Good morning, everyone, and thank you for participating in our earnings call for the results for 2Q26. I have with me our Director of Investor Relations, M&A, and Strategy, Bianca Faim, and our CFO, Eric Alexandre Alencar.

Today we'll start off with the message that I've prepared for you, and then we'll talk about the highlights for the quarter, a deep dive into our four business units. Afterwards, Eric will go into the financial results.

Lastly, the most important part, we will be available to take your questions. In a more comprehensive manner about our second quarter, the operating results, meaning our income statement, does not fully reflect the strength of our brands.

In fact, it's much different than our capability in selling and sell-out. What we've always mentioned during challenging times, that it's about the branding.

The positive side of our results, we had strong cash generation. That's work that we've been doing since 2Q25, with the company strongly focusing on that, good working capital in inventory we had resulting in 356 million.

We have clarity about our challenges: revenues, EBITDA, profitability. We are strongly focused, looking to improve our performance for the half year.

A positive highlight, I would say, or at least neutral, is our results in sell-out, even with the effects of the World Cup. In total, for the Azzas Group, we had a decrease of 1.9%.

Excluding Basic, which I'll talk more about later, we had an increase of 0.3%, reflecting 2025, even with the internal and external challenges. When we look at the revenues with sell-in and sell-out, for the sell-in of franchisees, the result was deliberate.

We have over 1,500 franchisees when we look at all the brands. For the Arezzo brand, it's the pioneer in the fashion franchisees in Brazil.

We have a relationship of one generation after the other with them. In all moments, our focus is the long term.

Even though it affects our short-term results, the numbers that you can see here show how we're supporting our franchisees, obviously because we are correcting the course of the leftover products from the other season, and we have projects that have been implemented to improve that. In the first half of the year, our franchisees in Shoes and Bags, I would say, had a sell-out of -4%, and we didn't deliver summer collection in June.

The reduction was 21%. In June, the Shoes and Bags increased 22%.

We're really focusing on that to improve sell-in and sell-out for franchisees that had a 22% increase. When I talk about Shoes and Bags, I'll give you the absolute numbers on that.

Obviously, the drop in sell-in, part because of franchisees and partly because of multibrand, and mainly Vans—and I'll explain about that because that's not under control—so there had an operational deleveraging of our business in this quarter. When you look at the snapshot, it's very bad.

When we look at the film, it's a dynamic that will be overcome. In sell-in that goes fast in operational leverage.

In sell-in, especially franchisees, they have a very low cost of service, the conversion between gross profit and EBITDA margin is very high. Sales expenses are 7% to 10%, depending on the brand and channel, franchisee or multibrand.

You have a decrease of 3.3% in sell-in channels, it has a very high impact to the bottom line, different when you look at sell-out, even though the sales are high, gross margin high, but the cost of service is high. The leverage is a result of lower sell-in, as I explained.

About the future, the biggest correction in the capability of increasing sell-in was already done. In the third quarter, we're balancing out the sell-out and sell-in of the franchisee network.

It was painful work, but very important. The main effect that we're measuring the health of our franchisees is the delinquency rate.

For Bags, it's just 6.4% of the total receivables. We made some tough decisions.

We decided to preserve the longevity of our franchise network. We focused on operations and, obviously, the partnership aspects that are public that we had some debates as of May 12th.

In the beginning, it took away some of our focus and energy, but now we have a group of people that are extremely dedicated, that are engaged in that topic, so that the management is completely focused on the business, going into the second half focusing on growth, obviously it won't be stratospheric, but especially in profitability, and continuing to focus on cash generation. What are the levers of our business, besides the standard operation and operating cost?

We have the strategic alternatives of FARM Rio, as the material fact announced on July 19th. We have Morgan Stanley to focus on strategic alternatives for FARM Rio.

The process is still according to schedule. All the accounting and legal aspects are well detailed.

It's worth noting that the decision was made, and the operation is still in the phase of preparation, as planned. We will inform the market at the right time.

The other lever to generate results is the consolidation of the Hering turnaround. In this first half, we see an increase in gross margin and especially cash generation.

We have 97 million in cash generation. I'll talk more about that later.

That was for the quarter. When we look at the consolidated numbers for the half year, that number is very positive.

