Vulcabras, parent company of Olympikus and Brazilian licensee for Under Armour, claims that its business model, which relies for the most part on in-house shoe production at two modern factories in the Brazilian northeast, is giving it a unique agility in responding to the Covid-19 crisis, positioning it as an attractive “smart choice” among domestic retailers. It should help retailers with their restocking process more than other vendors that rely on imported products during the expected recovery phase in the second half of 2020.

Nevertheless, the intensification of the coronavirus outbreak led to a production shutdown on March 20. The group resumed production only in part on April 26. Capitalizing on a “robust” order backlog, Vulcabras resumed full operations at its factories in July, generating a sales increase year-on-year and preserving margins. Also in July, the company presented its new collections for the second half of the year in an innovative, fully digital format, capturing encouraging preliminary order volumes.

After a positive start to the year, the group’s net revenues were down by 69.8 percent to 327.0 million Brazilian reais (€51.19m-$60.61m) during the second quarter. On the other hand, the company’s online sales went up by 131 percent, with the Olympikus website alone recording a 250 percent increase during the period – although e-commerce only represented 5.3 percent of the group’s turnover in the first half of this year.

Overall sales of athletic shoes were off by 73.6 percent to R$63.2 million (€9.89m-$11.7m) in the second quarter, with a drop in volume of 43.2 percent. The company’s two brands of women’s shoes, Azaleia and Dijean, recorded a similar drop of 72.3 percent. Apparel and accessories fell by a lower rate of 59.6 percent.

Vulcabras’ business model was not helpful in terms of profitability during the quarter. The gross margin decreased by 7.2 percentage points to 26.8 percent in the quarter from the same period a year ago. The Ebitda margin fell by a higher rate of 71.2 percentage points and turned negative at 55.8 percent of revenues. The bottom line showed a net loss of R$75.4 million (€11.8m-$14.0m) against profit of R$30.0 million in the year-ago period.

For the first six months of the year, Vulcabras booked a decline of 46.2 percent in sales, generating positive Ebitda of R$27.9 million (€4.37m-$5.17m). The sales shortfall was largely in line with the evolution of the Brazilian market, where retail sales of clothing and footwear went down by 80.8 percent in April and by 62.5 percent in May. For the full first half of the year, Brazil’s production of footwear showed an increase of 2.5 percent, but sales of footwear to consumers were off by 37.9 percent across all segments.