Brazil's Fashion Retailer Lojas Renner Sales Drop in Q2 Net Income

SAO PAULO, Brazil — Brazilian fast-fashion retailer Lojas Renner SA reported on Tuesday a double-digit fall in second-quarter net profit, as taxes and operating expenses grew while foreign exchange variations hurt margins.

In a securities filing, the company said its quarterly net profit dropped 14.4 percent year-on-year to 235.1 million reais ($62 million), based on new international accounting standards known as IFRS 16.

"This was the quarter with the slowest operational growth, but for the third and fourth quarters we expect a more positive scenario," Chief Financial Officer Laurence Gomes told Reuters in an interview on Tuesday.

He said inventory was at a healthy level even though winter came later than usual in Brazil this year and the company will not need to provide so many discounts in coming months, which should benefit its future margins.

A planned economic stimulus package announced by the Brazilian government last week could also positively impact results, Gomes added.

"Any stimulus measure improves confidence, but what will truly boost the economic recovery is the continuity of key economic reforms," he said.

Lojas Renner's net revenue climbed by 13.4 percent in the second quarter to 2.019 billion reais, while operational expenses increased 1.2 percent to 683.8 million reais. Same store sales growth came at 9.2 percent compared to 12.7 percent in the first quarter and 2.5 percent in the second quarter of 2018.

Adjusted earnings before interest, taxes, depreciation and amortization (EBIDTA) grew by 1.8 percent from a year ago to 441.9 million reais, including both retail and financial operations. Based in the southern city of Porto Alegre, Lojas Renner has successfully transitioned from a traditional department store to a leaner, fast-fashion retailer.

Lojas Renner shares closed 0.25 percent higher on Tuesday at 48.56 reais.

By Gabriela Mello; editor: Tom Brown.