The clothing sector is very sensitive to macroeconomic changes, since its main cost comes from the acquisition of raw material – cotton – the prices of which are established by the world market, in US dollars.

On the other hand, the textile retail segment is highly correlated with changes in GDP (Gross Domestic Product) and with the evolution of credit. Accordingly, the economic growth presented in recent years, along with the expansion of credit, has boosted sales in the retail sector as a whole, and particularly in the clothing segment. The stabilization of price levels observed in recent years has also provided a real income gain for the population, contributing toward an increase in consumers’ purchasing power.

The Brazilian fashion retail market is rather fragmented and competitive. We compete directly for sales and store locations with other local, national and international department stores, specialty stores, discount stores, and supermarkets, as well as Asian online sales platforms.

The main differences between retail competitors include store layout, product quality, prices, merchandise, brands offered, and the provision of services such as customer credit and clothing repairs.

The sector’s high informality generates major impacts, mainly on retail chains and department stores that comply with tax, labor and environmental laws. Even with all the illegal competition, the major chains have been growing strongly in recent years due to the following factors:
(i) differentiation;
(ii) segmentation;
(iii) quality;
(iv) advances in technology and control;
(v) gains in scale.

The retail sector’s performance is directly related by factors relating to unemployment, credit availability, and interest rates. In 2023, the company saw a significant recovery in its performance, with developments and the strengthening of its ecosystem. Despite the challenges of the macroeconomic scenario,, the company continued to focus on extracting even more efficiency from the core business and improving the profitability of Midway Financial. The company has made progress on its strategic priorities, supported by four fundamental pillars: Product obsession, Democratizing access to fashion, Our assets must be worth more and Operational efficiency.

The focus on strengthening the apparel value proposition through more effective category management has allowed us to drive growth and optimize margin management in key fashion categories.

The Company benefits from fiscal incentives for Income Tax on the income generated from the sale of products manufactured at it factorie located in Natal. These incentives, provided by SUDENE (Northeast Development Board), consist of a 75% reduction in or exemption from income tax on the results of each factory unit, until the base year of 2026.

The Company benefits from the following incentives: (i) Program for the Incentive to Industrial Development of Rio Grande do Norte – PROEDI created by Decree No. 29,030/2019 and guaranteed by State Law No. 10,640 of December 26, 2019, in the form of presumed credit equivalent to 95% of the ICMS value to be collected; and (ii) TTD 409 provided for in the Santa Catarina ICMS Regulation, in its Annex II, art. 246, in the form of presumed credit for import operations resulting in an effective taxation of 1.4%.