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UPDATE 1-Brazil's Renner misses profit estimates as expenses jump
April 26, 2017 / 12:41 AM / 8 months ago

UPDATE 1-Brazil's Renner misses profit estimates as expenses jump

(Adds details in paragraphs 3-7)

SAO PAULO, April 25 (Reuters) - Lojas Renner SA, Brazil’s No. 1 apparel retailer, missed first-quarter profit estimates on Tuesday, as surging expenses linked to store openings offset the impact of higher sales volumes.

In a statement, Porto Alegre, Brazil-based Renner said net income totaled 67 million reais ($21 million) last quarter, compared with 65.5 million reais a year earlier. Analysts projected profit of 70.3 million reais in the period, according to consensus estimates compiled by Thomson Reuters.

Sales at stores opened for at least a year, or same-store sales, rose for the first quarter in three as customers welcomed an early launch to Renner’s winter collection. Still, margins narrowed despite a tweaked sales strategy, better logistics and affordable prices for the new collection.

The pace of same-stores sales has remained roughly stable in the first weeks of April, Chief Financial Officer Laurence Gomes said in an interview after quarterly results were released. Sales could get a boost from Mothers Day in May and the Brazilian equivalent of St Valentine’s Day the following month.

“It’s too early to gauge trends for this quarter because of those dates and the behavior of weather, too,” Gomes said.

The numbers underscored the challenges facing Chief Executive Officer José Galló as Brazil endeavors to emerge from a severe recession. Galló has relied on cost-cutting and operational efficiency to weather declining demand for the apparel and kitchenware that Renner sells nationwide.

Earnings before interest, tax, depreciation and amortization, a gauge of operational profit known as EBITDA, came in at 190.4 million reais, well above consensus estimates of 119.8 million reais.

Net revenue rose 14.7 percent, more than expected, although the profitability of Renner’s retailing operations slipped to 54.4 percent of revenue in the quarter. A year earlier, the so-called gross retailing margin had totaled 55.6 percent.

Management will discuss results at a conference call with investors early on Wednesday.

$1 = 3.1505 reais Reporting by Paula Arend Laier and Guillermo Parra-Bernal; Editing by Jonathan Oatis

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