Merchandise Sales up at LOJAS RENNER

19 Feb '09

5 min read

However, it should be noted that the Company ended the quarter with inventories at normal levels, the need for further adjustments being considered unnecessary. Lojas Renner ended the year with a network of 110 stores nationwide, following the unveiling of seven new units during 4Q08 in the cities of Aparecida de Goiânia - GO, Campinas - SP, Porto Velho - RO,
Duque de Caxias - RJ, Porto Alegre - RS, Anápolis - GO and Vila Velha - ES.

RESULTS FROM THE RETAILING OPERATION:
Net Revenue:
Net Revenue from Merchandise Sales reported a year-on-year increase of 2.0% in the quarter, equivalent to an increase from R$ 601.7 million to R$ 613.8 million. Same Store Sales posted a decline of 5.4% compared with 4Q07. This less favorable performance is largely the result of a slowdown in sales due to the global economic crisis, in turn, undermining customer confidence and resulting in a more cautious posture to consumption. Unseasonable temperatures further exacerbated poorer sales results.

Gross Profit:
Gross Profit from Merchandise Sales was R$ 275.4 million against R$ 278.1 million in 4Q07, a reduction of 1.0% in the period.

Gross Margin from the Retailing Operation was 44.9% in 4Q08 against 46.2% in 4Q07. This reduction is again due to lower sales volume and unseasonable temperatures feeding through to higher than usual markdowns.

Selling, General and Administrative Expenses:
Selling Expenses increased by 10.9% from R$ 127.9 million in 4Q07 to R$ 141.8 million in 4Q08. The ratio of Selling Expenses to Net Revenues from Merchandise Sales recorded an increase from 21.3% to 23.1%. This difference is largely the result of weaker sales performance, combined with an accentuated portion of fixed store overheads, such as wages, sales force mandatory social charges and fringe benefits, energy and mall administration fees.

General and Administrative Expenses fell 9.3%, totaling R$ 48.9 million in 4Q08, against R$ 53.8 million posted in the same period for 2007. As a percentage of Net Revenues from Merchandise Sales, there was a decline from 8.9% to 8.0%. This reduction of general and administrative costs is already a direct consequence of certain initiatives implemented by Management particularly in November and December to calibrate the operation to a less favorable macroeconomic environment.

The shortfall recorded by the Company vis à vis the 2008 budget also implied a reduction in expenditure with payouts to employees under the results sharing program. In 2009 Management will continue to focus on reducing expenses, aligning them as far as possible with the new outlook for sales.

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