After a strong recovery of fashion sector actions in Brazil, Santander revised its estimates and reinforced a positive view for the main retailers listed in the Brazilian Stock Exchange. This year’s accumulated, the roles of HERE (CEAB3) 119%rise from Renner Stores (LREN3) advance 55% and Guararapes (Guar3) are up 30%, while Ibovespa accumulates 14% in the same period.
The reason for the review, according to a report by bank analysts, is that the operational and strategic adjustments made by the companies have begun to generate visible results, supporting the expectation of profit growth for this year and 2026.
Renner stores takes the first position in analyst preference, based on the strong projected growth of profits, valuation considered attractive, with a multiple price on profit (p/l) from approximately 10 times to 2026, which represents a 30% discount over the last three years, and high liquidity.
Then, C&A appears, which maintains a productivity gains trajectory with the Energy program and negotiates about 9 times the estimated P/L for 2026, still below the Renner multiple. Guararapes, in turn, maintains a neutral recommendation, while Santander awaits more evidence of the sustainability of recovery.
After facing strong competition from foreign retailers and e -commerce platforms between 2023 and 2024, the Brazilian fashion market is a more balanced environment. The increase in taxes on imported products and the price readjustment promoted by local retailers contributed to Renner, C&A and Guararapes to expand their market share in 2024.
Preliminary data from the first quarter of this year indicate that this trend continues, which supports the projection of sales growth in the same stores (SSS, acronym in English for Same Store Sales) Above inflation until 2026.
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In terms of productivity, Lojas Renner remains in the lead. C&A stores currently operate with a 27% productivity gap compared to Renner, while Guararapes gap is 37%. Santander projects that C&A should reduce this difference to 23% by 2027, supported by advances in the Energy Program.
Guararapes should also have improvement, although at a more moderate pace. One of Renner’s differentials, analysts say, is in e -commerce, which already represents 15% of total sales in 2024, more than double competitors. According to the company, this channel already operates with a margin higher than physical stores, which is not the case with rivals.
The profitability analysis also favors Renner, which should have the highest expansion of EBITDA margin (profit before interest, taxes, depreciation and amortization) between this year and 2027, up 2.2 percentage points (PP) in the period.
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Following are C&A, with an advance of 1.2 pp, and Guararapes, with 0.8 pp according to Santander, the dilution of operating expenses will be one of the main vectors for this gain, especially in the case of Renner, which enters a phase of lower operational investments after years of logistics and technology contributions.
Free cash generation (FCF, an acronym in Free Cash Flow) also positions Renner as the most efficient company in the sector, with EBITDA equivalent to FCF estimated in 2026, thanks to its liquid cash position and higher margins.
Recommendation and Risks
Among the companies evaluated, C&A had the target price adjusted from R $ 14.70 to R $ 23.30, which represents a high potential of 59%, maintaining a recommendation of outperform (above-average market performance, equivalent to purchase). To reach this amount, Santander adopted a weighted average cost of capital (WACC) of 14.8% and a perpetual growth rate of 4.0%.
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The bank points to the main risks the operation of its own financial division, C&A Pay, the slowest recovery of the gross margin on the line of electronics and possible negative effects of a less favorable macroeconomic environment.
The target price of Guararapes, controller of Riachuelo, went from $ 8 to $ 10, with neutral recommendation and 25%appreciation potential.
For the shares of Renner stores, the target price was revised from $ 18 to $ 24.30, with recommendation of outperform and expectation of valuation of 35%. The evaluation model considers a 13.0% WACC and a perpetual growth rate of 4.5%.
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Mapped risks include sales growth in the same stores (SSS, in the acronym for Same Store Sales) below expected, increased competition, worse in the financial operation of the Realize, with default (NPL, English non-performing loans), and difficulties in logistics management, which can lead to inventory rupture.
The report also updated estimates for other companies in the sector. The SBF Group (SBFG3), owner of Centaur, had the target price set for the end of 2026 to $ 10, compared to $ 8 to 2025.
In the case of Vivara (Alive3), specializing in jewelry, the target price was designed for the end of 2025, to $ 28.
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A Azzas 2154 (Azza3), which operates in the women’s and lifestyle clothing segment, had the target price calculated for the end of 2025 of R $ 51.
