Grupo SBF S.A. (SBFG3) Earnings Call Transcript

Good morning, everyone. Welcome to our earnings call for the second quarter of 2026. I would like to thank everyone for your presence here. I have with me Salazar, our CFO; Nikki, our IR Director and Luna, our IR Manager. So our agenda for today, as always, I'll start off with our highlights for the quarter. And then Salazar will step in to talk about the details of our financial results for the group. And lastly, we'll have the Q&A session. Let's go. So this was a very special quarter for the SBF Group, not only for the historical earnings in Centauro and Fisia, but also because we delivered the biggest world cup that was ever executed by the [indiscernible]. So I think it's important to highlight that the success of the world cup isn't just because of an increase in the demand of world cup-related products. It's a result of a combination of many different factors. So the -- I would mention the strategic initiatives that we've been executing since the second quarter last year. Second, very careful planning, not only for Fisia, but also Centauro. And third, the great execution and that those efforts have translated into the figures that we'll present this quarter. So we ended the quarter with net revenues of BRL 2.2 billion, which means 22% growth. We've increased 0.9 percentage points in our margin. So the gross profit was BRL 1.1 billion. The gross profit and net revenue increased positively impact the bottom line. So we've seen a growth of 48.7% of the EBITDA at 11.2% margin, which is a 2 percentage point increase year-over-year. Net income also had significant growth, 62.7%. And and net margin was 6.4%, meaning an increase of 1.6 percentage points year-over-year. So these historical results are a combination of historical results, not only in Centauro but also in Fisia. So Centauro is still presenting very consistent results, presenting a growth of 19% in net revenue, which is 26.3% in same-store sales, 18% growth in brick-and-mortar stores and 4% in digital GMV, and Fisia once again presented very consistent results. Brick-and-mortar grew 13%, digital almost 30% and wholesale stands out at 36%. So like I mentioned, the major highlight for this quarter was the world cup. It was the biggest world cup executed by the company. So to understand the order of greatness, combined, we sold over 1 million item. So 1 million official jerseys for the national team, an increase of 57% compared to the world cup in 2022. We sold 352,000 licensed products from CBF (sic) [ SBF. ] So that's an increase of 80% over the last world cup and 170,000 soccer balls sold, also impressive growth, 80% compared to the world cup in 2022. So this was also the biggest world cup executed by Centauro, and the success is a result of many different factors. So the first one was the assortment that Centauro offered to its customers. In addition to the official jerseys and the official soccer balls, our team of private label and licensed products had specific license products from CBF that was well accepted by consumers. Another very important point was our launch strategy of all the different collections. So we were able to guarantee that all the stores, the 229 stores and digital we're duly replenished with the assortment. So we were able to capture all of the noise that we made in marketing in the launch of these products. So inventory was very important as well. We combined brick-and-mortar and digital inventories. So we sent products to the stores and channels that made more sense. And we also invested in, not sure, for the world cup. So we elevated the display of the products here on this picture, you can see that it's very emblematic, and you can see the mannequin that's showing the -- and elevating the Brazilian National jersey. We've activated in the 229 stores, which enabled the results for the world cup at Centauro to be historical. At Fisia. Fisia success was also a result of many different reasons. We were very accurate in how we determine the price pyramid of the products that Fisia offer to consumers. So there was an offer that fit many different wallets. We had the net model that was BRL 150. There was the [indiscernible] that's BRL 450, that's the flagship for the world cup and a jersey that we called the supporter at BRL 250. So we found that all the styles had a good acceptance. Another thing was the forecast of the demand. This was the second one executed by Fisia. So we have the figures from the last world cup, and we were able to predict in a well-rounded manner, what would happen in our own channels and in the market. So we were very assertive. We had a strategy to launch that was very strong. Overall, at the same time, we activated 330 doors to launch. The Jersey One and Jersey Two, but I believe that the success was mainly a result of how we manage the world cup inventory. Instead of replenishing the channels with the figures that we had for the demand forecast, we replenished the channels as we realized that one channel could have some sort of rupture. So that highly impacted the company's success. And that -- this was just the second world cup, but the results were very expressive compared to the 2022 world cup for Fisia. Well, as I mentioned, historical results for Centauro. We delivered EUR 1.1 billion in net revenues, a 19% growth. Same-store sales of brick-and-mortar stores was at 20%. And GMV Digital grew 34.4%. And to mention that even during the world cup period, we've seen the categories presenting very consistent results. I think that the more emblematic result is what happened with the running category. We continue delivering expressive growth in running footwear, especially high performance. You can see that the soccer category, which was the driver for the quarter, has also seen other subcategories growing such as [indiscernible] launching their second jersey and as well as the soccer cleats because it represents the [ Vasomaracana, ] and that was well accepted by consumers. So in this quarter, the focus was to execute world cup, but we still continue to refurbish the stores. And the refit in the stores, they have presented superior performance to comparable stores. So they continue to grow 10.8 percentage points more than the comparable stores. And in this quarter, we continued to execute. We re-inaugurated 11 stores in the quarter. We started 10 more refits. And in total, we have stores that have already been refurbished from the 101 stores that we announced that we would refurbish. Moving on to Fisia. Fisia also delivered historical results. That was the biggest quarter. And once again, we've seen growth in all channels. So in the channels, we saw 13% growth in stores, almost 30% in digital. We saw 36% growth in wholesale. Wholesale, once again, performed well. We opened two stores according to the NDIS model. So they're incredible in the city of [ Campinos and DelPedro Shopping Mall and in Belize. ] And similar to what we've seen with Centauro, even though the world cup was the driver for growth, we do see growth in other Fisia categories such as running, which continues to grow a lot. Running grew 32% in this quarter and a combination of the new portfolio that we call [ road game. ] We've shown this before. So Pegasus, Structure and Vomero are still performing well. We reset the base of the pyramid, and that's working well. And four of the soccer teams not only [indiscernible] the others that are sponsored are doing well. So Centauro and Fisia have a historical results. Now over to Salazar. He'll go into the details of the financial results.

