LOJAS RENNER S.A. FINANCIAL STATEMENTS 2022
Management Report | 3 |
Social Balance Sheet | 30 |
Balance Sheets | 33 |
Income Statements | 35 |
Statements of Comprehensive Income | 36 |
Statements of Changes in Equity - Parent Company and Consolidated | 37 |
Statements of Cash Flows | 39 |
Statement of Value Added | 40 |
Explanatory Notes to the Financial Statements | 41 |
Board of Directors, Board of Executive Officers, Fiscal Council and Controlling | 98 |
Report of the Audit and Risk Management Committee | 99 |
Opinion of the Audit and Risk Management Committee | 102 |
Independent Auditor's Report on Individual and Consolidated Financial Statements | 103 |
Opinion of the Fiscal Council | 107 |
Management Proposal for Capital Expenditures Budget | 108 |
Statement from the Board of Executive Officers on the Financial Statements Statement | 109 |
of the Board of Executive Officers on the Report of the Independent Auditors | 110 |
MANAGEMENT REPORT 2022
Introduction
In compliance with the legal provisions and in accordance with Brazilian corporate law, Lojas Renner S.A. presents as follows its Management Report, with comments on the operational and financial results for the fiscal year ending December 31, 2022. This report is complementary to the Company's Financial Statements, which comply with the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB). The content presented herein is aligned to the Company's Integrated Report which respects global best practices and IIRC (International Integrated Reporting Council) guidelines.
Message from the Management
The year 2022 was marked by important developments in the Company's projects and by further investments in the consolidation of our Fashion and Lifestyle ecosystem which has brought us continuity in the increase of the active customer base, now totaling 18.7 million, as well as greater productivity in our businesses.
Operationally, the year began still with a degree of uncertainty in relation to the pandemic. However, with the gradual recovery in mobility, we were able to report a sequential improvement in sales, the Company turning in particularly robust year-on-year growth in 2Q. In this context, Net Revenue from retailing was R$ 11.6 billion, an increase of 21% in relation to the preceding year and 37% compared with 2019. And this despite a more challenging second half impacted by atypical temperatures, general elections, the FIFA World Cup and a macroeconomic environment characterized by reduced consumer purchasing power - a reflection of accumulating inflation with record leverage and delinquency. Set against these conditions, Youcom's 39% year-on-year growth performance over the year merits particular mention.
Additionally, sales performance combined with the optimization of the integrated inventory plus the use of data in our processes, have contributed to lowest levels of markdowns in recent years. With this, gross margin continued its upward trajectory to reach 55.3%, a 1.1 p.p. increase compared with 2021.
In 2022, online operations took on an even greater significance, reaching a 13.5% penetration and with ~250% more assortment at the disposal of the customers, mainly through the marketplace vehicle, officially launched and named Alameda Renner. Digital GMV rose 25% vs 2021, with increased representativeness of the new channels - marketplaces, Favoritos Renner, B2B and WhatsApp. The Camicado and Renner platforms expanded the number of categories over the period, ending the year with 505 and 362 sellers, respectively. In addition, a new home page was launched for the Renner app with architecture, performance, and search engines all upgraded. Thus, the Renner app was one of the 10 most used by Brazilians in 2022, in the retail category, in a survey carried out by Hibou, a market insights consultancy.
Accelerated growth of digital in recent years has resulted in a more intensive agenda for efficiency gains in the channel where we are focusing improvements in service and productivity. In line with omni-journey investments, the migration of operations to the new Cabreúva DC, unveiled in 2022, are occurring in line with plan, the process expected to be concluded in the third quarter of 2023. The rollout of this new DC is an important step in capturing synergies between the different businesses of the ecosystem and will permit efficiency gains in the physical and digital operation, also being one of the key elements in the evolution of profitability. Cabreúva is a totally omni DC which will enable the integration of the physical and digital operation, making exclusive use of SKUs, in turn, reflecting in greater optimization of inventory, fewer markdowns, improved productivity and more assertive store fulfillment. We have also acquired the startup Uello, a natively digital logtech, its focus on the optimization of corporate deliveries. As a result of these and other initiatives, the percentage of deliveries in D+2 in Brazil reached 48%, an increase of 12p.p, and in the metropolitan regions of São Paulo and Rio de Janeiro, accounted for 75% of deliveries, an increase of 14p.p. In relation to freight expenses on online sales, it reduced by 3p.p.
