As chief executive of Arezzo & Co., Alexandre Birman is taking one of the largest shoe empires in his native country of Brazil global. Operating brands including Alexandre Birman, Arezzo, Anacapri, Schutz and Fiever, the company’s portfolio is strategically distributed across price and positioning.

Arezzo & Co. dominates the Brazilian domestic market, selling more than 30 million products annually. And while roughly 90 percent of Arezzo & Co.’s business is Brazil-based, Birman is building on his existing international reach in what he refers to as the “corporate era,” which has included partnerships with influential retailers like Milan’s respected concept store Antonia and others. The Schutz brand is believed to have significant growth potential in the US market, and boasts 80 stores in Brazil.

The Brazil-based footwear and accessories conglomerate registered in the last 12 months adjusted gross revenue of nearly $900 million, up 60.3 percent year-on-year. The conglomerate’s e-commerce sales grew 44.4 percent year-on-year, equating to 20.4 percent of sales.

Arezzo & Co.’s US operations outperformed other markets, posting record-setting revenue of over $87 million, up 64 percent year-on-year. According to the company, its performance was driven by the strong sales in all the group’s brands and the acceleration in sales of physical channels.

Birman was born into a family of shoemakers: his father Anderson Birman, chairman of Arezzo & Co., and uncle Jefferson founded the shoe brand Arezzo in 1972, a time he now refers to as “the industrial era” of the company’s growth. By the 1990s came the “retail era”, when Arezzo rapidly expanded its store network, becoming a household name in Brazil.

In 1995, aged 19, Alexandre Birman decided to start his own label, Schutz, with a $1 million investment from his father. By 2007, Schutz reported annual revenues of over $63 million. It was then that Anderson Birman proposed his son incorporate Schutz into Arezzo & Co, and when the company was preparing for an IPO four years later, Birman senior handed leadership of the group over to Alexandre.

Also within the company’s portfolio is Birman’s eponymous line, known for its high glamour and vibrant hues, which has previously presented in Milan Fashion Week, and is worn by the likes of Blake Lively, Katy Perry, Gigi Hadid and Catherine, Princess of Wales.

Now, BoF sits down with Birman to better understand the company’s ambitions to become a global accessories conglomerate, and how it plans to acquire high-potential international SMEs and provide them with the infrastructure and insight to scale internationally.

What informs your retail channel strategy and how is it fostering Arezzo & Co’s global growth?

AB: My first order of business when I became CEO was to create an e-commerce platform and invest in the operations part of the business. We had nice brands, but our logistics were weak: we did not have an ERP [enterprise resource planning] system; we had a very simple distribution centre; we didn’t have a proper budget-driven process or strategic planning. So, my first job was to restructure the company, and it took me 4 years to get it right.

In 2018, my CTO and I ideated how to connect the sales associates to the CRM database. We realised that there is a lot of idle time, hours when they do not sell anything, and then we asked ourselves, why not create a system? So, we launched a trial where sales associates could connect with customers remotely using WhatsApp. When Covid came, we had already undergone our digital transformation. The stores were prepared and we implemented that system to all the 5,000 sales associates. We didn’t close a single store and we were able to go back to 80 percent of total 2019′s revenue by May.

When did you start acquiring brands?

AB: Our first acquisition was fashion retailer Reserva in October 2020, so in the middle of the crisis. We really hit the nail on the head — what made it the right target was that they had the right people. When we announced the acquisition, shares in Arezzo increased more than 9 percent.

Our plan was simple — to implement what we knew in shoes into the apparel company, and the results were well above our expectations.

We did a lot of research and saw that they had not optimised how they distribute. They were focused on a specific region of Brazil and they didn’t have a full 52-week sales calendar — they had some launches throughout the year, but not a coordinated set of collections like we do. They also didn’t have shoes. So, our plan was simple — to implement what we knew in shoes into the apparel company, and the results were well above our expectations.

What makes a good acquisition target in the footwear and leather accessories markets?

AB: A potential acquisition target brand has to have a star or iconic product. The brand has to be operational for a minimum of 4 years and a maximum of 10; it has to have the founder as the creative director; it has to have a gross margin that is sustainable; it has to have a good sell-through to a full price and its revenue range has to be between $5 to $50 million. We are really looking for something in the middle.

