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SAO PAULO, Brazil — Investors would never know Brazilians are cutting back on shopping by looking at Lojas Renner SA's stock performance.
Renner, Brazil’s biggest clothing retailer, is the Ibovespa’s third-best performer this year after it boosted first-quarter sales by about 25 percent from a year earlier. The retailer’s biggest rivals, Cia. Hering and Marisa Lojas SA, are both tumbling after posting sales drops.
Renner's rising revenue and stock rally stand out in a year when Brazilian retail sales are slumping nationwide as economists forecast a recession. While Hering has a reputation for sticking close to basic looks like plain cotton T-shirts, Renner has succeeded by following the fast-fashion model of international brands like Inditex SA's Zara, said Daniela Ribeiro Martins, an analyst at the brokerage firm Concordia.
“We’ve seen them improve margins each quarter,” she said in a telephone interview from Sao Paulo. “Next year should be even better as it focuses on demand and what the consumer is looking for, keeping inventories down and reducing logistics timing.”
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After Brazilian clothing sales fell 7.5 percent in February and 1.2 percent in March, the most recent data available, Renner’s rally could lose momentum, said Guilherme Assis, an analyst at the brokerage firm Brasil Plural.
‘Expensive’ Stock
“There’s little upside for the stock now, it’s expensive,” Assis said in a phone interview from Sao Paulo. He has a recommendation equivalent to hold for Renner with a 12- month price target of 100 reais.
Renner slid 0.8 percent today to 109.05 reais as of 11:15 a.m. in Sao Paulo, paring its year-to-date gain to 43 percent.
Blumenau, Brazil-based Hering, whose 31 percent drop this year through Tuesday makes it the Ibovespa's second-worst performer, has modeled itself after U.S. casual-style retailer The Gap, Martins said. Now, it is struggling to break out of that mold and convince shoppers its looks are trendy, she said.
Renner Chief Executive Officer Jose Gallo said he'll continue to look to Spain's Zara; Stockholm-based Hennes & Mauritz AB's H&M and Japan's Uniqlo Co. for "inspiration." Fast-fashion is a term used by retailers to express clothing designs that move quickly from the catwalk to stores.
“We have a lot of humility at Renner,” Gallo said in a phone interview from Porto Alegre, Brazil, where the company is based. “If someone is doing something better than us, we go and observe it and do it better.”
By Denyse Godoy, Christiana Sciaudone; editors: Jessica Brice, Molly Schuetz.
