Q4 2024 Grupo Casas Bahia SA Earnings Call
<unk> Board Youll began to put a wide body syndrome, we debate Z individual fed Egypt gas only his lithography to watch the nation's Indonesia, Guadeloupe No group because everybody.
The stock of finished your pitches outage at other sorts of Macdonough Cadenza Sofia, Amanda just one even about the forehead aboard our platform acts.
Access piece, you like bleach interpretation button through the globe icon at the bottom part of your screen and choose your language of preference in English approached.
Speaker Change: And for those listening to the conference in English.
You also have the option of meeting original video by selecting this option.
Speaker Change: If I'm I wish we'd like to let you know that this earnings call is being recorded and will be provided on the IR website of the company.
Speaker Change: I R. Dot group has via Dotcom, Nokia Eagle, where you'll find the full materials with the earnings release and updated you can download our presentation as well on the chat icon.
Speaker Change: In English and the company build the response, you're going to be some during the presentation. The companys figure all our participants will have their makes it turned out his course soon after will begin the Q&A session to the initial version of the film we'd like to highlight with deposits and features to ensure that the information in this presentation fossil statements that could be made during the earnings call.
Speaker Change: <unk> related to the business perspectives forecasts and operational targets and financial targets and the company representing beliefs and assumptions of the company's management as well as information that is currently available medicines kakuta signal future statements or not again key performance they involve risks uncertainties and assumptions as they refer to future events.
Speaker Change: And therefore as reported reliance circumstances that good or not occur.
Investors must comprehend that overall economic conditions market conditions and other factors.
Can affect the performance in the future of the company and lead to results to differ materially from those in such future statements.
Speaker Change: Today, we have the presence of the executives in the company, who can feel hangouts affecting the CEO CFO <unk>.
Speaker Change: L Sue uniformity and gabel, souccar water, but if all of us know him and now we're going to pass on the floor to Mr. Hangouts Franklin.
Speaker Change: Municipal.
Speaker Change: Clinical in rather.
Speaker Change: One.
No.
So from our view.
Speaker Change: So in Aten.
Speaker Change: Malone.
Speaker Change: Okay.
Speaker Change: So following up with Servicers quota.
Ben: Ben It's Lloyd Woodford Scoop as much gold Mercer had not the.
Well, Jeff Gordons, Pissoir overlaying, Iran. Obtaining a run for his review of welcome all to our company's or call earnings call here with Zoom Q&A you have read this Q&A and a quick summary of the results in the first quarter. We are here to do that the key share results that make us really happy and aware of that.
Restoration plan has a two year plan, an uptick with the increase of the interest rates be group extended till the end of change anyhow, but the results of fire damage at around the right path.
Ben: And I want to start off thanking and highlighting the fact that it's the fifth consecutive quarter that we've been delivering sequential improvement in our margin not only in gross margins, but also EBITDA margin.
Ben: And then.
Ben: Operational cash flow of the company reached Levered, mainly by the growth in them and physical stores of your growth of the buy now pay later and also the penetration of services.
Ben: This is a fourth quarter and is an important milestone which is also an infection point, where we start capturing operational leverage a uniform we've been talking about this in the first.
Ben: We at the stage, where we had a big focus on expenses and costs to improve operational performance and now we get into the second quarter with the effect of that is involved with <unk>.
Ben: Where we must bring in additional revenue to beautiful nausea.
Ben: And especially in the channels at a margin to be up to profitable is this ecosystem that's here.
Ben: The results are sure they have the best and free cash flow from one quarter with you in the last five years 1.2 million Reais and the liquidity increasingly that.
Ben: We had an EBITDA margin of 8% the best EBITDA margin and of course, whatever since 2017 on many.
Ben: Many different indicators have been lucky and they've been a record in the last seven years, but what I'm happy about is not these indicators because it's because I'm sure we'll be able to write new benchmarks for operational efficiency and profitability.
Ben: In the retail industry and the home appliances industry, the gross margins going.
Ben: To be a 30 point per se in a quarter, where we had black Friday and Christmas.
Ben: And these are moments, where we were able to really take advantage of is the had disclosure on the bike share gains and in the physical stores. This was even greater in contributing to the J M. D growth, It's a star.
And John the pent up editor.
Ben: It's really reaching an all time high which is very significant over 800 million and these roads.
