Arrezo is one of the highlights, with a price target converted to R$129, an increase of 29.6%
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 revised to R$129, compared to the previous R$111, which is 29.6% higher than the quote recorded in the early afternoon. The buy recommendation is maintained, and the paper is highlighted as one of the sector’s favorites.
According to analysts Ruben Cout and Eric Huang, Arezzo &Co has delivered strong results over the past 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 diverse portfolio of brands.
In addition, the retailer has diversified sales channels and strengthened its e-commerce operations amid the pandemic, while taking advantage of the reopening of brick-and-mortar stores, highlighting brands such as Reserva.
Analysts see strong results for the company in the coming months, with strong expectations for the Vans and Arezzo brands, and see no signs of slowing down.
The target price for Track & Field Preferred Shares (TFCO4) jumped to R$16, compared to the previous R$12, which is 34.4% higher compared to the price recorded earlier. The recommendation was held for purchase.
The report points out that the company is achieving “consistent results”, driven by a favorable trend in sportswear, mainly due to the continuation of events such as “beach tennis” tournaments after the peak of the pandemic.
Analysts say the trend for the coming periods is a slowdown, with a view to normalization after a period of strong growth.
For the second half of the year, however, the numbers should still benefit from the maturation of newly opened stores and the return of revenue from already promoted events. Another emphasis, according to Santander, is exposure among higher-income consumers.
Santander also raised its 2023 price target on Lojas Marisa (AMAR3) from R$2.70 to R$3.00, but maintained a neutral recommendation on the stock. The new price represents a potential increase of 20% compared to the current share price
“Although we highlight Marisa’s positive sales and gross margin recovery in the first six months of this year, the company continues to face a challenging scenario due to the reduced purchasing power of consumers, and MBank (Marisa stores’ financial products and services platform). ) continues to show some signs of deteriorating results,” say Couto and Huang.
Additionally, they point out that Marisa’s own challenges to reignite revenue growth are keeping the company in recovery mode, and even if it’s showing some progress, it’s still far from its full potential.
Santander raised its target price for Lojas Renner (LREN3) ordinary shares to R$37, compared to the previous R$34, representing a potential upside of 32.6% compared to the quote recorded in the early afternoon hours this Thursday. (22). The recommendation was maintained as a buy, and the paper was highlighted as one of the sector’s favorites.
Analysts say the company outperformed its peers in the first half of this year, with retail revenue growing 47% 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 exceeded” consensus market expectations, with strong retail operating results, they said.
The financial segment saw poor results, as the delay led to a 76% year-on-year drop in Ebitda. The peak of delinquency is expected in the third quarter of this year, although income from the loan portfolio is expected to grow.
Renner’s leadership in the sector is expected to continue in the coming years, despite the deterioration of the macro scenario, reflecting the large 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.
Shares of C&A (CEAB3) had their target price revised upwards, from R$3.50 to R$4.00, but have a neutral recommendation, according to the bank.
The new price represents a potential upside of 19.40% from the stock’s current price. The updated estimates include the results published in the last quarter and the latest macroeconomic forecasts from the Santander team.
“Our new estimates assume average revenue growth of 3% in 2022-24, retail gross margin growth of 113 basis points over the same period and virtually flat Ebitda in 2022-23, with this metric rising by 10% in 2024,” evaluates the house. As for 2022, net loss estimates worsened by 8%, while for 2023 and 2024, net profit projections fell by 37% and rose by 7%, respectively.
And in 2021, the company bought back its rights to operate its own consumer finance product, C&A Pay, in what the bank said was a “fundamental move”, enabling C&A to offer customers an in-store credit option. That should boost sales and put it in line with rivals such as Renner, Guararapes and Marisa, analysts say.
On the other hand, while it is an important strategic move, analysts believe that the investment in C&A Pay, along with the still challenging macro environment, could continue to hamper the company’s cash flow generation and earnings growth in the short to medium term.
Shares of Guararapes (GUAR3), the owner of Riachuel, had their target price cut 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 upside of 17.52% from the stock’s current price.
The bank continues to take a more conservative view on the company given the persistence of this performance gap and a still challenging macroeconomic scenario, with high inflation and negative GDP estimates for 2023 that could threaten retail growth.
Couto and Huang, who signed off on the report, base the investment case for Guararapes on the company’s ability to demonstrate that operational improvements and investments focused on technology and digitization are reducing its operational gap with the sector’s long-standing benchmark, 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. Nevertheless, we emphasize that recent results have shown that this performance comparison with Renner is still relevant, especially when analyzing store productivity,” they say.
They point out that, after a mild first quarter, Guararapes’ results improved in the second quarter, especially in the retail segment, where sales in the first six months of this year increased by 27% compared to the same period in the pre-pandemic period. , in 2019.
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