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

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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. Importantly, Lojas Renner S.A. (BVMF:LREN3) does carry debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

What Is Lojas Renner's Debt?

You can click the graphic below for the historical numbers, but it shows that Lojas Renner had R$590.6m of debt in June 2025, down from R$1.26b, one year before. But on the other hand it also has R$1.79b in cash, leading to a R$1.20b net cash position.

How Strong Is Lojas Renner's Balance Sheet?

According to the last reported balance sheet, Lojas Renner had liabilities of R$6.31b due within 12 months, and liabilities of R$2.12b due beyond 12 months. On the other hand, it had cash of R$1.79b and R$7.14b worth of receivables due within a year. So it can boast R$494.1m more liquid assets than total liabilities.

This surplus suggests that Lojas Renner has a conservative balance sheet, and could probably eliminate its debt without much difficulty. 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. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Lojas Renner can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. 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. Happily for any shareholders, Lojas Renner actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Lojas Renner has net cash of R$1.20b, as well as more liquid assets than liabilities. And it impressed us with free cash flow of R$1.6b, being 107% 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. Be aware that Lojas Renner is showing 1 warning sign in our investment analysis , 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.