Q4 2023 Grupo Casas Bahia SA Earnings Call
Hello everyone and good afternoon. Welcome to our earnings call as we talk about our earnings for the fourth quarter of 2013.
Status on our Transformation Plan and also the Q&A session.
Abri, para perguntas.
Before we begin...
We would like to summarize the main messages that are here in the material disclosed yesterday. The video, the presentation, the numbers, and the overall status of the pump. We want to cover the main messages. So please, let's share screen.
Abri: First of all, when we take a look at the key messages for the Fourth Quarter, we talk about the transformation plan, I want to reinforce that I'm really happy and confident with the capacity for execution that our team has in this transformation plan. So a quick analogy, if you look at Formula One, for example, a sport I really love.
Abri: We adjusted our car in 2023. We have a new car.
Abri: to accelerate down in 24. So it's a new car, there's still some incremental improvements to work on, but they will bring results to each effect. So I'm super confident that the results in the bottom line will be delivered with possible positive prizes. And after I'll talk about each of these dimensions, then we had a significant cost reduction
Abri: It makes the company leaner and this seems to be a very precise strategy because we bet on a more challenging macro scenario with a restrained demand that has been confirmed for long-lasting durable goods that have an average higher ticket than the previous year.
Abri: Reduction in the interest rate will take a while to have an impact in our category, so we prepared the company for this challenging scenario focusing on profitability.
Abri: Although we have to give up a bit on the revenue.
Abri: and delivering the bottom line and cash flow.
Abri: So this is discipline that's here in the company. We're able to overcome our expectations to bring this lower than 90 days, around 75 days actually, at a level that's very efficient. The minimum historically in the company. And obviously we see the opportunities for some structural changes, more like midterms, optimize our company with a revision in the mix. And the fourth point in this capital structure is an important milestone, which is the recovery of the trust levels in the market as a management.
Abri: and the team set up a plan and considered how we would be able to work on this and the delivery up until now has been able to allow us to recover this and work with the liability management and also bring in other opportunities to leverage the capital structure.
Abri: So that would be a lot easier to perform the sales and the proposals would be a lot less advantage for the company.
Abri: And the fifth point is our liquidity level is very stronger, which is really focused on free cash flow.
Abri: is the first year that we were in the
Abri: So...
Abri: It's the first year that we close with this kind of positive cash flow.
Abri: and
Abri: And of course we have a lot of upside to reap and we don't have the restructuring costs anymore.
Abri: I think the main message here is our commitment to profitability.
Abri: and we're going to keep our commitments to generate value.
Abri: Generating sales in irrational conditions won't be something we're going to be focusing on.
Abri: So we've been able to keep our market share and even gain market share.
Abri: and some of our core categories, which is what's most important for us. So we removed half of our category, and part of them also impacted our physical stores. So we had a little bit of toys, a little bit of cleaning supplies, a lot of 1C, and then we were able to keep this
Speaker Change: basically furniture, a bit of beauty, and home appliances. And another important message is with the binawipcaneator in the annual. It's very strong, which is the lowest rate rate.
Speaker Change: addressable markets growing. So we have a lot of demand with the for growth and of course we will be having a new funding model. Now we're going to be migrating gradually and 25 we should be able to elevate this.
Speaker Change: I will pass it on to Elcio, to pass it here.
Elcio: and the other
Elcio: and more.
Elcio: So I'm going to pass it on to Elcio to discuss the financial highlights, and then we'll get into the Q&A. Okay, Elcio?
Elcio: Okay, thank you. Thank you so much, Anastasia, Graf, and everyone. On the financial highlights, we presented three main...
Speaker Change: This is a boarded in this
Speaker Change: No Hickle Hank
Elcio: So the impact of the non-recurring effect.
Elcio: and the priority of the company was liquidity and cash flow and then capital structure as well.
