—results webcast. For those who will need simultaneous interpretation, please note that this feature is available on the platform. To access it, simply click the globe-shaped Interpretation Icon at the bottom of your screen and select your preferred language, Portuguese or English. If you are listening to me, this is João, and I am going to be your interpreter for today. You are already in the English channel. For those listening to the webcast in English, there is an option to mute the original Portuguese audio by clicking "Mute Original Audio." Please be advised that this webcast is being recorded and will be made available on the company's IR, Investor Relations website, ri.alpargatas.com.br, where the complete material from our earnings release is available.
The presentation can also be downloaded via the Chat Icon, including in English. During the company's presentation, all participants' microphones will be disabled. Afterward, we will begin the question -and -answer session. To ask questions, click the Q&A Icon at the bottom of your screen and type your question to join the queue. When your name is announced, a prompt to activate your microphone will appear on the screen, and you should then activate your microphone to ask your question. We advise that all questions be asked at once. We would like to point out that the information contained in this presentation and any statements that may be made during this webcast regarding Alpargatas' business outlook, projections, and operating and financial targets constitute beliefs and assumptions of the company's management, as well as information currently available.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions as they relate to future events, and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operating factors may affect Alpargatas' future performance and lead it to results that differ materially from those expressed in such forward-looking statements. Joining us today are the company's executives, Mr. Liel Miranda, CEO, Mr. André Natal, CFO and Investor Relations Officer, and Ms. Melina Rodrigues, Investor Relations Director. I will now turn the floor over to Mr. Liel.
Good morning, everyone. It is a big pleasure to be with you today about our third quarter's results. Before going on into each one of the pillars of our strategy, the overall message is that this was one more quarter that showed the consistency of our results, showing a positive variation, both for the top line and bottom lines. I think this is an important thing because this reflects our growth strategy, both in our revenue and growth and sales, but also on our margins. So it is not a strategy that focus on one or another variation or indicators, but it is a strategy focused on both the top and the bottom lines.
Another important thing is that we have a variation in this third quarter where we see that all of our business units in all geographies are growing or are showing growth, and that is important because we went through a phase where the improvement was the operational improvement, much more focused in cost control and internal efficiency. We went through a phase where we made the Brazil business unit go back to growing. Now, the latest quarter shows that all of our geographies are ready to keep growing and increase our participation in all of the priority markets where we operate in.
When I look at Brazil, the most important points is that we continue absolutely focused on our operational efficiency. Our OTIF, on-time in full metric keeps growing. It is getting close to 85% right now, and we have an excellent performance, both in the sales volume to our clients, as well as to the sales volume sold from our clients to our consumers, growing 13% in the grocery channel and 10% in Havaianas stores, and overall growing about 8%. Through that, we keep gaining market share, and now we reach a market share of about 80%. This is the only one where we can check our numbers, which is measured by Nielsen.
This shows the strength of the brand and the services we are showing to our clients, the service levels we are offering to our clients. When we look internationally, all geographies show growth. Europe continues to have a good performance since last year and growing again in this quarter, 17% in the first nine months of 2026. The United States geography, in which we showed our business model last year, this is still the first year of the transition, and we already see results in the growth in sell-in and sell-through, which is the sales of our distributor to its clients. In the distribution markets, which goes from Latin America to Asia and Africa, we saw a recovery.
In the first half of the year, we saw a decrease in the volume compared to last year, but now in the third quarter, we already see regain of volume, especially in the priority markets in Asia and, for example, South Africa. So, which is a sign that our strength of brand and execution is good. We also continue to buy to our market investments to be aligned to our strategy, gaining visibility to our brands, not only in Brazil, but internationally, which is our strategy. For example, our participation in fashion weeks in Europe, which take place around this time in the year, and are trendsetting for the summer next year. Havaianas was present in all of those fashion weeks, being a part of the trends that should be valid for next year.
We realized that the segments where we would have a smaller market share and where we have been developing our portfolio and specific products for those lines, which is the men's and kids, we see a more accelerated growth than we see in the overall volume growth. Last, for this financial standpoint of view, we continue our financial discipline because it is a discipline, growth and discipline. In this strategy, we keep reducing, managing our operational expenses, managing our cash consumption, and mainly, we continue to see the evolution of our return on investment, invested capital, since a very low level about three years ago, and now we are already at 19%, which is a huge priority for us, keep evolving so the ROIC continues evolving. I think this gives you a good overall idea of the business. André is going to go through each one of the aspects.
Well, good morning, everyone. It's a pleasure to be with you. As Liel said, we had a quarter which was very important from the perspective of growth. In this quarter, we grew in all the operations, in all geographies where we operate in, especially looking at the expansion of the international markets. As he said, it was the third wave of this journey that we were pursuing, and right now, we can see a good expansion, double-digit expansion in our priority geographies, and a certain stabilization of the operations in the market supported through distribution, which is the IDM markets, where we wanted to reduce volatility in those operations.
