Q3 2024 Grupo Casas Bahia SA Earnings Call
A few categories have left we were increasing in the core we will be reducing this dropped so it can start contributing to growth again, our priority is not G. M V. Our priority is the margin of contribution. So the highlight here is we have corrected the margin of contribution of all of our channels of sales now all of the channels.
Have positive.
Okay.
Speaker Change: Contributions and we can still see improvements for the margin contribution of every channel and obviously as we increase the G. M D. Principally in physical stores. This will read this will contribute to the physical costs and increase the sales online for us to reach our plan for 2025 of having a profitable and healthy company.
Speaker Change: Next slide please let's talk about credit of our core so the growth is very important to contribute to the gross margin into the results of the company, but two things are important to highlight first of all we will not to run any credit risks, we will grow and the best networks. So you can see that we've reached now.
Speaker Change: 0.4 prevent it went to eight and a half and eight 4%. So this shows that the trend of default as positive P. D D D.
Speaker Change: Which is done when we already issued the contracts we already provision it it's also dropping and it's.
Speaker Change: Forming the improvement in the mix of clients.
Speaker Change: It's important to highlight when a macro scenario is more restrictive with higher.
Speaker Change: Interest rates the addressable market increases with clients that are even more positive. So we see a capacity of maintaining this rhythm of growth improving the health of our stocks are even better when we look at the liquid losses at stable at 7%. This is what we have is our guidance and it has been working in.
In a very controlled manner. Our production is record with a lot of growth. This is transformative because this is shows the capacity for growth of the company and we're very confident of demonstrating this we have to build in first quarter and we will be doing a performing another record in the quarter of 2023, where we already announced.
Speaker Change: Yesterday, the availability of 1 billion hasn't credits for consumers for the month of November which is black Friday. This is being funded for the whole month, which will increase our credit maintaining selectivity.
Speaker Change: In our default indicators in <unk>.
Speaker Change: Healthy.
Speaker Change: Spread at levels, which will contribute to us having lower.
Speaker Change: Default rates next slide to talk about logistics, what is beautiful Sydney full basically is that the company has a large logistical services for our G. M V that we.
Managed so we bought chat log this ours already 5 million of our G. M. P. We're going to grow in our own Gen V as well and we brought CMT in the past in order to carry out fulfillment. These two businesses combined allow us to offer many kinds of genetic logistical services open.
Speaker Change: Last mile.
Speaker Change: Storage and then e-commerce for clients. So here, we have 25 clients in the last mile 40 clients for storage medium and large sized clients, we already have $1 billion and the open sea of G. M V here and we already have coverage for the delivery of all of the municipalities in Brazil. This is very important we wanted to do this before lunch.
Speaker Change: The new brand because we are launching the brand now and what is our path to improve and create a catalog. So that we can sell this in a scalable way, we see a huge potential for growth without having to allocate more capital C. D food will grow with its own cash flow investing into gains of operation I.
Speaker Change: If infrastructure already exists it will contribute to dilute the structure that exists today and the cost of the group and bring a contribution.
Speaker Change: With this service rendering that can contribute to the bottom line of the company of course, it's still delicate as a whole, but there will be a lot of growth we expect to double it.
Speaker Change: And twenty-five so that week, so that it can be very relevant in the Brazilian logistics market.
Speaker Change: Slide pleased to talk about fulfillment. So the full cross is a new service that we launched.
Speaker Change: Yeah.
Speaker Change: We launched this pilot last year with a small project and we closed and started operating in this.
Speaker Change: Player there are a lot of small players in medium sized players and there are large players that are migrating 100% of their logistical bottle to full cross what is full cross basically traditional logistics industry.
Speaker Change: Discusses our sell in and when they close a deal they delivered the <unk>.
Speaker Change: Product and then I have to pay them and the decided on terms. So the full crosses I segregate our space for the operation of the industry the industry starts to rent their stock inside of my.
Speaker Change: Warehouse, so I'm, providing a warehouse services I can also do this for other.
Speaker Change: Logistical operators inside of my warehouse and we integrate the system in such a way that I have visibility of the stock. So I do not need to buy yourself I can.
Speaker Change: Makes a sale possible online or on physical source for clients to the finish them in their houses or for them that should pick it up and I can lever sales with more.
Assortment because the stores can have more assortment they can sell to others.
Speaker Change: Players I leave is that once a D N I can deliver to other clients and when I felt I buy from them and I deliver it to clients. So this is going to be transformative for the industry of retail in Brazil, because it will increase the.
Speaker Change: Our working capital and the industry will see a sellout per day, and we will be able to deliver on the next day, what the sell out was for the previous say the objective line because they both are concentrated on the sell out here. We are concentrating on the cost of transportation, which dropped. So today you have to fight for the sell in and in the past we had to do.
Speaker Change: Liver it all at the same time. He this part is more complex I need more trucks. So every day you have to have a truck delivering and we're able to provide this in a more consistent way.
Speaker Change: As foreseen and in a stable way, it's much more of.
Speaker Change: It's much cheaper for stock and it improves the disruption so if we deliver.
Speaker Change: 4000 products in a day is better than doing it one and a month when you have to when you do it in a month.
Speaker Change: Yeah, the circus sell more because they don't have the lack of stock if a store receipts too much stock than they than you are paying for that cost of capital. So when we can adjust it on a daily rate, it's more agile to be able to correct demand situations and we always have the correct stock and be more assertive with our stock.
Speaker Change: So we just see this will be contributing to the correction of the company's capital structure and the improvement of this juncture of the company's capital then blow retail media here, we have numbers, we already talks about this tool.