Elcio: So this is the accounting effect so you can understand how the actions and the plan has been impacting the financial statements. So we mentioned three categories of events that explain results in this quarter. The first one is the remaining stock. We worked on this on a greater scale.
Elsio: and
Elsio: and so
Speaker Change: You can see that in the fourth quarter it's a smaller impact. And so we have this third category.
Speaker Change: and Eugenio Pino.
Speaker Change: provision of the DFAO.
Speaker Change: which is the provision for default. So overall we have 622 million reais.
Speaker Change: and the layer for non-recurring topics. Most of them come from the transformation plan. I think the most important is to understand the non-recurrent.
Speaker Change: What we can understand is that we announced the different impacts and measures and
Speaker Change: We were able to announce these on the 10th of August .
Speaker Change: We were able to consider the transformation of the results of the second quarter. And we also saw the need to have the structural cost of the company at a level that's way below making the company lighter, more agile, and directed to greater profitability and discipline with the capital. So another important topic, which is a gross margin of 27.6% versus 23%.
Speaker Change: ACL
Speaker Change: and the team that was here in the previous semester.
Speaker Change: and the rest of the regulations.
Speaker Change: and so we had an improvement of 4.6 percentage points which is mainly due to the reduction of the stocks and
Speaker Change: which is a lot better.
Speaker Change: and the SG&A had a reduction of 4.2% compared to the last year, which demonstrates some benefits of the transformation plan.
Speaker Change: which was 70% lower than the first quarter last year. We consider the adjustment of the big message here is that there's still a lot of non-recurring events considering a magnitude of 22 billion guys, which will make the company more agile lighter and
Speaker Change: And we consider the next slide.
Speaker Change: If we just remember this concept.
Speaker Change: and the free cash flow as we mentioned is generated before the payment of the debt and the compensation of shareholders for the follow-on and the fundraising resources.
Speaker Change: So...
Speaker Change: That's of course where you have the fulfillment of the financial obligations.
Speaker Change: and of course the most relevant which was positive by 648 million reais. So this is a reversal of the trend and what's most important is that it demonstrates a positive fourth quarter and as a highlight we had a cash flow of 621 million reais.
Speaker Change: and many more.
Speaker Change: Why was it stronger in the fourth quarter and the second semester when it made this balance?
Speaker Change: shift, right? Well, this is because you have the impacts of the initiatives started and some of them or even the stock reductions, where we had a reduction of 1.2 million reaids every a reduction of 18 days in our stock levels even actually below what we had set as a target and we continue to accelerate.
Speaker Change: This monetization process protects credits and as you can see in the full presentation, we have this sequence quarter-over-quarter that's really focused on the sale of the credit, the reduction of the stock, which represents
Speaker Change: lower tax credits at the inflow. You have a focus of profitability to guarantee greater margins and improvements in your tax credit stocks. And also we focus on the operation of logistics and tax situations, the company to maximize everything.
Speaker Change: We have the CapEx Impact certificate reduction which is really impressive in 2023. We were able to have $400 million in 2023 which also demonstrates the discipline of the capital.
Speaker Change: and this does not mean we're not investing in priority companies and U.X. which are very relevant and continue to invest and focus on. But it demonstrates that the
Speaker Change: We are in a position where we are still not the ideal, but we are capturing some of the benefits of this transformation plan that are going to be more evident over the next period.
Speaker Change: And so we can move on to the next one.
Speaker Change: and here we talk about the liquidity and leverage. So I want to remind you of the photograph we had in the third quarter.
Speaker Change: and the Church of Dead. And we were able to have a big effort to profile the dead 1.5 billion. So this is all reflected here in this.
Speaker Change: and we also
Speaker Change: for everybody.
Speaker Change: with all the levers that I think we just mentioned in the previous slide. So this also places a liquidity index, which is a liquidity upon short-term debt to 2.9 times, which is a position that's a lot better than last quarter. And this is an ongoing exercise in the company from the treasury area here to improve processes and the debt profile of the company.