When we look at the U.S. particularly, you know that we have changed the business model about a year ago, and this turnaround is taking us, this change is taking us to a very interesting performance of the expansion of doors we serve, and also the expansion, and therefore the expansion of volume, which is important for the scale of this operation. There, we saw a growth of 82% in this third quarter. Europe had already shown in the first half of the year a double-digit growth, and we kept this traction now in this third quarter where there is a smaller seasonality after summer, but yet we grew 13% in Europe. As I said, the geographies supported through distributions, which is Latin America, Asia, and Australia.
This is a very expanse and diverse geographies, but we think the stabilization of the business there is very important so we can grow, we can create the foundations to have a more robust growth in those regions too. Although Brazil, who is a big part of the business, because of the size of its sales compared to the overall sales volume, in Brazil, we grew 7%, which shows that we have also interesting traction with our consumers. There is no big movements of stockout in the channels or stockout in our supply chain or in retailers. There is a very strong focus within the company of, in fact, accelerating the demand at the edge with the consumers, which is going to show how healthy our growth is. On next slide, we already see a longer year-to-date overview with very close figures, very similar figures.
53% of growth in the American operation, 18% in U.S.A., which is also an interesting growth and aligned with the double-digit performance sell-out performances across geographies in Europe. Also in a longer window time, we see that the IDM has also shown a more stable, showing that we have reduced the volatility in those markets, and we have a decrease of about 1% in these year-to-date results. We think that in this moment, the connection of sell-in and sell-out is more effective right now. Again, in Brazil's results shows that this trend of 7%-8%, which has been seen in the last three quarters, is a growth that seems interesting given the size of our geography and given the size of the penetration we have in the industry and also the market share in this geography. Yet we are growing 8% every quarter.
Overall growth of 8%, 12% growth in our revenue. This is the year-to-date figure. We see these results in the cash generation. We saw one more quarter of cash generation, which was good, about BRL 150 million. This is connected to this expansion of all the operations, expanding the gross margins, as I am going to show later on in this presentation. This has been showing us to gain more efficiency in our operations and gain more scale as well. As for the leverage or indebtedness level, from the cash generation, we saw, once again, a deleveraging of the company, which has been continuous. If you look at the graph on the right-hand side, we have been deleveraging or reducing the debt of the company. We made a reduction of capital and dividends also to go back to some indebtedness.
Again, gradually, it has been decreasing due to the cash generation we have had. We reached 0.3 x the EBITDA. Now, about our working capital variation, we had a little bit of consumption of working capital, about BRL 39 million, about BRL 6 million less compared to the third quarter last year. This is without expanding the timeline. The timeline are regular compared to the previous quarter. Actually, in a few quarters, we have had the same timeline of working capital cash. When we look at the bars for the last four quarters, we see that this cash consumption, about 80% of this variation is explained by the growth of the operation. Naturally, as we have good performance for sell-out and good performance of sell-in growth across all geographies, naturally, this is going to demand more stock, more receivables.
As the line graph can see, we are not deteriorating our timeframe for the receivables and for our stocks. Therefore, our operations stabilized, and we are seeing a growth level that demands some capital consumption, which is completely normal because of the growth of our operation. On the right-hand side, we see the investment levels, which are also showing quite similar in the past two years when quarterly analyzed. It accelerates throughout the quarters in the year as we deploy our projects mapped, and it is totally within the limits that had been approved in our capital allocation in our last meeting. Again, this is inside a normal cycle, as well as in accordance with the seasonality of these investments as had been defined. Moving on to the seasonality of Brazil.
Brazil saw a sell-in of 7% growth, which is compared to the 8% of the sell-out growth. You see that the sell-out grew a little bit more than the sell-in this quarter, which also reaffirms what we have been saying for quite a while, the importance of not making large stock in our channels. We have the obsession now of keeping accelerated sell-out, and this naturally will demand our sell-in increase, as the stocks must be replenished. When we look at the right-hand graph, we see an accumulation of about seven million pairs of stock in this quarter. This is compatible to the seasonal movements where the retailers are stocking out, so they prepare for the summer in Brazil. These stock levels are aligned with the past years and with its needed in the market to be supplied properly for the upcoming summer.
We can see the last 12 months variation. There was a small, about 1.9 million pairs added to the stock. Obviously, this is estimative because the sell-out is based on an estimate of data that we have access to. Either way, this is a movement that shows a connection, a very strong connection between the sell-in and sell-out in long window times. In quarterly windows, this changes a little bit because of the seasonality. In the long timeline, what we are always pursuing is this. Remember that as the operation and the sales grow, also the numbers of stock in the chain should also grow. They shouldn't be exactly identical, but they should allow the stock to grow as the demand for the category grows in the retail or in the market. Moving on now, we see the expansion of our gross margin.