Ben: And the beginning of the S. I D C, which was offset by these bilateral facilities that have also supported the growth of Tibet, operator, and AOI also start with the S. I D C to disclose something in a different way they can generate even more trust in the capital market about the quality of our bent up in there.
Ben: <unk>, which will allow us to lower the cost of funding increasing the profitability of our <unk> business. The banner pay later, we'll use my follow up we can move on to the next favor will talk about the G. M V. In the company and here, we're talking about the company's Jim D. I wanted to highlight once again.
Ben: That our discipline of investing in growth and different categories and products that are profitable and the channels that have profitability. So our commitment is not towards the crows for the profitability, we want to make the company be in a profitable scenario, even with the high end, just now and we need ever the capture the operational lever.
Ben: Virgin.
Ben: Tighten up a bit on the efficiency services contributing a lot with 70% growth in same store sales and want to buy one percentage points of gains and the contribution margin and startup ecommerce script better with its contribution margin. It's important dimension ecommerce, where we had the most relevance and the revenue of noncore products.
Ben: On the 10th of August where he presented the transformation plan, where 40% of the revenue cut.
Coming from noncore products, that's less than 10% from overheads in our history, but we serve a base of products with other categories and channels that were not profitable that we reduced so the objective here is to be profitable have discipline financially VP offsets are the one P a bit and without the need to allocate capital. So it is.
Ben: Our three P is also growing in core categories and this is very relevant.
Ben: We have been reinforcing this strategy and we're the only national player focused on being a specialist and home appliances and furniture and this is really strengthened our relationship with suppliers of home appliances, and furniture and allowed us to be so competitive van was gaining share in our physical stores is locked.
Ben: So by award.
Ben: Mortgage Washington, 40 unit, where we see that.
Ben: You will also persist beyond lucky.
Ben: We talk about our ecosystem and when we talk about our buy now pay later.
Ben: A grew significantly reaching $6 2 million and really multiple favorable using cmos. Besides its a its really about our discipline and our approach towards having a dropping drinkable sea rate.
So in the macro scenario be even tougher in 'twenty five and it wasn't 24, so we chose to be more restrictive than the ratings and we've been growing with better ratings that helps lever the quality of our portfolio. So we went from an over 99% one 8%.
Ben: And that's a significant improvement.
Ben: To improve.
Ben: And Gal and loss rates.
Ben: Our goal is 10.2 presents a demonstrates the health of our portfolio and also the protection growing along.
Ben: Which is very relevant I want to highlight that whenever a grow with our buy in Appalachia, we have an impact in the free cash flow because that because it is long term receivables.
Ben: And the profitability with a crude interest happening on the next 14 months on average so that helps with the consistency.
Ben: Living an improvement in the margins every quarter, which are gradually reach for us and we're really happy to client that we really know about well and we know that this is a channel that also.
Ben: Leverage is the profitability of the company. So when we talk about the F. A D. C. We really see that the F. A D. C is already operational in it'll allow the benefit that the G&A to grow when we think about the profitability and the excess then we see the participation of the biomarker that a growing June remember that the fourth quarter had the bad debt.
Fred: Fred It everybody tracks, the higher income kind of public.
Fred: Which is an average that's higher than the average in the air but it's an evolution upon the third the fourth quarter of last year and in digital we have significant growth.
Fred: <unk>, 9% penetration on average 8.4 in one P and nine points evidence Street Fujairah really doubling.
Fred: I buy now pay later and this will allow us to also have growth in digital which makes it more profitable, but that's not a priority below the knee Av.
Fred: The services growing also and that's been contributing.
Fred: So you have the revenue from retail media growing almost more than 200% consolidating ourselves as an X system and we've received demands from players that are almost without that are always out of our industry.
Fred: To have these campaigns with us using the 100 in a customer's yep.
Fred: So that ended up accessing our export assistant will we can move on.
Fred: I wasn't sure that coupons, but also muscle pool baidu and we move we can move on one more thing and with the supplement a pause while we focus a lot on this first bay phases are planned 20 foreign change.
Fred: And so it was really focus on the efficiency and the cost in reviewing our operations to make the company light every job opportunities and we're going to tighten things up a bit more for ever since second semester, we just got into some selective beds the bit of growth in the revenue. So the pricing has really contributed to an improvement in profitability.
D and also to the margin, which will bring an important benefits.
Fred: The additional margin and we also have an issue with the assortment that would help us optimize our stock a bit and.
Fred: Now we want to capture and other evolution dropped 25, and I also want to highlight the CRM, which is the salesforce on using this tool with I a huge AI to make this work so customers get into site and look at the product.