How do you drive performance in the brands you have acquired?

AB: We intend to keep this structure of letting the founder be the creative responsible for the marketing and response before sales, and we provide the backbone. We are a centre of shared service from product development to logistics, digital to human resources management, budget control to institution planning. We implement the same concept of buying raw materials and outsourcing the production, putting the product in the centre.

At Reserva, we added the sales calendar so they went from four collections in a year to 20 collections. We redefined their store design and created the “zip code” — merchandising categories that appear in every store you visit. At Reserva, we have denim, workwear, trendy pieces, resort and shoes.

Last year, we also acquired streetwear brand BAW, which stands for Black and White. This company’s results didn’t come as quick as we expected. We had some adjustments to do in the margins and brand awareness, so sales reduced a bit, but it’s coming. We also completed our first womenswear apparel acquisition with Carol Bassi in December 2021.

Why is it the right time for Arezzo & Co to expand internationally?

AB: We waited for this moment — our US operation has matured and we are now in the middle of a roadshow. We are evaluating more acquisitions within the next six months. Against all the odds, Central Bank of Brazil worked faster than the more modern economies and at the moment we are already lowering our interest rates — and our company is in a very strong cash position. So, we believe that is the right moment.

What’s the significance of the American market to Arezzo & Co’s global expansion plan?

AB: We have today an amazing structure in the United States. Because we operate DTC, we have stores and a structured online business that is 100 percent omni-fulfilment. The most important part about the stores is our drop ship programme that we implemented 4 years ago.

We intend to keep this structure of letting the founder be the creative responsible for the marketing and response before sales, and we provide the backbone.

Most European brands are small brands, so they are either in the hands of distributors or they do sales out of Europe. They don’t have their own entity in the US, so this is our added value.

We would think that with the operation already in place, it is easier to plug brands that are already known here, in the northern hemisphere, rather than bringing a brand into that. Brazil is different but globally, we don’t want to take this risk, because we still do not understand production or sourcing. So it is global expansion with a sole focus on shoes.

What are the core advantages of Arezzo & Co’s intelligence that it brings to its band of brands?

AB: The biggest point of differentiation that we have against other companies is the fact that we were born as manufacturers. But my father knew how to make the right changes to move from manufacturing to retail to brand verticalisation. So today, we are not just a brand-driven company, but verticalised in product development and production. Secondly, as a customer-driven group with an exceptional CRM database, we have deep consumer insights.

How are you responding to consumer sentiment for less environmentally harmful business practices and consumption patterns?

AB: We separate the company’s social impact from the environmental. On the social side, we audit 100 percent of our factories and have the highest standards as per the Brazilian Textile Retail Association (ABVTEX) certification requirements. We also have full control over labour, with 95 percent of our production today based in Brazil.

As for raw materials, most of the petrol-driven products that we use for the soles are recyclable. We follow a strong programme to track our leather sources, most of which are sourced in Brazil, for which we received a gold seal from ABVTEX. In terms of material innovation, it’s hard to get away from leather for Alexandre Birman, but we are developing and testing new materials constantly.

For me, the real way to reduce the impact that fashion makes on nature is not to recycle but to reuse — the circular economy is the future. It got traction a few years ago, but it’s still something new that will take time.

What does the future hold for Arezzo & Co?

AB: Over the last 10 years, we multiplied the company capital by five. Now, we want to multiply by five in 5 years. The key to that is to choose the right acquisition — consider the people in the company, be strict as to the boundaries of our international mission and the boundaries in Brazil, and be diligent with capital.

We have to have a fast inventory sell through so we don’t carry more than 90 days of inventory, which for fashion is good. So, we have to be keen on inventory and on capital expenditure — try to invest 30 percent of EBIDTA in capital expenditure and to have a working capital over revenue of less than 20 percent. If we maintain that diligence and are able to attract the right brands, we can justify a global workforce of 5,000.

This is a sponsored feature paid for by Arezzo & Co. as part of a BoF partnership.