Thank you, Gustavo. Good morning, everyone. Once again, I'd like to thank everyone for participating in our earnings call. So going into the details of Centauro and the financial performance. It was great performance. Same-store sale was great, obviously, driven by the world cup. And it's also important to note the performance of the world cup product. So when we look at footwear, which is basically a category that doesn't have any specific world cup items. We had 10% growth year-over-year, which is already something that's driven by the Destrava project that started last year. So we can see strong growth focused on the world cup, but well distributed in other categories as well, the X-world cup categories. When we look at digital, we see recovery of growth. GMV at 74.4%, X-world cup category growing a lot, which was running. So we can see performance in the quarter that is well balanced given our expectations in terms of growth. That's mainly driven -- strongly driven by the world cup, the execution of the world cup, like Gustavo mentioned, but also the other categories have very strong performance as well. Gross margin for the company, very healthy, 50.7%, a small drop year-over-year, but in that case, there's a specific matter, which is the fact that we've grown digital a lot. Digital has a gross margin that's a bit under the brick-and-mortar store. So when we have the mix, we have a drop in the gross margin at a very healthy level. So the summary for Centauro for this quarter was very strong growth in world cup. As Gustavo said, a lot of execution, planning, activation in stores, strong growth in digital, recovering growth for actually maintaining the growth that we already have and highlights to the footwear category and world cup. So regardless of the world cup. The stores and website, we're still selling the products that were not specifically related with the world cup. So that was a very important factor for us based on the point of view of continuity. Moving on to the next slide. At Fisia, I'll be a bit repetitive. So obviously, world cup, the Brazilian National jersey, we have some interesting highlights in performance. I believe that we were bold in the jersey inventory and it worked. We sold pretty much everything that we had to sell. Another interesting bet that we had was that we grew the percentage of sales compared to the other world cup in the more expensive jerseys, the players' jerseys and an initiative that was nice for the cheaper jerseys that we called supporter, and we had a great demand for that. So both jerseys, the yellow one and the blue one and the #1 and #2, as people like to call them, we also had great performance in all of them. So in fact, the audience loved the jerseys. There was a strong demand for both. So it was a very positive quarter. In addition, we have some highlights as Gustavo mentioned in running. So with the re-shifting of the running category by Nike, it's still showing results. We continue to grow that category. And that's another example of the X-World Cup products. Obviously, wholesale also has a strong impact from the world cup, but it's important to note that customer relations, customer service, an improvement in logistics to deliver to our customers, all of that work seamless. So obviously, that does drive the world cup results. They also can be used an example for the future of the company. So some things that we wanted to do in terms of improving the quality in services provided, the investments in the showroom and other things that we've been doing have shown results. Obviously, the world cup is important. It's in -- mainly in May and June, where it was stronger. But it shows us that the operations are getting better and that's important for the business continuity for the upcoming quarters. Fisia margin. We've been reiterating in the past that we still had some issues with the pressure of the FX rate. And even the gross margin of the Brazilian National jersey that has a better margin, but still, we're working, and we were saying that we were going to offset the FX effects during the year, especially when it started. In the third quarter last year, we would offset those effects through initiative of taxes that would help to offset those impacts. So now we have the two tax incentives that started up last year and working in the brick-and-mortar stores and wholesale. So without a doubt, that helped us to offset the negative impact of the FX rate. We had a growth in the gross margin of Fisia even with the headwinds of the FX rate against us, so that was very positive based on execution. So through strategies that we were able to implement and not easy because then you have to organize and structure logistics and operations for that. So we were able to offset the FX impact. And that gives us the future positive outlook. On the next slide, we see the growth of the company. We see in net revenues and also in gross profit given the consolidated growth of the company. And that's a result of everything that Gustavo has mentioned. And some things that I've mentioned as well. We were well prepared for the world cup, and we were well prepared with products that were not for the world cup. So 24% growth in gross profit for this quarter is a result of the initiatives that we've had in the past. On the next slide, there's another important point that's becoming clearer is that we're doing strong in controlling our SG&A. We know there's a variable part