital structure that will not create a high burden for the company. This is a clear view we have. Of course, there might be points in time in which we deliberate dividend policies that may vary a bit to one side or another. That’s pretty much our belief here at the company. Excellent. That was very clear. Thank you. Thank you, Danny. Our next question comes from Isabela Lamas with UBS. Hi, Isa. Go ahead, ask your question. Hi, everyone. Good afternoon. Thank you for taking my question. I actually have two questions here on my side. Going back to gross margin, but exploring the factory a bit more. You have given us details about.

Where the main gains come from, and internal gains have been a highlight. We wanted to try and measure it. From 0 to 10, when it comes to factory improvement, where are we? Is there a lot still to happen or most is behind us? What have you been doing at the plant, what you still have to do, and do you have opportunities to bring production in-house and gain efficiency? Another point related to margin gains is profitability gains. What’s your take on the opportunities to reduce homeware? Can this help you improve your profitability and margins with the new stores as well? Thank you. Eu que agradeço, Isa. Obrigado aí pelas perguntas. Thank you for your questions, Isa. Starting with margin evolution and the role of our factory. A gente chega aqui, a gente quer sempre melhorar.

I mean, of course, we are not, we’re never satisfied with what we have. We always want more. As I told Gastin, we are halfway through this process. We have done a lot, but there is a lot to be done yet. We always want to do more and deliver more. I know this is very philosophical, so let me try and give you details and examples of a few things we have been doing at our factory that show this evolution. When I joined the company, I knew that the factory existed, of course, but I knew it had a low occupancy level. The first part of the journey was to understand whether it made sense to fill up our factory more, use its capacity, and in which categories. That is what we did. We started to work with a much higher volume.

Our volume at the factory increased by 30-40% in the last two years, and the factory has 7-8% higher margins with the categories we chose. This is the value of integrating the chain. However, we have supply policies that aim to work with three different types of suppliers: our own factory, other important suppliers in Brazil, and other suppliers from abroad. It is not about the factory. We keep on doing what we did in 2023 and 2024, but in a more detailed level. We are looking into subcategories to understand them and see what the margins are at the factory. In the past, we were looking into T-shirts. In T-shirts, we have greater margins. Most of the T-shirts in these textiles, these fabrics will be made in the factory.

Now we know that sleeveless shirts with a different type of cut may have lower margins, and we do not have the right machinery in the factory to make them. We can use a different type of supplier for that. It is a different granularity. As I told you five months ago, we hired a new sourcing director. She is working hard, and her work will help us understand the improvements that we can make and the decisions of what to make at the factory and what not to make there, you know, what generates more complexity that should be done elsewhere. Also, product choice, where we will go when it comes to quality, margin, and profitability. Because once we understand the factory costs and everything that is happening there, we also know how we can be more efficient.

We can do better what we already do. Then we can learn and become more and more efficient. I’d say we’re halfway through this journey. I do dedicate my time to this because I believe this is going to bring us even more results in the future. The other question was about space management and store categories. The stores that we have just opened do not have any homeware or technology. The indicators show that the revenue per square meter and margin per square meter in fashion is better. When we say that we’re investing in core categories, we’re also deciding on what not to invest in. We have our homeware store model that is working better and better, but we think that the Riachuelo stores should focus more on fashion. This will help us improve our revenue per square meter. Great.

Thank you so much. Thank you, Isa. Our next question is from Renan Sartorio. Hi, Renan. Boa tarde, gente. Tudo bom? Hi, everyone. I have a follow-up question about production. Will you increase your winter production so that you do not rely so much on imported items? And what about the delinquency level at Midway? Has this changed in recent months? Okay. I will talk about the winter question, and then Fran will talk about delinquency. Thank you for your questions. These are actually great questions. We do not use the factory enough, and we have problems with national suppliers in the winter. Asia has a much greater scale, so most of our winter items come from abroad.

Having said that, we’ve been working hard to identify which categories could come from national suppliers or from our own factory so that we can be quicker, we can react faster, and be prepared to the different temperatures that we can have. This is a good example of how we’ve been maturing and evolving the way we use our factory. This year, we had very little winter production. In November next year, I hope I’ll be here in our earnings call saying that we have advanced and that there is a part of the winter collection being made at the factory. We are trying to adapt our chain so that we can react faster to the winter season. Now, Francisco will talk about the delinquency levels at Midway. Hi. Like we showed you in our presentation, delinquency levels are well under control.