So 2025 drained a lot of our cash flow, but now, even though there's contraction in revenues, there's a drastic change in the capital employed, and consequently, cash generation. About the highlights, we have total revenues of 3.2 or 3.24 billion BRL, with an impact of the sell-in by 7.1%, which is negative, and in the Azzas Group of 3.4 billion BRL in one single quarter.

That shows the robustness and our ability. As you can see, the sell-in we had deleverage.

If it went too fast, we would have a historical positive bias of the entire business. Operating cash generation was 357 million, 3 times greater than 2Q25.

Here's some highlights, but obviously we have some lowlights as well. Highlights: gross margin, as a result of lower sales and markdown, especially in the Basic apparel business line.

Obviously, with the change in the mix, there was an increase of 1.3 percentage points. Ex-Basic was 60.6%, gross margin was very healthy.

Basic was a growth margin of 40.4%, an increase of 1.2 basis points year-over-year. Sell-out channels totaled 1.7 billion.

We have this within our income statement. This does not include sell-out from the franchisees.

Excluding BU Basic, we had +0.3%. A reduction of 31 days in our financial cycle.

Highlighting our stock days with which was 15 days less than Q2 2025. Even with a large volume of summer product products in our distribution centers, this happened in July.

This is a highlight, because if it was not invoiced in July, the stocks would be lower. Our operational cash generation was strong.

The figures are here, I won't be repeating myself. About the lowlights, as I said, nobody is in a country to have a revenue retraction, even with all the explanations that were mentioned.

They are corrections from the past. We work with a company to have constant growth.

We know that a company that does not grow does not have a longevity. This is what also happened in our results in this quarter.

It was the expenses grew 5.3% with a retraction of revenue of 7.1%, generating this deleveraging we mentioned. Occasional expenses were very well management.

There was a saving of 6.5% compared same period last year. Our EBITDA—Eric is going to explain this further—was 379.6 million reais, with a retraction that was big compared to last year.

Of course, this figure is uncomfortable, but we have control and management over it. This is a company that is here for the future, and an occasional result from a quarter, of course, makes makes us dissatisfied, but also more willing to struggle to get this performance back, our history of growth.

We knew that the decisions that have happened in this quarter were crucial for the longevity of our business. I'm going to highlight some issues about our four business units.

Starting with Shoes and Bags, our gross revenue was 966.5 million reais. Here, due to the bigger impacts of sell-in, there was a retraction of 12%.

This result was positive of 12% in July, and it tends to normalize in the third quarter compared to 2025. The first quarter, the gross revenue of this unit was near 2 million billion reais.

About the revenue per channel, our own stores grew 4%. E-commerce also deliberately was reduced the sales with markdowns had a retraction of 6%.

Multibrand channel, we're going to explain, impacted by the Vans brand, had a retraction of 20%. The franchises, as mentioned, a reduction of 21.5%, while sell-out in the franchises had an increase as well.

We're going to the last line here of this page, you can see how these figures in absolute numbers are strong. The total invoicing for the franchisee channel in Shoes and Bags was 210.2 million reais, whereas the sell-out of this network in this period was of 524 million reais.

That is, here this coefficient that we measure so deeply, sell-out for sell-in was 2.5 times, a growth of 22% versus the same coefficient in Q2 last year. Now about the sell-out revenue to the first point here, first bullet point of this page, a positive highlight for our main brands.

Arezzo grew 12.3%, even with the effects from the World Cup. This is a result of the better collection and a reduction in sales in markdown.

The Schutz brand, that for so many years we presented to you difficulties in finding their position and finding the essence of the brand—we've talked about this for many years—it was great work done by under the leadership of Rafaela Furlanetto and the team, putting the Schutz brand very positively. It has healthy growth in own stores, growing 7.7%.

We're going to talk about Sarah Jessica Parker. Schutz, with this positioning that is young and connected, has Marina Ruy Barbosa as its ambassador for the summer collection, very much connected to the brand.

About the work with Sarah Jessica Parker for winter this year, which was almost accidentally, I think I've mentioned, she came for a beverage brand here for Carnival, and we got one day from her. It was a great repercussion.

This motto, 'obsessed for shoes', resonated very well with the Arezzo brand. We had a deal with her, multistructured.

We have a miniseries with her for the second semester of 2026. We recorded it in New York.

The results in the beginning of summer in August have been surprisingly positive. Now about the turnaround from the Vans brand.