Renato: Back to you, Renato.
Renato: Thank you, Elson.
Renato: Well, thanks, Alcino. Just to keep up here, I just wanted to quickly cover the main message and a bit of what we're looking at up ahead. So we can jump to the next slide. Well, the main message is looking at the year of 2023. You can see the cycle with an adjustment in the company's strategy.
Renato: to really do the basics well done. The second point is a robust transformation plan. You all know very well that
Hina: and import levers as well. 1.6 billion reais to the entire service. So we're really confident we're going to deliver this and bring in new levers. The new lever we're going to be adding is the Casapaya Edge.
Speaker Change: So we're going to bring him here.
Speaker Change: We've already signed 20 contracts, so we're going to bring in a few hundreds of millions of dollars as revenue with us. I'd like to thank our marketing team.
Speaker Change: and we're going to provide more teachers as soon as we discover the project. It's going to be launched in March, so we already signed over 20 clients.
Speaker Change: The recovery of confidence in the market, allowing us to have improvements in the structure of our capital structure, and also a strong liquidity and cash flow commitment, making the company prepared with the short-term challenges.
Hina: So you can see how we are looking at this up ahead.
Hina: Specialists
Hina: We're focused on the core business of durable goods, which is different than the generalist in commerce.
Hina: and a couple of other people.
Hina: profitability. So you can see our plan was doing a drop in the same pay by two and a half percent. And dropping more special lines with some channels of course that didn't seem to be profitable. And when you adjust this commercial condition, it loses volume so we don't have this kind of
Hina: commitment so we have a lot of commitment to our services and it's also contributing to margins
Hina: and Recovers are available.
Hina: and many more.
Hina: We've been gradually recovering this quarter over quarter. We are improving this situation and we have a lot of leverage in this assortment. We can improve these margins gradually. The contributions to EBITDA are ahead. So expenses are very important to material reduction to lead to a new level of EBITDA.
Hina: which is stronger.
Hina: and a whole other level really at the end. And our cash flow is still the focus of the company's management. We have a lot of comfort and confidence when we talk about labor claims and monetization of tax credit and everything coming through this plan and monetization is a little better even with the potential upside contributing to the cash flow between the 24-hour infrastructure as well we mentioned the recovery of our confidence allows us to have new leverage. We didn't have the sales of strategic assets and now we're getting back to negotiations
Hina: have a discount for funds and transactions for these operations that are more like midterm.
Hina: and the rest of the farm throughout the quarter. Nothing immediate right now.
Speaker Change: Thanks for checking.
Speaker Change: Then up ahead, where do we want to reach? We actually mentioned this in the past, and we're enforcing this now. We want to be the best retailer, that's a specialist for electronics, furniture, and home appliances, offering a full journey. We've already decided this. Our efficiency, customer experience, customized and really attractive for this kind of product, and efficient operation, physical and digital. I can't say it, but what does this mean?
Hina: and many more. We want to be leaders in our core business. We want to keep our relevance. So we talk about core categories. We want to be the customer service first choice for destination and we want to continue like this. And to be like this we have to be competitive. We're going to use CRM to leverage our sales. We have a really extensive customer base and it's the most efficient channel we have to attract customers to our site and store. Then profitability, robust margins of customers. We have a lot of customers that are very competitive. We have a lot of customers that are very competitive. We have a lot of customers that are very competitive. We have a lot of customers that are very competitive.
Hina: and the corporate lead and
Hina: and many more.
Hina: and and and
Hina: We want to highlight the importance of rescue culture and we wanted to highlight which
Hina: and many more.
Hina: for the people, to let everyone know we want to make a difference in everything we do. Austerity.
Hina: Cadets.
Hina: which needs to be a simple and efficient operation. So we wanted to start with the Q&A session now. I'll pass the floor to Gabriel.
