Grendene S.A. ($GRND3)

Good morning, everyone, and thank you for waiting. Welcome to the video conference for the release of the first quarter of Grendene S.A. 2026. [Operator Instructions] Please note that this video conference is being recorded and will be made available on the company's Investor Relations website, ri.grendene.com.br, where the full earnings release material can be accessed. The presentation is also available for download via the chat icon including in English [Operator Instructions]. We emphasize that the information in this presentation, along with any statements made during the video conference regarding the business prospects, projections, operating and financial targets of Grendene is based on the beliefs and assumptions of the company's management as well as information currently available. Future considerations are not guarantees of performance. They involve risks, uncertainties and assumptions because they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should be aware that general economic conditions, market conditions and other operating factors may affect the future performance of the company and result in substantially different outcomes from those stated in such forward-looking statements. Today, we have the following company executives with us. Rudimar Dall'Onder, the CEO; Gelson Luis Rostirolla, Chief Operating Officer; and Alceu de Albuquerque, the CFO and Investor Relations Officer, as well as all of the company's key managers. I will now give the floor to Mr. Alceu de Albuquerque.

Good morning, everybody, and thank you for your presence in our video conference to disseminate the results of the first quarter of 2026. In this first quarter, we have observed a scenario that's very selective for consumption in the domestic market. And in international market, a little bit challenging with geopolitical conflicts, exchange rate fluctuation. And in the domestic market, we have observed a rationale of consumers that have been suffering with high economic living costs, especially for the low-income people, high interest rates, high indebtedness of the population and also using of the bets and gaming habits, and that's been making the consumers to have less income available for consumers, especially for nonessential items. So in this context, on the first quarter of 2026 reflected an adaptation of a mix of products and categories that we sell and the channels of distribution where we sell our products. We also observed -- we focus in keeping operating resilience in the company, having a very strong discipline and controlling our expenses as we are going to show later. We also focus on the adaptation of a mix of products and categories that are more accessible and channels with more sales like self-service channels and direct services. And we also trust in the robustness of the company, its soundness with the robust cash flow and keeping the continuity of remuneration of our shareholders. Based on that scenario on the first quarter, we performed in value. It grew to 25.7 million pairs. This growth comes from the domestic market that's growing 9.3%, while the domestic market recedes 16.4%. And when we talk about internal domestic market, our growth comes from the brands of Division 1. The brands that grow in volume are Ipanema and the male segment, Rider, Cartago and Mormaii. Our net revenue decreased 3.2%, reaching BRL 683 million, and in the domestic market, the retraction was 1.5%, while in the international market, it was 7.8%. The gross profit decreased 12.7% for BRL 230 million with a gross margin of 43.1%, a decrease of 3.6 pp. The decrease in gross profit is connected to a commercial sales of a mix with less value-added products. It's less revenue per pair when compared to the first quarter of last year and a decrease also a decline in the COGS. It didn't went down with the same comparable to the gross profit, and it went up to BRL 59.1 million adjusted EBIT with the margins of 9.3%, 6.1 pp and the net result is BRL 122 million, a decrease of 24% and also a decrease of 5.3 pp. And now talking about the performance of the domestic market, what we observed in the division brands is that they are growing in volume, 11.9%. They also increase in gross revenue. It's 0.4% growth in revenue and this growth is sustained by the more accessible categories and brands that are more accessible, such as Ipanema and the male segment, Rider, Cartago and Mormaii. We also present a growth in selling in the channels with the high service channels and indirect channels. And the selling has been impacted. It grew 11.9% in volume, but it was impacted by these two channels that sell more products with more accessible prices with less added value. The other lines of division 1, they are also showing decrease in volumes and in revenue. Talking about Melissa now, we observed a more challenging environment with less flow in the stores, which impacted in a negative way the sell-out and volume. It decreased 12.7%. And because of that sellout, this weaker sellout, we also have a decrease in the sell-in similarly, a retraction of 12%. And we can observe the brand preserving its value strategy and growing in gross revenue per paring [ 18.3% -- 7.83% ] and a very strong performance of Melissa in the online channel where it grows 18.3%. Because of this growth that's very robust of 18.3% online, online sales of Melissa in the domestic market, they represent almost 20% of total sales in the domestic market. And we end this first quarter with 476 stores when compared to 419 in the first quarter of last year. When we analyze the external market, the international market is a little bit more challenging with geopolitical conflicts. This conflict, they are causing ruptures and logistics and increasing freight costs, what's been causing delays in deliveries and impacting the performance of sell-out in seasonal markets where the hot season is not the whole year, it's just a few months. So when we have delays in shipping, that will compromise the sell-out. And we have observed competition with Asian products, not only in Brazil, but in all of the markets where we are present. China is coming strong, selling their products in markets -- other markets other from the United States because they're not selling there anymore, and that's been impacting our exports. And we have a growth revenue in exports of 2.5%. This growth in gross revenue, it's a result of a better mix of products sold. Melissa is being more relevant, growing in volume and revenue. And a continent where we have a very positive performance is the North America. If you look here at e-commerce performance, you can observe volume and increase in GMV, 14% in volume, GMV 18%. They grew even though that -- the number of sessions is 2.5% when compared to the last year, it's a smaller number. Gross margin is stable in 68.9%, a small decrease of 0.1 pp and the recurring EBIT coming from our online sales grew 17% for BRL 2.4 million. And we observed the general sales online compared to the total sales in the domestic market, they grew from 6.8%. They are 8.2%. And when we observe this indicator of Melissa only, we can see that total online sales, they represent 19.7% of total sales of Melissa in the domestic market. Here, you can see the gross revenue graph you can see what grew and what decreased. This revenue decreases 3.2%. The volume of the domestic market adds BRL 4 -- BRL 48.5 million, decreasing for BRL 56.5 million, as I mentioned before, because of a mix of less added value, especially Ipanema. The volume in the international market decreases BRL 30.4 million and price and mix because of -- with this mix of Melissa growing and strongly in the international market, we can add BRL 35.1 million. And the 10% that has been more valued in comparison to the first quarter. With this change, we have a decrease in the revenue of BRL 18 million. And our COGS here, as I mentioned before, our COGS has a gross margin decrease is 3.6 pp, representing 56.9% of the net revenue when compared to 53.3% in the first quarter of last year. And this impact is related to labor. This negative impact is directly connected to the mix with more accessible categories. We have smaller margins in these categories and a smaller revenue per pair and a smaller decrease in our manufacturing costs. Additionally, to this effect of a changing mix, we also have an impact in the payroll. We have a -- we started with the first statement installment and last year and this year, we have two other installments. So checking our expenses, we are highly disciplined in controlling our expenses where our recurring expenses, they are stable. they had a small growth of 0.1% when compared to the first quarter of last year. And when we observe our total expenses, they decreased 12.6%. Our sales expenses decreased 9% and our administrative expenses, they grew 4.8%, highly influenced by this payroll. This decrease of 12.6% of total expenses, it's highly connected to the restructuring of GGB that we did throughout last year, and then they are showing their effects now. Now evolving to the EBIT, it decreases 13.1%, going to 47.8 to 41.6%. And the two variables here that impact this decrease in EBIT is the net revenue and COGS variation because all the other factors, except from a small variation in G&A expenses, all the other factors, they contribute for this increase in EBIT. Adjusted EBIT and EBIT, we have a variation of BRL 17.5 million of nonrecurring items. And out of this BRL 17.5 million, BRL 13.5 million are connected to the payment of an agreement with the IRS, and we have the understanding that payments abroad related to licensing, there are no transfer of technology and because of that, but the revenue, the IRS understood different than us. And then we had to establish an agreement to balance this new understanding of the IRS and apart from this extraordinary charge we have, we also have BRL 5.2 million GGB. This BRL 6.4 million and obsolete inventory also impacted. This is our financial results. It was 17% smaller than last year, reaching BRL 73 million. And the major impact in our financial outcome is a smaller profit in our financial obligations because of an average balance of 26.7%, that is declining when compared to last year. And that comes from the extraordinary dividends of almost BRL 1 billion that we announced last year. If you remember the BRL 978 million, we made four installments with that. And out of these four installments, two out of them were paid, BRL 400 million in January, BRL 200 million in March, another BRL 200 million in June and another BRL 178 million in September. And because of this smaller cash balance, we had a 17% decrease. And when we adjust the real estate projects because they ended up impacting our EBIT and our operating results, that is not part of our operation, but it's part of the remuneration of our balance of obligations. This is the results that impact equity in our financial outcomes. So the adjusted one is BRL 74.7 million, a decrease of 13.7% when compared to the same period last year. Our portfolio that we call alternative investments, they used to have BRL 978 million in March this year, 100% of this amount is allocated for projects of real estate development. And when we observe this portfolio since the beginning, it has a profitability of 291.4% of the CDI. Based on all these numbers, as I mentioned before, it was BRL 102 million. We have BRL 25.5 million reserve for fiscal incentives, BRL 17 million for IRS, for taxes and fees. And then we have BRL 56 million for legal reserves and BRL 2 million were tested by the legal reserve. So we have BRL 55.7 million. The administration management proposal is to distribute this BRL 55.7 million, BRL 25.7 million as dividends and BRL 30 million or BRL 24.7 million net as IOE. This amount will be paid to our shareholders on the June 10, 2026. For the shareholders that had shares from 21st of May 2026 onwards. So it's ex dividends from 21st of May. What I had to say was that from this first quarter. Now I'm open for a Q&A session.