I think the line in the graph speak for themselves. This shows how much the gross margin has been expanding over time, has reached now 50%. I think this is the best number we have ever had in the third quarters in a very long time, at least, to say the least. We can see this large evolution, despite the fact in Brazil, we have not yet regrown completely the scale we used to have in 2021. So this gross margin expansion has been precisely from the efficiency gains. Of course, in the past few years, we have also recovered some volume, but this is due to the better efficiency. On this slide now, we see our SG&A. It's broken down in three components. There is a main component of evolution, quarterly evolution, which is the marketing, which is the dark green line.
There, we see an evolution, which is back to 6% of our revenue. This was already expected. We remind everyone that in the third quarter of 2025, we had seen investment levels which was a little bit smaller than the average for the year. This gave us a little bit more of an expansion of EBITDA margin, which you can see on the right-hand side graph was of a 30% of EBITDA margin, but that was because of that specific time window. We explained that we don't manage the marketing account every quarter. We do it based on the calendar for market activations, which are necessary and defined at the beginning of the year. So we had artificially had a lower marketing expenditure, and now we are back to this level of 6%.
When we look especially at the fixed expenses, we can see some negative evolution in the growth of expenses, and this is due to a series of factors within the company. There is one factor that has different basis to the previous one, which is the payroll tax reinstatement. This explains about 20% of this variation. We also had some one-time off, like a market pricing of our long-term incentives, which is again related to the payroll tax reinstatement. Also, once our share price goes up, and this has been performing well, we also bring some correction of all the provisions made for these long-time incentive programs that need to be taken, these provisions need to be increased. This can go up and down according to the performance of the stock prices.
We also have seen sales of energy and other products that were smaller, which also has an effect on the comparison basis, unfavorable compared to the comparison basis. None of them is big enough, but all of them together lead to this amount. When we see the right-hand side graph, when we look at the EBITDA margin, right now, we are already, as I said before, we have a smaller scale compared to five years ago. We already have a larger EBITDA compared to the third quarter in 2025 when we had seen a market investment that was much smaller. Now, on this slide, we see the international markets evolution.
We also saw a volume evolution of about 15%, considering all the geographies outside Brazil, which is important because in the sense of our regaining of scale and also because we understand the international market as an avenue for growth because of its opportunity size, because of the size of the opportunity, and also because of the symptoms that we are growing across all geographies. This makes us excited and makes us believe that finally we might be making this potential to materialize. When you look at the revenues on the left column of this table, we see an evolution on the revenue per pair of about 8% in Europe and about 9% in the International Distribution Markets. There was exchange rate, a little bit unfavorable results, which brought this a little bit down, but this is not only the evolution of price.
It is also a better mix of channel, mix of geographies, mix of products that are being sold there. So there is indeed a positive evolution of our mix. Obviously, the exception is the U.S., where these numbers are due to our revenue per pair are decreased because we now have the intermediary in the chain, right, which the easement resulting from this new business model. So this effect is also explained by this new business model. Now moving on to the gross margin in the international, we are growing again another 2% points compared to in the revenue, which also arises from a better efficiency, but also gains in scale. So growth is still very important.
We now have a scale which is smaller than we had in 2021, 2022, but we are getting very close to the gross margins that were obtained at the time, although we have a smaller scale right now. So what we have been growing now is our volume and regained this scale, although we are not there yet, on par with we had in 2021, 2022. Now, looking at the market investment, the orange line, we see a positive variation at a different level, smaller than we used to have in previous years, but which we believe to be absolutely normal and within what we expect for our operations abroad. Also the evolution of fixed and variable expenses, we also see a favorable evolution. Of course, there is here a lot of effect of the U.S.A.
This is the trade-off. For the expressive results, we reduced both the expenses we had in U.S. because of the distribution model, and also because of the headcount and office and all kind of admin and warehousing expenses. Now, all of them were direct expenses. Now, they are operated by our business partner, so this helps us in this favorable evolution of our efficiency levels here. Because of that, we reach a positive EBITDA margin, which we hadn't seen in the past five years in the third quarter. When we go a year back, only in the distribution markets, only distribution markets a year ago had a positive EBITDA. The margin in U.S.A. and Europe a year ago were negative, and now we see that all the international regions are positively contributing, are contributing with positive results to the EBITDA.
If we want to break it down, this evolution, a year from now, 50% of this evolution is due to the turnaround of profitability in the U.S., and 30% of the turnaround of the European business, and 20% also profitability in the International Distribution Markets. All of the markets bringing these positive contributions that resulted in a positive EBITDA result for the overall international performance. Moving on now, we see Rothy's that is still growing its top line, which is sales, right, to the market, or revenue, which is important because since they grow, they also have a decompression scale. They gain scale, and they reduce the compression of margins. They were affected this quarter, specifically because of logistics issues and higher freight prices.