Gabriel: Good afternoon, everyone. Thank you, Anato and Elzu. I'm going to call on our first
Gabriel: question from Felipe Robredo from Citi. Hi there, good morning, this is Renato, Succar and everyone. On the Citi side we just want to understand a bit more of the short term points, right? The monetization of the tax credits, typically explore a bit more of this perspective for this 2024 and 2025. And the second point to explore is we have a bit of a difficulty to understand.
Gabriel: and the other two.
Philippi Hoverado: throughout the quarters so when we talk about the restructing funds and I wanted to understand if we can expect for the first quarter of the four is
Philippi Hoverado: and many more.
Philippi Hoverado: and many more.
Philippi Hoverado: and all the other people involved in the last two quarters.
Speaker Change: Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Great. Let me start off here.
Speaker Change: and then after I will pass it on to Renato.
Renato: So about the tax credits, I think we shared this quickly and we're very focused on monitoring this with the validation and certification process and sale to third parties and all of the other initiatives operationally and internally on this topic.
Renato: Subgratois
Renato: So it's a gradual process. It does not only rely on the company.
Enato: There's a process to certify the credit so we can have this sale to third parties.
Enato: We had some strong acceleration in the second quarter. We continue to be strong and it's so early to say we continue to be strong and it's so early to say
Enato: and
Enato: We are going to update you guys gradually but the idea is that we should have something quite similar and in line with 2023.
Enato: Hello.
Speaker Change: Thank you.
Speaker Change: Well, getting into the second question, as I mentioned, the first quarters are really where we'll have the biggest impact of the transformation plan. So we're not seeing these levels of impact up ahead. And when we look at the first quarter, it's a lot cleaner. So that's why we were saying...
Speaker Change: at the market you look at the first quarter and see what's the new motor I talked about, right? So you don't have like reorganization processes anymore, riding off assets and firing people and all this.
Speaker Change: Daniel,
Speaker Change: This is not material. We may have to close down a few things, but very insignificant, not anything at these levels. So we're going to have an adjusted ebidode to look closer to the bouncing values.
Speaker Change: and of course we can see the piece here with the company's reality. So on the P&L side and also the cash flow,
Speaker Change: From the first quarter onwards, we'll start seeing a whole other trend. When we talk about the improvement in the EBITDA margin, it's a construction process gradually. The plan sells a lot of libraries, we're like at 35% of the exhibition. So we have a lot to be done, and that's why it'll be improving quarter over quarter.
Speaker Change: But I'm convinced that when I look at the target now, four, a third quarter are going to deliver this, and maybe some levers will be able to anticipate, of course, if you're prepared.
Speaker Change: if we have any other problems that we can really deliver the plan. This is what we plan for and have a company as profitable. Getting 25 with growth possibilities. So this is what we're looking at without any negative surprises in the short term. Well, super clear. Thank you, Philippi.
Speaker Change: Thank you, Felipe. Our next question is from Irma Sars from Goldman Sachs. Irma, please, you may proceed.
Irma Starris: Hi, good morning. Good afternoon, I should have...anyways, I wanted to talk about the two pillars.
Irma Starris: So,
Irma Starris: and our adjustment, we want to see the adjustment of the impact of the stores and we already planned to go out with this last year and how much is still missing this year. And the other one is the pricing color, which I think is a project that's still on its first phase as you look at that whole view showed us.
Speaker Change: I wanted to get a feel of how this has been advancing.
Speaker Change: Thank you. The Story Network. Well, thank you.
Speaker Change: Remember, a lot of the cost would be the cost of the exceeding stock, which incurred on capital. And so, of course, that impacted the net margin.
Speaker Change: So that's why we adjusted this.
Speaker Change: Well, it was on our calculations that was negative. You want to see the difference. So.
Speaker Change: Performance
Speaker Change: There are some stores that depending on their sales performance can be profitable and if with a few commercial initiatives, you know, increase the penetration of services and can overcome this, watermark could close them down.
