Lojas Renner (LREN3), one of Brazil’s leading apparel shops, saw its shares fall dramatically on Friday, ending a five-session winning streak worth 9.40%.
The stock was down 6.54% to R$16.86 at 11:20 a.m. (Brasília time), As investors booked profits following the release of the company’s second-quarter 2025 results.
According to local media outlet InfoMoney, analysts were generally pleased with the results, while several lines on the balance sheet raised concerns.
XP: strong sales and gross margin support long-term view
According to XP Investimentos, the results met consensus expectations, with strength in key measures like Same Store Sales (SSS) and gross margin. However, the firm reported that administrative expenses (SG&A) were greater than anticipated.
“Although the result was not above expectations,” says XP, “the figures show important metrics that support our constructive vision for the future.”
These include a high SSS performance that outperformed competitors, thanks to a favourable comparison base and increased retail productivity.
Gross margin also exceeded expectations, which is an important KPI for determining the effectiveness of Renner’s strategic investments. XP retained a buy rating.
Retail segment sees higher margins amid cost discipline
Meanwhile, in retail, XP noted a 0.90 pp y/y (percentage points year on year) in gross margin expansion, which exceeded its expectations by 0.80 percentage points, driven by a more favourable product mix (more winter apparel), lower markdowns, and price increases.
Adjusted EBITDA margin (under IFRS, before tax credits) increased 2 percentage points, with retail contributing 2.90 percentage points of marginal improvement as the company successfully diluted admin costs despite higher variable costs (stock options, bonuses, labour provision).
JPMorgan also saw the outcomes as favourable on an operational level. Renner reported adjusted earnings per share (EPS) of R$0.35, up from R$0.26 in 2Q24; however, the amount was around 10% lower than both the bank’s expectation and the consensus.
This gap was linked to higher-than-expected financial expenses and losses associated with its Realize financial services business.
Nonetheless, JPMorgan observed many positive developments: core retail EBITDA met its revised estimates, while SSS increased 17.3% year on year, exceeding the 15.8% prediction.
Flooding in Rio Grande do Sul lowered last year’s numbers, making a more accurate comparison.
Furthermore, the report noted a higher-than-anticipated gross margin due to minimal markdowns, enhanced responsiveness, and a Retail Business Unit EBITDA margin approaching 2019 levels, implying that a return to peak profitability may occur sooner than planned.
Free cash flow remains strong and is expected to continue returning value to shareholders.
Monte Bravo highlights financial stability amid sector challenges
Monte Bravo also weighed in, emphasising Renner’s robust capital structure. The firm stated that it is currently one of the few Brazilian merchants with a net cash position.
Nonetheless, Monte Bravo recognised that the garment retail field remained problematic, citing competition from international platforms, the changing nature of fashion marketing, fintechs entering the credit space, unpredictable seasonal weather, and increased e-commerce adoption.
“Although we are comfortable with Renner’s thesis today,” said the organisation, “we understand that the segment in which the company operates has been one of the most complex in recent years.” Nonetheless, Monte Bravo maintained its buy rating and target price of R$20.50.
Genial Investimentos mirrored the upbeat tone, estimating that Renner will provide significant profits in the second half of 2025.
Their outlook is supported by increased consumer disposable income, retail expansion initiatives, and a more favourable climate for low-ticket discretionary purchasing. The firm also confirmed its buy recommendation.
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