We see here an unfavorable evolution both in the gross margin and the EBITDA margin. It reached a EBITDA of - $2 million, subtracting from the last 12-month performance that we saw in the records of the company. It was also affected by the tariffs imposed by the U.S.A. and some growth in the marketing expenses related to the Autumn campaign that was launched. The combination of all of those factors, despite the evolution of the top line, led to a contraction of the company's results. I think these are the main points that we had to present to you, and now we are going to open for Q&A, if you have any questions.
We will now begin the question -and -answer session. As a reminder, to ask questions, you should click the Q&A Icon at the bottom of your screen and type your question to join the queue. When your name is announced, a prompt to activate your microphone will appear on your screen, and you should then activate your microphone to ask your question. We kindly ask that all questions be asked at once. Our first question is from Vinícius Strano, UBS. Vinícius, go ahead. Please go ahead, open up your microphone.
Good morning, Liel, Natal, and Melina. I want to explore a little bit more the sell-out in Brazil. You have been growing 8% in the quarter, which is expressive growth, right? Even though there is this macro scenario that shows to some deceleration. But I'd like to understand a little bit the drivers that made this happen and how you see the What is your perspective of sell-out from now on? The growth also comes from the grocery channel mainly, where you have already reached 80% of market share, right?
So, if you could make some comments, what do you see for the specialized retail? I would like to go a little bit deeper into the sell-out in Brazil and your lookout, and also for the COGS and costs in general. If you can go with some perspective, considering a little bit in the rubber price and the six by one or five by two work model legislation change.
Thank you, Vinícius . I am going to take the question about the sell-out in Brazil, and also André can answer a little bit about more the costs. Sell-out in Brazil, in fact, is not a result of this quarter. It has been building over the last quarters. When you look at the sell-out in the last nine months, we see a growth of 9%. When you look at the sell-out of last year, we saw a growth of about 5%. So, the sell-out we see right now is the result of the consistency and execution. Our OTIF, our on-time in full levels continue to grow. We deliver almost nine out of 10 orders, which means that the consumers, when they go after the products, they are there.
The second is the growth of portfolio. We have been growing portfolio for the men's and kids. We have been growing the DTC channel. Our portfolio has been covering some gaps we used to have, so we gain incremental volume rather than only cannibalizing the volume of other products we have today. The third is execution at the store. When we look at, go to the stores in Brazil, the presence of Havaianas in Brazil, whether it is the display of products, the space we gained inside the stores has gained a lot compared to previous years.
When we combine all of those three things, the products are available, the products are the correct products for all the segments, right? A bigger portfolio, and the brand is well executed at the point of sale. We see these positive results in sell-out and market share. There is not a magic formula. It is a lot of work, a lot of consistency, a lot of sweat that has resulted in this consistent sell-out increase. The grocery channel has been showing, because in previous years, the traditional grocery market had been losing market share in the market as a whole.
As Havaianas is strongly anchored there, this was a headwind that we had to fight against. This year, this small retail, the traditional retail is growing. So this helps us because we have a market share, a strong market share there. When it grows, we benefit from that, right, automatically. But it is not only that. In the modern grocery channel, which are supermarkets and cash and carry, for example, where we have a smaller market share of about 65%, we have a lot of space to keep growing there. By the way, we are growing our market share there. So it is a combination of the traditional grocery regaining its volume, and in the modern grocery channel, we are growing our market share.
This explain the growth. In the specialized, we still have growth. We see a deceleration. We saw a deceleration in the last quarter, but we are still positive. Our growth is still positive, especially because our portfolio growing in the men's and kids segments, we gain more competitiveness in the specialized channel. This is a channel where we still have plenty of opportunities for growth. Not necessarily we need that our volume grows. We need to keep replenishing them correctly, gaining representativeness, and therefore, we will continue gaining our market share because our market share there is still below 50%. There is plenty of room to grow there.
Thank you, Vinícius, for your question. I think it was great that you asked about that because it gives me the possibility of making a few comments on those points. I think the COGS was a big concern of the market for several quarters, especially for the increased oil prices this year and in the previous years. People have been talking a lot about that. I think this quarter shows once again what we had already said here. It shows in terms of as a fact and with figures that the growth of our operations, the actions we have for large productivity and efficiency in our manufacturing has been much more relevant as defining our gross margin and EBITDA margin than the natural oscillation of raw material, which are actually expected in our industry, right?
