CGRA3

Grazziotin S.A. is a publicly held company with common and preferred shares traded on B3 under the tickers CGRA3 and CGRA4. Its origin goes back to the history of the Grazziotin family, which started out as a family of merchants in the Venice region of Italy and migrated to Brazil in 1879 in search of new opportunities. The foundation of the business was built by Valentino Grazziotin and his descendants, who combined retail and agriculture in the countryside of Rio Grande do Sul. The decisive step toward forming the current company took place in 1950, when the brothers Tranquilo, Plínio, João and Idalino, financially supported by their father, opened in Passo Fundo (RS) a wholesaler of dry goods and groceries that also operated in retail. This venture evolved quickly, going through phases of wholesale, export and import of products such as grains, wool, weapons and notions, until consolidating a predominantly retail-focused model.

Throughout the 1960s and 1970s, the company expanded its retail operations, initially with a strong focus on home appliances, furniture and construction materials, and introduced innovations for the time, such as in-house installment plans of up to 36 payments and automated sales systems. The physical expansion of the chain began in 1971, with the opening of branches in several cities in the interior of Rio Grande do Sul, supported by a Distribution Center inaugurated in 1974 and by automated administrative processes since then. In 1979, its transformation into a corporation, with shares traded on the stock exchange, marked the institutionalization of governance and the beginning of a new phase of growth. In the 1980s, faced with intense competition in the home appliance retail segment, the company redirected its strategy, shifting to a model of stores focused on fashion and bazaar, which led to the creation of different specialized chains under the corporate umbrella of Grazziotin S.A.

Today, the core business of Grazziotin and its namesake holding company is in retail trade of apparel and related products, complemented by a range of home goods and discretionary items. The company operates mainly in smaller cities, with stores primarily located in municipalities with more than 15,000 inhabitants, after an assessment of market potential and local competitiveness. In the retail segment, its main corporate purpose covers clothing and accessories, merchandise in convenience stores, home appliances and electronics, bedding, table and bath products, sporting goods, drugstore items, camping, cosmetics, décor, gardening, fragrances, household items, and services as a banking correspondent and as an insurance brokerage representative. In 2023, the retail segment accounted for around 72% to 76% of consolidated net revenue in recent years, reinforcing the clearly dominant nature of this activity compared with the group’s other subsidiaries.

Grazziotin’s retail operations are organized under five main banners: Grazziotin, Tottal Casa & Lazer, Por Menos, Franco Giorgi and GZT. Grazziotin stores, present in the states of Southern Brazil, target families and offer a mix that includes men’s, women’s and children’s fashion, footwear, as well as home items in bedding, table, bath and décor lines. The Tottal Casa & Lazer chain, created in 1984, focuses on home and leisure products such as bazaar items, camping, small appliances and kitchenware, with presence in Paraná and Rio Grande do Sul. The Por Menos chain, founded in 1985, targets the value retail segment, with affordable prices and easy credit, offering fashion for the whole family and home items, and operates throughout the South of the country. The Franco Giorgi chain, since 1989, has specialized in men’s fashion, with in-house brand product development. In 2020, the creation of the GZT banner consolidated a new brick-and-mortar store concept that brings together in a single space the product mix of the other chains, seeking operating synergies, cost optimization and higher profitability in cities where there was store overlap.

In addition to physical stores, the company has been developing its digital presence. Beginning in 2018, it launched e-commerce operations with the Franco Giorgi chain and, in 2020, expanded online stores to the Grazziotin, Tottal and Por Menos chains. In December 2022, it launched the GZT Store marketplace, integrating all of the company’s chains and partner brands on a single platform, with a focus on omnichannel experience and convenience. Digital store credit has become the main payment method in online retail, accounting for most of the financial volume of sales, which reinforces the importance of proprietary credit in its commercial strategy. This digital model is aligned with a highly fragmented customer base, without any significant revenue concentration in a single buyer, and seeks to replicate in the online environment the payment flexibility and breadth of assortment already present in the physical stores.

To support sales, the company has developed a centralized logistics and supply structure. All products are purchased exclusively from domestic suppliers through a process led by a purchasing committee that assesses fashion trends, turnover potential and consumer acceptance. Merchandise arrives at the Distribution Center in Passo Fundo already priced, packaged and organized, and is distributed to the stores through a model that combines warehousing and cross-docking, with weekly or biweekly deliveries by third-party carriers. The restocking system is integrated, based on orders generated by each store according to its inventory turnover. There is also quality control and compliance with legal standards, including requirements from agencies such as INMETRO, which is complemented by a rigorous supplier selection process, in which suppliers undergo labor, tax, environmental, and health and safety compliance assessments.

Although the economic focus of Grazziotin S.A. is retail, the company also controls businesses in other segments. Centro Shopping, located in the historic center of Porto Alegre (RS), leases commercial spaces in a five-story building with 7,500 m², currently leased to a single tenant. Grato Agropecuária operates approximately 19,300 hectares at the Ipanema and Santana units, producing soybeans, corn and cotton, sold mainly to trading companies and regional buyers, serving both the domestic market and indirect exports. Grazziotin Financeira offers Direct Consumer Credit and personal loans exclusively to customers of the group’s stores, integrating the installment plan and loyalty strategy. Floresta Grazziotin focuses on the cultivation of pine and eucalyptus in Piratini (RS), monetizing forest assets through the sale of standing timber. While relevant for diversification, these segments represent a minority share of consolidated revenue compared with the contribution of apparel and related retail.

From a regulatory standpoint, Grazziotin does not operate in a heavily regulated market, except for its financial subsidiary, which is supervised by the Central Bank of Brazil. The company has also adapted to data protection frameworks, in particular the General Data Protection Law (LGPD), adjusting internal processes to ensure responsible handling of personal information, which is particularly relevant in a retail operation that is data-intensive in terms of customers and credit transactions. Consumer relations are governed by the Consumer Defense Code, which guides transparency practices in the offering of products and services. In terms of environmental, social and governance practices, the company publishes an annual ESG report and states it is in the process of adapting to international standards IFRS S1 and IFRS S2, in addition to maintaining a Supplier Code of Ethics and audit routines and technical visits to monitor social and environmental compliance in the supply chain. This set of elements makes up the environment in which individual investors assess the performance and risks associated with CGRA3 and CGRA4 shares on B3, based on a discretionary retail group with operations concentrated in Brazil’s Southern Region and additional diversification in credit, agribusiness, forestry and income-generating real estate assets.