[Operator Instructions] Let's start with our first question. There is a big level of discount. What do you think about a program of rebuying the stocks?

Today, we have this program. It's open already. But it's much more related to rebuying stocks to actually go to our program of stock options. Grendene today cannot rebuy stocks because we don't have autonomy, we don't have an accumulated profit because we redistributed our profits, 100%. So we cannot do this action unless we don't distribute dividends anymore, and then we can rebuy our stocks.

Our next question is from [ Javier Eron ]. The company had a strategy of prioritizing the profit to volume. But now in the first quarter of 2026, we saw a difference, a change for products that have less value -- added value. So what can we expect for 2026 because of this action?

Based on this strategy, our strategy reflects the market demand. Our clients demanded and this comes, like I said before, Ipanema and also the male -- masculine segment, but we still have products that are more expensive that have more added value. Actually, we're producing more of these products that are more added value. But the consumers, especially the low-income consumers, they have less income to purchase. So what we decided to do, and this is actually reflecting the sellout of this product and of course, in our selling, it's a bigger amount of products that are more affordable, but we keep producing products that have more -- products that have -- that offer more comfort, products that are softer and lighter. And at this moment, the demand is for products that are more affordable.

And our next question comes from [ Eduardo ]. My question is after the process of taxes over dividends, how does Grendene see this? And what would be the idea for the year of 2026?

We are not changing the policy of dividends. So we will keep distributing whatever is needed to do. So our sellout is not going to be changed in relation to other situations.

The question-answer session is over and the floor is yours, Mr. Alceu de Albuquerque for your final considerations.

Once again, thank you so much for your presence in our video conference, our video call. Thank you. These were the results of the first quarter of 2026. If you have any further questions, our team is there to answer questions, whatever questions you need. And so have a great weekend. Thank you so much.

The video call results of the first quarter of 2026 is over now and the Department of Investor Relationship is there for you any time you need. Thank you so much for your participation, and you all have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]