Fred: Haven't bought them there.
Fred: And this leads to a sales rep and no tragic and burdens or how much of the recovery where we can.
Add more services and have products placed above what they were expecting.
And bring in more profitability with the company. So that's a what will happen from the end of 'twenty five and then we need to really reinforce our capital structure that will allow us to enter a growth cycle for the company you will can.
Fred: Can we move on.
Dan: Dan I'm going to talk about <unk>.
al: Al Civil start sharing a bit of the financial highlight regardless. Thank you head out to thank everyone for your participation you have us orange life.
Dan: We can advance a muscle.
Dan: The transformation plan, we announced on August 20, <unk>, we had very clear objectives, Synopsys already mentioned, but it's important to reinforce because the profitability into cash flow really focus on.
Dan: Core categories and also the expansion of the buy now pay later and after a year of this launch we have been consistent with the same commitment from their homes and with all the different initiatives, we've been talking about on the year and a half and we.
Dan: These operational and financial actions aligned.
Dan: Towards this fishing here, so I'm going to discuss with you just a little more on the next slide we can move on.
Dan: Well like you see in this page are the reflects the evolution of the transformational plan and numbers. So the left upper side bass damages swings won't lump packaging growing the revenue we had a growth of 8% as set out as already mentioned this was due to the <unk>.
Dan: More precise at commercial approach and also the growth.
Dan: Some H valuable occupancy mesothelioma and in the last in the previous quarters <unk>. We also had a retraction of the revenue due to a category adjustments are in one P, which is our people and also <unk>.
And we already expected a short term.
Dan: The impact in the revenue.
Dan: But now after the third and fourth quarters, we positioned the company.
Dan: To have more sustainable growth from now on and what's.
Dan: What's going to fall off because you really.
Dan: Ah searching for this operational leveraging growth.
Dan: So we end the year.
Dan: With a revenue run rate.
Dan: You can see from what is a server at a positive trend.
Dan: And in fact, as you very significant and on the right side. The gross profit reached 2.5 billion.
Dan: 20% higher than the fourth quarter, a margin of 38 and also the same margin in the F 30, <unk> compared to base Eventbrite nine in the previous year. So the advanced all bodes very significantly gross margin.
Dan: Twenty-three had many different oh.
Dan: Bags in the margin.
Dan: And so that leads to us having to look at the history of it more than what we would like to do from now on it will illustrate our commitment to profitability I think it's very clear that we had a reduction in our revenue from 6% in the air and the gross profit went from each other kebab grew 4% sustaining more robust margins and volume.
Dan: Moving to the bottom left the bluegrass on the SG&A, we've been very rigorous in controlling your expenses ending the quarter with 23, 8% of the revenue reduction of 2.4 percentage points compared to the previous year.
Dan: And.
Then in the fourth quarter, when we look at the macro scenario and the interest rates growing funnel. We've already started to operate in a more preventive manner adjusting the structure and the closure of another eight stores.
Dan: With a reduction in the positions of almost 700 people and when we look at the full year we've reduced.
5% nominal soccer is a strategic one and it is a 284 million rise equal so Jos you're supposed to do and that sits with only four failures.
There's a possibility to reduce and offset the inflation and that's a discipline, we have with SG&A, Wisconsin expenses abroad, and we're going to keep up with this going to be fundamental for 25 as a pillar of it honestly to defend and accelerate operational.
Dan: Efficiency as we have a more challenging macro scenario pretty much N, which are three consecutive with five consecutive quarters at evolving we have seven point during the year compared to $4 three in the previous year and of course, we have the issues of the year 'twenty three.
Dan: But you could assume something so we grew at 733 million compared with last year, even with this reduction of $1 6 billion in the revenue. So once again, we demonstrate that our commitment is towards profitability and not only growth.
Just by all of these variations between the revenue profit and margin.
Dan: And so let's move onto the next slide I want to show you. This in edge two initiatives that are extremely track drawn transformational nuclear market.
Dan: So on the left side you have the labor issue a major cash detractor with impact was in 2024, that's very relevant.
Dan: And Theres a drop that is significant engine 60 million versus last year.
Dan: And so we have a draw downward trend to Kalydeco will Smith with.
Dan: So since this is.
Dan: A topic that is sensitive that we already had some issues with in the past in April. This improvement is as really just to make it clear we have a rationale on the dropping amount of a labor claims that were legacy claims and we really want to share the amount of losses and claims.