Speaker Change: And we launch and I I solution for <unk>.
Speaker Change: Relevant to clients all the Red website. This is growing our gross revenue at 410%.
Speaker Change: ROE as it was growing at 24% much more than our market places. So it's a very good business because it's here at the end of the funnel for items that are core items, and we see a lot of potential here and the retail media and in order to continue growing next year at least doubling what we did this year. Please go to the next slide now on N. Gen.
Speaker Change: Roll.
Speaker Change: And.
Speaker Change: We have the credits growing in penetration in physical and digital arena as we have financial solutions in general growing at 38% for financial service solutions is the three PS solution is growing at 24% then would be tell media growing in services and services growing 38%. This is far from the potential these are.
Leverages that will make it possible for us to increase our gross margin. We believe that we have large commercial sale and the growth will not bring discounts additional discounts from the industry.
It will be an increase of the participation enough accessory services NOL monetize our ecosystem and will allow us to have a company that is more profitable and sustainable in which we can begin the cycle of expansion. After the end of 'twenty five let's go to the next slide please.
Speaker Change: Next slide to talk about the transformational plan that transformation plan continues to work well, we are still at 20% higher than their timing I think this is a good business. We recovered last time with a credit. So we had a fifth rig that left in the beginning of 'twenty four and we were not able to increase the credit protection was repriced in the first.
Carter, we were had working with less revenue than was forecasted we were able to recover this growth and we are going to recover.
Speaker Change: The growth in the year higher than we expected as over 2025, we are within the plan and we will be able to deliver the plan of 25 in relation to credits at which moment are we today the investment of selections that we have so we entered with AI pricing is already working we are already running at 80% of the online pricing.
Speaker Change: With AI that has improved the e-commerce margins and will allow us to have wealth any margin N e-commerce than we started tests in physical stores.
Speaker Change: This will also allow us to gain market share in physical stores physical stores are still in the pilot process and the impact we'll see more than 25 E. Commerce will start showing its impacts in the first part of 2024. All of this is the algorithm will be learning and we will be learning with the.
Algorithms as well and whatever we need to correct walgreen constant evolution.
Speaker Change: The other is the digital solution of advanced analytics to the handset sales men. So the add back the <unk>.
Speaker Change: ALS Representatives fabs for their stores, they have an AI to support them.
Speaker Change: What margins do they have and the sales reps are stimulated to work with online leads when they are with our idle time to bring new clients to stores.
Speaker Change: Online sales or through Whatsapp. This has been given us very good returns we increased 25%.
Speaker Change: Our productivity from our sales persons and till the end of 'twenty five will increase.
[laughter].
Speaker Change: Sales and reduced SG&A and increase the sales and the whatsapp channels of sales.
So we already talked about retail media and three P. So this is what we are doing in the transformational model now pass the floor to Welshpool.
Speaker Change: You talk about the financial highlights. Thank you Hannah and good morning, everyone as always I would like to start talking about our discipline is the execution of the transformation plan, we announced on the 10th of October of last year, and we've always maintained the consistency of our discourse and the discipline of execution. This has been our guidance since the beginning and so.
Speaker Change: For the leads are the financial highlights the gross margin of 31.2% an increase of high increase in relation of last year eight point Chris.
Speaker Change: <unk> points are basically and last year. If you remember we were focusing on reducing our old stock.
Speaker Change: We had to have huge discounts on that impacted the margins of last year. That's why the operation was a bit on loyal but the relevant aspect is the sequential evolution in relation to the second part of this year with increasing 0.9 percentage points in relation to SG&A.
Speaker Change: Our commitment.
Speaker Change: To have a lean structure when we look at the first nine months of the year. There is an accumulated reduce schmidt of 336 million has.
So until the in the past when we were talking about 300, or 50 or 350 million for a year now we have even higher value in relation to SG&A than what we estimated in the beginning of the plan.
Speaker Change: The gross margin with SG&A.
Speaker Change: With discipline led us to an EBITDA of seven 7% in the quarter.
Speaker Change: Once again, a sequential evolution in relation to the second part of the fourth quarter of consecutive quarter of sequential improvements of our margin even with a reduction of revenue we've been talking about this for a long time of our strategy to focus.
Speaker Change: In the core categories and.
Speaker Change: Profitability cash flow too.
Speaker Change: Even with a reduction of.
Speaker Change: Our revenue we've had improvement in margins so preparation for Black Friday and Christmas. Our stock is at 470 has in relation to the free as part of the second quarter of this year. Even then we were able to advance.
Speaker Change: Got it.
Speaker Change: Yeah.
Speaker Change: And the monetization of <unk>.
Speaker Change: Taxes, and we closed the quarter with 3.2 building 336 billion increase.
Speaker Change: The increase from the last part of the next slide It tells US about tells the story and numbers ever since the beginning of the transformation. So the focus.
Speaker Change: Of cash flow and profitability, we discontinued 36.
Categories in P and online, especially in B to B, we were able to close we closed six stores that brought us the planned reduction in revenue as the graph shows us on the higher left.
Speaker Change: Eight of the slides so the reduction of 3% during this quarter in comparison to them average of 14 from the previous quarter. So.
Speaker Change: We have been observing a reduction of the total and increases in physical stores that have not already showed us previously.
Speaker Change: The lower left graph talks about SG&A, which we already commented on and the second phase of the transformational plan. The focus is the growth of healthy revenue. So we have been talking about the expansion of physical stores and a trend of improvements for the fourth quarter and the phone.
