Good morning, everyone. Thank you for waiting. Welcome to the video conference for the release of the first quarter of Grendene S.A. 2026. I want to remind you, those who require simultaneous translation, that we offer this function on the platform. To access, simply click on the interpretation button through the globe icon at the bottom of the screen and choose your preferred language, either Portuguese or English. Anyone watching the video conference in English, you can mute the original audio in Portuguese by clicking the Mute Original Audio button. Please note that this video conference is being recorded and will be made available on the company's Investor Relations website, ri.grendene.com.br, where the full earnings release material can be accessed. The presentation is also available for download via the chat icon, including in English. During the company's presentation, all participants will have their microphones turned off.
After that, we are going to start the question- and- answer session. To ask a question, go to the bottom of your screen and click the Q&A icon, then input your question. When your name is announced, a prompt to activate your microphone appears on the screen, and you must then activate your microphone to ask questions. We recommend that you ask all of the questions at once. We emphasize that the information in this presentation, along with any statements made during the video conference regarding the business prospects, projections, operating and financial targets of Grendene, is based on the beliefs and assumptions of the company's management, as well as information currently available. Future considerations are not guarantees of performance. They involve risk, uncertainties, and assumptions because they refer to future events, and therefore depend on circumstances that may or may not occur.
Investors should be aware that general economic conditions, market conditions, and other operating factors may affect the future performance of the company and result in substantially different outcomes from those stated in such forward-looking statements. Today, we have the following company executives with us: Rudimar Dall'Onder, the CEO, Gelson Luis Rostirolla, Chief Operating Officer, Alceu Albuquerque, the CFO and Investor Relations Officer, as well as all of the company's key managers. I will now give the floor to Mr. Alceu Albuquerque. Please, Mr. Alceu, you can come to the floor.
Good morning, everybody, and thank you for your presence in our video conference to disseminate the results of the first quarter of 2026.
In this 1st quarter, we have observed an scenario that's very selective for consumption in the domestic market, in the international market, a little bit challenging with geopolitical conflicts, exchange rates fluctuation. In the domestic market, we have observed a rationale of consumers that have been suffering with high economic living costs, especially for the low-income people, high interest rates, high indebtedness of the population, and also using of the bets and gaming habits. That's been making the consumers to have less income available for consume, especially for non-essential items. In this context, on the 1st quarter of 2026, reflected an adaptation of a mix of products and categories that we sell and the channels of distribution where we sell our products.
We also observed with focus in keeping operating resilience in the company, having a very strong discipline and controlling our expenses as we are going to show later. We also focus on the adaptation of a mix of products and categories that are more accessible, and channels with more sales, like self-service channels and direct services. We also trust in the robustness of the company, its soundness with the robust cash flow, and keeping the continuity of remuneration of our shareholders. Based on that scenario, on the first quarter, we performed in value. It grew to 27.5 million pairs. This growth comes from the domestic market that's growing 9.3%, whilst the domestic market recedes 16.4%. When we talk about domestic market, our growth comes from the brands of Division 1.
The brands that grow in volume are Ipanema, in the male segment, Rider, Cartago, and Mormaii. In the domestic market, our net revenue decreased 3.2%, reaching BRL 683 million, the retraction was 1.5%, while in the international market it was 7.8%. The gross profits decreased 12.7% to BRL 230 million, with a gross margin of 43.1%, a decrease of 3.6 percentage points. The decrease in gross profit is connected to a commercial sales of a mix with less value-added products. It's less revenue per pair when compared to the first quarter of last year. A decrease also, a decline in the COGS.
It didn't went down with the same comparable to the gross profit, and it went up to BRL 59.1 million, adjusted EBIT with the margins of 9.3%, 6.1 PP, and the net result is BRL 122 million, a decrease of 24%, and also a decrease of 5.3 PP. Now talking about the performance of the domestic market, what we observed in the Division 1 brands is that they are growing in volume in 11.9%. They also increasing gross revenue. It's 0.4% growth in revenue, and this growth is sustained by the more accessible categories and brands that are more accessible, like, such as Ipanema. In the male segment, Rider, Cartago, and Mormaii. We also present a growth in selling in the channels with the high service channels and in direct channels, and the selling has been impacted.
