C&A Modas (CEAB3) Q2 2024 earnings summary

Executive summary

• Apparel net revenue grew 13.1% year-over-year in 2Q24, with same-store sales up 13% and gross margin expanding for the 10th consecutive quarter.

• Adjusted EBITDA rose 28.8% to R$359.5 million, and adjusted net income reached R$58.1 million, both significantly higher than 2Q23.

• Net revenue for the half-year ended June 30, 2024, reached R$3.28 billion, up from R$2.88 billion year-over-year, with net income of R$154.7 million compared to a net loss of R$122.1 million in the prior year period.

• C&A Pay digital cards issued surpassed 6 million, now representing 26.9% of retail sales, and the C&A Pay portfolio grew 45.2% year-over-year.

• Continued deleveraging, with net debt/EBITDA ratio improving to 1.4x from 3.8x a year ago.

Financial highlights

• Consolidated net revenue increased 11.5% year-over-year to R$1,831.6 million in 2Q24.

• Apparel gross margin reached 57.7%, up 1.3 pp, and consolidated gross margin was 56%, up 2.5 pp.

• Net income was R$83.9 million, up from R$4.2 million in 2Q23; adjusted net income was R$58.1 million.

• Operating cash flow for the half-year was R$310.5 million, with a net decrease in cash and cash equivalents due to significant debt repayments and investments.

• Adjusted EBITDA margin (post-IFRS16) was 19.6%, up 2.6 pp year-over-year.

Outlook and guidance

• Management expects growth opportunities in 2H24 with the spring-summer collection and further benefits from the C&A Energy Strategy.

• Investment volume is expected to increase in the second half as Energy Strategy projects advance.

• Plans to open 5–10 new stores in 2025, with a focus on quality locations and sales per square meter.

• A new debenture issuance in August 2024 will extend debt maturities and improve the capital structure.

• Management expects to realize deferred tax assets over the next several years, supporting future profitability.