Centauro, the largest sporting goods retailer in Latin America, could get extra funds for its expansion as its owner, Grupo SBF, has requested authorization from the Brazilian securities regulator for an initial public offering (IPO).
Centauro is a multi-sport retailer with 187 stores, plus a very active web store. Based in Brazil, Grupo SBF further encompasses a banner of sneaker stores, By Tennis, and Almax Sports. The company also has a retail partnership with Nike for a network of franchised mono-brand stores in Brazil.
As reported by Valor, a Brazilian business publication, the filing to the Comissão de Valores Mobiliários (CVM) says that Grupo SBF generated sales of 1,345 million reais (€351.7m-$412.9m) in the first nine months of this year, up by 6.7 percent from the year-ago period. Reuters adds that the group's net income reached R$229 million (€59.9m-$70.3m) for the period.
The preliminary prospectus obtained by Valor says that Grupo SBF's IPO is intended to pump fresh capital into the company, to open and remodel stores, to increase working capital and amortize debts. It adds that the stores haven't been upgraded for eight years, and that the retailer wants to invest in women's athleisure products. The number of stores has apparently declined, since it had reported 194 in September 2016.
Grupo SBF is currently controlled at 63.5 percent by Pacipar Participações and at 36.5 percent by GP Investments. The latter, which made its first investment in SBF five years ago, says in its quarterly report that Centauro continued to perform well in the first nine months of this year, with a single-digit increase in sales in its physical stores and a double-digit rise for its online sales. The retailer has been implementing an omni-channel retail strategy, with a new concept that was adopted by a first store in September and that should be implemented in three more stores before the end of the year.
Started in Belo Horizonte in 1981, Centauro has become strongly established in Brazil and beyond with large stores carrying a mix of Brazilian and international brands, along with private labels and exclusive deals with some of the brands. Centauro is the only sporting goods retailer that has stores in all Brazilian states, although it has been facing increasing competition from Netshoes. The online retailer raised its sales to $533.7 million last year and its shares started trading on the New York Stock Exchange in April, in an IPO that valued Netshoes at about $558.5 million.
Extracts from company filings in U.S. dollars suggest that Grupo SBF's sales declined significantly from a peak of $881.9 million in 2014 to $528.9 million in 2016, but this picture is badly distorted by changes in the exchange rate of the Brazilian real against the dollar, which increased from 2.35 in 2014 to 3.48 last year. As reported on the same basis, Grupo SBF managed operating profit (Ebit) of $41.3 million last year, up from $6.5 million in 2015, but it ended with a loss of $7.8 million. That was still much better than the loss of $60.8 million reported in 2015.
The projected IPO comes about two years after a change of leadership at Grupo SBF. Sebastião Bomfim Filho, the group's founder and president, handed over as chief executive to Pedro Zemel, a former associate at GP Investments who joined Centauro in 2013 as chief business development officer and then became vice president of sales and marketing.
Several years ago Grupo SBF already started preparing an IPO, which was due to take place in 2013. The plans were floated in 2011, as the company was poised to capitalize on the football World Cup and the Olympics to take place in the country. It reported sales of R$ 1,347 million (€352.3m-$413.5m) for 2010, estimating its market share at about 18 percent. Grupo SBF anticipated at the time that its turnover could reach nearly R$6,300 million (€1,647.5m-$1,934.0m) by 2016 if several investments in its logistics, brand partnerships and online sales worked out. But in the interval, the Brazilian economy has been under pressure.
The filing last week did not disclose a range for the pricing of shares or the number of shares to be sold. The request related to a public offering of common shares and a listing in B3, with admission to the Novo Mercado. B3 is a tie-up formed earlier this year between the BM&F Bovespa and Cetip exchanges, and the Novo Mercado is a listing segment of BM&F Bovespa, for issuers that commit to specific corporate governance practices.
SBF has hired the investment banking units of Banco Bradesco, Grupo BTG Pactual, Itaú Unibanco, Banco do Brasil and Goldman Sachs to manage the issue.