What Happened in C&A’s Q4 2025
What Happened
C&A Modas (CEAB3) reported fourth-quarter net income of R$313.2 million (~$60 million), a 22.9% increase over the year-earlier period, boosted by a R$62.1 million (~$12 million) reversal of tax-contingency provisions after favorable court rulings reduced the company’s estimated future liabilities. Stripping out that non-recurring item, adjusted net income was R$269.8 million (~$52 million), up 7.9% year-over-year, with the adjusted margin expanding 1.1 percentage points to 10.9%.
Consolidated net revenue fell 3.2% to R$2.47 billion (~$475 million), dragged down by the strategic exit from smartphone sales — a deliberate decision to close dedicated kiosks that had previously contributed to the electronics and beauty segment. Apparel revenue was essentially flat at R$2.15 billion (~$413 million), up just 0.6%, as erratic weather and a more promotional environment weighed on entry-level products.
Adjusted EBITDA (post-IFRS 16) came in at R$560 million (~$108 million), down 5.6% from R$593 million (~$114 million) in Q4 2024, but comfortably beat the R$547 million LSEG consensus estimate. For the full year, C&A delivered record net income of R$470.7 million (~$91 million), up 57.5%, on revenue of R$7.9 billion (~$1.5 billion), up 4.5%.
Key Drivers Behind C&A’s Results
Key Drivers
Margin Expansion Through Mix Shift
The standout feature of the quarter was the gross margin, which surged 4.7 percentage points to 56.1%. Apparel gross margin reached 56.2%, driven by improved product assortment, dynamic pricing, and the ongoing benefit of replacing low-margin electronics with higher-margin beauty products — a category that grew 22.6% in the quarter. The company also recognized tax credits related to the beauty segment, which contributed to the consolidated margin expansion.
The electronics and beauty segment posted a 28.6% revenue decline, but this was entirely by design: C&A completed the shutdown of its smartphone kiosks over the course of 2025, leaving only residual accessory sales. The strategic trade-off is clear — lower top-line contribution but a structurally richer margin profile going forward.
Balance Sheet Transformation and Capital Allocation
Net financial expenses fell 18.1% to R$80.9 million (~$16 million), reflecting lower gross financial costs, reduced currency volatility, and a lower average cost of debt. The improvement is notable given that Brazil’s benchmark Selic rate remains at a restrictive 15%.
C&A ended December with a net cash position of R$83.7 million (~$16 million) — excluding lease liabilities — reversing the R$509.6 million (~$98 million) net debt position from a year earlier. Net debt-to-adjusted-EBITDA fell to approximately 0.4x (based on reported debt excluding the cash reversal), while return on invested capital reached 21.8%. Capital expenditure totaled R$247.7 million (~$48 million) in Q4, up 32%, directed toward seven new store openings, renovations, and technology and supply-chain investments. Full-year capex reached R$545 million (~$105 million), a 51.8% increase.
C&A Pay Financial Services Performance
The company’s consumer-finance arm, C&A Pay, generated net revenue of R$86.1 million (~$17 million), down 14% year-over-year as management adopted a more conservative credit stance in response to Brazil’s high-rate environment. The pullback in interest-bearing installment plans reduced the segment’s contribution but reflects a deliberate prioritization of credit quality over volume — consistent with the approach management outlined after the macro deterioration in the second half of 2025.
C&A Financial Detail and Profitability
Financial Detail
Quarterly and Full-Year Profitability Metrics
Gross profit rose 5.8% to R$1.39 billion (~$267 million) despite the revenue decline, a direct result of the margin expansion. The adjusted EBITDA margin of 22.7% was down from 23.3% in Q4 2024, reflecting the loss of operating leverage from weaker top-line performance — though partially offset by disciplined expense management.
For the full year, adjusted EBITDA totaled R$1.5 billion (~$288 million), an 8.8% increase. Full-year revenue reached R$7.9 billion (~$1.5 billion), growing 4.5% despite the electronics drag. Full-year net income of R$587.1 million (~$113 million) — including the provision reversal — represented a 29.7% increase. Excluding non-recurring items, full-year adjusted net income was R$470.7 million (~$91 million), up 57.5%, a record for the company.
Same-Store Sales and Competitive Dynamics
Same-store sales growth in apparel decelerated sharply to near zero in Q4, down from 8.1% in Q3 and 15% in Q1. The slowdown — which had been flagged to analysts in early January and triggered an 18% selloff in the stock — reflected a weak Black Friday, softer shopping-mall traffic, and intensifying promotional competition across Brazil’s fashion retail sector. C&A attributed the weakness to erratic temperatures and a more aggressive discount environment, particularly in entry-level categories.
C&A Management Signals and Strategic Outlook
Management emphasized that the “Energia C&A” strategic plan remains on track, with the focus shifting toward store renovations and productivity gains rather than rapid expansion. The company opened seven new stores in Q4 and invested in technology and supply-chain improvements aimed at sustaining margin gains even in a softer demand environment.