Vans is under new leadership. Thiago [unclear], he was has been working in the company since he was 15.

He has this entrepreneurship project together with Davi and Fernando. Great experience in the sneaker segment.

He's in charge of the Vans brand, and he has been very efficient in his work, focusing on reviewing the production cycle, using what we had in the past with a bigger participation in sourcing done in Brazil, which gives us more flexibility and better margins. Of course, we're increasing the purchase and the furnishing of the brand and commercial activities to accelerate sell-out.

We will have a second semester with challenges from the Vans brand results. We are aware.

Our project forecasts that for December, results are going to be positive. The actions are very well implemented, and 2027 in Vans brand is going to start growing again.

Some highlights about the campaign that I mentioned with Sarah Jessica Parker: we had the first seven days of the campaign since its launch last week, more than 6 million views in digital channels, 70 organic articles. I think everybody was somehow impacted very aggressively in São Paulo, in Iguatemi.

This generates very strong brand awareness, especially these shoes, the black and white, had sold out almost 100%. This campaign was very successful.

Continuing this process of recovering our sell-in, this week we had on Monday and Tuesday, we were in Campo Bom. We had the biggest launch in the in the history of our franchisees.

We had the honor to count with the presence of our founder, Anderson Birman, from Arezzo brand in Campo Bom, talking to our franchisees that have been with us for 20, 30 years. The trust in the brand is positive.

The initial results from sales is strong. In parallel here in São Paulo, in a large event in the Paulista Avenue, we had more than 500 multibrand store owners.

If you are in São Paulo, it is still a setup. You can schedule that with our team to see the strength of our brand Arezzo Shoes, Anacapri, and Vicenza.

Here's some of the pictures of the great events. Congratulations to the team.

I'm sure that with this energy, our sell-in in 2026 will be positive for the next semester. Now about our business unit Fashion Women, our gross revenue was very expressive, 1.4 billion reais, despite a slight contraction compared to last year.

Absolute figures are huge. We had in the semester revenue of 2.7 billion reais, growth in this in Q2 of our own stores.

This shows health in our sell-out. Slight retraction in e-commerce, as mentioned also for Shoes and Bags.

We are in a process that expects selling with discount. This is positive for reduction of stocks, the health of our business regarding sales at full price, stock, and cash generation is positive.

The retraction with multibrands, the store owner profile is more sensitive to macroeconomic variations, interest rates impact our store owners. We have very small sales deadline, we work with a very low level of default is a prerequisite.

Here we had credit restrictions for several clients, deliberately aiming at our high a low level of default. In the international market, this retraction is due to exchange issues in dollars.

FARM Rio operations, as I mentioned in the third bullet in this slide, grew 4.3%. We're going to show highlights about strong branding and sales work with opening of four pop-ups that FARM had in June and July.

Highlights here for the sell-out brands for Cris Barros with a very expressive growth of 20%, Carol Bassi 14%, the other brands also growing, and multibrands as mentioned. Here is a small taste of the pop-up stores from FARM.

Large events moving $1.5 million in this period, overcoming in 100% our goal. This made that European stores, London and Paris, they had a sell-out of 41% in this period.

We are still to measure the correct branding effect. It's hundreds of thousands of people worldwide that are still visiting these stores till the end of summer now in August.

They're going to have a very positive impact in the expansion and the global branding for the FARM Rio brand. Now for Fashion Men, we had a revenue of 420 million reais, flat compared to last year.

We had in our own stores growing 2.6%. E-commerce, for the same reasons mentioned before, retraction of 4.2%.

Multibrand here growing due mainly to the continuous improvement of the Foxton brand. The sneakers business for Reserva grew, boosting multibrand.

For the same reasons mentioned for Shoes and Bags, a deliberate retraction for improvement in the health of our franchisees, which caused a retraction of 18.6%. The Oficina brand is a highlight, in the base of 30% of growth in Q2, keeping a growth of 7.6% in this second semester.

Now lastly, about our Basic business unit. Continuous process that is going to be deeper here in what are the performance KPIs that we're measuring today at Hering.

In absolute figures, a revenue of 559 million reais, retraction of 12% year-over-year, and an improvement compared to the first quarter that had a drop of 18 18%, although of course there are some seasonal aspects that impact sell-in. The sell-out channels with a reduction equal equally for own stores and e-commerce around 14%, due to a strong reduction of sales in markdown.