Speaker Change: So do you expect something?
Speaker Change: Well then we're working with a base scenario, keeping them profitable and open.
Speaker Change: a question.
Speaker Change: So if you see this is not going to work, then we'll just close it down. And so the biggest part is done. The structure aspects are done, but eventually you'd have to assess it.
Speaker Change: with a normal market condition where you're going to have stores that are going to be opening closing, but this here we won't open up stores, maybe 20 stores we could close down. We're going to try to recover them, though, to avoid their closure. So the other part of the very important, we talk about pricing in May. The company has a pricing model that's really focused on
Speaker Change: The industry, reality, and that's when you have these incentives as well, allowing us to be competitive in moments.
Speaker Change: Like others say, and other periods that are really strong for retail and industries pressure us also to invest in the transport and to consumers, guaranteeing our margins. But we still have a lot of room for improvement.
Speaker Change: Thank you.
Speaker Change: Closers, de tipos de lojas
Speaker Change: and also the types of stores online with consumers. And so we see this lever to bring one to two points
Speaker Change: and the margins. But of course, this will take a while. We're piloting a few categories. We have some all-for-them work to have a pricing model.
Speaker Change: and a lot of generative AI, but a machine learning basic structure to have a more customized pricing system that's more granular, looking at the sale items, right? So, when we look at the Monceo, it's very relevant and we have a lot of opportunities to increase prices in certain items and gain margins and in others guarantee good margins but accelerate the compression and sales.
Speaker Change: So this is just hand in hand with the makes leverage with the clusterization, where we also had almost all of the products in all stores. And it would make sense through just search that we used to be more in the same and having this adequate product mix for each type of store, which really simplifies our efforts.
Speaker Change: makes features have logistics, optimizes logistics, and also helps us with our pricing system, and even gives us greater ease on the sales team.
Speaker Change: to know which product is the winner in that category store. And then as soon as the customer arrives, they'll have the options the customer was recommended for the store of what generates more margin and rejects the conditions to the customer. So we're still gonna see the overall impacts of this more towards the second half of the year.
Speaker Change: Perfect, very clear Renato, thank you so much. Thank you Irma. Okay, thank you Irma. Our next question is from Nicholas from J.B. Morgan. Nico, you may proceed.
Speaker Change: and
Nicholas: Thank you, Succar. Good afternoon, Renato. I have two questions, actually. The first one is about the Pai Nao Pele, the Quixote Ario. What's your guys' mindset on the rollout?
Nicholas: of the FDIC financial instrument and when do you imagine this will already be active in all of the Casasaiia stores. And on the other hand, what's your mindset regarding the CapExan 2034? You mentioned your still investing in such categories as priority initiatives.
Nicholas: and the
Nicholas: throughout the company and
Nicholas: How should we look at this when it comes to the number of investments? Okay, thank you, Nico. When we talk about the COGAD or the binomial operator, it's not only to talk about the funding, then there's some issues where the silent period we can't talk about much.
Nicholas: and many more.
Nicholas: We had to correct about the sub 400 million, which we can still use as a number. We do have like a peak. But when you look at the fourth quarter, we were able to be a little bit slower than what was initially the plan. And we understand this is a pretty good pace for the overall situation in the market. So we work on the investments required for the customer experience, optimizing the digital journey.
Nicholas: Improving the products and services and credits.
Nicholas: A little bit of the improvements in the store systems and logistics that also reduce costs to the company, but it's a gap exit that's not considered the store expansion and that we consider this level below 400 million reais in line with the fourth quarter of 2023.
Speaker Change: Thank you, Renato.
Speaker Change: up.
Speaker Change: Okay, thank you, Renato.
Speaker Change: Thank you, Nicolas. Our next question is from
Gustavo: Gustavus and I from XP. Please Gustavo, you may proceed. Hi guys, good afternoon.
Gustavus: Gabriel, Renato, Nelson, thank you for my question. I have two, actually.