On capital allocation, management signaled plans to invest roughly 6–7% of revenue in capex for 2026 — implying nearly R$1 billion based on market revenue projections — with the bulk directed toward store openings and renovations now that infrastructure and technology buildout phases are largely complete.
The conservative posture on C&A Pay reflects management’s willingness to sacrifice short-term financial-services revenue to protect credit quality as Brazil‘s interest rates remain elevated. The company noted that higher returns on financial investments and a lower average cost of debt helped offset the reduced lending contribution.
What to Watch Next for C&A
Watch Next
The central question is whether same-store sales can recover from the near-zero Q4 print. The sharp deceleration from double-digit growth earlier in 2025 raises the possibility that the “Energia C&A” turnaround, which has driven margin expansion and share gains over the past two years, is encountering diminishing returns in a more competitive environment. Investors will look for Q1 2026 indicators that the weakness was seasonal rather than structural.
Lojas Renner (LREN3), C&A’s closest listed peer and Brazil’s largest fashion retailer, reports shortly and will provide a valuable read-through on whether the Q4 softness was sector-wide or company-specific. The productivity gap between the two — which Itaú BBA estimated at roughly 38% by store-level metrics — has been narrowing, but a sustained deceleration would slow the convergence thesis that has been central to the bull case.
On the macro front, Brazil’s Selic rate at 15% continues to weigh on consumer discretionary spending and on financial-services profitability. Any signal from the Central Bank on the timing and pace of potential easing would be a meaningful catalyst for the entire fashion retail sector.
C&A Q4 2025 Results Summary Table
| Metric | Q4 2025 | Q4 2024 | YoY |
| Net Revenue | R$2.47B | R$2.55B | −3.2% |
| Gross Profit | R$1.39B | R$1.31B | +5.8% |
| Gross Margin | 56.1% | 51.4% | +470 bps |
| Adj. EBITDA (post-IFRS 16) | R$560M | R$593M | −5.6% |
| Adj. EBITDA Margin | 22.7% | 23.3% | −60 bps |
| Net Income (Reported) | R$313.2M | R$254.9M | +22.9% |
| Adj. Net Income | R$269.8M | R$250.0M | +7.9% |
| Net Debt (ex-leases) | R$(84M) | R$510M | Net cash |
C&A Q4 2025 Revenue by Segment
| Segment | Q4 2025 Revenue | YoY |
| Apparel | R$2.15B | +0.6% |
| Beauty | — | +22.6% |
| Electronics & Beauty (combined) | — | −28.6% |
| C&A Pay (financial services) | R$86.1M | −14.0% |
Key Risks Facing C&A
Risks
The near-zero same-store sales growth in Q4 is the most pressing risk to the investment thesis. If the weakness persists into 2026, the margin expansion story loses its most critical support — volume leverage. With Selic at 15% and consumer discretionary spending under pressure from elevated food inflation, there is a real possibility that the recovery in traffic and conversion that fueled the 2024–2025 rally may stall.
Competitive intensity is rising. Lojas Renner, Riachuelo (Guararapes), and international entrants including Zara and H&M all compete for the same consumer. Shopee’s growing presence in value fashion adds a cross-border dimension to the competitive pressure. C&A’s stock — which surged 77% in 2025 but has fallen roughly 16% since early January 2026 after the SSS leak — already reflects some of this caution, but at a P/E of roughly 7x trailing earnings, further deterioration in operating trends could weigh on sentiment.
On the financial-services side, the conservative posture on C&A Pay limits a revenue and margin lever that was expected to contribute more meaningfully to profitability. If the high-rate environment persists longer than anticipated, the drag from reduced credit origination could become a more material headwind to earnings growth.
Brazilian Fashion Retail Sector Context
Brazil’s fashion retail sector ended 2025 on a softer note than the first half suggested. Christmas-period sales at Brazilian shopping malls rose just 2.6% according to the Cielo–Abrasce index, with physical retail growing only 1.8% — confirming the weaker demand environment that C&A flagged. The sector faces a complex macro backdrop: while unemployment remains near historic lows, the 15% Selic rate is compressing household budgets and diverting consumer spending toward essentials.
Despite the headwinds, Brazilian fashion retail stocks have broadly recovered from their January selloff. C&A shares trade near R$12.60, giving the company a market capitalization of roughly R$3.9 billion (~$750 million) at a trailing P/E of approximately 7x. JPMorgan recently initiated coverage of CEAB3 as its top pick in the sector, projecting a five-year EPS compound annual growth rate of roughly 13%, while Itaú BBA (target R$22), BTG Pactual (R$23), and XP Investimentos (R$18) all maintain buy-equivalent ratings.
The controlling Cofra family has been gradually reducing its stake — now around 52% — which has improved the stock’s free float and daily trading liquidity. Analysts view this as a structural positive that could attract new institutional investors as the company continues to narrow the productivity gap with Lojas Renner, which the Itaú BBA team estimated at roughly 38% on a per-square-meter basis as of Q3 2025.