Speaker Change: US on on the on the online.
Speaker Change: Platform in a more sort of weigh on the graph, we see the sequential improvements within the gross margin and EBITDA margins reinforcing.
Speaker Change: Aspects of hanging onto commented on besides the commercial execution, we have been advancing very strongly and services of credits and insurance.
Speaker Change: Which has been.
Speaker Change: Improving.
Gradually the structure of our margins.
Yeah.
Speaker Change: That was the beginning of the team at the beginning of the plan the risk was a higher than expected and now we are in a scenario.
Speaker Change: Despite the macro scenario and maintaining the discipline of costs.
Speaker Change: Okay.
Speaker Change: And which we are advancing in the increase of revenues. So the potential of operational leveraging so if we go to the next slide.
Speaker Change: Yeah.
Speaker Change: We have the cash flow.
Speaker Change: Cash or free cash flow is negative at 70 million, it's important to highlight a few temporary events.
Speaker Change: So the first credit.
Thanks.
Speaker Change: It is $700 million.
Speaker Change: It's a very positive vision for the company not only because of the issues of the sale of merchandising, but it brings expressive improvement. So at the first moment to even brings a negative impact of the result, because of the initial reduction that is carried out but also the increase of accounts receivable increasing cash flow and.
Speaker Change: All over the next two weeks, we also have higher.
Speaker Change: Improvements and cash flow and also will be compensating over time. The second temporal aspect is related to seasonality increase of stocks in preparation for the fourth quarter. Most of the increase of stock is compensated by accounts payable.
Speaker Change: And integrity so.
There is a return of the working capital that occurs in the seasonality of the fourth quarter and the third important aspect.
Speaker Change: Temporary effects.
Is the monetization of tax credits in the quarter and left in that term 17 million, even with the increase of stock.
Speaker Change: If there was none or if there was a maintenance of the.
Speaker Change: Stock levels. This monetization would be closer to 300 million as we have focused much most of our attention on so it's important to highlight that this leverage continues to be we continue to be focus on this leverage if we look at the last 12 months, we had a net monetization of 1 million and a half with wine and finally.
Speaker Change: Liquidity has closed at 3.1 million, we already commented that we were able to increase the liquidity, which is not common when we observed the variations year over year, we were able to advance and in a sequential way increase cash flow so going into the fourth quarter.
Speaker Change: That is favorable for the seasonality, but at the same time planning and structuring the first compensation of.
A more challenging cash flow as always is the global beauty company absolutely. So the cash flows the absolute priority for the company and were focusing on our objectives.
Speaker Change: Back to you in October.
Speaker Change: Yeah.
Sue: Oh, great. Thank you I'll Sue and now we can move on.
I think we're getting to the key messages at this point in time. So first of all the current moment Black Friday, everyone was really are concerned about we were able to grow our stock. It's really good stock level, just core items and new items, we don't have a huge backlog of sales.
Sue: Sales of items that are going to hinder margins are good sale items and good depth good quality and so the teams are really engaged we just boosted this was the buy now pay later they could you add you and where we can really unleash the.
Sue: Gross a limit for growth is really ours.
Sue: Activity in the writing and we can reach the 1 billion raised in November. This is a commitment that we're going to maximize sales, especially in the physical stores penetration with the buying up and that are digitally now dropped a bit in back bay because of the high income consumers whenever they search for the seller and what's interesting is that the most searched dry items, we set up this model and of course, you're ever going to talk about black.
Sue: Which is bringing more profitability because we have this unit where customers we try to find what customers are most looking for on the Internet and we just got these items so.
Sue: This helps safe and increase efficiency and marketing investments and it gives me the capacity to invest more in pricing. So I can reduce the cheniere at list price and we maximize sales so it's working well.
Sue:
Sue: And so.
Sue: We're not gonna have an exaggerated volume Ah, it's gonna be proportional and the focus will be profitability and we want to deliver their gradual improvement in our margins.
And improving the company preparing the company for 2025, because they still have a lot to deliver.
Sue: When it comes to operations and profitability. So next we'll get into our vision for 2025.
Sue: Wanted to keep up the sequential improvement in the operational margins.
Sue: We want to continue.
Sue: With about half of it or an increase.
Sue: This liquidity as well.
Sue: So we also were able to have a reduction when we.
Sue: Grow our revenue, we're going to dilute our fixed costs more so than the increase in margins won't be delivering trout upon well, obviously become a major revenue leverage.
Sue: Just structurally anymore to be able to adjust expenses. They were already adjusted in the contribution margin is already higher.
Sue: But the growth here and the revenue is going to lead to an important increase so that might not be that is working well everything is progressing well within the plan to have the funding with higher costs and.
Sue: The impact.
Sue: That exists for this transformation plan is.
Sue: Our fund raising costs because interests are higher and spreads are a bit higher. So this will consume a bit more of our financial expenses, but our objective is to adjust this.
Speaker Change: Then of course you can.
Speaker Change: Change the funding pockets and then afterwards, we'll still have some important levers.
Speaker Change: Accelerating monetization of taxes and some assets as I'll show you already mentioned some of these assets we already had in our plan and we postponed this monetization.
Speaker Change: And all of this is getting better we can see that there's potential also to do some things in 2025 and operational adjustments as well that'll bring in benefits with more EBITDA margins and advances in the full cross so with this we can address this a win and finish with better leverage.
Speaker Change: And really discuss the expansion plan and then will present the strategic plan.
Speaker Change: Yeah.