This increase in gross margin for Hering is totally explained by a great control of stock stocks that brought great cash generation and a healthy sales and for our store for our clients. The selling channels, in a continuous process to normalize the stock for the network, we had a positive highlight here for the improvement in gross margin.

On the next page, more specifically about the main KPIs for the Hering brand. Our main goal is to recover profitability, expansion margin, cash generation, based on stock reduction and an improvement of the capital employed.

Therefore, we had a reduction of 25% in the sales of products at discount prices. This is very positive for the business, not only for cash generation, but also for branding, for you to have faithful clients at full price.

The reduction in stocks is very relevant. It goes from a total of 200 214 days in Q2 2025, and it drops to 149 days.

Our goal is to get to 130 days, it's very, very close to this goal. Actually, some products were had were at fault, but we chose that we cannot want a great bonus.

We chose to be more conservative in our purchases. Several Hering products, especially winter puffers and others, had a reduction of purchase that was deliberate, and they were missing in the stores.

We know that. To find the ideal level is a process.

It is the first semester in our new management for Hering, and this process is part of it. In doubt, we chose for a drastic reduction of stocks, as you see here.

That led to cash generation of 160 billion for the half year and a reduction of 163 million in the same period year-over-year. The delta is 326 million BRL for Hering, and that's very important.

The team is very much set up with high level of confidence. Next week we'll have a kickoff for Christmas sales, a big convention on August 19th with our internal team, and I'm absolutely sure that we're prepared to have a second half with better results, but specifically the fourth quarter.

There's a milestone in September on the 3rd, launching the Brasil T-shirt. It's replacing the one that has had a historical name, and we believe this fits better with Brazil calling it Brasil.

It used to be called World. Here's some highlights in product engineering that's very deep, very detailed, practically nine months of work, over 18 different sewing processes from the label to other aspects, improving the fabric label and lowering the price drastically in sell-out.

It'll be sold at 49 reais 99 cents, and improving the gross margin. I'm absolutely sure that how this T-shirt is bringing B2C consumers into the base, with a huge share of the market in Brazil that Hering had lost in the past years.

This process was a lot of engineering and predictability in demand. The T-shirt is made completely internally.

We decided to focus the entire production, Hering production chain, on basic products so that we can have productivity and high scale. When you visit, you can see that our plants are more productive because they have less variations and the products that are temp would be made outside the company in Brazil or abroad.

This is about Father's Day in Hering. It was very strong, rescuing the essence that the brand has, with Thiaguinho, a very strong personality that has a big outreach in our country.

Those are my opening points about the second quarter and business perspectives. Now Eric Alencar, our CFO, floor is yours.

Thank you, Alexandre. Good morning, everyone.

It's a pleasure to be here with you and Bianca for our earnings results for 2Q26. Starting off with the financial results on slide 16, in the second quarter of 2026, gross revenues of continued brands was 3.4 billion BRL, a decrease of 7.1% year-over-year, with specific dynamics between the channels.

The sell-out channels totaled 1.7 billion BRL. It was 1.9% drop, with own stores growing 0.9%.

Own stores, the highlight goes for goes to Arezzo, with a 12% growth; Schutz, 8% growth; and Cris Barros, with strong growth of 42%. In sell-in, dropped 13.6%, reflecting the priority of covering the inventory of the franchisee network and conservative purchasing from multibrand channels, given high interest rates scenario in the country.

The lower purchase lower share of summer in Shoes and Bags in 2Q26 being more representative in June this year. In abroad, revenues dropped 4%, reflecting the depreciation of the real compared to the dollar, a 12.9% drop, and a lower share in revenues of the spring and summer collection in 2Q26 in FARM Rio.

By adjusting the FX effects, the international revenues would have grown 5.9%. Net revenues totaled 2.7 billion BRL, a drop of 8.2%.

The deductions account for 20.6% of gross revenues, an increase of 0.6 percentage points year-over-year, in line with the first quarter of 2026. The variation is essentially from better generation of tax benefits in the Fashion Women and Men business units, with a 1 percentage point increase in gross revenues, and taxes increased 0.4 percentage points.