Gustavo: My question is more about the working capital. You mentioned major strength in the stock control and I want to look at this from the suppliers' perspective. Have you had any support or help from suppliers? What can we expect for this throughout 2024? I understand that these are two lines that are probably in some way and the second question is when you look at this,
Gustavo: and I want to understand a bit more about the contribution margin of these channels at this point in time and how this has been evolving throughout 2023 and what you expect as improvements in 2024.
Speaker Change: Thank you Gustavo. As we talk about the working capital, what we're able to deploy here is really sustainable. So it's about discipline with capital allocation and buying what will be sold. So this stock level is what we plan to work with and with just the purchases also of suppliers, only according to the seasonality we have in the year. According to the inventory by a little more, to have back Friday and all of this affects the purchase from suppliers. But of course, there's no like special additional help. We've been operating well. And now it's structurally better when you talk about the working capital of the company. And that's what we're going to keep
Speaker Change: And the second question about the contribution margin, 3P, we were able to adjust to have a contribution margin that's positive and have results in the 3P business.
Speaker Change: that are already stopping the cash burning and reaching break even. So there's the opportunity to give the service conditions and offering better credit and services not only when it comes to insurance but also services to sellers. Against fulfillment continues to grow.
Speaker Change: The delivery rates also improved a lot. We continue to extract, to attract more suppliers from Soma. We also have this new model. It's almost like a drop ship model. It's MPs, it's growing a lot, contributes a lot to the contribution margin overall for 3P. But of course, part of this gets into the blue ocean there, and then you have the company's margins overall. When it comes to the Noro supplies,
Speaker Change: The contribution margin is $1.333.
Speaker Change: and then the main thing is that 3P delivers a lot more ROICs because they don't have employed capital. The employed capital is a lot smaller because it's more related to the structure, the capital, etc. So from a ROIC perspective, and here, the 3P is a lot more of an advantage. It provides better profitability on invested capital, but a similar contribution margin when you look at the LA layer, etc. It's very similar. Okay, thank you, Renato. Thank you, Gustavo.
Speaker Change: Well, thanks, Alex. The question is coming from Eric from Sun Sun Teh. Eric, you may proceed. Okay, guys, thanks for taking your questions.
Eric: On our side we have a follow up here, the working capital. I think you guys discussed the stock and supplies a bit. So just to discuss the receivables and how you're looking at this dynamic.
Speaker Change: and some more.
Speaker Change: and and and and and and and and and and and and and and and and and and and and and and and and and and
Speaker Change: build this bridge until the end of the year when it comes to profitability and advancing. Thanks, guys. Okay. Great. Thanks to Eric. Let me get this fun and on if you need to be the working capital. Generally, when you talk about the stocks,
Speaker Change: and suppliers generally when it comes to receivables. It's a dynamic of the payment means that we receive from our customers. We've been focusing a lot on upfront payments and capital, the installments free of interest. So we focus on this a lot. We use this mix a lot.
Speaker Change: and of course,
Speaker Change: We're going to be balancing this out through the volumes and the needs.
Speaker Change: We have and will optimize this over time.
Speaker Change: So there's all like a magic formula related to our sales and the payment makes is and
Speaker Change: and the resources and costs of the funding that we have versus other alternatives. When it comes to the leverage, I think we're going to have a broad set of
Speaker Change: that starts off really with the increase of the Epida in the company. So as the transformation plan,
Speaker Change: has its benefits here in RPNL.
Speaker Change: and more.
Speaker Change: and many more. We're going to be able to do this gradually in a more consistent way and we'll be able
Speaker Change: and of course it will improve over time.
Speaker Change: When it comes to financial receivables, we've been encouraging big slots. And what's interesting is that we're going to normalize the growth, but we'll have a bigger share.
Speaker Change: a fix versus what we had in the installment of prevention. So the grass margin is going to be interacting a lot more with the LAR margin, which would actually impact.