Speaker Change: And this is becoming more clear.
Speaker Change: And of course, keeping it a leaner structure and increase operational efficiencies. So we're really preparing for the fourth quarter and we want to have a historical black Friday and have a quarter, that's going to be really important.
Speaker Change: For this half.
Speaker Change: Half of the transformational plan.
Speaker Change: Showing the company and another trend.
Demonstrating what we can achieve with a lot more to do still of course, though within the plan prepared so we can be convinced that by the end of 'twenty five we'll have another company with a lot of growth potential I want to thank you all for your trust and for the all of you as I said the apps downloaded in the active notifications.
There's a lot to buys tell so thank you for that and we want to get into Q&A now. So we can go deeper into certain plants.
Speaker Change:
Speaker Change: And so we have people raising their hand. Thank you. All soon thank you and I have to we're going to start off with the Q&A and then good afternoon, everyone. The first question is from Vitor is Ive done there Peter you May proceed. Please.
Speaker Change: Hi, good afternoon, and Uh Huh al Sue and I said, we have two questions. A person is more focus on the pricing for the physical stores and and it's clear you have the same sort of in the last few quarters and also the continuity and the name of the fourth quarter I just wanted to confirm.
Speaker Change: This point of view you still have this acceleration in same stores.
Speaker Change: And also if you guys think this acceleration is.
Speaker Change: I'm more focused in the market or the share gains.
Speaker Change: The second point is to explore but of the levers with the gross margin and I said it really calls the attention of the growth of the financial revenues. So in the better pay later what has been your RASM performance.
Speaker Change: Recently and is there any relevant difference in the credits granted in physical stores. It also digitally.
Speaker Change: So much.
Speaker Change: Yeah.
Speaker Change: Thank you Victor Thank you for the questions first for the physical stores same store sales.
Speaker Change: As planned and this continues to grow we're going to deliver growth upon the previous quarter, that's greater so fourth quarter versus fourth quarter is going to be better October was pretty strong the market was strong in October.
Speaker Change: And we start recovering share so when we look at the total share we see limited some categories. We ended up kind of losing a bit of share but this was recovered a.
Speaker Change: Gradually in the third quarter, but in the fourth quarter, we started reaching similar levels and so we still have room for this.
Speaker Change: To get to grow our share getting back to what it was before and.
Speaker Change: We're kind of getting some tailwind and some categories, especially as we grow as market conditions recover you a bit of our marketshare furniture, the market's growing and we're growing more than the market, we're gaining share.
And in other categories, as well, where we've kept our share but.
Speaker Change: But we've been recovering a bit of the volume based on the market.
Speaker Change: So we are see priorities in the physical sure, but the dynamic pricing and adjustments also brought in some opportunities for e-commerce.
Speaker Change: Congress, we have been working above two.
Speaker Change: Contribution points in margin so.
Speaker Change: If it's above two points in growth starts generating value and so.
Some improvements in E. Commerce will also bring in here to be able to contribute to the total gym be when they come.
Speaker Change: These are just very gradual and keeping up our commitment with our bottom line.
Speaker Change: Gross margins or financial results are really an important contribution very relevant and what's interesting is the lost batches. We are operating in line with what we were doing.
Speaker Change: And there's a bit of a cluster when you talk about the average rate we have customers that are five and others that are 14th of the profitability in the worst ratings or even a little better but do you think it is a little worse, but when you grow more and the better rating that our profitability is that the.
Speaker Change: The challenges of the buffer we will drop a little bit, but the delinquency also improved a bit so.
This is for the growth of the delinquency of the buying up into their customers are going to see delinquency below 9% and net losses below 5%. So we're not going to face any risks by include increasing the amplitude of the credit we're offering.
We are.
Speaker Change: The willing to offer more installments are smaller down payment for it.
Customers that have payment conditions that we know about and customers that are already company customers in auto bi and also the pre approved them.
Speaker Change: Our credit granting right, which is one of the best ratings, we have as we work with this portfolio.
Speaker Change: And I think I answered both of your questions.
Speaker Change: Yeah, just wanted to add on to this on.
Speaker Change: Our financial solutions. Besides the buy now pay later we've been.
Speaker Change: Really expanding with this full package of financial solutions.
Speaker Change: And so.
Speaker Change: Okay.
The sale of services extended guarantees and assembly install.
Speaker Change: This is all the things we've been focusing a lot right from a ROIC perspective, you don't have.
Speaker Change: Like any capital and you have high margins and that contributes significantly.
Speaker Change: So that we can continue to advance and the gross margin. So there's still a lot of room in services.
Speaker Change: Yes.
Speaker Change: Yeah, Okay. Thanks.
Speaker Change: Thanks Peter.
Speaker Change: Thank you, but there our next question is from Felipe <unk> Citibank.
Speaker Change: Philippe you May proceed.
Speaker Change: Jim.
Either team on Citibank said, we want to understand the turnaround project. When it comes to growth you guys have done some significant work on the reduction of the.
Speaker Change: Stocks with lower margins, especially in one P, but I want to understand how we can imagine.
The dynamic of the online for 25 and here is it the industry is going to grow how much do you expect the market to grow as this demand.
Consumers in a as I understand it is not to leave the car, but the second point is with the library. So.
Speaker Change: That was pretty clear in the quarter and if you could it shows a bit of your perspective for cash generation in 2025 that'd be important. Thank you.
Speaker Change: Well. Thanks for the question first of all on growth our priority is physical stores.
Speaker Change: Orders. So if we have limited capital we want to.