We sometimes have to accommodate some cost pressure in any of the items in our operation. For example, just to give you an idea, we gained BRL 0.32 of margin EBITDA per pair only related to the expansion of our scale growth. We gained BRL 3.4 per pair in the international market, also related to our expansion, our scale expansion. This proves that the growth of our operation has helped us gain productivity much more than offset these oscillations, which are natural. What we have been telling you, and now I think it has been proven with the figures, is that the raw material price variation, I'm talking here both about the oil and the exchange rate, they have been offset by our evolution.
I cannot promise that it's always going to be like that from now on, but you mentioned a few elements like the exchange rate, which is a little bit higher, not too much higher than it was a year ago, but yet higher than it was three months ago. On the other hand, the oil price reduced a little bit. We need to play with those variables, and there is also the five by two new work regime legislation in Brazil. We are analyzing the best way to do that, and of course, to comply with the law and attentive to the impact that this could generate in the operation.
But what I would like to tell you, without giving you any guidance, because we don't give guidance, is that we are always going to work to try to mitigate the pressure and the changes that happen in the market as we grow our efficiency. We always seek to find the best way to offset those fluctuations, and as we gain more scale in our operation, this will make us stronger to navigate this scenario. This is what we have been doing, and we have been seeing a very good margin evolution from at least up to now.
Thank you, Natal and Liel, for your answers. Thank you for taking my question.
Our next question is from João Soares, Citibank. João Soares, go ahead.
Thank you, Liel, Natal, Melina. Taking the opportunity for asking this question because it's the last call in the year. I'd like to hear a little bit about your minds for 2027. The company is shifting, as you say, to growing more in an operation that is extremely well-structured right now. So, as you go and seek higher flights, we see this allocation of your expenses. We see this in the sell-out growth, but I would like to hear what your priorities are for 2027? What do you do to avoid that expenses actually outplay the scale gains? How do you make sure you avoid this kind of scenario? I think it's more kind of a, how can you be sure and what kind of triggers and elements you have to keep growing and offset all of those pressures that might come to exist?
Hello, João. Thank you for your question. I think your point is extremely relevant. In fact, it is what you said. We have been growing, and growing implies in investing, right? Investing working capital to have a bigger operation, which it does not mean absolutely, as we have proven, that we have had any kind of deterioration in our profitability of the company. Actually, quite the opposite. Our return on invested capital increase has been very positive. We actually had a negative ROIC some time ago, and now we have a high double digit of ROIC, 19%, right? We keep improve on that. We keep have even better ROIC.
But one important factor to answer your question is, since all the evolution we have seen and all the evolution in expenses and all the measures taken to allocate capital correctly, to have a very correctly and disciplined CapEx focused on fundamental needs of the company, in parallel with all of those adjustments that have been made, there was a very big change in the governance of those allocation. So, all location of resources in the company now goes through a very strong scrutiny. We analyze scenario sensitivity of the investment. There is a very detailed discussion, and no project or no capital allocation that is relevant goes on without having all the due understanding and discussions based on conservative basis. Very comprehensive analysis and understanding of the risks that lie ahead.
We do not have this mindset of being seduced now of an investment that is ahead of us, and being seduced by and start having expenses that we cannot justify and which are not fundamental for the growth of the company. The operational mindset we have for the business right now, and which is current and implicit in our five-year planning and in our yearly planning, is a model where we gain efficiency over time. We want to see the top line growth without having a growth in the expenses. If you look at the past three or four-year records, you are going to see the SG&A has been growing, has been actually decreasing compared as a percentage of the revenue. What we believe, what we want is that continue to happen.
We want that the revenue growth does not imply in expenses growth, which doesn't mean we're not going to invest. We are going to have investment cycles as we confirm our potential and traction in the market with consumers. We are going to make the necessary investments to expand our operational capacity and offset our growth. This is going to be made, but it's going to be made rigorously and with a lot of care and rigor. The mindset we have and the planning we have, they reflect the concern you are demonstrating. I cannot ensure we're not going to make mistakes, but I can assure you that we are going to do this with all the rigor and all the allocations that are going to make are not going to be disconnected from the reality we see in the market.
Just to take the opportunity, thinking of the priorities for 2027 for Brazil, for the Brazilian and international market, can you list the three priorities that you would like to attack? So we can keep it in mind.
I think the advantage of the quality of a strategy is when it doesn't have to change year over year. Our strategy continues consistent and absolutely the same. In Brazil, the big priority we have is the growth in the channels. Our market share is still smaller, especially the specialized channel, which is a huge channel and where we have a market share smaller than 50%. We have a huge growth avenue there, right? Also in the modern grocery channel, we have our market share at around 65%. The big strategy in Brazil is to keep gaining market share, focusing on those channels where we have a bigger opportunity for gaining market share. You could ask, "But isn't that what the company was saying so many years ago?"
