Balance sheets from the 3rd quarter of fashion retail may reveal the size of the squeeze on consumption

When C&A, Riachuelo and Azzas release their third quarter balance sheets, the market will look beyond revenue. According to InfoMoney, the numbers from these companies can clearly show how Brazilian consumption reacts to a scenario of more restricted budgets.

Economists interviewed by InfoMoney estimate that pressure on consumption should continue to affect retail results in the 3rd quarter. The assessment is that this effect should continue to appear in the sector’s numbers in the period.

XP Investimentos highlights two points. The first is that tight domestic budgets continue to put pressure on consumption. The second is that discretionary spending, those that are not essential, should suffer further deterioration. The two factors help to explain why fashion retail is entering the period with caution.

The most specific data comes from the margin. According to XP, around 53% of clothing companies covered by the bank are expected to see a contraction in their gross margin, an indicator that shows how much revenue remains after the cost of products sold. In other words, even if sales are sustained, profit per piece may decrease.

The horizon is also a concern. According to economists cited by InfoMoney, an uncertain macroeconomic scenario could extend this pressure until the next quarter and until 2027. The challenge, therefore, should not be restricted to a single balance sheet.

What changes for the investor

For those who invest, the balance sheets of these three companies act as a consumption thermometer. If margins confirm the contraction projected by XP, the market should pay more attention to whoever manages to preserve profitability amid weaker consumption. The effect on each role will depend on what the numbers show. This article does not provide price forecasts or suggestions for buying or selling.

Automatically translated from Portuguese.