Speaker Change: M S T.
Speaker Change: And really demonstrate that as they reduce the quantities over all the costs. The total cost of the company tends to drop and besides this we have really reinforced governance and management of these labor claims. So I think this is something we continue to operate with a lot of focus and efficiency.
Speaker Change: Abo, we've been monitoring this we have a positive trend for 2025, which is exactly what we launched in the transformation plan that starts becoming more concrete effectively and then the other issue is the tax topic, which we presented on the right side.
Speaker Change: And there's a net impact of the taxes and the cash flow like I talked about the wage considers all of the different transactions inflows and outflows.
Speaker Change: And here you have a net result of that will impact the cash position and we see the monetization.
Speaker Change: That's significant in 'twenty three 'twenty four versus the previous years, which is important and that was a.
Speaker Change: Important source of cash for the company.
Speaker Change: He'll approach and we continue to have irrelevant stockman continuing to monetize and we're just illustrating the ICM S recoverable IC mask, and we reduced 50% ever since the peak in the third quarter of 'twenty, two and we wind quarter over quarter working on this with more complex monetization state by state give us look at.
Speaker Change: The tax logistics birthday.
And we just consider that in drainage we of course, we had a bigger reduction in monetization.
Speaker Change: Due to the fact that we had a reduction in our stock that was very significant if we remember in 23 of reduced more than 1 billion in the stocks that were aged that never in the operation on next slide we talk about positive casually free cash flow generation of 1.2 billion re <unk> our operational performance then.
Speaker Change: You see them up because it's also the different topics, we mentioned now with the tax and labor shifts and sky. So when we look at the free cash flow annually.
Speaker Change: It's the best in the past five years.
Speaker Change: Compared to last year with $640 million and Edison or remind you that last year. We had this impact that was a one off impact in the stocks.
Speaker Change: One 1 billion.
Speaker Change: And in 'twenty, four and not the just mentioned there was a big negative impact on the cash flow, which is the increase of the accounts receivable of 500 million. So when we look at the full evolution of what.
22 was.
Speaker Change: Water systems, we can really see this evolution in the.
Speaker Change: Cash flow and really understanding what is coming up ahead, Barry are expected to lead to advance and improve our position. We ended the quarter with 4 billion in liquidity very robust Robert Baird.
Speaker Change: For lower cash seasonality.
Speaker Change: And which is always the first quarter of ESG and then when we get into years move onto the next one.
Speaker Change: And we have a b.
Speaker Change: Scheduled for maturity and just to remind you that the first interest payment.
Speaker Change: And the.
Speaker Change: Happen in November 26, so that there is reasonable timeframe to start paying for these leases.
Speaker Change: Debt maturities and there's always going to be like a mismatch between the results of the cash position because the Evans lack of payments that we also want to reinforce we had the second series one.
Speaker Change: Right.
<unk> 5 billion and do you have the stock conversion price based on the user <unk> of 90 days.
Speaker Change: Turning to the conversion day with 20% discount so just to make the fake here the financial average according to the methodology establish an attentive and issuance of debentures, which is at 0.4 way below three times. So just to mention this because there's a lot of space in regards to the leverage of the attempt to me.
Speaker Change: But getting back to you went out to well I'll say, let's finish with the main messages. So we can get into the Q&A, we can move onto the sides fees of muscle.
Speaker Change: One more great. So we won't do any journey for I think was the year with the biggest transformation as you mentioned strong adjustments in the company's structure and.
Speaker Change: And major improvements in the margins, if we compare with D. A history. So we've delivered the indicators and the plan is 120% of what we were talking about a 60% of the scheduled plan and we've been delivering some important milestones. So what we expect for train 25 is that.
The macro scenario got a little worse than the plan that was established in August became insufficient.
Speaker Change: For the interest that the company had to pay for it to increase the operational targets to be able to supply.
Speaker Change: The increase of U S D and spread.
Speaker Change: So with this we really need to capture the operational leverage does an important leverage M with the physical stores, that's really amburgey levered by the buy now pay later.
Speaker Change: Also an increase in profitability and our retail media.
Speaker Change: Which is important additional monetization.
Speaker Change: Were you happy with Marsh about.
Speaker Change: That really helps the company get online.
Serena: So besides as Serena.
Serena: Taken up with the operational leverage and gains as Youll see this gradually happen and we'll be delivering 2025, we're very confident of.