Well, I think this is working right now. We have been gaining market share in the grocery channel. We have been gaining volume in the specialized channel. This is a long-term work. We keep improving our on-time in full levels. Because supplying those regular retail stores is a little bit more tricky, we have changed our whole operational channel to be more effective when supplying those channels. For the portfolio, we need a portfolio that's much more focused in men's and kids' models. Third is the execution. We need to be there. Calendar is extremely important. The season is extremely important. Like Christmas, extremely important.
So we are prepared to be more effective in our campaigns in these channels, in these calendar events. So Brazil has this opportunity to grow specifically in the specialized channel and in the modern grocery channel. As for the international business, the main priority in 2027 is to have one more year of expansion and growth to make the brand increasingly more relevant. So the brand will be increasingly more relevant in this European summer, so we want to keep growing market share in Europe. In the U.S., this was the first year of this transition of business change. In this year, we doubled the number of doors we were in. Next year, we want to keep growing the number of stores.
Probably not going to be the same speed of doubling, but we will keep increasing the number of doors, and more importantly, to increase the revenue per store where we are in, right, already, with better execution and more visibility to the brand. And in the International Distribution Markets, where we left the fall and got to recover, our focus is in the priority markets, which is Asia, South Africa, and Latin America, mainly Argentina and Colombia. Our focus in the IDM, International Distribution Markets , is to focus on the priority markets and not get distracted by the many other opportunities lying there. We want to accelerate where we have been focused and where the results have been coming.
So these are the priorities we have for next year, and as André said, we are going to manage the business environment we are in, whether it is the cost of raw materials or other variables such as oil or the exchange rate. Because our strategy, as our pillars say, they are and strategies. We want to grow and keep gaining efficiency, not only in our investments, but as we mature our management models, we digitalize, we find ways to reduce expenses. Not only we do not create new expenses which are not justifiable, but we also can always find expenses to be reduced, which can be automatized, digitalized. So this and mindset continues to be part of, is already part of our strategy, and it will continue to be a part of our strategy.
Our next question is by Pedro with XP. Pedro, please go ahead.
Good morning, Liel. Good morning, Natal. Thank you for the space. I think two points from my side. You have already shared briefly, but making a balance of what was the first year of operation in the U.S., it would be interesting to understand what was better than you had expected and what you see in terms of expectation for the second year of operations in the U.S. in terms of sell-through, volume, and so on, since you already know what should be this new normal of the American operation.
Another point I would like to follow up on is, one of the points that caught my attention is that the expenses with simplification decreased a lot. I would like to understand if you are already at a level in a moment where this line is going to be less relevant in the P&L, in the profits and losses, and/or in the balance sheet. And also, I would like to understand what you have in mind for this work regime, that is a change that is going to happen in Brazil. If you see there will be an impact, what can you do to minimize the impact and so on?
Well, thanks for the question, Pedro. I will start talking about the U.S. What was better than we expected was the speed of the growth of Havaianas. We knew there was a difference between the strength of the brand and presence in the market. We had numbers to prove that. We talked about this in the past. We were the second biggest brand in brand awareness, but the fifth most sold. So obviously, there was some room to sell more, but we were surprised by the speed it happened. This was extremely positive, and we believe this trend should continue because the brand is now a brand that is much stronger than it was in the past, and not in each geography.
It is all the effort that we have been putting into all the geographies together. Together, they create a global, a brand that has presence and global presence and global visibility. This is going to serve and support the growth in all geographies, including the U.S. We believe that we will continue to see an evolution and growth in the U.S. because of the strength of the brand. As I said, we doubled the number of doors we are in, or stores we are present, points of sale we are present.
But more important than increasing the number of points of sale, we want that the stores where we are in, they perform better. As the first year, nobody knew very well how much we were going to sell. Many retailers or store owners, bet, let us use the word bet, so we were not ready to supply them or resupply them with the right models, right size, and at the right time. So we are preparing. So next year, we are present at the store much earlier than we were in the season.
Even before the summer arrives, we want to be there, better positioned, with more products, better executed in those points of sales, and we believe this should help in the same store performance. So we are quite satisfied after this first year. Of course, we have to mature our relationship with our partner, our distributor. We need to mature his partnership with his clients, his retailers, but we will keep doing exactly what we have been doing, and we believe that the results in the U.S. will keep improving. From a standpoint view of cost, I think Liel can talk about that.
Maybe only one comment about the six by one work regime. We still do not have the size of the impact, especially because it is not yet fully regulated, right? We are still waiting for the norms to be issued, and we will execute it as soon as these points are defined by regulations, by the governmental agencies. As André said, we always manage these headwinds, all the types of headwinds, with the same discipline we have been having.
