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Good morning, and welcome to Grendene S.A. earnings release conference call to announce and analyze the results of the fourth quarter 2020. We'd like to inform you that this conference call will be held in Portuguese with simultaneous interpretation into English. [Operator Instructions] As a reminder, this conference is being recorded and will be available on the website, ri.grendene.com.br.
With us today are Grendene's main executives, who will be available to answer your questions: Rudimar Dall'Onder, CEO; Gelson Luis Rostirolla, VP; and Alceu de Albuquerque, Director of Investor Relations, as well as other executives and managers.
We'd like to inform you that the Q4 2020 press release is available at ri.grendene.com.br, both in Portuguese and in English. Before continuing, I'd like to clarify that certain statements made during this conference call about the company's operating and financial outlook are forward-looking statements based on the expectations of the company's management about its future. Forward-looking statements are highly dependent on market conditions, the general economic performance of the country, the industry and international markets.
Now I'd like to turn it over to Mr. Alceu de Albuquerque, Director of Investor Relations. Mr. Albuquerque, please go ahead.
Good morning. Thank you all for joining us for this Q4 2020 earnings call. It's a pleasure to be here with you again, sharing the company's results. I hope you are all doing well and staying healthy.
First, I'd like to inform you that all information regarding Q4 2020 was announced yesterday after the market closed at our company's RI website. We also uploaded an additional file, conference call presentation, to help you follow this call.
As usual, before we discuss the company's performance for this fourth quarter, I'd like to draw your attention to dividend payout. According to our current dividend policy, the management proposes to distribute both the results for fiscal year 2020 and the outstanding balance for fiscal year 2019, taking into account the material effect from November 20, 2020, as follows: BRL 260.8 million as supplementary dividend for fiscal year 2019 and 20 -- BRL 219.5 million as dividends for fiscal year 2020.
Together, this amount total BRL 480.3 million, minus the quarterly amount paid in advance on November 18, 2020, equal to EUR 21.5 million, which give us a balance of BRL 458.8 million that the company will pay at referendum of the ordinary shareholders meeting that approved the accounts for 2020 as of May 12, 2021, and as follows: BRL 110 million as interest on net equity. This is the gross number attributed to dividends totaling a net amount of BRL 93.5 million; BRL 348.8 million as dividends, where BRL 260.8 million are supplementary dividends for fiscal year 2019 and BRL 88 million is the balance for fiscal year 2020.
Shareholders holding common shares and common share GRND3 and on record on April 22, 2021, cut of date, are entitled to receive interest on equity and supplementary dividends. As of that date, shareholders will be individually paid after income tax, according to the legislation enforced. Grendene shares, GRND3, will be traded on B3 ex-dividend and ex-interest on net equity as of April 23, 2021.
Okay. So now let's discuss the company's performance for the fourth quarter of 2020. Q4 was Grendene's best quarter in history regarding gross revenue, BRL 1.03 billion, a 29.5% growth compared to Q4 2019. The company also had one of the best quarters of its history in volume, shipping 62.1 million pair of shoes, 26.8% above the same period last year.
Recurring EBIT had a market increase of 47.2% compared to the same period last year, totaling BRL 227.8 million, a recurring EBIT margin of 27.2% in this quarter. A similar performance was observed in recurring net income, an increase of 47.7%, achieving BRL 314.6 million, recurring net margin of 37.6%.
This extraordinary performance in this fourth quarter reflect the success of the spring/summer collections; the relaxation, particularly in October and November, of restrictive measures in the retail sector, considering debt in Brazil, most of the retail purchasing is done in brick-and-mortar stores; extension of the cash transfer program by the federal government; the shortage of raw materials in the market, leading to the concentration of orders by large footwear manufacturers, retailers were afraid that no products will be available for major retail dates of Q4, Black Friday, Children's Day and Christmas; and finally, increased demand for flip flops and sliders to the detriment of other footwear categories.