Increase in the tax is mainly explained given the higher share of the sell-out channels and the incidence of ISS on royalties in 2026. These factors were partially offset by a 0.8 percentage point improvement resulting from the decrease in returns in Shoes and Bags and Basic.

That's something we've been talking about for a while now, that in this quarter finally brought on positive results that we were mentioning. Recurring gross profit reached 1.5 billion BRL, which is an increase of 130 basis points in gross margin and ending at 56.2% in the quarter.

By excluding the Basic business unit, gross profit was 1.6 billion and 130 basis points over the second quarter of 2025. Gross margin is explained by the lower markdowns and higher participation of the sell-out channels in revenues, overcoming the impact of the increase in the deductions of gross revenues.

In the Basic unit, gross profit was 40.4%, with an increase of 1.2 percentage points, reaching 105 basis points, even with a higher share of sell-out channels in the quarter. The increase in the Basic gross margin shows the better quality of Hering and decrease in the pressure to flow the off inventory in the previous year, as expected according to our plans.

Recurring expenses ex-depreciation totaled 1.1 billion BRL, an increase of 5.3% year-over-year, representing 43.3% of net revenues. These expenses increase 9.5%, reflecting mainly or in the fixed expenses in the net opening of stores and recognizing the increase.

The variable expenses increased 3%, recognizing bad debt in the multibrand channels in this quarter, being offset by better management of shipping and commissions. We have decrease of 6.4% in the annual comparison of expenses.

On slide 17—no, actually next slide is 22—recurring EBITDA totaled 330 million, a drop of 29.1% year-over-year, with a margin of 14.2% and a decrease of 430 basis points. Even though you have a gain in gross margin, the decrease in net revenues shows deleveraged operational deleverage, and EBITDA margin decreased 430 basis points.

The recurring EBITDA is 39% under the second quarter of 2025. Net financial expense totaled 187.6 million BRL, compared to 199.5 million in 2Q25.

That is mainly a reflection of the lower impact of the FX rate, as the contracts were determined with lower rates in the previous year, decreasing the interval between the hired or the contracted FX rate. Recurring net income was 106.5 million, 4% under year-over-year.

Income tax and social contribution had a positive impact, and recurring net income for the quarter 106 million, with a net margin of 4%. Now moving on to the following slide about cash generation and working capital.

Once again, these items were the highlights for the quarter, as Alexandre already mentioned for us to us today. The operational cash generation achieved 356 million BRL, over 3 times the 106 million in 2Q25, with a conversion of 105% of EBITDA in cash generation.

In the post-CapEx vision, we have 100 point 1.6 billion BRL, conversion of 105% of the EBITDA to IFRS. In the past months, we achieved 1.3 billion in cash generation, 1.

1.6, I'm sorry, 1.3 billion post-CapEx and conversion of EBITDA for the period. In the quarter, the investment activities were 26 million BRL, so that resulted in a cash generation increase of 122 million.

In the next slides, you'll see the factors behind the high cash generation. The financial cycle ended the quarter at 93 days, a reduction of 39 days year-over-year, with a better with an improvement in all steps of the cycle last 12 months.

By excluding the provisions in inventory loss, the impacts that were adjusted in recurring EBITDA, an improvement of the financial cycle of adjusted from 31 days to 29, and an improvement in inventory days 15 days, accounts receivable 5 days, and improvement of supplier days by 11. Basic achieved a reduction in inventory as well, and post-CapEx 97 million BRL, with a consumption of 56 million in the first quarter last year.

Now we're moving on to the last slide to talk about company indebtedness, and ended the quarter with a cash position of 1.1 billion BRL and net debt of 2.2 million, a reduction of 39.9 million year-over-year. We had a leverage of net debt-EBITDA recurring last 12 months reflecting it, even though there was cash generation.

The gross debt ended at 3.3 billion BRL. The complex situation in the country this year, we extended the profile of our debt, concentrated 82% of them in the long term, 43% of what it was in second quarter last year, in addition to 964 million in credit card receivables, reinforcing the liquidity and the financial flexibility of the country company in the short term.

That's a summary of my presentation. Now we'll open up for Q&A.

Thank you very much.

Thank you, Eric. Thank you, Alexandre.

Good morning, everyone. Let's move on to the first question, and this from Luiz Guanais from BTG.

It's about sell-in. He's asking: 'It would be interesting to hear the inventory cleanup that you've done with the franchisee and multibrand channels in the past quarters, not only in Hering, but also others.

