Alpargatas reported a decline in sales volumes, revenues and margins in the first quarter of 2023, as it focuses on boosting operational efficiencies amid a “challenging” demand scenario and persistent inflation. The Brazilian owner of the flip-flop sandal brand Havaianas is also looking for a new CEO following the resignation on April 27 of Beto Funari.
Funari is being replaced on an interim basis by board member Luis Fernando Ziegler de Saint Edmond. Alpargatas said a successor would be named “in due course”.
Alpargatas sees small decrease in top line
In the three months ended March 31, Havaianas’ revenues declined by 1.5 percent to 894.3 million Brazilian reais (€161.5m). Revenues in Brazil inched up by 1.6 percent to R$575.3 million (€103.9m). International revenues decreased by 6.8 percent at constant currency rates to R$318.9 million (€57.6m).
The small decrease in the brand’s top line came as a 13.4 percent drop in volumes to 48.2 million pairs was largely compensated by a 13.7 percent rise in revenues per pair to R$18.55. Volumes in Brazil decreased by 13.2 percent to 40.6 million pairs while internationally they declined by 14.4 percent to 7.6 million.
At a group level, Alpargatas reported sales of R$902.5 million (€163.0m), down by 2.7 percent versus the year earlier. The gross margin narrowed by 4.5 percentage points to 43.1 percent, driven by higher costs for manufactured products and additional storage costs in Brazil that are expected to decline over the course of the year as inventory drops.
Missed equity purchase payment contributes to net loss
Alpartagas’ Ebitda stood at a negative R$211.6 million (€38.2m) versus a positive R$144.4 million the year earlier while normalized Ebitda sank by 62.4 percent to R$65.8 million (€11.9m), as the company pointed to lower volumes alongside pressures on operating expenses.
Alpargatas reported a net loss of R$199.7 million (€36.1m) against a profit of R$112.1 million the year earlier, mainly due to a R$268.7 million (€48.5m) provision recorded in March after the investor Carlos Roberto Wizard Martins failed to pay the first instalment of the remaining sales price for a 22.5 stake in Alpargatas S.A.I.C. agreed in 2018. Excluding one-off factors, the net loss amounted to R$15.0 million (€2.7m) versus a profit of R$80.1 million in the first quarter of 2022.
At constant currency rates, quarterly direct sales of Havaianas footwear inched down by two percent in the EMEA region and the U.S. The decline in revenues in the U.S. market came despite a 23 percent jump in volumes, where growth was led by e-commerce and off-price channels. Sales in countries where the brand operates through distributors in Latin America and the Asia Pacific region fell by 24 percent.
Rothy’s not immune to challenging environment
At Rothy’s, the native American digital brand in which Alpargatas acquired a 49.9 percent equity stake in Dec. 2021, revenues in the quarter slipped by 3.0 percent to $31.2 million. The loss at the Ebitda level decreased to $8.8 million from $9.4 million while the net loss was trimmed to $9.3 million from $11.0 million. Alpargatas said Rothy’s first quarter “revealed a challenging environment for revenue growth, reinforcing the need to implement initiatives that seek to improve profitability during the year”.
Overall, Alpargatas said its priorities this year are to focus on “selected growth levers, reducing expenses and simplifying structures”. This will entail measures to boost productivity, cut industrial and logistics expenses and improve its working capital, alongside a reduction in selling, general and administrative (SG&A) expenses apart from marketing.
After announcing a simplification of its EMEA/APAC structure in the fourth quarter of 2022, Alpargatas added that it would also be pursuing “rightsizing” initiatives for its “structures and corporate areas” in Brazil and elsewhere in Latin America.