The content and branding front has also played a fundamental role in CAC (Customer Acquisition Cost) optimization. In the year, we aired digital fashion shows, lives of different formats and activations with influencers. These initiatives have brought greater flows, awareness and engagement, contributing to the reduction of CAC participation over online revenues. As a result, Renner become the Brazilian fashion company with the largest number of followers in the social networks.
During the year, we rolled out 40 stores of which 21 were Renner, 11 Youcom, 4 Ashua and 4 Camicado, 30 of the new stores in cities where previously we had no footprint, in line with the Company's plan of expanding to new municipalities. As we have announced, these units have a more accelerated maturation curve with profitability above the average. At the stores, we are advancing in the digitalization of the customer journey with more agility in processes and service. In this context, we are increasing the relative importance of alternative checkout modalities with a greater number of mobile devices in the hands of instore employees. Also, we are the only company in Brazil to operate self-service totems with RFID technology, and this year, we installed more devices totaling 133 stores, which reach up to 25% of their revenue in this modality. In addition, the Pague Digital feature whereby the customer pays using their own smartphone, has gained traction with a 7% participation. These initiatives have reflected in greater efficiency for our operations as well as a more digitalized and enchanting journey through our stores, which among other factors, contributed to a growth of 8% in the omni-customer base.
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In line with our strategy of expanding the offer of innovative products and services, in October we launched our Estilo Orbi Loyalty Program and the Orbi Bank digital financial platform, reinforcing our relationship with consumers throughout the entire Fashion and Lifestyle ecosystem. The Loyalty program offers rewards to the most assiduous of the Company's customers, while the Orbi Bank platform provides a complete and differentiated financial experience, potentializing the benefits journey.
Still in the matter of financial solutions offering, the institution's client base increased 5% compared with 2021, in parallel with growth in services revenue, the latter accounting for a 25% share of the total in 2022. Realize's results for the year were impacted by a more challenging scenario for credit and delinquency and affecting the banking sector. Several actions in client capturing, maintenance and collection were taken, such as a reduction in the approval rate, considering different profiles and their risks, higher negotiations, an increase in service positions e anticipation of the billing rule, as well as a new balance in approvals across different channels and products. As a result, the new cohorts already showed better quality.
In addition, in March we launched RX Ventures, our Corporate Venture Capital fund with a capital of R$ 155 million, which seeks to invest in the growth of startups focused on innovative solutions for the ecosystem. The first investments were in the logistics startup, Logstore, and in Klavi, which operates in the financial services area.
On the ESG front, we renewed our strategy focused on the building of human and diverse relations, on climate, circular and regenerative solutions in addition to expanding connections in the search for solutions along the value chain, setting new goals for 2030. For the nineth consecutive year, we were components of B3's Corporate Sustainability Index (ISE) as well as featuring as the leading fashion retailing company in the Dow Jones Sustainability Index and inclusion in the S&P Global Sustainability Yearbook for the fifth consecutive year with the highest score among retailing companies worldwide. Also, we unveiled 2 stores which employ the circular economy concept.
Set against the foregoing scenario, our total EBITDA reached R$ 2.5 billion in 2022, a growth of 43% compared with 2021 while ROIC increased from 6.7% to 12.8%, reinforcing the Company's commitment of recovering profitability and return on capital. In turn, Net Income reported an increase of 104%, totaling R$ 1.3 billion, of which 50.2% distributed as shareholder remuneration. We concluded the year with a cash position of R$ 3.5 billion and net cash of R$ 1.1 billion. With a view to greater efficiency in capital structure and shareholder returns, we repurchased 18 million shares in 2022 and anticipated the payout of earnings as well as amortizing debt. We also totaled R$ 1.0 billion in CAPEX, employed on several fronts and in 2023, we intend to invest a similar amount, allocated largely to the rollout of approximately 40 new stores - some 20 under the Renner banner, 75% of which in new municipalities - that bring not only growth in the physical sales area, but also leverage online. We will also invest in refurbishment to update the layout, which generate greater productivity in operations, as well as investments in the ecosystem and IT development.