How do we go into the second half for these channels?'

Luiz, good morning. Thank you for your question.

This work started at the end of 2025. We had sell-out and sell-in that was historically at healthy levels of 2 times.

However, in the beginning of 2025, end of 2024, it reached 1.8 times. That's a coefficient that's part of the main KPIs that our team analyzes, because the health of our franchisees is essential for a long-lasting company.

That work was done, and you can see the results in the second quarter: no less than -4% in sell-out and a decrease of 21% in sell-in. Now you can expect that balancing out the performance of sell-out and performance of sell-in.

Thank you, Alexandre. Next question is from Vinicius Strano from UBS.

He has two questions. The first one is about FARM Brazil: 'Can you give us some more flavor about the FARM performance in Brazil?

How do you see sell-out, sell-in? What's the evaluation about the level and quality of inventory for the brand?'

Thank you, Vinicius, for your question. I'll start off with the second part.

Inventory level, I would say, is extremely healthy. It's the lowest level that we've had in apparel for our group, by far.

Very fast sales that FARM has. Even in some specific categories, I would say that it's very optimized.

According to our assumption for the group is strong cash generation and inventory reduction. We also have opportunity to review the quality and the intensity of the FARM stocks.

As for sell-out performance, worth highlighting that the 2024-2026 cycle in FARM doubled in size, virtually. It's a very strong expansion cycle that we knew that in this time period in 2026, especially the second semester, what we had invested, the seeds had been planted, and the fruits were being coming.

When we started this process to analyze and how to maintain this growth with FARM, and at the same time with the premise from the Azzas Group of the reduction of inventory, reduction in CapEx, it's a bit contradictory. This work that Morgan Stanley was hired to carry out is here to bring a new cycle that is very well designed.

Our strategic planning is very well designed, but we are at this transition moment from a very virtuous cycle with strong investment in the past two years in this brand, and a plateau in this growth due to actually being very high values. It's the biggest brand in women's apparel in Brazil by far.

FARM alone this year is going to have as revenue globally 3.5 billion BRL. Now it is going through a reinvestment.

The actions are fantastic. The branding is strong.

You will have collabs with FARM from the second semester, from Stanley—I don't know if I'm allowed to say it. I'm not.

A partnership with an international collab that we'll be launching in the second half of 2026. I think we can say it.

We can say it. There is a collab with FARM with Real Madrid and Diesel.

It's going to be very strong. We are very confident that in terms of awareness and distribution, the brand is doing well, but it needs a new cycle of investment that is being well designed and well-matured.

About sell-in, the brand has a distribution that covers all of Brazil. The growth that we have with FARM last year was very strong.

It was beyond our expectation in the first year, it's normal that it stabilizes this year.

Thanks, Alexandre. Vinicius' second question is about the scenario of expenses and points of efficiency.

The question is: 'How do you see the scenario of expenses for the future? What do you see as potential points of efficiency that can be captured?'

Hi, Vinicius. Thank you for your question.

We know we growth 5.3% in our SG&A. Breaking this down, we go to fixed expenses, a bit over 9.5%, especially in CTO, which is occupation in lease, and lots of investments in the expansion of FARM internationally that Alexandre mentioned is one of our pillars for growth in the company now.

In the variable expenses, we grew less than inflation. We grew 3%, and the main growth came from PDD, which we have 13 million that we recognize as losses from doubtful debtors, even with our default dropping.

We are conservative in the more and the older accounts receivable, recognizing that the chances are that this number is going down. The others, consultancy, travel, we were diligent, and it dropped 6.4%.

About the future, we talk a lot about this. We are an industry with high gross margins, we need to sell.

We made the decision to hold sell-in. Once we go back, the ratio between SG&A and sales is going to normalize.

This being said, the SG&A work continues. We see lots of opportunity: people, commissions, marketing, freights, and storage.

We have a plan ongoing that is going to have impacts more to the end of 2027, because its execution takes some time. I hope it was helpful.

Next question from Daniela from XP. She asks about gross margin and working capital: 'In the quarter, cash generation and gross margin, especially working capital, were positive highlights, but both end up being strongly related to the situation of stock adjustments where you're not growing.

How should we consider the dynamic for working capital and gross margin when you recover growth?'

