October 24, 2017 / 9:00 PM / a year ago

Brazil's Renner beats profit estimates as credit operation gives boost

SAO PAULO, Oct 24 (Reuters) - Lojas Renner SA, Brazil’s biggest apparel retailer, beat third-quarter profit estimates on Tuesday as a strong performance by its credit business and healthy sales at existing stores more than offset rising operational costs.

In a securities filing, Porto Alegre-based Renner said net income totaled 140 million reais ($43 million) in the quarter, up 65 percent from the same period last year, and above a Reuters consensus estimate of 124 million reais.

Same-store sales, a measure of sales at stores open for at least 12 months, climbed 13.4 percent from a year earlier, as a recovery in consumer spending in Brazil gained steam.

The soaring profit highlights how stronger demand and Renner’s effective transition from a traditional department store to a fast-fashion retailer made it an investor darling as Latin America’s largest economy shakes off a painful recession.

Renner’s shares have risen 78 percent this year, helping power a rally among retail and consumer stocks in Brazil, while heavy industry continues to lag a broader rebound.

“It’s true that there was an economic recovery, but we managed our (clothing) collections well,” Chief Financial Officer Laurence Gomes said in a telephone interview.

Net profit from the financial products division rose 49.7 percent from the same period last year, the company said, as it introduced its Meu Cartão rewards program.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 27 percent to 289 million reais, also beating a consensus estimate of 276 million reais.

Operational expenses increased 16.3 percent in the quarter and capital expenditures rose 26 percent to 135 million reais due largely to renovations and construction of new stores and distribution centers.

The company opened 17 new stores in the third quarter, eight of which were part of the company’s flagship Renner brand.

Gomes told Reuters that Renner should open around 65 new stores next year. This year it aims to open 70 new stores.

$1 = 3.25 reais Additional reporting and writing by Gram Slattery; Editing by David Gregorio

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