Domestically, gross sales and volume of pairs of shoes shipped increased 40.8% and 36%, respectively, compared to the same period last year, reflecting the increase in gross revenues per pair by 3.5%, especially because of the price readjustment as of October to offset the successive increases in the price of raw materials.
All segments presented a positive performance when compared to the fourth quarter of 2019, particularly flip flops, sliders and sports sandals for men. Retail and department store channels maintained their recovery pace as shown in September, and their performance was within historic behavior, contributing to the increase of the average price, although at a lower scale.
As for self-service and indirect channels, performance was also good just as in previous quarters. In foreign market, sales dropped 5.4% in volume and 6.1% in gross revenue compared to the fourth quarter of 2019, totaling 10.3 million of pairs of shoes and BRL 179.5 million, respectively.
And just in the previous quarter, shipments of Latin America led exports of our company in the fourth quarter. The poor performance in the foreign market reflects the worsening of the pandemic in different regions across the world that triggered new social distancing measures, including lockdowns in some countries, which led to decreased movement of people and tourists and consumer foot traffic in brick-and-mortar stores, especially in Europe and in the United States. The gross revenue per pair in Brazilian reals in the foreign market decreased 0.9% in this quarter as a consequence of the change in the mix of shoes exported. And just as previously, we shipped mostly to Latin American countries that consume more basic products.
Now allow me to talk specifically about Melissa's performance, that was very excellent. Actually, Melissa achieved record revenue in this quarter. The company shipped 7.7% volume, 7.7% above the same period last year. Gross revenue per pair, 13.4% above because of the increased volume in the domestic market and price readjustment as of October.
We continue to expand Melissa. Throughout the year, we added 12 new Melissa clubs to our franchising network, totaling 348 active clubs in Brazil. In December, we kicked off our internationalization project of this brand by opening the first club Melissa company-owned store in Los Angeles, California, United States. We plan to open other owned stores in 2021 in the United States and in China. The objective is to know this channel check payback and the viability of these stores for replicating the franchising model adopt in Brazil later on.
We also continued with our omnichannel project for Melissa that started in the first half of 2019. To date, more than 200 Melissa clubs are ready to provide integrated services with endless shelf or express delivery. We estimate that the integration of all Melissa clubs to the omnichannel model will happen April this year.
Now let me go back to consolidated numbers for Grendene. So net income was BRL 837.1 million, 25.7% increase in this quarter. Gross margin dropped to 1.1 percentage points to 49.6%, as a consequence of the high-pressure of cost of raw material, shortage of resins and cardboard and other inputs in the domestic and foreign markets. Because of this scenario, costs with raw materials accounted for 26.2% of our net revenue compared to 22.3% for the same period last year. However, the increase of cost with labor and compared to the net income presented a lower percentage, and that mitigated the impact of the increase of input. We were more efficient in managing our operating expenses. There was just a 3.7% increase in the period, much lower compared to the growth of our net revenue.
With that, our operating expenses accounted for 23.2% of our net revenue, 4.9 percentage points drop compared to the same period last year. Financial result was BRL 44.7 million above what we achieved in fourth quarter 2019, mainly because of gains from our variable income portfolio that generated BRL 47.4 million in this quarter. This variable income portfolio includes allocations to the financial, energy logistics, steel and mining sectors.
In December, we sold a position we had in the real estate sector. We closed this quarter with cash above BRL 2 billion, maintaining our robust financial situation.
Now we're going to talk about this year's results. The strong performance reached in the second half of the year in 2020 outbalanced the negative performance in the third quarter of 2020 when Grendene's operation was severely impacted by the Ceará states government decrease, prohibiting resumption of nonessential activities to fight COVID-19 dissemination.
As a result, we remained almost the whole second quarter with discontinued production. And therefore, in the year, gross revenue reached BRL 2.3 billion and the volumes of pairs shipped totaled BRL 145.4 million, a decrease of 7.1% and 3.6%, respectively, when compared to 2019. Even with a decrease in the volume of pairs shipped in the year, we can say that Grendene gained 3.6 percentage points of market share since we have presented a reduction in the volumes of pairs shipped in the year, which is lower than the production decrease in the sector.
