Azzas 2154 (AZZA3) Q1 2026 earnings summary

Executive summary

• 1Q26 results were below expectations, mainly due to significant revenue drops and underperformance in Vans and Hering, while most other brands, especially premium women's apparel and international operations, showed strong growth.

• Excluding Vans and Hering, group revenue was stable, indicating challenges are brand-specific, not structural.

• Strong operational cash generation and working capital management, with BRL 148 million generated and a BRL 220 million year-over-year improvement.

• Arezzo and Farm Rio brands performed well, with Arezzo up 10% in sell-out and Farm Rio international revenue up 21% in USD.

Financial highlights

• Gross revenue reached BRL 3.12 billion, down 4.4% year-over-year; net revenue was BRL 2.48 billion, down 8%; gross profit was BRL 1.35 billion, down 8.6%.

• Recurring EBITDA was BRL 328.5 million, down 23% year-over-year; EBITDA margin at 13.2%, down 2.7 p.p.

• Recurring net income was BRL 63.9 million, down 45.7% year-over-year, with a net margin of 2.6%.

• Operational cash generation reached BRL 148 million, a significant turnaround from prior year cash consumption.

• CapEx reduced by 27% year-over-year, focusing on high-return projects.

Outlook and guidance

• Margin recovery and operational improvement expected in the second half of 2026, with Hering turnaround and normalization of returns and tax benefits.

• Vans recovery expected mainly in 2027, with 2026 remaining challenging; positive early indicators for Mother's Day and May sales.

• Farm Rio international and premium women's brands anticipated to continue strong growth.

• Strategic focus on balancing sell-in/sell-out, inventory normalization, and disciplined capital allocation.