And I have nothing to add to what Liel said. We are always trying to accommodate all of the impacts that come from all the headwinds, including, for example, the work regime change in Brazil. We have our internal items and leverages that we can pull, right? But also, we have the price, product mix, and volume, and scale. This is all a composition. We do not want to work on one item alone. We look at the whole. We are right now creating the planning for 2027.
This is what we have been doing, and we are having this discussion with our board and internally with all the key stakeholders. There are also many good things going on. So there are positive and negative variables and factors, so we try to balance it all out. I cannot anticipate exactly a number, and I would not do that because we do not give guidance, right? What I want to reassure you that we are managing the best way possible so we keep growing the business for the upcoming years.
Just one thing about the expenditures on simplification. Should this line keep going lower? Because I think in the first and second quarter, the line was in about BRL 20 million. Now, this quarter, it was in about BRL 5 million.
Yeah, sorry, I forgot to talk about this. These movements, the objective is that they are as extraordinary items, the ones which are connected to specific restructuring items. So, for example, we had a big movement at the end of last year, beginning of this year, related to the U.S.A., where we did an important restructuring because of the change of the business model. When we make those structural movements, like putting areas together, making bigger movements, we do consider as non-recurring because we do not do that all the time, right?
In fact, in this third quarter, we saw a smaller volume of those non-structural changes. We do not see any kind of a big bangs ahead of us, or as Liel said, our strategy is to grow with discipline. So it is always going to be part of our journey to have some level of automation and efficiency creation over time without necessarily meaning that we have made big movements of restructuring or changes in the structure. I cannot give you any kind of projection right now, because again, we do not make any statements, forward-looking statements, right? But right now, what we see is a more of a organic gain of efficiency and more spread over time rather than any movements of restructuring that might be needed, okay?
Thank you for taking my question, Natal and Liel.
Our next question is by Joseph with JP Morgan. Joseph, go ahead.
Good morning, Liel, Natal, and thank you for taking my question. I would like to explore two points, maybe to quantify a little more the impact of the reforms in manufacturing. We have this regime model that is going to impact you, and also the tax reform that should start being implemented in 2027. My second question is about the competitiveness environment, both in Brazil, trying to understand how you see the competition in Brazil.
You have gained a lot of market share, which it tells us that you are executing your business better than your competition. And internationally speaking, you said that our brand is much stronger than it used to be, and much stronger than the market share we have in the U.S. So, I would like to understand how you understand the opportunity of SKUs, which are unique, for example, for the U.S.A., to leverage your sales in the U.S., for example.
Thank you, Joseph, for your question. About the reforms, as I mentioned before, both reforms, tax reform and the labor regime reform, they are not totally regulated, so we still have certain level of uncertainty. For example, as for the tax reform, the CBS, we are waiting for the definition of how high this rate is going to be. It is being defined at the Congress House.
We still do not know how much it is going to be for the next year, so there is not even the slightest possibility to consider this in our results or to give you any kind of statement on the impact of the tax reform. As for the labor regime reform, obviously, we have all the scenarios of how we are going to face that. We are just waiting for the final regulation so we can execute the scenarios we have already, simulations we have already run. We have prepared for that.
So obviously, one of the challenges, not only the cost, but also capturing this, because when you need to hire a lot of people in the short term. But we prepared for that. We tried to create a database of people in the cities where we operate, and we have been keeping close to these people, so when the decision has been made, we can immediately hire the people we might need and not lose any kind of manufacturing capacity, which is fundamental for our business development.
So, all of the variables have been mapped, simulated, so we will just execute them when the definitions actually are made, which is going to be in December. As for competitiveness, what we have been seeing is that in Brazil, since we have this difference in participation of market share in the different channels, we have this big chance of keep growing. They specialize it in the modern grocery market share. We were at 60% initially, now we are closer to 70% of market share in the modern grocery channel. This happened over the period of two years, so we believe we are going to continue to gain market share in the modern grocery channel.
And in the specialized channel, we cannot so accurately measure because these figures do not exist. We work mainly by growing the volume and working mainly with the most strategic clients, and we see that our market share has always been growing, and this will keep going. So, as for the competitive environment in Brazil, it will be the same that we have been managing so far, and we will keep executing that with the best efficiency we can. As for the international environment, we talked a lot about the United States. We see a continuation of growth in the United States, but in Europe, over the past two years, we grew 8%. We grew 8% last year, and this year, we are growing double digits.
And this represents the strength of the brand in those two geographies. I believe we will keep growing. I do not see any reasons or any changes to the competitiveness or the competition in those two geographies. For the international distribution market, we operate almost independently from the competition because we work mainly through the DTC. We have our Havaianas stores, our own stores, in Asia, now in Argentina, South Africa, and Colombia.