It's Eric again. Daniela, I'm going to speak and then maybe Alexandre wants to contribute.

Thank you for your question. It's an important point.

I think from this vision, from the time that you are getting away with inventory, you're working with the worst scenario for gross margin. This is the nature of the industry.

The trend for the gross margin in the channel has to be positive, which contributes for the margin ahead. Once you're reducing stock and working on that, this is how you're going to reduce.

We manage to have an expansion in margin even in this scenario. Of course, how did we manage to do that?

We could with a biggest mix of sell-out and sell-in with a bigger gross margin, and also a lower level of markdown in all brands, as Alexandre mentioned. When we talk about the cycle of working capital with the reduction of inventory, it was an energy shock to reducing the cycle in 31 days.

We adjust inventory. If you look at our working capital cycle, is one of the best in the market today.

Then we have the cash generation that we have of 280 million. 50 million came from reducing sales, we don't need working capital, sell-in, but 220, 30 came from this structural improvement that we're doing.

Going forward, we believe that most of the working capital has been mostly captured. What we need going forward is to ensure the maintenance of this level of working capital and recovery of sell-in now that the relationship between sell-in, sell-out are healthier.

What's interesting for you to get to know us, we work a lot with working capital over net revenue, today about 25%. The goal for the future is to reduce this number drastically, not that, but to grow that indicator, keeping this healthy level that we reached.

Eric, excellent actions. Dani, thank you for the question.

I don't have anything to add, but to say, Dani, that on Monday, on the 17th, I adjusted my agenda—I don't think Bianca even knows it—I'm going to be able to participate in the XP Conference in Rio de Janeiro with a restricted time frame, but it's going to be a pleasure to be with you.

Dani has a second question, Eric, about the change in the stock provisioning rules. She wants to understand what the change was, and if this stock has been mostly sold or it's going to benefit the margin in the next quarters.

Dani, let me clarify what we do. We made a decision in the company to try a change in our perspective about how we see inventory and how we're going to transit that in our statement.

We reviewed the provisioning rules to increase the adherence in the profile of aging of our inventory. The new premise is to recognize the loss of shoes and other raw materials as zero.

We've always recognized it whatever is over than two years. We've always done this since 2023.

It had a one-off impact of 70 million reais. 15 million is raw material that we believe we're not going to be using for our clients.

This generates a huge improvement from now on in how we're going to see the business. Zero improvement in gross margin, of course, because the central point here, it's because this inventory is going to be discarded.

We're not going to use it. It's mostly from now on, we have no margin gain because of that, but we're going to be more aligned between what we provision and what we use in the day-to-day in our business.

Therefore, the vision of putting this as nonrecurring, because it's things from 2023.

Thanks, Eric. We have a lot of questions.

I'll try to get one or more from each analyst due to our time. Next question comes from João from Citi, and about the growth in own stores for the Schutz area: 'What was the most relevant factor that generated this improvement in a challenging macro environment?

Is this going to bring a broader recovery soon?'

Thank you for your question. This is a process that started at the end of 2025, when we had a big change, especially in the management of product, with a growth under the leadership of Rafaela Furlanetto, and a big adjustment in the mix of product products, especially in the Arezzo brand.

I remember at the XP Conference last year I talked about this. We managed to bring a consumer that we had lost, that looked for a product that shoes that looked like shoes, more casual.

Besides, we had a great improvement about the perception of cost-benefit from our products. This is something that we also talked about for the Arezzo brand and for the Schutz brand.

It was a an issue of positioning and branding. It was a work that we solidified this first semester.

Exceptional results from the Schutz brand, especially for boots, which dominate in the winter. We managed also to set a reduction in the sneakers category that reduced worldwide for casual sneakers, and the Schutz brand grew a lot in boots.

Today it has a very good positioning that is for their core consumer. The bags category has opportunity for growth, especially with the improvements of international sourcing.

I know it's consistent work that we're doing, that is very well executed. The second quarter second semester, you're right, we're being conservative in our assumptions.

We have a capacity, when we do well, that we can react quickly and grow. We has a very great for sell-out positive for the cruise in July.

Now in August, when we turn the campaigns, we're very confident that we'll have a Q4 of a very successful in the legado Arezzo&Co.

A question from Morgan Stanley, Alexandre: 'What about the health of the Hering brand? I understand the impact of the reduction of discounts in the sell-out, but do you see any issues as for the health of the brand?