We can select the customers at the entry. We have a very low level of default. We are still very careful. While the interest rates do not go down, we will keep on with a low appetite, aiming for single-digit growth. We are selecting customers at the entry well, and we predicted a scenario that is very similar to what is actually happening. We are navigating well. This is not a point of concern for us for now. Great. Thank you. Thank you, Renan. Our next question is from Ian with BTG. Hi, Ian. Go ahead, ask your question. Boa tarde, pessoal. Boa tarde, André. Hi, everyone. Hi, André, Miguel, Francisco, Isa. I have two questions on my side. The first. Can you update us on the sales of the new collection? We know that Q3 was a transition quarter, but it was impacted by lower temperatures for longer.

Do you see a more normalized demand now in the beginning of November or in the last weeks of October? What have you been seeing there? The second question is about the price dynamics. Do you see room to keep on increasing prices in the next months? Thank you. Thank you, Ian. We have had a long winter. October was a cold month as well. The performance was stable, given that the factors have not changed since May with this prolonged winter. For now, we do not see any changes there. We are going into the two most important months of the year, and we are going to be able to feel this more, and we hope the winter will leave us once and for all. We are able to keep things on track like we did in Q3. The second question was about price increases.

As part of our strategy in the experience pillar, we have product improvement. Product improvement, once it’s well done and in normal conditions, can lead to the sales of higher added value products, but not necessarily price transfer. We’ve been investing in brand, in products, in technology, in the factory, and this is all being done to improve our products. It’s only natural that if this work is well done, we’ll see an increase in the average price if this branding work and product quality increase is done. If there is a macroeconomic problem or a micro problem in our execution, our model can also hold lower prices. Our long-term plan is to improve product and increase average prices, but we also build our efficiency pillar so that if there are hiccups along the way, we can lower prices to sustain volume. And consumers who.

Are tighter. For purchasing. So we’re confident about what we’re building. Perfeito. Claro. Great. That’s very clear. Thank you so much. Thank you. Okay, our next question is from Ruben with Santander. He sent his question in writing. He’s asking if we can update him on the e-commerce, the % of the digital in apparel sales and how this has been evolving throughout the year, and if the growth in marketing expenses has any effects of performance marketing or it all comes from investments in brand. Thank you for your question, Ruben. Our e-commerce strategy is really strong. For several months, we have had robust double-digit growth and even triple-digit, as I like to joke around. This is an increasingly relevant share of our business. The good news is that our e-commerce has the same level of margin contribution as the stores.

When we grow in e-commerce, this is not a detractor of our accumulated margin. We have increased our e-commerce marketing in a proportional way to the e-commerce sales. This is not diluting margins, and we believe this is the model of the future. You’ll see performance marketing expenses growing in proportion to the sales. As we become more profitable, we will invest more in marketing as a whole. Thank you, Andrea. This concludes our Q&A session. Now I turn the floor back to Andrea for his final remarks. Thank you, Isa. Thank you, Miguel, Fran, and everyone else who’s here. You make this event possible, so I want to thank you. I see all your happy faces here at the studio. I would also like to share my view about the future of the company.

I told you about the evolution of our strategic pillars. We have five different pillars that guide our day-to-day execution. We have weekly meetings at the board and the directors in which we dive into different initiatives for each one of the pillars. We use OKR methodology to guide our execution. If the execution is well done and we have focus, we will deliver value. If you ask where we are in this evolution, I see that there is a lot yet to be done, but with a clear focus and disciplined execution, we will continue delivering results that make us really proud and that improve our company’s indicators. That is part of my thinking here. The other part is how can we build a company that has competitive differentials in the long run and that is a long-lasting and thriving company with an ecosystem that works robustly?

I firmly believe that we have to keep on investing in our core business fashion because we have a competitive differential with our integrated model in our factory. This is something we do differently from the others. This is where we stand out and have the right discipline. This is going to keep on generating value in the long run. We are a fashion company. We have an integrated chain. Of course, we work with many different vendors, but we also know that we have the opportunity to do things well, to do them better, and to keep on improving our bottom line. That is one of the elements of our long-term strategy. Another element is the strength of Midway. We see this business as something that adds a lot of value to our ecosystem. The market went in many different directions in recent years, having a financial.

Company or not. Operating with partners. We have shown with Midway’s results that in the last 20-something years that we invested in this business, we created a core business of financial services here, and this generates value in our ecosystem. Fashion financing can help us offer other financial products, and we see no reason why not to use this strength, this scale, this system, this team to keep on offering products that add value to the ecosystem as a whole. This creates more value in the long run, and this is something that we do. That makes Guararapes a much stronger company. Another point that is part of our five pillars that is as important for the long run is that we always have to invest in experience and in our brand. This is going to make our fashion core become even more robust.

We have these clear guiding principles with a clear strategy and disciplined execution and this long-term vision to strengthen our two businesses so that in the future, when we combine them, we can generate value in a way that no one can beat us. Thank you all for your time here today. On December 11, I hope to see you on our Investors Day. We will be able to give you further details then. Thank you so much. See you next time.

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