It grew 11.9% in volume. It was impacted by these two channels that sell more products with more accessible prices with less added value. The other lines of Division 1, they are also showing decrease in volumes and in revenue. Talking about Melissa now, we observed a more challenging environment with less flow in the stores, which impacted in a negative way the sell-out and volume. It decreased 12.7%. Because of that sell-out, this weaker sell-out, we also have a decrease in the selling. Similarly, a retraction of 12%. We can observe the brand preserving its value strategy and growing in gross revenue per pair in 18.3% 7.8%-8%, in a very strong performance of Melissa in the online channel, where it grows 18.3%.
Because of this growth, that is very robust, of 18.3% online sales of Melissa in the domestic market, they represent almost 20% of total sales in the domestic market. We end this first quarter with 476 store, 36 stores when compared to 419 in the first quarter of last year. When we analyze the external market, the international market is a little bit more challenging with geopolitical conflicts. These conflicts, they are causing ruptures in logistics and increasing freight costs, what's been causing delays in deliveries and impacting the performance of sell-out in seasonal markets, where the hot season is not the whole year, it's just a few months. When we have delays in shipping, that will compromise the sell-out, and we have observed competition with Asian products, not only in Brazil, but in all of the markets where we are present.
China is coming strong, selling their products in markets, other markets, other from the United States, because they're not selling there anymore, and that's been impacting our exports. We have a gross revenue in exports of 2.5%. This growth in gross revenue, it's a result of a better mix of products sold. Melissa is being more relevant, growing in volume and revenue. A continent where we have a very positive performance is North America. If you look here at e-commerce performance, you can observe volume and increase in GMV 14%, in volume GMV 18%. They grew, even though that the number of sessions is 2.5% when compared to the last year, it's a smaller number. Gross margin is stable in 68.9%. A small decrease of 0.1 PP. The recurring EBIT coming from our online sales grew 17% for BRL 2.4 million.
We observed the general sales online compared to the total sales in the domestic market. They grew from 6.8%. They are 8.2%. When we observe this indicator of Melissa only, we can see that total online sales, they represent 19.7% of total sales of Melissa in the domestic market. Here you can see the gross revenue graph. You can see what grew and what decreased. This revenue decreases 3.2%. The volume of the domestic market adds BRL 4.8 million, BRL 48.5 million, decreasing for BRL 56.5 million. As I mentioned before, it because of a mix of less added value, especially Ipanema. The volume in the international market decreases BRL 30.4 million. Price and mix because of this mix of Melissa growing and strongly in the international market, we can add BRL 35.1 million.
The 10% that has been more valued connect, in comparison to the first quarter. With this change, we have a decrease in the revenue of BRL 18 million. Our COGS here, as I mentioned before, our COGS has a gross margin decreases 3.6 PP, representing 56.9% of the net revenue when compared to 53.3% in the first quarter of last year, and this impact is related to labor. This negative impact is directly connected to the mix with more accessible categories. We have smaller margins in these categories and a smaller revenue per pair, and a smaller decrease in our manufacturing costs. Additionally to this effect of a changing mix, we also have an impact in the payroll. We started with the first statement installment last year. This year we have 2 other installments.
Checking our expenses, we are highly disciplined in controlling our expenses, where our recurring expenses, they are stable. They had a small growth of 0.1% when compared to the first quarter of last year. When we observe our total expenses, they decreased 12.6%. Our COGS expenses decreased 9%, and our administrative expenses, they grew 4.8%, highly influenced by this payroll. This decrease of 12.6% of total expenses, it's highly connected to the restructuring of GGB that we did throughout last year, and then they are showing their effects now. Evolving to the EBIT, it decreases 13.1%, going to BRL 47.8 to BRL 41.6. The two variables here that impact this decrease in EBIT is the net revenue and COGS variation, because all the other factors, except from a small variation in G&A expenses, all the other factors, they contribute for this increase in EBIT.