The strength of the brand that we build in Europe, in the U.S., and in Brazil tends to carry on its shoulder a good performance to those IDM markets. So, in terms of performance, we do not see any changes for 2027 compared to what we saw in the past two years. We have been winning, and we believe we will continue winning in 2027. I do not know if this has answered your question, but this is the answer about our competitiveness in the world.
Yes, it does answer my question. Thank you, Liel, for taking it.
Our next question is by Wellington Santana with Bank of America. Wellington, go ahead. Wellington?
Good morning, everyone. Liel, Natal, Melina. I have two questions from my side here. I wanted to understand a little bit more, have a little bit more of color in terms of the, regarding the margin in the third quarter in Brazil, because I understood part of this is linked to a bigger investment in marketing, because you invest a little bit, sorry, a little bit less in marketing in the third quarter of last year.
I would like to understand what was the impact level you had in marketing, in the impact of the marketing investments for this quarter, this third quarter. Another question that I have about margin is, as we observed, you had a good margin increase in the international markets. You mentioned the scale gains, but you also mentioned some FX gains, right? So, can I have a little bit of better understanding of those margin in Brazil and international operations?
Thank you, Wellington, for your questions. Let us take them. First about the margin in Brazil. In the presentation we shared with you this morning, there is a graph of selling and general administrative expenses where there is the evolution of marketing and of marketing expenditures. In the third quarter 2025, we made 4% of the revenue as marketing investments, and now in the third quarter, we invested 6% of the revenue. This drains about, rounding the number, about 2% of the revenue in terms of EBITDA margin. Our EBITDA margin that was at 30% of the revenue last year to 27% of this decrease of 3% of the EBITDA margin, two of this 3% were associated with the marketing investments, which were higher. It is hard to say that this is the right number for the third quarters because it is not how we manage it at all.
The way we manage is looking at a longer window time, and we define a certain investment number for a year, and then we allocate it according to the calendar, the campaign's calendar and activations calendar throughout the year. So not necessarily this makes us respect the quarterly number, so we have a kind of balanced number, so good numbers. As you said, we had a more concentrated number of investment during the World Cup or the Olympics, depending on the calendar, depending on the collaborations we have.
So there is a series of events and campaigns which are associated to these decisions of the time of the investment. I believe that this is probably a number that is close to the recurring number. But what I recommend to you as a better window is the 12 months, like 6% or 7% every quarter of the revenue is probably a better measure of what we could see over time rather than the specific numbers for investment and marketing investments in a quarter. As for the international margin, we have two important effects. First of all, I want to remind you that one year ago, two of the main regions had a negative EBITDA margin, Europe and U.S.A., and only the International Distribution Markets was positive, margin was positive.
Now, the margin of distributors has grown, and the margin of U.S.A. is positive, and the European margin is also positive. So there was a positive variation in all of the three regions. If we look at this evolution against one year ago, we evolved 4.12 percentage points, out of which this is an estimative of how we break it down into efficiency and scale. We understand that 3.4 percentage points is due to decompression of scale because U.S.A. and Europe grew a lot, and about 0.72 percentage points are related to a better efficiency. It is always a combination of those two variables. And if you want to look at geographies, half of the evolution came from the U.S., and about 30% came from European evolution, coming from the negative to a positive number, and about 20% of this improvement came from the IDM market.
And the exchange rate effect actually was the opposite because the exchange rate was lower. And remember that from the profitability, it is an export business for us. So, for this part of the business, a higher exchange rate helps us to make more money, right? So we had a lower exchange rate during this time than we had in the third quarter 2025. So the effect of the exchange rate was actually a detractor to our results. This is also in the table. The evolution of the revenue was much higher in constant currency than in recurrent currency, than in variable currency. So we expanded our prices and mix of products, but we had this headwind of the exchange rate, which lowered slightly our evolution in Brazilian reais. So, there were those headwinds, but I do hope that our scale gains helped us have a better margin.
And again, without making promises, as we gain, if we consolidate this growth engine, especially in the geographies where our brand is positioned at a better price point, this helps us to have a constant support from the decompression of scale. Remember, we are still not back to the scale we used to have in 2021, 2022. If we make it back to that number of scale or even more, this should help us have a better performance in the all-time records. I hope I have answered your question.
You did. Thank you very much for taking my question.
The question and answer session is now closed, and we would like now to turn the floor over to the company for its closing remarks.
Well, I just wanted to thank you all for being here for this call. I think there is nothing to be added. I think we have explored all the questions during the Q&A session. I just would like to say that the third quarter was one more step in our growth journey, in which we showed financial discipline, and this is what we have been doing over the many last quarters that we can remember. We will keep doing the same, delivering positive results for the next and upcoming quarters. Thank you very much.
The video conference regarding the third quarter of 2026 for Alpargatas is now closed. The Investor Relations department remains available to answer any further questions you might have. Thank you very much to all participants and have a good day.