Brazilian Giants Arezzo&Co and Grupo SOMA agree on historic Merger

In a significant business move, Arezzo&Co, a leading footwear and accessories conglomerate and retailer, has merged with fashion retailer Grupo Soma. The deal is expected to propel the combined company's turnover to approximately 12 billion reais ($2.3 billion), as estimated by Brazilian Bank BTG Pactual.

The newly formed entity, which is yet to reveal its name, will see Arezzo holding a majority stake of 54 percent, with Soma owning 46 percent. The joint management of the company will involve shareholders from both Arezzo&Co and Grupo Soma. Alexandre Birman CEO of Arezzo&Co will assume the role of CEO for the new conglomerate, while Roberto Jatahy, CEO of Grupo Soma, will be the CEO of the women's fashion business unit, and Rony Meisler, CEO of AR&Co unit, will oversee the men's fashion business unit.

This morning at 11:00 am Sao Paulo time, Birman and Jatahy gave a press conference to express their enthusiasm for the deal and outline details of the company’s future. “It’s with immense joy and pride that we formalize the union of the two groups, creating the largest fashion platform in Latin America, a Brazilian retail fashion giant!,” said Birman.

This merger comes at a time when Brazil's fashion sector, including players like Lojas Renner and Guararapes, has experienced heightened competition due to rising interest rates and the entry of Chinese online fast-fashion retailer Shein into the market.

According to Brazilian Bank BTG Pactual's projections, the combined Arezzo and Soma entities are expected to generate an estimated net revenue of 10.2 billion reais in 2023, positioning them closely behind Renner, leading the sector with $11.7 billion reais.

Additionally, Shein's revenue in Brazil was reported to be around £10 billion reais last year, according to BTG Pactual, as reported by Folha de Sao Paulo earlier today.

Meanwhile, in the first nine months of 2023, Grupo Soma reported a noteworthy 9.9 percent growth in net revenue, reaching 3.862 billion reais ($ 771 million), compared to 3.513 billion reais ($ 701 million) in the same period in 2022. Concurrently, Arezzo's net revenue for the same period in 2023 amounted to 3.422 billion reais ($683 million), marking a substantial 17.1 percent increase from 2.922 billion reais ($ 583.3 million) in 2022.

The financial report for the fourth quarter of these publicly traded companies is yet to be released, but in 2022, the combined net revenue of Arezzo and Soma amounted to $9.1 billion reais (aprox $ 1.8 billion).

The newly formed company will encompass 34 brands from both portfolios, distributed across more than 2,000 stores, including both owned and franchised outlets. The company will operate in four distinct business verticals: footwear and accessories, featuring brands like Arezzo, Schutz, Anacapri, Vans, and others; women's apparel and lifestyle, including Animale, Carol Bassi, Maria Filó, NV, and more; men's apparel and lifestyle; and an affordable range of brands, such as Hering, Hering Kids, Hering Intimates, and Dzarm.

Furthermore, the companies have indicated that this merger has the potential to generate 4.5 billion reais in cross-selling opportunities between the brands. Additionally, there are expectations of cost reduction in administrative expenses, human resources, and technology, with Safra bank estimating an annual reduction of around R$200 million.

Arezzo&Co, established in 1972, has ascended to become Brazil's leading fashion conglomerate. Boasting an impressive portfolio including Arezzo, Schutz, Anacapri, Alexandre Birman, Alme, Reserva, Carol Bassi, Vans, Oficina Reserva, Reserva Go, Simples, Reserva Ink, Reserva Mini, BAW Clothing, TROC, Vicenza, and the Italian sensation, Paris Texas, along with the ZZMALL marketplace, the company's mission revolves around interpreting fashion trends and igniting desires.

On the other hand, Grupo SOMA is a publicly traded company founded in 2010 and listed on the B3 Novo Mercado since July 31st, 2020.

A decade before its IPO in 2010, SOMA began with the fusion of ANIMALE, established by the visionary siblings Roberto and Claudia Jatahy in 1991, and FARM, founded by Kátia Barros and Marcello Bastos in 1997. Subsequently, the Group has experienced remarkable growth and now presides over a portfolio of 15 esteemed brands, including FARM, FARM Global, Hering, Animale, NV, Foxton, Fábula, Cris Barros, and Maria Filó, encompassing the production and trade of clothing and accessories.