By Brazil Stock Guide – Riachuelo’s transformation is increasingly being built from the inside out — literally. After years of restructuring its retail and financial arms, the Brazilian fashion group has now turned its focus to production efficiency, leveraging its integrated factory in Natal as the cornerstone of a new growth cycle.
The in-house model is paying off. According to CEO André Faro, garments produced internally yield up to eight percentage points more gross margin than those sourced from external suppliers. Over the past two years, factory output has risen between 30% and 40%, supported by a “make-versus-buy” program led by the newly created sourcing and supply chain division. “We’re only halfway through this journey,” Faro told analysts, “but we can already see the results materializing quarter after quarter.”
The company’s goal is not to become fully vertically integrated but to optimize its mix across three supply fronts — own manufacturing, national suppliers, and imports. By shifting more production to categories with higher profitability, such as basic T-shirts and knits, Riachuelo captures scale benefits without losing flexibility in its product offering.
Internally, the integration between design, factory and retail has become a central lever of the company’s turnaround. Executives said the factory is now being used to test new production models, shorten lead times, and apply analytics to fashion cycles, enabling price adjustments “every two weeks, sometimes weekly.” The factory’s operational efficiency is also expected to help offset potential macro headwinds by reducing exposure to imported goods and currency volatility.
Looking ahead, Riachuelo expects in-house production to grow gradually from roughly 25–30% of total apparel volume today to around 40% by 2026, especially as the company begins manufacturing part of its winter collections domestically for the first time. “Our goal is to build a sustainable competitive advantage from within — combining brand, product, and process,” Faro said.
The shift toward a more integrated and data-driven model comes as Riachuelo posts record profitability, with a consolidated EBITDA margin of 16.4% and a 63% jump in net income in the third quarter. The factory, once underused, is now emerging as the group’s engine of margin expansion — and a symbol of its long-term reinvention.
Read more: Riachuelo posts record results with 63% profit surge and historic EBITDA margin
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