CGRA4 Grazziotion

Grazziotin S.A. is a publicly traded company with common and preferred shares listed on B3 under the tickers CGRA3 and CGRA4. Its origins go back to the trajectory of the Grazziotin family, who began as 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 commerce and agriculture in the countryside of Rio Grande do Sul. The decisive step toward forming the current company occurred in 1950, when the brothers Tranquilo, Plínio, João and Idalino, financially supported by their father, opened in Passo Fundo (RS) a dry goods wholesale operation that also served the retail market. This venture evolved quickly, going through phases of wholesaling, exporting and importing products such as grains, wool, firearms and haberdashery, until consolidating a predominantly retail-oriented model.

Throughout the 1960s and 1970s, the company expanded its retail operations, initially with a strong focus on home appliances, furniture and building materials, and introduced innovations for the time, such as in-house installment plans of up to 36 months 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 growth phase. In the 1980s, in the face of intense competition in home appliance retail, the company reoriented its strategy, shifting to a store model focused on apparel and bazaar items, 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 retail trade in apparel and related items, complemented by a range of home products and discretionary goods. The company operates mainly in smaller cities, with stores located primarily in municipalities with more than 15,000 inhabitants, after an analysis of market potential and local competitiveness. In the retail segment, its main corporate purpose covers apparel and accessories, convenience store merchandise, home appliances and electronics, bed, table and bath items, sporting goods, drugstore items, camping, cosmetics, décor, gardening, fragrances, household utilities and services as a correspondent for financial institutions and as an insurance brokerage representative. In 2023, the retail segment accounted for around 72% to 76% of consolidated net revenue in recent years, underscoring the clearly dominant nature of this activity compared with the group’s other subsidiaries.

Grazziotin’s retail operation is organized under five main banners: Grazziotin, Tottal Casa & Lazer, Por Menos, Franco Giorgi and GZT. Grazziotin stores, present in the states of Southern Brazil, are family-oriented and offer a mix that includes men’s, women’s and children’s fashion, footwear, as well as home items such as bed, table, bath and décor. The Tottal Casa & Lazer chain, created in 1984, focuses on home and leisure products, such as bazaar items, camping, small appliances and kitchen utensils, with operations in Paraná and Rio Grande do Sul. The Por Menos chain, founded in 1985, targets the popular retail segment, with affordable prices and easy credit, offering fashion for the whole family and home items, with a footprint across the entire South of the country. The Franco Giorgi chain, since 1989, has specialized in men’s fashion, with the development of private label products. In 2020, the creation of the GZT banner consolidated a new physical store concept that brings together in a single space the product mix from the other chains, seeking operational synergies, cost optimization and higher profitability in cities where there was overlap of points of sale.

Beyond physical stores, the company has been developing its digital presence. Starting 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 the company’s chains and partner brands on a single platform, with a focus on omnichannel experience and convenience. Digital installment credit has become the main payment method in online retail, accounting for most of the monetary volume of sales, which reinforces the importance of in-house credit in the commercial strategy. This digital model is aligned with a highly fragmented customer base, with no material concentration of revenue in any single buyer, and seeks to replicate in the online environment the payment facilities and broad assortment already present in physical stores.

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

Although Grazziotin S.A.’s economic focus is on 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 and loyalty strategy. Floresta Grazziotin focuses on growing pine and eucalyptus in Piratini (RS), monetizing forest assets through the sale of standing trees. While relevant in terms of diversification, these segments represent a minority share of consolidated revenue compared with the contribution from 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, particularly the General Data Protection Law (LGPD), adjusting internal processes to ensure responsible handling of personal information, which is particularly relevant in a data-intensive retail operation involving customers and credit transactions. Consumer relations are governed by the Consumer Defense Code, which guides transparency practices in offering 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 IFRS S1 and IFRS S2 standards, and maintains a Supplier Code of Ethics and routines for audits and technical visits to monitor social and environmental compliance in the supply chain. This set of elements shapes the environment in which retail investors assess the performance and risks associated with CGRA3 and CGRA4 shares on B3, based on a discretionary retail group with operations concentrated in Southern Brazil and additional diversification in credit, agribusiness, forestry and income-generating real estate assets.