Speaker Change: Use that in our higher margin sales he come with a buy now pay later is priority number two so it's important that you can help us a little bit.
Speaker Change: We move on to the physical store without buy now pay later and then E. Com three P is more profitable and it doesn't require a capital allocation.
Speaker Change: So for this one I don't have this limitation three P and ecommerce should probably continue to grow.
Speaker Change: And it also contributes to margin gains do you.
Speaker Change: Get some good support in the gross margin, but when you look at the categories, it's valid to physical stores and also you've come.
Speaker Change: In physical stores.
Speaker Change: With home appliances, that's been performing pretty well in the industry understands that it is going to continue to grow next year, but we have like a marginal gains in them.
Speaker Change: This is especially for areas, where we have a lot of space I'm not going to give you too much details about.
Speaker Change: Then for furniture, we have a lot of room. So for furniture, we're growing strongly above market levels, our furniture was kind of left.
Speaker Change: Aside for awhile, because it was less digital 20% was online 80% of physical so there's a lot of room for growth in furniture, we were growing a lot. This year and we're going to continue to grow next year in furniture, which helps you the.
Speaker Change: Profitability penetration of our buy now pay later program.
Speaker Change: And also our other services that help a lot with monetization. So its something that really makes sense just financially now in the other categories. It's like growth. According to the market, we don't expect to grow it.
Speaker Change: For the market when we talk about technology TV in cell phones, because they have a deflation we have an increase in our average screen size and there's also the arrival of new supplies for screens and cellphones.
Speaker Change: And then also helps us with our bargaining power.
Speaker Change: To be able to work on some initiatives with the messenger of industry that can help capture part of the market, but it's more like we're keeping up with our market leadership and competitive vantage point and contributing a bit more with the bottom line. So in income there is an opportunity in these categories, which kind of.
Speaker Change: Gives us the possibility to work on our ambitions have bit more than we can recover the previous share.
Speaker Change: And so.
Speaker Change: Right.
Speaker Change: Yeah.
Speaker Change: Now Oh, well, we can recover the prior share so there's some share gains but they recovering also what was the share in 'twenty two 'twenty three so that's pretty much what we see to show you a bit of a dynamic when we discuss leverage we haven't provided any guidance to the market, but we want to reach a.
Speaker Change: Positive cash flow, we want to finish the year at a whole another level and the EBITDA needs to reach the end of the year with double digits. So this is the expected EBITDA growth.
Speaker Change: And in the fourth quarter, we would have the company at a whole another level to be able to reach 26, what are the conditions to operate in a sustainable manner with a free cash flow that covers interest.
And generate value for shareholders.
Speaker Change: Okay, that's very clear thank you.
Speaker Change: Okay got it.
Speaker Change: Thank you Philippe next question is from Alicia that in America at Morgan Stanley.
Speaker Change: Yeah.
Speaker Change: Yeah.
Well good afternoon, everyone and thanks for taking my question.
Speaker Change: Yeah.
Speaker Change: So just to focus a bit more on this point that you guys had mentioned on the market share gains for next year I wanted to understand.
Speaker Change: Yeah.
Speaker Change: How much of investments would be necessary to accelerate the growth.
Speaker Change: That you would need to.
Speaker Change: Work on in order to capture the additional share from industry and the second question on my side is more like if I could help me understand the ecosystem side. It was really clear in the release I think retail media is growing a lot, but if you could give us a little more color maybe in regards.
Speaker Change: Two.
Speaker Change: How much of this is really like the advertising versus how much what's actually performance related give us a little more details on the type of customers.
Speaker Change: That are coming in through this type of service.
Speaker Change: Okay, well first about market share our capex should continue to be pretty similar to this year. So I don't really plan to increase investments in capex and marketing as well so.
Speaker Change: We're.
Gaining efficiency.
Speaker Change:
Speaker Change: And when we look at this compared to the revenue we see that there's a market share gain for a certain period of time, we were kind of getting them close reservation rate and pricing right, but to be able to get this rare to eliminate some items and then another items, which took a while because you have to operate with the entire cycle.
We're having some capital discipline I wasn't going to buy another product before I finish with the older product sotheby get the cluster transition right in each region. This is brought in a major growth in our sales, especially when it comes to.
Speaker Change: Physical stores are brick and mortar stores, where the availability of products, where they brings in the sufficiency considering the strength of our brand when we look at ecommerce as Jochen.
Speaker Change: Take on a gym V a gross.
Speaker Change: Commandment right. So we consider this kimono in the margins, but we see and we do have a plan.
Speaker Change: Considering the opportunities for growth in G M b in ecommerce so for certain categories. We also.
Speaker Change: <unk> reduced the summer where the contribution margin was negative and has improved the sufficiency of the conversion rates went up with the same.
Speaker Change: This is we can optimize this for months.
Speaker Change: One two plus two and that also.
Allows me to buy more of this product and keep this positive contribution margin, but it's a test every day and we're really measuring our barra, what's the message how much about and what's the contribution margins we don't so.
Speaker Change: In a way that it improves in one quarter, but structurally destroys the business unless somebody is sustainable and if necessary, we'll give up on a bit of growth, but when you look at the strength of the brand and our share.
Speaker Change: We do imagine the possibility of this growth in E Commerce and three P. It's actually collected choose a second question.
Speaker Change: There's two main levers for the growth of three P.
Speaker Change: One is.
We had to give a bit of focus so we stopped negotiating and providing our space is a gene items, because we wanted to do so.
Speaker Change: And one P. We didn't want to have competition, there, but now.
