Alpargatas, the Brazilian parent of the Havaianas, Rothy’s and Ioasys brands, reported net revenue reached Brazil Real (R$)931.8 million in the first quarter, climbing 3.2 percent compared to the same period in 2022. 

The flagship Havaianas brand’s strength in Brazil offset declines in the U.S. and Europe. The increase in volumes sold drove the 3.2 percent overall gain.

Alpargatas’ normalized EBITDA surged 67.1 percent in the first quarter to R$110 million from R$65.8 million a year ago, with the EBITDA margin improving to 11.8 percent from 7.3 percent a year ago. Alpargatas said the improvement in EBITDA this quarter was due to gains in operational leverage with the greater volume of pairs sold, in addition to the improvement in cost and expense efficiency per pair sold. Gross margins improved 260 basis points to 45.7 percent.

The consolidated net income for the period was R$24.7 million against a loss of R$199.7 million year ago. Excluding extraordinary items in both periods, the normalized net income would have been R$31.4 million against normalized net income of negative R$15.0 million a year ago.

At the flagship Havaianas brand, net revenue in the quarter increased 3.0 percent and 4.4 percent on a currency-neutral basis to R$921.1 million, reflecting higher sales volume; however, the net revenue per pair decreased 5.1 percent on a reported basis and 3.8 percent on a currency-neutral basis, mainly driven by the geographical mix effect with the Brazilian operation gaining significance compared to 1Q23 and the reduction in price per pair in international markets. Alpargatas said, “This decrease in net revenue per pair is primarily explained by the mix between regions, as the USA lost relevance and international distributor markets gained compared to 1Q23.”

Havaianas Brazil segment net revenue climbed 14.0 percent year-over-year to R$655.8 million, with an increase in revenue per pair of 1.8 percent. Havaianas International segment net revenue fell 13.5 percent on a currency-neutral basis year-over-year to R$265.3 million for the quarter, driven by negative performance in the U.S., Europe and distributor markets.

Addressing the U.S. performance in its commentary, Alpargatas said, “In the United States, we are still in the early stages of implementing our channel strategy. In 1Q24, we experienced a 20 percent YOY volume decline, mainly due to reduced discount levels and the decreased relevance of the off-price channel. The positive counterpart of this movement appeared in revenue per pair growth and improved gross margin.”

The gross profit of Havaianas was R$418.6 million this quarter, an increase of 8.7 percent versus the previous year. The total gross margin of Havaianas was 45.4 percent, an increase of 2.3 percentage points versus 1Q23. Excluding effects from additional costs related to write-offs of raw materials and finished products, the gross margin would have been 1.6 percentage points higher.

The consolidated EBITDA of Havaianas reached R$107.5 million, with an EBITDA margin of 11.7 percent. Adjusting for the impacts caused by write-offs, EBITDA would have reached R$121.8 million with an EBITDA margin of 13.2 percent, an expansion of 5.2 percentage points year-over-year. Excluding also the impact of the additional provision for labor litigation, the total Havaianas EBITDA margin would have been 14.9 percent.

The normalized net income of Havaianas was R$39.4 million vs. R$15.5 million in 1Q23.

Among other brands, Rothy’s achieved a net revenue of US$34.3 million in 1Q24, representing a 9.8 percent growth year-over-year, driven primarily by the higher volume resulting from newly launched products during the quarter and strategic discount and promotion events. The gross margin improved by 6.6 percentage points year-over-year. This improvement was attributed to increased industrial efficiency, reduced China-U.S. freight costs and lower last-mile delivery expenses. SG&A expenses decreased 10.5 percent, driven by optimized marketing investments that led to lower customer acquisition costs. Additionally, general and administrative expenses were optimized. Rothy’s EBITDA for the quarter was negative U.S.$1.5 million, against negative U.S.$8.8 million a year ago.

Image courtesy Alpargatas/Havaianas