Marisa (AMAR3): net loss increases 92.4% in the third quarter, to R$ 196.4 million

Marisa Lojas (AMAR3) reported a net loss of R$196.4 million in the third quarter of 2023 (3Q23), an amount 92.4% higher than that reported in the same period in 2022, the retailer reported last Tuesday (14) .

The recurring consolidated net loss in 3Q23 was R$171.6 million, an increase of 69.9% against a loss of R$101.0 million in 3Q22.

“Our net result was mainly impacted by the reduction in revenue from merchandise sales due to lower inventory levels”, pointed out the retailer.

According to the company, in line with the need to prioritize cash and remain on track to adjust its operations, the abnormal sales result was not a surprise but rather a direct consequence of the minimum restocking, favoring the assortment and basic and less risky products. in terms of modal load and with better turning performance.

“With the recovery of working capital and the reestablishment of the offer to our client, commercial activities in 4Q23 have already normalized and the prospects for the year 2024 are in line with the guidance”, he pointed out.

The company’s “pro-forma” net revenue totaled R$258.8 million between July and September this year, a drop of 48.6%. The “pro-forma” data assume that the operational optimization plan has been implemented since January 2023 and excludes extraordinary adjustments of R$15.7 million and R$135.9 million for 3Q23 and 9M23, respectively, referring to operating expenses related to the closure of 89 stores as part of the restructuring plan and consultancy expenses.

Net revenue fell 50.1% on the same basis of comparison, going from R$634.785 million in 3Q22 to R$316.449 million in the same period this year.

In 3Q23, pro-forma profit before interest, taxes, depreciation and amortization (Ebitda) was negative at R$122.6 million, a worsening of 215.3% compared to negative R$38.9 million of the same period in 2022. The recurring pro-forma adjusted EBITDA was negative 116.6 million between July and September this year, an increase of 207.9% on the negative value of R$ 37.9 million in 3Q22.

Adjusted EBITDA from the retail operation was negative at R$93.4 million, an increase of 212.4% from the negative result of R$29.9 million in the previous year.

According to the retailer, the number was mainly impacted by the reduction in gross retail revenue (with store closures and a reflection of the reduced stock level), despite the 20.2% reduction, to R$211.48 million, in operating expenses year on year, which partially offset the drop in revenue.

“It is worth remembering that a large part of our operating expenses are fixed, weighing more at a time of lower sales”, pointed out the company.

The company points out that it had a significant reduction in expenses year on year, however the specific supply situation did not make it possible to dilute these predominantly fixed expenses. “We understand that, with the normalization of supply and the new, leaner and more efficient expense structure, this should help boost our net result”, he states.

In 3Q23, gross retail revenue was R$350.5 million, 48.3% below 3Q22, impacted by the closure of 89 stores throughout 2023 and 10 stores in December 2022, in addition to the inventory level lower than same period in 2022, impacted by the replenishment challenge directly reflecting on the level of same-store sales in 3Q23.

Gross revenue from physical stores reached R$327.6 million, 48.7% below 3Q22, impacted by the closure of stores last year and a reduction in same physical store sales of 36.2%.

“It is worth highlighting that the store replenishment process throughout 3Q23 occurred as expected with commercial relations returning to normal and we can already see stocks returning to the level that supports sales at the appropriate level for our new retail operation”, the retailer said.

Revenue from sales in the digital channel (website, App and marketplace) was R$22.8 million, 54.9% below 3Q22 due to the continuity of the profitability strategy for this operation started in 1Q23, stated the company.

“In line with 2Q23, we ended 3Q23 with digital’s share of retail revenue at 6.5%, maintaining the same share in the first nine months,” the company pointed out.

Gross profit in retail totaled R$126.3 million, 49.4% down year on year, in line with the reduction in gross revenue.

The gross margin reached 48.8%, 0.8 percentage points (pp) below 3Q22, but 1.2 pp better than 2Q23.

“Despite the lower margin year-on-year, our gross margin in 3Q23 benefited from the lower volume of heavy inventory leftovers (winter products). We were able to balance markdowns on lighter products (which require a lower level of markdown to rotate), in order to preserve our gross margin while boosting the turnover of older stocks to begin replenishing stocks for 4Q23,” the retailer said.

In addition to prioritizing turnover, the company also highlighted discounts for cash payment methods. “Despite the impact that the cash discount had on the quarter’s gross margin, we believe it was an assertive strategy, given the positive impact on our customer financing expenses and improvement in the operating cycle”, he states.

Net debt increased by R$68 million between June 2023 and September 2023, to R$448.5 million, 18% higher over the third quarter of 2023, driven by the reduction in the cash position.

During 3Q23, the retailer highlights that it had a reduction in the consolidated gross debt balance (by 14%, to R$671.3 million), due to debt amortization at both Marisa Lojas and Mbank.

“As announced in October 2023, as a subsequent event, Marisa Lojas contracted a loan of R$65 million with a three-year term from Banco BTG Pactual SA. At first, despite not impacting the net debt, the entry of the new financial resource that marks Marisa Lojas’ return to the credit market, contributed to improving the debt profile with long-term maturities”, he pointed out.

Visions for the coming periods

“We entered the 4th quarter of 2023 as expected, with a more adequate capital structure and reinforced working capital, which also guarantees the normalization of commercial activities. We still have a lot of work to do, but we are sure that Marisa is already a healthier, more efficient company with a culture increasingly focused on sustainable results. This makes us confident that our 2024 projections, already released to the market, will be materialized”, pointed out the company.

Marisa projects gross revenue of between R$2.3 billion and R$2.5 billion for next year; gross margin between 50% and 52%; Ebitda (Ex IFRS-16) between R$100 million and R$130 million; Debt profile of 10% short term and 90% long term and Net Debt/EBITDA between 0.9 times and 1.2 times.