that will obviously walk hand-in-hand with revenues. So if the revenues grow a lot, the variable cost in performance and logistics and sales, so on and so forth will grow as well. However, we've been showing strong control in the fixed costs. And then you can see a high dilution of the expenses for that quarter. We mentioned last quarter that we had some one-off issues such as royalties and royalties for the soccer clubs that would go back to normal. And we believe that, that is going back to normal, as we had mentioned in the last quarter. So we can show that the company has the expenses absolutely under control, and the company is doing strong work to contain an increase in the operational leverage of the company. On the next slide, the EBITDA is a result of all of that. So we have an increase by 2 percentage points of the EBITDA margin. An increase in net income. We have very strong control in expenses and operational leverage translates into the 2 percentage points increase in the EBITDA margin. And net income has a specific case here, we have some positive factors and negative factors. Positive, the EBITDA increase helps a lot. Negatively, we have increase in net debt. We have more financial expenses. But given everything that we've been doing in terms of the tax incentives to offset the FX rate, we can obtain net results that are very positive because the tax effect is non-taxed and that reduces our effective rate. So we do have an increase in the net margin of the company. A lot of work is being done on that side to increase profitability and based on the rules of the game, pay the least amount of taxes possible, and we've been successful in that -- in the past years. Now moving on to cash flow. For this quarter, I would say that this quarter really follow a regular second quarter. The main point and an important point for us to mention is that, well, we had all of this growth in the first and second quarter, and we maintained the inventory in line with last year. So we're getting ready to the third and fourth quarter. We grew solidly in the second quarter and yet the controls of PME show -- have shown the controlled inventory. And where do I see a differential in this quarter regarding other second quarters, the first point is that to have the world cup as we did. We have to buy first or beforehand in advance. Sales are very much focused, and we can't run the risk of lack of supply. So if I want to focus in May and June, which is the pre-world cup period, and the post-world cup period. And I don't want to run a risk of lack of supply. We might have a problem in that or in ships and wars and so on and so forth. So we have to buy in advance. So that leads to accounts payable where you sell your products and you have 60 days to receive and you pay in 90 days. In this specific case is that when you sell the product in May and June, you have 60 days to receive, but the payment that would become 90 days later is happening at the same time. So you had to bring in that merchandise in advance to avoid a risk of stock out. And not having the Jersey, not because you didn't buy enough, but because you didn't -- the product didn't come in. So that's the main issue with this quarter, where if we had had -- in normal flow, we would have received it in the quarter and accounts payable for the next quarter. So that's the behavior that the we will be coming in the next quarter. So when we look at cash flow. And now moving on to the next slide. We can see the impact to the quarter, and we can see that what happened was receiving the sales that we expected for the world cup. And the cash in the third quarter, and you see higher accounts payable because you bought the product in advance, so you didn't run any risks. And still, if we look at the second quarter, we see operating cash generation, which is enough to pay the investments compared to last year. I think Gustavo mentioned the renovations, the refits, everything that we've been doing and that we're at a higher rate than last year. So even with accounts receivable only coming in, in the third quarter, we generated sufficient cash flow to maintain the net debt stable and leverage between one quarter and the other had a small reduction. So when we look at the snapshot of the first quarter compared to the second quarter, obviously, it's different when we compare it year-over-year, which was at the exact time where we started getting ready for the world cup. We started getting ready for higher growth and getting ready for higher investments. In that period, you can clearly see an increase in leverage. But now we also see certain stability in that leverage. Now we're going into the third and fourth quarter, where we've been over the world cup phase, in the third quarter, we stepping into building our inventory for the fourth quarter and building the inventory will be helped by the leverage that would be higher, and that will be assisted by the cash flow that's coming in. So the leverage is under control. Based on the assumption that we will continue to deliver the results that we have, that means that the leverage would be on a downward trend. So that was important to mention as well. I'm not sure if I have another slide. Oh no, Luna just mentioned that we're done. So now I'll hand over to Gustavo. Now we'll begin the Q&A session. Gustavo and I are available to answer any questions that you may have. Thank you very much. Once again for participating.