The growth in the orders for the summer collection seems to be a positive indication of recovery, but is there any data that makes us more convicted that this recovery will be more sustainable going forward?'

It's a great question, Alexandre. Thanks for your question.

The answer I have to you is a strong conviction that we have, because in the past we didn't have a branding problem at Hering, but there was a deviation from its core audience. The Hering brand became premium, and it was losing the share in the B, C1, C2 classes.

A well-done work done by the team for maintaining great quality in terms of images and product, but bringing a communication that is more accessible, more democratic, bringing products at an entry point, P0, for example, the Brasil T-shirt. Because branding is not just marketing, it is product with it.

Hering is coming in the moments that it's going to reaffirm its leadership in the segment of basics. It's worth saying that from 2027, some important levers of growth for the Hering brand, one of them is Hering Sports, that has a great performance.

We have expanded the number of stores that distribute Hering Sports. Still was low percentage from the total of the brand, but with great sell-out results.

We're developing new formats for stores as well for the Hering brand. We're sure that we're on the right track.

There are great adjustments. We also applied due to an excess in reduction of inventory in some specific items in the first quarter.

For positioning and brand positioning, we are aware that the work is being done.

Thank you. Now we have two questions related to multibrand.

The first from Bob from Bank of America related to the adjustments of the inventory of this client's multibrands, there is a work to do, and another from Felipe Rachels is about our conservative approach that we feel from the multibrand clients. Is it related to the macroeconomic scenario or is there any other factor?

The second question from Felipe from Goldman Sachs.

Thank you for your question. The multibrand channel is very important for our business.

The origin of footwear was from multibrand, we are very close to them. When we talked about per business unit, an express of reduction in footwear, that's a result of Vans.

In the women's shoes, that reduction is small, and it's given not because of buying less, but because of some points of sale that were closed in Brazil. The capillarity of that channel is very big, and during sensitive moments in the economy with higher interest rates, that's a channel that has higher exposure and volatility in that sense.

In apparel, be it women or men, we were more selective in granting credit, on purpose, and we decided to focus on the health of our customers. In terms of share of wallet, we haven't seen any new entrants that have been taking away share in all product categories.

Revenues in multibrand is very expressive in our business. It is responsible for driving our gross profit and margin.

We pay a lot of attention to that channel. In Shoes and Bags, you can see the energy at the event.

It's worth visiting. In that collection, we want to sell 170 million in multibrand.

Here in São Paulo during these days, we'll be working together with our store owners to grow share of wallet.

Thank you, Alexandre. Last question from Santander.

It's about the rate of recovery of gross margin of Hering: 'So the gross margin has increased 120 bps, but what makes you believe that there's still a representative inflection that would come in the second half and it won't be postponed? What are the specific levers that support our schedule?'

The gross margin of Hering is 40.4%. It's positive growth.

It's worth knowing about the mix. We had a reduction in the sale in own stores greater than in sell-in.

When you look at the margin, it's consolidated in the channels, the variation is very big in the sell-out and sell-in channels. Currently doing assertive pricing plan, so that will grow in the half year, and it'll be positive in growth, but not with main levers.

We've been working a lot full-price sales, that's been helping to lower inventories and lower the sales in markdowns, and a lot of work in international sourcing. We've been focusing on having new suppliers, better negotiations.

It's not a silver bullet. It's constant work of the gradual change and absurd control of our team in that important KPI.

Perfect, thank you. Is that it?

We've reached the end.

I would like to thank and recognize our entire team, even during important moments in making difficult decisions, an external environment that's very challenging. We were able to preserve what's most important, which is the strength of our brands, and retaining our team even during times of a lot of transition.

That is very important, with a lot of dedication and passion of our team for the brands that they operate. Financial information, we mentioned that we were very effective in cash generation.

I'd like to recognize the commitment of our team, of leadership, of all our business units, all our brands. We have clarity of the challenges that we face, that we have to improve.

Above all, absolutely focusing on execution, so that we have a second half with better results. Priority is to stabilize inventory for our franchisees, gross sales, and consequently, operational leverage.

Thank you very much, and we wish to have a very successful second semester. Bye-bye.

That does conclude today's presentation. You may now disconnect your lines at this time and have a wonderful day.