Does Lojas Renner (BVMF:LREN3) Have A Healthy Balance Sheet?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. As with many other companies Lojas Renner S.A. (BVMF:LREN3) makes use of debt. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Lojas Renner Carry?

You can click the graphic below for the historical numbers, but it shows that Lojas Renner had R$424.5m of debt in March 2025, down from R$1.41b, one year before. However, it does have R$1.63b in cash offsetting this, leading to net cash of R$1.21b.

How Healthy Is Lojas Renner's Balance Sheet?

We can see from the most recent balance sheet that Lojas Renner had liabilities of R$6.32b falling due within a year, and liabilities of R$1.87b due beyond that. Offsetting this, it had R$1.63b in cash and R$6.56b in receivables that were due within 12 months. So these liquid assets roughly match the total liabilities.

This state of affairs indicates that Lojas Renner's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So while it's hard to imagine that the R$18.1b company is struggling for cash, we still think it's worth monitoring its balance sheet. Succinctly put, Lojas Renner boasts net cash, so it's fair to say it does not have a heavy debt load!

Check out our latest analysis for Lojas Renner

On top of that, Lojas Renner grew its EBIT by 44% over the last twelve months, and that growth will make it easier to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Lojas Renner's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Lojas Renner has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last three years, Lojas Renner actually produced more free cash flow than EBIT. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While it is always sensible to investigate a company's debt, in this case Lojas Renner has R$1.21b in net cash and a decent-looking balance sheet. And it impressed us with free cash flow of R$1.7b, being 111% of its EBIT. So is Lojas Renner's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Lojas Renner you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.