Okay. Salazar, before we move on to the Q&A session, I would like to reiterate that we are very satisfied we are very proud with our results of the second quarter. It's showing that this is a result of the strategies that we've made in the past quarters and the performance of our team. I'm very proud of what our team delivered, and I'd like to congratulate the entire team. So that said, now we can begin the Q&A session.

[Operator Instructions] First question is from Danni Eiger from XP.

Congratulations on your results. I have two on my side. First of all, you're talking a lot about the world cup, not by chance. It's a very relevant event. But now the world cup is over, could you give us some information about what you expect, or what you've seen in demand in the category because obviously, soccer was very intense. I know there is running as well. So do you see like a hangover, so to speak, or something in that sense? And what do you see for the future of the company in terms of levers? And the second question, maybe for you, Salazar. Could you help us think about what would be a normal level in terms of expenses now that the world cup is over because there are many points that you mentioned that were mainly related to the world cup. Working on the first cup and that helped this quarter, excuse me, that helped the second quarter. So what would be normal levels for expenses moving forward?

Thank you, Danny. Thank you for your questions. I will start off with the first are starting off with the end part. So you asked -- in the first part you asked about how we see, yes, post-world cup and the prior and the new levers, right, that we're working on. And then Salazar can talk about expects. So about the levers, Danni. I believe that everything that we've been doing, all the strategies and initiatives that we've been executing are, in fact, structural. So all the investments that we've made in the sales teams, the store teams, the constant training, improving the surface given by the sales teams in stores is structural, and we will continue to reap those results. We still have many stores to be renovated. We are very excited with the upside in sales because after the renovations, that's what we see. So there's a lot to be captured with the refit renovations of the stores. Another point that we're looking at is how we replenish stores. So we've been mentioning that we're making investments in secondary distribution centers. There's a very big initiative to improve store with [indiscernible]. Another important thing that we have to mention, Danni, is inventory management. It's the rationalization of inventory combined between Fisia and Centauro. Ever since we internalized operations for the stores, e-commerce and Fisia, we pretty much maintained separate inventories for each one of those channels. And I believe that the world cup was an emblematic example of what inventory management, in this case, such as Nike could offer. So now we're looking at that about how we can manage the group's inventory, how we can take part of that inventory to be closer to the demand, and we're also looking at the supply tool, so replenishment tool. So we look at the entire chain from merchandise coming in to arriving at the stores in digital, having a huge opportunity there. In Fisia, we still see a big growth opportunity with new line stores. We currently have 14 and complete other markets, we see that there is under penetration in those stores. We can see that the categories that Nike decided to invest in are leading to many fruits, such as running. It's impressive growth that we've seen in the running category. So we expect that other modalities at other categories, we would see the same thing. In terms of supply, that would positively impact Fisia. So we see a lot of opportunities for growth moving forward. About the post-cut period, I think you're already accustomed to us, and we don't usually talk about subsequent months. But I believe it's important to note that we are very confident in our capability to execute. Quarter after quarter, we've been showing that we've been able to capture opportunities. We've shown that the categories that were not related to the world cup continue to grow. And that's the idea. We're ready for whatever is coming. Now over to Salazar to answer the second part of the question.

So to repeat the question, basically, expenses, right? So this is what I see. Seasonality of royalties is in order now. The variable expenses always has to do with day-to-day management, right, and trying to do the best we can and integrate that growth, but we don't imagine under any possibilities that we would have any pressure on that line. We're still working and trying to create efficiencies. In terms of fixed costs, especially salespersons in the stores, we had a leap in the second quarter of '25 to this quarter of '26. And that's when we started the Destrava program. And now as of the third and fourth quarters, I would say then that base has already been determined. Third quarter is already getting reinforced stores. the third quarter of 2025 already received reinforced stores because that movement started in the second quarter of 2025. So now this third quarter, should have a base for comparison, which is very close to quarter in the previous year because we haven't made any major movements in increasing expenses after we had that increase in personnel in stores. So I believe that the control that we've had in fixed costs should continue. I believe I said, variable cost that has to do with revenues and try to manage that the best way we can. The royalties, there's a certain seasonality that was normalized now. And in fixed costs, I believe that we should see growth based on inflation much -- mainly based on that and trying to normalize that. That would be my answer. Did I answer your question?