Speaker Change: We've got back to structure this.
Speaker Change: And.
Speaker Change: Especially for the core a nice Skus and then retail media is the way to bus and provide more visibility to these products. So most of retail media is for performance and that's really related to three P. N. One P. M mine sale so.
Speaker Change: And this helps bring profitability and growth.
Speaker Change: In three P and in one P online retail media for physical stores are starting but it's still a small.
Speaker Change: The part we want to do more in 25 than we've done in 'twenty, four and that's where.
Speaker Change: In physical stores are brick and mortars, there's a lot of partners and when we look at digital we have hundreds of small players that sell in our marketplace.
Speaker Change: And we have the big suppliers and industry growing exponentially so with each one coming in the ticket is greater and that helps us. So we have started to work on our joint business fun.
Speaker Change: Yeah.
Speaker Change: And.
Speaker Change: This has been already hired but we have to have this.
Speaker Change: Execution challenge to be selling this at every month and week and they're gonna help grow so investments are already made and it's already in our G&A. We have teams structured and we don't have to increase the structure, but now we went to dilute this by delivering the business plan. So they each area Bill is it.
Speaker Change: Over this.
Speaker Change: If everyone delivers in this really to grow that won't be too being therapy in physical stores and we can even deliver more than what's in our business on because obviously, we've planned with some deviations in regards to the targets we had to be able to deliver this plan. They can make the company would be in a sustainable position and really it is.
Speaker Change: Gus this expansion cycle.
Speaker Change: So that's pretty much it within what I can discuss without giving any future guidance. We're just going to reimburse the topic, you mentioned on share gains and investments in marketing.
Speaker Change: Thank our topic generally is.
Efficiency in how we can with the same amount we've invested this year, but he has the analytics and challenging the marketing teams, how we can have better productivity and efficiency for each ria always spend and.
Speaker Change: Which channel where are we going to place that and that's a significant granularity right and then.
Considering our focus in our brick and borders or is in digital we also have a CRM system, where we really focus on this end.
That's the leads we have to the south of the cells.
Speaker Change: People and we create this relationship that's really personal it's not like an email.
We receive or spam, but this.
Speaker Change: Personal relationship with the sales team and customers and.
Speaker Change: You can see that this last installment of the a buy now pay later as they expire maturing in a month from now don't you want us to buy.
Speaker Change: Our new TV or exchange, a cellphone and you bring this consumer in house any separate fund me. This conversion. So there are many initiatives in this aspect are gaining share and advancing the revenue with a more productivity and then we have many different levers we sat here in the second phase two.
Speaker Change: We able to advance more and more without having to have such a big spend that were maybe not be profitable.
Speaker Change: Okay, perfect very clear. Thank you so much guys.
Speaker Change: Thank you Alicia Anthony.
Speaker Change: Well. Our next question is from Yahoo. Yahoo. You May proceed.
Speaker Change: Hey, good morning, Hey, not to else isn't going to be all things for the space and I have two questions. The first one is about credit.
Speaker Change: So what you guys can tell us in regards to the provisions policy that you guys have.
Speaker Change: First of all how much he is provision and if something changed.
Speaker Change: In regards to what it was before the restructuring.
Speaker Change: Then the second question is a bank he so I imagine that it's.
Speaker Change: But that's all explored that much and besides the main objective, which is paying the but the digital buy now pay later what would be the proposal for bank key rate what else are you going to.
Speaker Change: I just got to bring in value to this asset and then the third and last question is about the.
Speaker Change: The scale of our six.
Speaker Change: Taiwan and you don't want to discuss the actual impact of this measure but we.
Speaker Change: We've been questioning we've question we've received a lot of questions about this from investors. He is up 33000 employees. So can you guys give us some information like what would be the possible impact and how many of these employees are working six days and rest one day regime.
Speaker Change: That's being discussed in Parliament in Brazil, well, our provision is a methodology, that's really conservative even the buy now pay later and that's an unfortunate point for everyone. When I grow in the write up in later than actually the impact that month because the provision is done base is made based on the indicators that has a deviation that after recover later on so may be considered.
Speaker Change: This provision and then I recover this though.
When I reached the six months, we are moving all to losses is quite conservative in regards to the market.
Speaker Change: So they've been out there that are bringing this negative impact in the bottom line and then 14 months on average of the positive impact, which gives us major profitability. It's over 40%. So even in the growth of about up here later that helps us with this conservative provision model to guarantee our.
Speaker Change: So that meant that is to deliver a consistent evolution of the margin every quarter, because when I grow and provisioning a bit of this in this quarter and I'm also generating gains for the next quarter. So.
Speaker Change: Keeping up with this growth cycle.
Speaker Change: Helps us deliver our plans and conquer credibility in the market when we talk about bank. He theres major potential. So we've been discussing this as the company.
Speaker Change: Company has been gaining profitability and there's a lot of people that wanted to explore this right channels either through personal loans and we want to also set up an F. I do see a financial instrument there isn't interesting tier there's a health funds many different proposals being discussed.
Speaker Change: To do implement bigger partnerships that we are planning to study as long as we can keep.
Speaker Change: That our financial leverage of the company, but we are not interested in this in the short term.
And bring in more sales of services to the company and the channels that are under developed but then there's some libraries that are off a little more strategic as well and that could maybe even bring in a reduction in our funding costs, but it's kind of early to start talking about this but.
Speaker Change: Yes, it's in the umbrella of financial services as a bank each has required some discussions underway.
