November 29, 2016 / 7:12 PM / 2 years ago

Brazil retailer Lojas Renner keeps expansion plan despite recession

SAO PAULO, Nov 29 (Reuters) - Lojas Renner SA, Brazil’s largest apparel retailer, will keep its ambitious expansion targets even as consumer spending in the country shows no signs of recovery, Chief Financial Officer Laurence Gomes told Reuters.

Lojas Renner forecasts it will grow its number of stores to 450 by 2021 from 290 currently. That would imply opening roughly 30 stores per year starting in 2017, a pace faster than in both 2015 and 2016.

The company originally estimated it would reach 408 stores by 2021 but revised that figure in May, seeking to reap the benefits of its efforts to boost operating efficiency amid Brazil’s two-year recession.

“Even in the face of a tough scenario, the company’s profitability improved, cash generation is growing and we reduced debt,” Gomes said in an interview on Friday.

Free cash flow rose 250 percent in the nine months to September from a year before even as sales at stores open for over 12 months remained nearly flat, a sign of increased efficiency despite tepid demand.

Analysts at Goldman Sachs said in a client on Monday that Lojas Renner “offers a compelling structural growth story” supported by investments in its supply-chain, merchandising and logistics, which give it a competitive advantage relative to peers. They hold a “buy” recommendation on the stock.

Common shares in Lojas Renner, which also operates the Camicado and Youcom store brands, fell 2 percent to 22.94 reais in early afternoon trading in São Paulo, paring gains to about 36 percent so far this year.

$1 = 3.4027 reais Reporting by Paula Arend Laier; Writing by Ana Mano; Editing by Bruno Federowski and Paul Simao

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