RIAA3 Guararapes Confecções

Guararapes Confecções S.A. is the company that leads Grupo Guararapes, one of the largest fashion groups in Brazil, with common shares traded on B3 under the ticker RIAA3. The group’s history begins in 1947, when brothers Nevaldo and Newton Rocha opened the fabric store “A Capital” in Natal (RN). Expansion to Recife (PE), with the implementation of a garment manufacturing operation and the acquisition of retail locations, led to the formal incorporation of the company in 1956. Over the following decades, the company went through cycles of industrial growth, retail expansion and corporate reorganization, including its IPO in the early 1970s, construction of new factories in the Northeast and acquisition of regional retail chains. A key milestone was the acquisition of Lojas Riachuelo and Wolens in 1979, which consolidated the company’s entry into fashion retail and redefined its business model, gradually shifting the focus from simple garment manufacturing to an integrated platform encompassing industry, retail and financial services.

Guararapes Confecções’ business model is marked by a high degree of vertical integration, combining three main pillars: merchandise (fashion industry and retail), financial services (Midway Financeira) and real estate (Shopping Midway Mall). In the merchandise segment, the company operates a large garment factory in Natal (RN) and a brand platform that includes Riachuelo, Casa Riachuelo, Carter’s and FANLAB, with 425 physical stores across all regions of Brazil, in addition to e-commerce and marketplace operations. Logistics is treated as a strategic element, with three distribution centers in Guarulhos (SP), Natal (RN) and Manaus (AM), as well as Transportadora Casa Verde, which is responsible for a significant share of distribution between the factory and the stores. In 2024, the merchandise segment accounted for 74.9% of consolidated net revenue, showing that most of the company’s economic value is tied to retail and the sale of fashion items.

At the operational level, the merchandise segment covers the entire chain of design, production and distribution of women’s, men’s and children’s apparel and home fashion items. Product development combines industrial know-how with trend research, analysis of consumer behavior, monitoring of fashion shows, social media and benchmark brands. The design team defines, collection by collection, the mix that will be produced in-house at the Natal factory or outsourced to domestic and international suppliers, including through a trading office in Shanghai (China), which intermediates imports from Asia. The company-owned factory, with 219.1 thousand m² of built area and 402 thousand m² of total area, produces knit fabric and a significant share of knitwear, woven fabric, denim and twill garments, using manufacturing cells to provide agility and flexibility. In 2024, the industrial unit billed R$ 1.6 billion to Riachuelo with the production of 41 million pieces, all destined for the group’s retail chain since 2008, which reinforces the integrated nature of the relationship between industry and stores.

From a channel standpoint, Guararapes Confecções, through its subsidiaries, operates physical stores and e-commerce under an omnichannel strategy. In 2024, the chain had 333 Riachuelo stores, 73 standalone Carter’s stores, 12 standalone Casa Riachuelo stores and 7 FANLAB stores, in addition to Casa Riachuelo and Carter’s shop-in-shop units. The Natal and Guarulhos distribution centers operate in an integrated manner for both brick-and-mortar and digital, with stock management by SKU and automated picking and shipping systems, especially at the Guarulhos DC, which has operated under a push-and-pull model since 2016. The company also offers solutions such as endless aisle, self-checkout, mobile POS, in-store pickup, ship from store and a curated marketplace with complementary brands and categories, forming a multichannel service proposition that integrates logistics, technology and shopping experience.

The financial arm, Midway Financeira, is another relevant component of Guararapes’ model. Although it accounts for a smaller share of net revenue (23.9% in 2024), the segment was responsible for 73.2% of the group’s net profit that year, underscoring its importance in earnings generation. Midway offers private label and co-branded cards, with specific installment terms for physical stores and e-commerce, as well as personal loans, cash advances, insurance and assistance products. Midway’s digital account includes features such as Pix, bill payment and interest-bearing account, integrated into Riachuelo’s apps and digital channels. This financial services structure is used as a loyalty and sales-leverage tool for the retail business, while also diversifying the group’s revenue streams. Midway’s operations are regulated by the Central Bank of Brazil, whose authorization is essential for the functioning of consumer credit activities.

In addition to retail and financial services, the group also operates in the Midway Mall segment, responsible for store leasing, management of spaces and parking operations at a shopping center located in Natal (RN). In 2024, this segment accounted for 1.2% of consolidated net revenue, representing a complementary activity focused on monetizing the group’s real estate assets. Midway Mall manages leasing of stores and kiosks, merchandising, event areas and other common spaces, seeking operational efficiency and recurring income generation. Although less significant in financial scale compared with merchandise and Midway Financeira, the mall reinforces the group’s local presence in Rio Grande do Norte and broadens the conglomerate’s business scope.

Geographically, Guararapes Confecções remains strongly anchored in the Northeast, especially in Rio Grande do Norte, where its headquarters, main manufacturing hub and Midway Mall are located. The administrative head office, in turn, is in São Paulo, the center for corporate decision-making and close to the country’s largest consumer markets. The store network is spread across the entire national territory, and the Shanghai office, opened in 2013, strengthens the group’s negotiating and sourcing capabilities with Asian suppliers. No individual customer accounts for more than 10% of total net revenue, which indicates a highly fragmented consumer base, a typical characteristic of large-scale retail operations.

From a regulatory and governance perspective, the company does not operate in a traditionally regulated sector, but it maintains a set of licenses and permits required for its activities, including environmental licenses, IBAMA certificates, water use permits, licenses for controlled chemicals, business licenses and fire department inspection permits. The move to B3’s Novo Mercado segment, formalized in 2022, reinforces its commitment to more robust governance practices. There is also a structured effort in data protection, with compliance to the LGPD, creation of a privacy department led by a certified DPO, internal and external privacy policies, process mapping and interaction with the National Data Protection Authority, reflecting the importance of handling customer, supplier and employee data for the business.

The ESG agenda is presented as a cross-cutting axis in Guararapes Confecções’ strategy. Since 2021, the company has had formal policies on sustainability, environment, diversity and inclusion, social investments and risk management, integrating environmental, social and governance factors into its business plan. In 2024, it reorganized its ESG strategy under the “Moda que Transforma” (“Fashion that Transforms”) platform, structured around four pillars: fashion that transforms fashion (environmental focus: climate, water, circularity, regeneration and innovation), fashion that transforms lives (social issues such as decent work, diversity and inclusion), fashion that collaborates to transform (governance, value chain, ethics and transparency) and fashion that invests to transform (economic aspects and financial compliance). The company reports progress such as Brazilian GHG Protocol Program certifications with Gold Seal, improved CDP scores in climate change, water security and forests, validation of emissions reduction targets by the Science Based Targets initiative (SBTi) and inclusion, for the third time, in B3’s Corporate Sustainability Index (ISE) portfolio. These initiatives form a context in which Guararapes seeks to align its integrated business model in fashion, retail and financial services with long-term climate risk management, resource efficiency and social responsibility practices.

For retail investors following RIAA3 shares on B3, the FRE portrays a vertically integrated company centered on fashion retail, highly exposed to discretionary consumer spending dynamics, but with complementary pillars in consumer financial services and shopping mall real estate. The integration between factory, logistics, physical stores, digital channels and Midway Financeira, combined with an explicit governance and sustainability agenda, forms the backdrop against which segment results — especially the predominance of revenue in merchandise and profit in financial services — should be analyzed when assessing the group’s economic performance and risk profile.