Serena: That the company besides having a tougher market will continue to gain share and the share gains in the fourth quarter were very imports and I will continue to gain share throughout 'twenty five and so then I want to show you how the year started off just a quick summary of the market share in Brazil.
Serena: With the payments in January historically, a special sales caused by you would it really take advantage of the special sales in January we can see that the stocks we've repaired the stores for the special sale.
Serena: In January now are able to have a great spot.
Okay.
Serena: Those stores so.
Serena: The tour gains in my chair and physical stretched with you put eight percentage points and all of our core categories. The share gains were very relevant so the.
Serena: The phone corporate seven presenter points are white.
Serena: Appliances for quite for Tvs.
Serena: 8% market share.
Serena: Some weeks of January so that's very strong and we can see the first quarter of the year really gaining share. So the market's not growing at the pace at in the fourth quarter, but we're going to be able to deliver our business bond with revenue coming with growth upon the previous year.
Serena: We're really geared towards the share gains in the company and not just a market gain.
Serena: Growth and so we've been projecting the market with challenges.
Serena: They will be able to deliver these consistent market gains at every quarter in a gradual manner to really place the company in a scenario with a sustainable operation and really perform the capital structure initiatives that will reinforce the balance sheet. So that in the beginning to six the Canadian.
Serena: Growth cycle for the company, where we're going to prioritize the allocation.
Serena: Of capital if we're going to open up stores first are you going to reduce the risks et cetera.
Serena: We're able to proper both the company and so.
Serena: We'd be allocating our own camera and display.
Serena: Going on.
Serena: Two things.
Serena: Things here internally, so we're really confident and we went to.
Serena: Trustful, Delphi congratulate because by a team and for the first time, we are in will we have a new headquarters here in this group and.
Serena: One thing, we really want to do work on zinc cultures, one of the biggest challenges in the retail company and really experiencing the store life everyday reinforces our culture. So we were able to changes and in Monday, we're going to have a flagship store open up.
Right in front of the Vahine station.
Serena: Just have this one little video to show you our headquarters our new headquarter office and show you what's happening before we get into Q&A.
Serena: Just a second.
Serena: Got it.
Serena: Local law.
Serena: Let's go.
Serena: Okay.
Okay.
Serena: Yes.
Serena: Okay.
Serena: Yes.
Serena: Thanks for that.
Serena: [noise] Domino.
Serena: [noise].
Okay.
Serena: Yes.
Serena: Okay.
Serena: [music] announcement.
Okay.
Serena: Yes.
Serena: Okay.
Serena: No.
Serena: [noise].
[noise] [noise].
Serena: Thank you.
Serena: Okay.
Serena: Okay.
Serena: Great.
Serena: Sure usage to quintuple diesel ahead as a phone, let's say guys very happy. This is an important achievement and first are reinforcing our culture experiencing the store every day makes a huge difference integration with all departments and we were able to reduce our <unk>.
Serena: R&D costs.
Serena: Now are more real life scenario whenever subway station with a bunch of people that we have put up a store that supply shape in a region that doesn't have a store like this with just one are you more of a corner away from shopping D day, which is very strong with a house items and appliances.
Serena: As such the shopping mall for.
Serena: Her house appliances in.
Speaker Change: Applications and you can see tomorrow, we're going to open up the store and we're going to light up the whole store, it's going to be a really beautiful reference yaron them at all Biogen out began as a big highway and at crossing through the city.
Speaker Change: Thank you so much and auto and our first question comes from bad to do at Bradesco. Pedro You May proceed. Please.
Speaker Change: Okay.
Speaker Change: Pedro can you yes.
Speaker Change: So a pivotal.
So instead, we'll pass up there and you say well move onto Danny. Please ask you to take the first one sure. Good afternoon, everyone. Thanks for the results and thanks for taking my question.
Speaker Change: We have two mainland laying out or at.
Speaker Change: I'll leave some questions to my colleagues.
Speaker Change: The first one is about the working capital dynamics that calls our attention of all the gains you guys had in dealing with the suppliers line I remember you guys always talk about some opportunities and even a distribution model I'll I don't know if it was connected to the full cross you mentioned in the release, but it'd be great. If you could first XP.
Speaker Change: Lane a bit of this movement.
Speaker Change: Movement in the quarter and how we can consider this looking up ahead, if there's some strategic drivers that could make this change a bag.