Speaker Change: All right, Laier.
Speaker Change: And the company, so when you normalize, it's going to be a lot healthier than the historical level because you'll have a big percentage that's a lot greater. And then, of course, you have the Treasury strategy and sometimes it's going to be a cheaper funding model that you end up using it. So it's pretty much it. Okay, thank you for the answers.
Speaker Change: Thank you.
Speaker Change: Thanks Eric. Now I'll call Andrew from Morgan Stanley . And Renato, you can also answer this in Portuguese, okay?
Andrew: Thank you.
Andrew: Thank you very much for the questions. Just a follow up on the 1P to 3P mix. You mentioned the categories migrated. I'm just curious how meaningful the drag was for 1P and then the uplift
Andrew: in three pieces.
Andrew: and then just if we take a step
Andrew: and many more.
Andrew: and Christian for this year's Marketplace in Brazil, but he declined in the fourth three. So, Christian, what is your vision for 2024 and how it fits into 2025 and beyond?
Speaker Change: Thank you.
Christian: Thank you, Andrew. I'll answer in Portuguese so that everyone can follow.
Speaker Change: Thank you.
Christian: The question was about the migration of 1p to 3p and also demonstrating the growth in 3p and the variation between the third quarter and the fourth quarter. And what would you expect from our 3p if we look up ahead into any forest, any pocket place, and a structural change?
Christian: because it's very concentrated now in some core categories. So although we have profitability in non-core categories and we have the possibility to grow our non-core, that's not where we're going to be allocating our capital.
Christian: and I think Causas Bahia Ads is a platform that allows the seller to add cash to leverage sales in our platform and just grow a bit of our non-core. But it's not where we're going to put our own capital into to make this happen. We sell 3P as a channel that's organic.
Christian: that can work as something that's compatible with our 1P. So the migration happens, there are some SPUs that make sense present in the 3P and Casa Sayad can bring additional growth. So when you look at this in the long term, we can understand that if you have 100 million customers in the Bay, some 37 million access, we have pretty big audience and so with this,
Christian: We had one supplier growing 24%, two suppliers that were different also with growth above 30%. And now we have 20 contracts that are starting.
Christian: now starting in April . And then more people will join who can stimulate. But the bulk of what we are doing in these contracts is also
Christian: Players
Christian: and many more.
Speaker Change: Thank you for watching!
Speaker Change: We got Renato.
Renato: Thank you, Andrew.
Renato: Opa
Renato: Good afternoon, everyone. Thank you for the opportunity. I have three questions here from our side. The first one, I want to understand a little about the economics of these stores, the closure of non-profitable stores. Do you see this flow going to other stores in a nearby radius, or do you feel that this flow is lost and you will not fight for it with the competition?
Renato: The other question, regarding the CT's readjustment. Do you have 10 more distribution centers that you intend to restructure? How is this being done? Are you getting rid of part of their area, in terms of expense impact? And if we add there, along with the closure of 20 more stores, as I understood, throughout 2024...
Renato: We should have an expense level of 150 million in the quarter, it's something that makes sense, it can be a little higher, a little lower.
Renato: And the last question is about the default. So, I know it was something that affected the sector in the quarter, it wasn't something we projected, because of the visibility, you can't project this number, but understanding from now on, was 100% of this value provisioned, or do you understand that there may be some other level of provisioning here? Thank you.
Iago: Thank you, Iago.
Speaker Change: Let's open up closed stores.
Speaker Change: Here the reality is different from store to store. We have a store in the city, some have it in the block. So we have places where the migration was 50%, 60%, none was more than that, okay?
Speaker Change: But in some places the migration was 20%, 10%, it's small. So, in terms of flow, we don't even see it. We see an improvement in sales conversion. The flow is very impacted in several regions by the market. When we look at January , we had a stronger flow in the clearance sale, which is the beginning, then it decreased. February was already weaker. Then March, the beginning of the consumer week, was very strong in the first half. Then it cooled down again.