Speaker Change: There are upsides are we didn't price DS yet, but they could bring any contributions that are transformational, especially when you consider the stability of the scalability of the company and potential for growth as well.
Speaker Change: Yeah.
Speaker Change: So it's a real complex topic on the six by one discussion for labor.
Speaker Change: Laws and people try to price things at the end of the day, it's never what people think of Enzo you make a huge effort to just discuss hypothesis. So we must wait on this and at the right moment, we'll position ourselves, but I think the sales force. The variables are the expenses are variable you can manage them and then.
Speaker Change: Depending on what it's like after just structure and when its something for everyone. In the worst case, you know have some pricing impact.
Speaker Change: And that site right. So it's not something that we can control I think what.
Speaker Change: Our commitment here is to improve the operational efficiency.
Speaker Change: Our capital structure and have a sustainable and efficient company, regardless of the macro scenario changes we know how to operate in these changes and we know how to optimize the company. According to the scenario we have.
Perfect guys. Thanks for the question for the answer Thank you Jago.
Alright. Our next question is trying to make us at J P. Morgan Nicholas you May proceed.
Speaker Change: Okay.
Nicholas: Hi, guys. Good afternoon. Thanks for.
Nicholas: Taking my question.
Nicholas: Still about the buy now pay later and after you talked about this in your initial conversation where you'd maybe started a little slowly in the beginning of the year, but then that was re accelerated in the second, especially I wanted to understand what the growth is like and for that operator.
Nicholas: And it's interesting to see the penetration.
Nicholas: And one P M.
Nicholas: Okay.
Nicholas: But I wanted to understand.
Nicholas: Uh huh.
Nicholas: How do you imagine this is a digital channel and also in the storm.
Nicholas: And if you also imagine you guys would be a low 30, let's say.
Well thanks, Nick for the question.
Speaker Change: The buy now pay later is important and we've always had demand. It's just that we didn't have the funding to be able to grow this but as we deliver the.
Speaker Change: We started having funding and with this where the conversations I've had with investors and banks, we do see support to keep this current growth pace. The demand we have could help us grow even a bit more.
Speaker Change: So growing like 100 million per month is something we can achieve but if you look at this we're reaching over 800 million reais per month, eliminating the seasonality and maybe we can it can be a little bit bigger so maybe 100 million more per month and.
Speaker Change: And we can grow gradually so greater gains would be more risky and once again, we're not here to take risks we're here to increase gradually.
Speaker Change: Our profitability our performance and the growth in ourselves so it's going to be a little soft journey easier than our 100 million per month, we're gonna grow a bit less than the potential we believe and to keep this conservative approach in our credit availability et cetera. So that's what we're seeing for 'twenty to 'twenty five for digital we have spread in housing.
Speaker Change: But it is similar with the physical stores. It's counter intuitive my expectation is that eventually it could be a little worse.
Speaker Change: What's the bankruptcy and then with that maybe a little less profitable.
Speaker Change: The guys have been working on exceptional work and they've been able to deliver the same profitability, but within this.
Speaker Change: We think that we could reach.
Speaker Change: Reached levels that are a lot higher than 30%, but in the short term.
Speaker Change: We won't have any sudden changes or shifts in this increase will also be gradual so we see the stores moving towards this but it's going to take a little while for us to reach the 30 in time here is like more than a year right now kind of finished or any five or 30% because we're going to do this gradually and the store is growing it's a star was not growing.
And then they would go over the 30.
Speaker Change: Easily but since we understand that the physical stores will grow then that also increases penetration compared to what we've seen here in 'twenty four and so in digital we also see that going beyond the 10%.
Speaker Change: We have seasonality.
Speaker Change: We have the consumer week in March back Friday.
Speaker Change: And.
Speaker Change: So I'm not gonna be disputing penetration right, we want to do whatever we can do with profitability.
And we think that the high single digits or the low double digits are really good penetration between 9%, 10%, 11% penetration and that seems to be really healthy we already have significant contributions and that's the scenario. That's the most probable for 'twenty to 'twenty five and the long term, we do plan to increase.
Speaker Change: Both penetration and I think that grows a lot as well.
Also leading Jim fortunate in contribution which is a credit cards credit cards, we issued 50.
Speaker Change: 50000 per month, we went onto 100000 150000 number maybe 200000, so for credit cards, they're really becoming like a big important business right. We have revenue per ticket and you receive a fee on the.
Speaker Change: And the C and the commissions and I also increase the loyalty so.
Speaker Change: We want to increase penetration to bring in a big percentage of my revenue.
Speaker Change: Which increases profitability recurrence my control.
Speaker Change: The CRM.
Speaker Change: Stocks as well provide unfortunate returns and so they're paying the last installment of iridium by them to come to the store and try to buy another product. So that's where they already are places and.
Speaker Change: [laughter] that provides more stability in our revenue recurrence loyalty and that's really important for sustainable retail I'm, sorry, if I went over time a bit here.
Speaker Change: I just wanted to mention that in the short term we will have this movement.
Speaker Change: With a lot of focus on.
Speaker Change: This bump in the mid to long term, it's unimportant library right to see when we see the other regional players that you know really well they have double the penetration.
Speaker Change: So of course youre going to be building this over time with a lot of discipline.
Speaker Change: The potential for growth and as our portfolio, considering our brand and presence is really big.
Okay.
Speaker Change: Okay perfect. Thank you guys very clear.
Speaker Change: Thank you.
Speaker Change: Thank you Nicholas <unk>. Our next question is from Danny eager for Mike speed. Danny You May proceed.
