Away from the corporate spotlight e-commerce traditional, like Magazine Luiza (MGLU3), amazon or shoppea Renner stores (LREN3) remains among the preferred roles of analysts and managers.
In its biannual letter, the oceana evaluated that after many years closely following one of the best managements in Brazilian retail, but without valuation comfort, “we were finally able to make a relevant investment in Renner”.
In the letter, the manager cites four arguments that support her optimism:
- robust balance sheet, with a net cash position of R$ 1.9 billion at a time when the clothing retail sector was very fragile and interest rates were high;
- expressive share gains over time;
- a gradual improvement in profitability after a high investment cycle;
- an omnichannel operation with increasing integration between physical and online retail that gives it an important competitive advantage over purely online competitors;
Oceana recalls that during the pandemic, the Renner accelerated investments in the online channel, carrying out the investments initially planned to be made in 5 years in two years.
“This acceleration of investments naturally brought less efficiency in the operation and between 2019 and 2021 the company saw its retail Ebitda margin drop from approximately 18% to 9%”, he says.
However, the manager states that the company is now starting to capture both cost efficiency and to dilute expenses due to the greater scale.
“These factors already appear in the results of the last quarters. In addition, inventory turnover has also been much more agile, which has benefited the markdown level and consequently the company’s gross margin, something very relevant in the fashion industry”, he says.
For managers, the challenges ahead in the online market are not negligible, but now Renner has
a much more robust operation, which strengthens the company’s competitive edge.
“The growing integration of logistics between the operation of stores and e-commerce provides efficiency gains in freight and shorter delivery time online, in addition to lower markdown in physical retail”, he says.
Additionally, the company’s 2023 price-to-earnings is at around 14x, “considerably below the company’s historical average.”
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Source: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
