Santander presented an investment analysis report on the fashion sector this Thursday (22) with some very positive projections for the sector, but some players stand out more than others in this scenario.
One of the beneficiaries is Arrezo&Co (ARZZ3), whose target price was recalculated to R$129, compared to the previous R$111, up 29.6% from the quotation recorded in the early afternoon. The buy recommendation was maintained, and the paper was pointed out as one of the sector’s favorites.
According to analysts Ruben Couto and Eric Huang, Arezzo &Co has had a robust performance in the last 18 months, contrary to other names in the Brazilian fashion segment and exceeding market estimates.
Santander says the company benefits from greater exposure to the high-income market, as well as a diversified portfolio of brands.
In addition, the retailer has diversified sales channels and has strengthened its e-commerce operations amid the pandemic, while capturing the benefits of the reopening of physical stores, highlighting brands such as Reserva.
Analysts estimate strong results for the company in the coming months, with robust expectations for the Vans and Arezzo brands, and see no signs of slowing down.
The target price for the preferred shares of Track & Field (TFCO4) jumped to R$16, compared to the previous R$12, up 34.4% compared to the price registered earlier. The recommendation was held to buy.
The report highlights that the company has been delivering “consistent results”, driven by the favorable trend in sportswear, mainly due to the resumption of events such as “beach tennis” tournaments after the height of the pandemic.
Analysts say that the trend for the next periods is of deceleration, considering the normalization after a period of strong growth.
For the second half of the year, however, the numbers should still benefit from the maturing of newly opened stores and the return of revenue from events already promoted. Another highlight, in Santander’s view, is the exposure among higher-income consumers.
Santander also raised the target price for 2023 of Lojas Marisa (AMAR3) from R$2.70 to R$3.00, but maintained the neutral recommendation for the shares. The new price represents a potential increase of 20% over the current share price
“Although we highlight Marisa’s positive sales and gross margin recovery in the first six months of the year, the company still faces a challenging scenario due to pressured consumer purchasing power and MBank (the financial products and services platform of Marisa stores). ) still shows some signs of deterioration in the results”, say Couto and Huang.
In addition, they point out that Marisa’s own challenges to reactivate revenue growth are keeping the company in recovery mode, and even if it has been showing some progress, it is still far from its full potential.
Santander raised the target price for ordinary shares of Lojas Renner (LREN3) to R$37, compared to the previous R$34, which represents a potential increase of 32.6% compared to the quotation recorded in the early afternoon of this Thursday. (22). The recommendation was kept in purchase, and the paper was pointed out as one of the sector’s favorites.
Analysts say that the company showed a better performance than its peers in the first half of this year, with a 47% growth in retail revenue compared to the same period in 2019. C&A and Guararapes advanced 24% and 22% in the same time frame, respectively. .
Renner’s second-quarter results “significantly surpassed” consensus market expectations, with strong retail operating performance, they say.
The financial segment reported weak results, considering that the delinquency led to a drop in Ebitda of 76% in the annual comparison. The delinquency peak is expected in the third quarter of this year, although the loan portfolio is expected to generate revenue growth.
The expectation is that Renner’s leadership in the sector will continue in the coming years, despite the deterioration of the macro scenario, reflecting a high volume of investments, such as in the new distribution center in Cabreúva. The company’s Ebitda margin is expected to recover to 2019 levels between 2024 and 2025.
C&A shares (CEAB3) had a recalculated target price upwards, from R$3.50 to R$4.00, but have a neutral recommendation, according to the bank.
The new price represents a potential increase of 19.40% over the current share price. The updated estimates incorporate the results released in the last quarter and the latest macroeconomic forecasts by the Santander team.
“Our new estimates assume a 3% average increase in revenue in 2022-24, a 113 basis points increase in retail gross margin over the same period and a virtually unchanged Ebitda in 2022-23, with this metric up 10% in 2024 ”, evaluates the house. As for 2022, net loss estimates have deteriorated by 8%, while for 2023 and 2024 net profit projections have dropped by 37% and increased by 7%, respectively.
And, in 2021, the company repurchased its rights to operate its own consumer finance product, C&A Pay, “a fundamental move”, in the bank’s opinion, allowing C&A to offer customers a credit option for in-store purchases. This should increase sales and put it in line with competitors such as Renner, Guararapes and Marisa, according to analysts.
On the other hand, although it is an important strategic move, analysts believe that the investment in C&A Pay, together with the still challenging macro environment, could continue to hamper the company’s cash flow generation and earnings boost in the short and medium term. .
The shares of Guararapes (GUAR3), owner of Riachuelo, had a target price reduced to R$ 11.20 and a neutral recommendation. The previously calculated target price for 2023 was BRL 12.70. The new price represents a potential increase of 17.52% over the current share price.
The bank continues with a more conservative stance towards the company in view of the persistence of this performance gap and the still challenging macroeconomic scenario, with high inflation and negative GDP estimates for 2023 that could hamper retail sales growth.
Couto and Huang, who signed the report, base the investment case for Guararapes on the possibility of the company proving that operational improvements and investments focused on technology and digitalization are closing its operational gap in relation to the long-standing benchmark in the sector, to Renner.
“We recognize that the company has achieved significant achievements, especially on the digitization front and in its corporate structure, thanks to the professionalization of management. Despite this, we emphasize that the recent results showed that this performance comparison with Renner is still relevant, especially when analyzing the productivity of the stores”, they say.
They point out that, after a mild first quarter, Guararapes’ results in the second quarter improved, especially in the retail segment, where sales in the first six months of the year grew 27% compared to the same period in the pre-pandemic period, in 2019. .
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