Recurring EBIT in the year reached BRL 372.2 million, a growth of 10.7 -- I'm sorry, 10.9% when compared to 2019. Recurring EBIT margin advanced 3.4 percentage points, reaching 19.6 percentage points. Recurring net profit decreased 2.6 -- I'm sorry, 2.1%. And even though the gross revenue and the volume of pairs shipped have decreased in 2019 and when compared to 2019, we are convinced that we have closed the year with a solid result and unprecedented business -- in an unprecedented business environment. We are proud of our employees and their recent performance.
And now we're going to talk about some qualitative performance in the quarter. Fourth quarter of 2020, we progressed with our ESG agenda. We continued supporting suppliers and clients, meeting our role as a company that pays attention to citizenship based on the tax force involving our partners for the production and distribution of masks and face shields to over 4.5 million.
We also participated, for the first time, in a CDP survey, which disseminates environmental data for national and foreign investors. We also launched the Rider R4 program, which consists in 4 models with a lower environmental impact, and it has actually the lowest in our history.
Footwear in this collection are produced with up to 82% of recyclable materials. We relaunched Melissa Flox. They are produced with 100% recycled PVC. The model was manufactured based on other Melissa sandals, which could no longer be used, reuse or exchanges that were disposed by consumers in containers installed at our Melissa clubs throughout Brazil in October 2019. We have improved our circular economy program with over 340 Melissa clubs throughout the country.
We also started collecting Rider shoes for recycling. We obtained the golden seal of the Brazilian Association of Textile Retail. A BBT audit certified our good practices throughout our production chain.
In addition to the advances in the ESG agenda, we have also evolved with our digital transformation strategy. In the fourth quarter, we capped the accelerated pace of online operations migration to the e-commerce platform, which owns Grendene by launching complete sales operations to Rider, Grendene Kids and Ipanema consumers.
We have also launched our B2B platform for web sales and all of the company's brands. Now in February, we had a turning point with the Melissa, Grendha and Cartago brands in Brazil. With that, we have reached our objective to internalize the management and operationalization of all online stores of our brands in Brazil by the first quarter of 2021.
We are excited about the expansive growth observed after the migration of our stores. Relevant growth has been observed. For example, Zaxy store, which migrated in October 2020. There has been a 370% growth since migration. Rider grew almost 415%, whereas Grendene Kids had a growth close to 500% and Ipanema 450%. When we analyze the consolidated results of all online stores, we can see a growth of 400% since store migration.
We also observed the first delivery of Bergamota Works, our innovation laboratory, whose objective is to find new ways to access consumers and to approximate Grendene to the startup ecosystem. We already have some pilots running. As for example, the launching of the Ipanema [ Fun Spot ] project. It is an Ipanema product, sales products in vending machines launched in December 2020. We intend to launch the concept of micro franchises. We have received very positive feedback from the market on this initiative and heavy large interest of entrepreneurs to have franchises with these vending machines.
Regarding the exclusion of ICMS from the calculation basis of PIS and COFINS, as already extensively disseminated and after approval of the authorization request to the Brazilian Federal Revenue Office in the third quarter of 2019, we have chosen to adopt a conservative stance regarding the acknowledgment of the tax credit to be compensated and reimbursed and have made the accounting entries according to the competence regimen and according to internal consultation solution #13/2018 COSIT. The amount of remaining credits in the order of 51.3 million in PIS and COFINS for the exclusion of ICMS effectively paid and not the amount of credit for the ICMS highlighted in the sales invoice.