The year 2022 was one of challenges, albeit undoubtedly, also one of evolution and lessons learnt! And now moving ahead into 2023 with strategic priorities bringing further opportunities of accelerating growth and creation of value through differentiation and focus on the consumer. Thus, in addition to the store expansion plan in new cities, inculcating greater productivity at a lower operational cost, we shall continue seeking to consolidate our position as a leading reference in fashion and lifestyle, in responsible fashion and in enchanting the consumer journey.
Our priorities will continue to be directed to improving time to market, seeking to integrate the supplier's network with the process of developing collections, making the entire chain more flexible and agile to the demands of the customer, with gains in efficiency and precision and in a sustainable manner. We shall also be investing in our technological and logistical platform and highlighting the ramp-up of the new DC, already mentioned above, this to translate into transformational benefits to our physical and digital operations and in the consolidation of our omnichannel model. In line with the advances in the omni experience, we will accelerate the customers conversion from single to omnichannel, which brings gains in spending and frequency, and we will continue to gain scale in digital channel, with profitability, this requiring not only improvement in the services offered but also in greater assortment (1P and 3P). From the value equation point of view, in addition to the benefits of the new logistics platform themselves, the attraction and retention of organic flows are fundamental for a continued reduction in CAC through initiatives for fostering the generation of content and loyalty. And we shall also continue to advance in recovering profitability and attractiveness in the offer of financial solutions. So it is that we move into the new year, aware of the external challenges, but convinced of our capacity to continue gaining market share, enchanting our customers, and creating value for our shareholders!
And finally, a vote of thanks to our employees, directors and executives for their engagement and dedication; to our suppliers, for their commitment to our operations; to the shareholders, for their trust in our Company, and to our customers and the community at large, who maintained their complicity with the brands in the ecosystem.
José Galló | Fabio Adegas Faccio |
Chairman of the Board of Directors | Chief Executive Officer |
Porto Alegre, February 16, 2023 |
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Highlights
Net revenue from retailing sales rose 21% and 37% vs 2021 and 2019, respectively
Youcom: high performance in sales, +39% vs 2021
Sales for 2023 so far are in line with expectations
Consistent share gain (+7p.p vs PMC-IBGE)
Digital GMV: +25% with 13.5% penetration. Marketplaces reached 8.5% of Digital GMV and ~860 active sellers
Launch of the Estilo Orbi Loyalty Program and the digital financial platform Orbi Bank
Record-setting enchantment highly satisfied customers: 93.7%
Markdowns at the lowest levels in recent years
D+2 delivery: BR +12p.p.(48%) and Rio de Janeiro/São Paulo +14p.p. (75%); Reduction of 3p.p. in freight expenses over online sales
Accelerated content production: Over 3 thousand activations and 150 live broadcasts
- CAC/Digital Sales decrease 2.8p.p.
Total EBITDA (post-IFRS16) of R$ 2.5 B, +43%; Record Net Income of R$ 1.3 B, 2x vs 2021
Free cash flow generation of R$ 182.8 MM (+449.4 MM vs 2021)
12.8% ROIC (+6.1p.p.): improved return and capital structure progress
Acquisition of Uello, a logtech focusing on corporate deliveries optimization
Ramp-up of the totally omnichannel Cabreúva DC
50% payout with R$ 648MM in ISE distributed to shareholders
18.7MM active customers in the ecosystem (+6%). Omnichannel customer base +8%
Launch of RX Ventures, with R$ 155 MM in equity capital, for investments in startups, with two contributions made
Renewed ESG strategy with new 2030 targets
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Lojas Renner SA published this content on 16 February 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 February 2023 23:05:07 UTC.
