Retail will buy more national product

The fashion retailers have decided to strengthen promotions in this third quarter and replace part of the imported goods by local production, as part of the strategies to reduce spending and lower the level of stocks. The companies plan includes reducing the goal of opening stores and investments to reduce the leverage ratio--a process that can be favorable in the short-term but brings risks for long-term expansion. Together, the companies ' stocks Arezzo, Grendene, Cia. Hering, Marisa Lojas Riachuelo (Guararapes) and Renner totaled r $ 2.2 billion at the end of the second quarter, an increase of $ 393 million in relation to June 2014. The account of stocks increased by 22% compared to the second quarter of last year-period in which the performance of retailers was weaker due to the holidays of the Fifa World Cup. Marisa was the only one who had the reduction in inventory, account of 5.3%, compared to the same period and 2014. The company partnered with the result the work done since last year to lower inventories. The other had increased. Arezzo was discharged from 2.5% in the inventory account. The increases were greatest in Hering (13%), Trade (15.1%) and Riachuelo (49.6%). Even the Renner, who had the best performance among the fashion retailers, with the net profit of 33.5% in the second quarter, closed the period with high of 21.1% in stocks. According to data from the Brazilian Textile Industry Association (Abit), retail sales of clothing fell 5% in the first half and tend to close the year with a fall of 4%, with a slight improvement in the fourth quarter. In the first half, the industry reduced production by 13 percent and increased imports at 13%. For the year, the estimated 7.5% drop Abit on imports, due to the high dollar. For production, the forecast drop of 10%. The Hering and the Riachuelo, which have manufacturing and retail operation, have announced that they intend to reduce imports, as part of an effort to shrink inventory and lower costs with the dollar. Without citing numbers, the two companies reported that will enhance local production of garments to replace the products imported mainly from China and will reduce purchases abroad. The Trade, which also operates in retail with 187 shops Melissa Club, expanded inventories in the second quarter because of production lines in anticipation of the high summer. According to Francisco Schmitt, Chief Financial Officer and investor relations officer of Grendene, the anticipation was made to take advantage of idle capacity and reduce the payment of overtime at the end of the year. Renner reported that stocks of the company are set, in view of the prospect of sales for the coming quarters. Laurence Garcia, Chief Financial Officer and investor relations officer of the Renner, said see little need to lower prices in the third quarter to reduce inventories. The retailer has a direct operation in China which, according to the company, has facilitated the import of products the most favourable costs, mainly of items for the Camicado network. On the eve of the entry of the high summer-spring-summer lines have already arrived to the most-the retailers have urgency to get rid of stocks of winter lines and older Collections. And this spawns will have to be made with further reductions in prices. "Consumers are more price-sensitive than usual. Even on tracks, he wants to promote. The markdown of prices has been relevant in the sector and the expected contraction in profit margin in the third quarter because of this, "said Frederick Oldani, Chief Financial Officer and investor relations officer of Hering. The Riachuelo also reported this week that will make further reductions in the prices of old collections to try to normalize the level of stocks, and the effect will be felt in the profit margin. In the second quarter, just Renner and Grendene had improvement in profit margins. The margin of the Renner 1 percentage point grew to 11.7%, while the margin of Grendene increased 4.6 percentage points, to 22.8%. The Riachuelo was 5.4% drop in profit, to 5.6%; The Hering had fall of 2.3 percentage points to 15.4%; and Arezzo was 1.3 percentage point reduction, to 11.2%.