In the last few months, we have reviewed the following: Number one, federal regional courts, including TRF in the fifth region with jurisdiction on the company have decided that ICMS highlighted in sales invoice should be excluded from the calculation basis of PIS COFINS; project law determine the social contribution on goods and services operations, CBS; and above all, the risk of having credits expire according to Article 103 of IN RFB 1717/17, the deadline for the presentation of the compensation request for the above-mentioned credits, including those regarding ICMS. And therefore, we understand it's important to reevaluate the guiding principles of the accounting and tax procedures that were adopted.
We understand that there are possible effects of the statement's cancellation and the ICMS value to be excluded, among others. After a detailed analysis, we have concluded that there were solid arguments to base the acknowledgment of credit integrality of PIS and COFINS calculated over the amounts highlighted in the invoices for ICMS. CPC 25 was used and we understand that the -- it's not contingent.
Our expectation is that tax credit, whose updated balance on December 31, 2020, totals BRL 462.831 net in the compensations that have already been performed is made by 2024. Statements dated December 31, 2019, are being reintroduced, taking into account the impact on the results and net assets of the controller and consolidated in the amount of [ 324,263 ]. These adjustments are presented retroactively according to CPC 23.
Finally, I'd like to wrap up by saying that despite all of the difficulties faced in 2020, Grendene, once again, demonstrated its resilience in turbulent times and was able to emerge even stronger from this coronavirus downturn. We gained market share, closed the quarter and the year with positive perspectives for 2021 when we celebrate 50 years of existence. We are confident that our results will be good, even though there are uncertainties related to the acceleration of COVID-19 cases in the country and in the world.
There is high unemployment level and also tax issues to be solved in the country. The recent approval of vaccines against COVID-19 brings about a lot of hope for the market, and it has to do with the control of the pandemic and return to normality.
As I mentioned, we are very optimistic for 2021. The strong performance we had in January and February point to good results and reinforce our optimism for the year. This is what I wanted to share with you for now.
And now let's move on to the Q&A session. Thank you very much.
[Operator Instructions] Our first question is from Mr. Augusto, [ Angadi Investments ].
Good morning, everyone. First of all, congratulations for the results achieved. We have been following the Hungary -- at Hungary, we have been following what's going on, and we are following the digital transformation.
I'd like to know about the schedule you have for transferring brands. Will that be done by the end of this quarter? And also about the impact of inflation rate and the end of the cash transfer program by the federal government. Have you already discussed that?
Well, thank very much, Augusto, for your question. In answering your first question about digital transformation, as I mentioned, we have completed the migration of online platforms to online platforms. The last stores were Melissa, Grendha and Cartago. Those were the last ones that were migrated, and we ended that -- we finished that in February 2021, so we met our target.
As for inflation rate and this decrease in the cash transfer program, we know that this emergency relief, particularly in the third quarter of 2019, really helped to increase the volume of sales. In the fourth quarter, that relief decreased. And we could not concretely measure if that had an impact on sales because we believe that there was another factor that offset that, the price of raw materials.
And the retailers ordered from large manufacturers, such as us. So with that, we believe that, that has offset the decrease in the cash transfer program. Now what we see for February of 2021, February and March, we started to observe a decrease in the appetite for consumption, especially now with the implementation of social distancing measures again, being more restrictive.
So we really do not know exactly what is going to happen, but we believe that perhaps impact will be higher in the second quarter of 2021, but we believe that the results for the first quarter of 2021 will be positive. Because we manufacture after orders are placed, so everything that's being manufactured now in March are orders that we received in February. Obviously, we have some clients that have asked for extending terms or production, but we believe we will have a very positive first quarter in 2021. Was that clear?
Yes, sure. Thank you so much, and congratulations for everything you have been doing.
[Operator Instructions] Since there are no more questions, we now close our Q&A session, and I'd like to turn back to Mr. Alceu for his final considerations.
Well, I'd like to thank you all for being here today. I hope you have a great day, and take care of yourselves. Take care of your families. Thank you very much. Have a nice day.
Grendene's audio conference is now over. We thank you all for your participation, and wish you a good day. Thank you for using Chorus Call.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]