Adjusted EBIT and EBIT, we have a variation of BRL 17.5 of non-recurring items. Out of this BRL 17.5 million, BRL 13.5 are connected to the payment of an agreement with the Receita Federal. We had the understanding that the payments abroad related to licensings, there are no transfer of technology and because of that. The revenue, the Receita Federal understood different than us, we had to establish an agreement to balance this new understanding of the Receita Federal. Apart from this extraordinary charge we have, we also have BRL 5.2 million GGB. This BRL 6.4 million and obsolete inventory also impacted. This is our financial result. It was 17% smaller than last year, reaching BRL 73 million. The major impact in our financial outcome is a smaller profits in our financial applications because of an average balance of 26.7%.
That's declining when compared to last year. That comes from the extraordinary dividends of almost BRL 1 billion that we announced last year. If you remember the BRL 978 million, we made four installments with that. Out of these four installments, two out of them were paid BRL 400 million in January, BRL 200 million in March, another BRL 200 million in June, and another BRL 178 million in September. Because of this smaller cash balance, we had a 17% decrease. When we adjust the real estate projects, because they ended up impacting our EBIT and our operating results, that is not part of our operation, but it's part of the remuneration of our balance of applications. The results that impact equity in our financial outcomes.
The adjusted one is BRL 74.7 million, a decrease of 13.7% when compared to the same period last year. Our portfolio that we call alternative investments, they used to have now BRL 978 million in March this year. 100% of this amount is allocated for projects of real estate development. When we observe this portfolio since the beginning, it has a profitability of 281.4% of the CDI. Based on all these numbers, as I mentioned before, it was BRL 102 million. We have BRL 25.5 million, a reserve for fiscal incentives, BRL 17 million for Receita Federal, for taxes and fees, BRL 56 million for legal reserve, and BRL 2 million were destined by the legal reserve. We have BRL 55.7 million.
The administration management proposal is to distribute this BRL 55 million, BRL 25.7 million as dividends, and BRL 30 million or BRL 24.7 net as JCP. These amounts will be paid to our shareholders on the June 10th, 2026, for the shareholders that had shares from 21st of May, 2026 onwards. It's ex-dividends from 21st of May. What I had to say was that on this first quarter. I'm open for a Q&A session.
Now we're going to start.
Now we are going to start the Q&A session.
Carla
I would like to remind you that you have to tap the Q&A icon at the top end of the screen to ask your question. A request to open your microphone will appear on the screen, and you will have to write your questions all at once. Let's start with our first question.
Good morning. There is a big level of discount. What do you think about a program of rebuying these stocks?
Good morning, William. It's much more related to rebuying stocks to actually go to our program of stocks open. Grendene today cannot rebuy stocks because we don't have autonomy, we don't have any accumulated profit, because we redistributed our profits 100%. We cannot do this action unless we don't distribute dividends anymore, and then we can rebuy our stocks.
Thank you. Our next question is from Taddeo Eron.
Good morning. The company had a strategy of prioritizing the profits to volume, but now in the first quarter of 2026, we saw a difference, a change for products that have less value added value. What can we expect for 2026 because of this action?
Thank you for your question. Based on this strategy, our strategy reflects the market's demand. Our clients demanded, and this comes, like I said before, Ipanema and also the male, masculine segment. We still have products that are more expensive, that have more added value. Actually, we're producing more of these products of more added value. The consumer, especially the low-income consumers, they have less income to purchase. What we decided to do, and this is actually reflecting, it reflects in the sell-out of this product and, of course, in our selling. It's a bigger amount of products that are more affordable, but we keep producing products that have more added value, products that offer more comfort, products that are softer and lighter.
In this, at this moment, the demand is for products that are more affordable. Thank you.
Our next question comes from Eduardo Alves.
Good morning. Thank you for your presentation. My question is, after the process of taxes over dividends, how does Grendene see this, and what would be the ideal for the year of 2026?
We are not changing the policy of dividends, so we'll keep distributing whatever is needed to do. Our sell-out is not going to be changed in relation to other situations.
The question- and- answer session is over, and the floor is yours, Mr. Alceu Albuquerque, for your final considerations.
Once again, thank you so much for your presence in our video conference, our video call. Thank you. These were the results of the first quarter of 2026.
If you have any further questions, our team is there to answer your questions, whatever questions you need. Have a great weekend. Thank you so much.
The video call of results of the 1st quarter of 2026 by Grendene is over now, and the department of Investor Relations is there for you anytime you need. Thank you so much for your participation, and you all have a great day.