Yes, you did. Congrats on the results.

Next question is from Mr. [ Philippe Rashad ] from Goldman Sachs.

We have two quick questions on our side. I'd like to explore the running category. I believe that the demand is probably good. But I'd like to hear some more details about what's being done in the company to help this category perform well and pretty much in all segments and channels. Second question is qualitative about the gross margin in Fisia moving forward. So the FX rate is a factor that could help as of the second half. So is there any other factors that could help or get in the way of that gross margin in the short term.

[ Rashad, ] thank you for your question. So let me repeat. As always, so the first part is about the initiatives and actions that we've taken to take advantage of the running category. And the second one is about the Fisia margin moving forward, what we could expect. So on to the first part, Salazar will answer the second part. So about running, first thing is that it's a modality. It's a category that things are in favor of that. We see more people using doing that. We see younger people going into running. So that category is moving because we have tailwinds, right? And in Centauro, about Fisia, I think we have a straightforward answer. The focus was the portfolio. So there's a big reset in all the levels of the price pyramid. So in any range of the price pyramid, you will see a renewed product that's well accepted by the market. We've been seeing a better better sales in the channels that we control. And we've been making marketing investments that we call demand creation to accelerate growth. One example of that is the CP marathon that we sponsored. Not sure if you had an opportunity of seeing or running but it was great event with a seamless execution, and we elevated the brand. So that's for Fisia. On -- at Centauro, we see a combination of different factors. The first one was that we hired salespeople that are very much focused on selling footwear. If you go to our store, you'll see that an important part of the footwear [ wall ] is focused on running. It is a very relevant category for us. And a characteristic in that sale is that it's technical, specialized sale. So we've been ensuring not only to have the number of sales people to handle the traffic in stores, but also when we look at that every month, but not only that, also the training to make that team even more skilled. And the other thing is assortment. We have an advantage at Centauro as we are a multi-brand store, so that's a huge advantage for us. We can show the main franchises of all brands and let consumers choose the product, the franchise, the price range that fits their wallet and the technology that's most convenient for them. So having that on the portfolio at Centauro was essential. Visiting the different stores and understanding the type of consumer of each one of these stores with that we were able to open up the distribution of the running products that are more expensive or less expensive. So that had a great impact on sales once again. So first, there's conversion, and then there's a second impact in recurrence. And we've seen that moment in an increase in conversion. And as of that moment, people consider Centauro as their destination for running footwear. Those are our initiatives and the initiatives that we've been having moving forward. Salazar?

Hi, [ Rashad. ] In fact, -- in the second half, we have tailwinds with the FX rate. I think about other things that could affect the tailwinds or even cross that out. I wouldn't say that in inventory, we're fine. We have the World Cup inventory levels ended at levels that were similar to last year in the second quarter of last year. So I don't see any major pressure there to have any markdowns that could eventually pressure the market. I would say that would be a headwind if that existed, but it's not. I believe that we're seeing a movement of margin recovery even we mentioned wholesale, for instance. So I would say but that is a factor. In the event of any inventory issues, we could balance that out, I would say the headwind of the FX rate. I think of stores, I would say they've been successful with the NDIS and that increases the is still small, only 10, 12 stores. But as we open stores, and we have other stores to be opened by the end of the year that would increase share of that channel. So we would have a higher gross margin as well. And that should at least be positive. So in fact, the expectation is that we would maintain the outlook of an improvement in margin as a result of the FX rate. Just trying to think here. It's important to mention, though, we're always thinking of SBF as a group and not the companies individually. So I would say that the FX rate is a positive effect for the margin of the SBF Group. And in each of the business units at this time, we don't see anything that would be a threat for that to happen. That said, what is important to us is the margin of the SBF Group? And why am I saying that? Because you know about the tax issues, you know about the need to monetize tax credit. So we're always looking at the best way to optimize the group's gross margin considering the fact that the margin could be would be transformed into cash. I don't know if I mentioned too many things, but...