Danny: Hi, guys. Thanks for taking my question.
Danny: First it's more of a top down dynamic we're seeing deterioration in the macro scenario.
Danny: Also the interests are at higher levels.
Danny:
Danny: And so.
That also impacts the strategy more towards 'twenty 'twenty five is there something that you guys think will will rely more on will be more cautious about this.
Speaker Change: I wanted to understand your mindset.
Danny: Yeah.
Danny: Let's see.
Danny: And so the levels.
Danny: <unk>.
Thank you.
So probably very healthy.
Danny: And I wanted to understand if it makes sense.
Danny: To not expect my expansions on from now on and then the EBITDA factories coming more from Mike operational leverage, but also maybe investing in competitive advantages considering the macro scenario for.
Danny: To be able to sustain growth and so I think these are the two points on my side.
Danny: So interesting Danny both are related.
Danny:
Danny: So that increases the cost of capital and also the variable a funding cost right. So a lot of what we sell we sell in installments.
Danny: Free of interest and so our pricing also considers the contribution margins for each of the products so to be able to deliver the same contribution margins of that product with the higher interest then you need to have a higher gross margin that is gross margin could come from pricing it could come from the optimization of stocks that could come from.
Danny: Adding on services or the buy now pay later so these four levers really influenced a lot when I look at the.
Danny: Their action for 2020 five considering the macro scenario, we need to increase the gross margin or reduce our stock or do something else like that.
Danny: What's the problem and the market dynamic right I see the gross margin for product right in each of the sales channel of the market sees as consolidated business of course, the gross margin for ecommerce is a lot smaller than individuals' store physical stores. So if ecommerce responds the one for this.
Danny: That'll push the margins upwards, but.
Danny: And then I won't have a problem with delivering the grasslands and salads right.
Speaker Change: As always a discussion with the concern of how the market is going to understand that the market really weighs in on this.
Speaker Change: We can see this gradual improvement so yes, I do see this improvement because this is offset with furniture, that's growing a lot and they bring in gross margin, but as far as I can makes effect and the penetration effect of these services than the actual pricing and everyone connects this gross margin to the pricing.
Speaker Change: And so.
Speaker Change: Once again I said this back there and when you expand as you see everyone gets back to the gross margin and that'd be down because it's difficult right you'd have to provide a lot of granularity open up that and disclose the strategies that everyone can have the same comfort we have.
Speaker Change: To increase the.
Speaker Change: Profits after income tax so for gross margins. This is the level of the gradual growth.
Speaker Change: Very much influenced by that makes some channels that merchandise.
Speaker Change: Okay.
Speaker Change: And so.
Speaker Change: So.
Speaker Change: And so their gross margins are smaller and before that couldn't exist why why are we selling life before right well.
Speaker Change: Especially for physical stores for example, because sometimes you have a better gross margin you could it sounds decided that has profit.
Speaker Change: So I got to have like a something that keeps you from delivering this profit right. So the gross margin isn't a is a medium indicator and outbid that's maybe not the best it's like a guide.
Speaker Change: But it's not one of the best guide. So I think we should continue to gain SG&A efficiency as you mentioned the operational leverage provides important contributions to the EBITDA.
And that's really important.
Speaker Change: Yeah.
Speaker Change: I'm sorry.
Sorry, we had a technical issue here with the sound. Okay. Thank you for the question.
Thank you Danny and I thought we don't have any other questions. So we will pass it on to you for your final remarks.
Speaker Change: Yeah.
Thank you Gabriel and final remarks, I think that would be the last slide.
Speaker Change: From the short term vision them, how do we see the company.
Speaker Change: The feedbacks and all the reports we saw we received just in the morning, and yesterday everyone's kind of recognizing this operational efficiency and important steps taken when it comes to re profiling the debt with the expenses financial expenses and interest rates are really concert in 'twenty to 920 30.
Speaker Change: The Gray spirit is still trying to 'twenty six.
Speaker Change: And.
Speaker Change: And we gained a lot of time why is that.
Speaker Change:
Speaker Change: Right.
Speaker Change: And so we can have a.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: And so I think the macro scenario is still challenging.
Speaker Change: Okay.
Speaker Change: And we're gonna see players that are kind of.
Gary: Gary the market a bit.
Gary: We've done our homework and the macro scenario should start getting a little better by the end of 2025. We also have some unfortunate library and our capital structure.
By the end of 'twenty five so we even have the possibility to convert the debt into equity and that'll help with the transformation process and.
We have important improvements as well to deliver this so we understand that we're going to finish 25 with a very different scenario.
Gary: To be able to reach this expansion cycle with them a better capital structure. So I want to thank you for your support with fundamental today, we're more confident are than where we were.
Gary: With upon moving along well the capacity for execution.
Gary: The team is well set up and we're really happy here with the team. We've we've had to lead the business once again.
A little more control now more and more and more knowledge.
Gary: Yeah.
Gary: And so.
Gary: Okay.
Gary: And so.
Gary: So you'll see some opportunities.
Gary: Yes.
Gary: That makes everyone.
Gary: Yeah.
Gary: I'm more comfortable and comfortable with the company as well.
Gary: Hum.
Gary: And so.
Gary: Got it.
Gary: Yeah.
Gary: And so the company is investing.
Gary: And the prospect of this habit of inflation.
Gary: Yeah.
Gary: And so you have this before the increase right. So switching that airfare blender etcetera. So thank you all and.
Gary: And have a great afternoon.
Gary: And our our team is still available. Thank you all.
Gary: Yeah.