Speaker Change: And then we will investigate this specific migration from one store to another, it's not trivial. We are considering here that we lose a lot of this sale, we put there that we could lose everything, in practice I think 20% migrates, it's a small thing. They are small stores, we haven't closed any big stores, so it's not that significant.
Speaker Change: The readjustment of CDs
Speaker Change: What we had to return, there are maybe two CDs that we can resolve to pay a contractual fine. The rest, the majority, we are subleasing an area of our CD. So the expenses are lower.
Speaker Change: The big ones have already spent, readjusted, and moved everything, leaving empty space. Now it's just a matter of subleasing, so most of the expenses have already been covered.
Speaker Change: What we have now is very small to last for 24 hours. So, when we take your store closing, CD, the assistance is 150 million, I think in the whole year, if you think about 100 million reais, it's closer to that number, and that can come from the readjustment and possible fines, store closing, CD closing. But the main material here is a part.
Speaker Change: The most relevant part is the readjustment through subleasing. We are in talks with the market, already with a purpose, obviously trying to optimize. And one or the other may make sense to stay empty. We have the option to reopen. I only turned off all employees, terminated third-party contracts, and we keep the operation of a warehouse, which is a much lower cost than a distribution center, and making direct deliveries from a larger distribution center, which was further away from the customer, but still managing to deliver within 30 hours or at most 48 hours, which we understand is a reasonable, good timeframe for our category.
Speaker Change: by default, we are really a new factor that can have a reversal, remembering that this is not definitive, lawyers insist that it is still a possible factor, that is, a higher probability of winning than losing, but by our technical area discussing everything here, it was the value that we extended as a provision
Speaker Change: reasonable, efficient and what has to be done at this moment. I don't know if Elcio wants to add a little more color about Indifal. Let me say, I think the important thing is that it has no cash impact. We have approximately 340 million in judicial deposits that, at the end of the day, after the final decision is made, will not affect our cash flow.
Speaker Change: Thank you for your time.
Speaker Change: Thank you for watching!
Speaker Change: Thank you for watching!
Elcio: Thank you for watching!
Elcio: Perfeito, obrigado, Iago. Perfeito, obrigado, pessoal.
Speaker Change: Thank you, Iago, Renato and Elcio. We don't have any more questions, so I'll give you a word to close, okay?
Speaker Change: Thank you.
Speaker Change: Guys, I think...
Speaker Change: We sought to reinforce the main messages of the year here.
Speaker Change: I skipped you, Chief.
Speaker Change: He is very happy, I think it's important to make it clear here at the end, we are happy and confident in the team's execution capabilities, I think there are very important deliveries throughout 2023. We had already talked to the market and knew that the PML numbers would be impacted by these costs of rehiring, some of these expenses have a payback of 12 months, but they were necessary for us to have a lean, efficient, and profitable company in any demand scenario, not depending on growth and a much larger scale than the current one to generate value. We can now have a company that will generate value even in scenarios.
Speaker Change: Good afternoon everyone, I am here to give you an update on our company's progress. We have been working hard to turn things around and I am happy to report that we are on the right track. Our goal was to improve our market position and demand, and I am pleased to say that we have achieved that. Of course, there are still challenges ahead and a lot of work to be done, but we are making good progress. I am feeling more confident, lighter, and more excited about the future of our company. I want to thank everyone who has believed in us so far, I know it was a difficult start, but we are now entering a new phase where we can start sharing good news every quarter and show gradual improvement. The good thing is that the next quarter is just two months away, so we can give you another update and show you why we are confident and how the company will be viewed by the end of 2024. Thank you all for your support.
Speaker Change: Thank you for watching!
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Speaker Change: Thank you for watching! Thank you for watching!
Speaker Change: Thank you for watching! Thank you for watching!