Speaker Change: And then my second question is about profitability coming out of a U S had significant improvements.
From the grass at profits and also the EBITDA and so for us in the grass.
Speaker Change: Line it'll be important to understand if you see you'll see a lot of space Revolution.
Speaker Change: And then first of all <unk> G month, while the things we wanted to mention.
Speaker Change: My level gigabit ethanol also what is more like a natural operational leverage.
Speaker Change: Here's a dusky muscles are coming from a growth of the AR.
Speaker Change: Revenues above are the expense lines.
Speaker Change: Thanks for the questions and first of all talk about the working capital. So just to give you some context when we arrived the first English.
Speaker Change: We wanted to really adjust variable model on the management of the company focusing on.
Speaker Change: <unk>.
Speaker Change: The net margins at the net income so when we see that it's close to D. A profit after income taxes reality.
Considering the working capital optimization and that consumes the working capital.
Which is in the account for each of the body. So and of course see acceleration demonstrates his job a big opportunity in capital working capital management from now on the retail.
Speaker Change: And the disciplined debating calculate how much working capital are going to consume in each category at the moment, we were accelerating a.
Speaker Change: Certain category and then you have to step on this on the brakes, because maybe the costs are too high.
And he didn't get a gain additional margin, but then maybe useful more but there's some he's the only see after they die outright. So maybe there's still opportunities for improvement Ryan in the management of the working capital and so yes. There are some improvements that have already been captured in 24 part of has come from the new supplying the buyer models lever the <unk>.
Speaker Change: Help us with this growth cycle severe pain.
Speaker Change: Pain. After this it's really how the working capital and there's also a aspect that's related to the mix change.
Speaker Change: When we prioritized as a net proxy this buyers that have a higher.
Speaker Change: Payment term really ended up growing more and in practical terms the new suppliers.
Speaker Change: That are arriving are also more aggressive with payment terms and they're the ones that most grow so the market also helps us to extend this rides MVC. This there was no major change in the payment terms.
And it's just a change in the makeup and the products that were allocated.
Speaker Change: And a different supply modality to a really ended up contributing to this which is unfortunate for the company there's still space during the year of training five we continued to see the macro scenario.
And.
Speaker Change: Everything has been everyone has to take on a very disciplined approach with the abnormal that sort of thing.
Speaker Change: Cellular pizza there how about the growth plan and so because you need to have a bit more flexibility to accommodate this and considering our scale, we provide more opportunities to those that can help us also with the working capital.
Speaker Change: So that also generates important benefits I wish you can paint G and capture and training five I don't see any changes in the short term.
Speaker Change: That would be that significant there's a bit of seasonality in the quarter and the payment terms are higher then Andre 90 days whatever you buy for a black Friday, you're just going to pay in the first quarter.
Speaker Change: So that also contributes as Jim making the fourth quarter. The best quarter. We have is this seasonality adjustment in every quarter.
Speaker Change: But.
Speaker Change: So the second question about profitability Boeing first talk about the gross margins in the quarter.
Speaker Change: They have an impact, but well we joke about here.
Speaker Change: Is that are we have almost a 11 november's year within it causes buyer. So we're bringing in different initiatives every month.
Speaker Change: Yes, so much of himself and so we want to really differentiate ourselves.
Speaker Change: And attract customers.
Speaker Change: As much as we can.
So the entire month trying to bring in new options and so the margins in the fourth quarter.
Speaker Change: Has some impacts of course, you can increase the margins.
And that also.
Speaker Change: Increases of penetration and buy now pay later and that impacted the service penetration in the commercial margin, it's kind of difficult to be able to achieve is right. But then sometimes you have discount than before this penetration of the buyer out there that are in services is really what's going to help us to gradually increase.
Speaker Change: Our gross margins on branded retail media and its also a service that contributes quite a bit in the gross margins as a company in G&A, we still have opportunities.
I think we had.
Speaker Change: <unk> had a stronger movement in this direction, but when we look at the indirect contracts logistical efficiency, there's a lot to be done and the challenges inflation is higher than what we expected.
Speaker Change: So theres some lines wherever even delivering what was planned.
Speaker Change: They end up kind of a.
Speaker Change: Make any inflation Knowles, so to optimize the G&A, even more it's going to be a little more incremental buy needs to happen.
Speaker Change: And so the biggest gain will come from the dilution of this journey, considering he our operational leverage and considering the growth, especially physical stores, which is where everybody capture the operational leverage and that's why we're looking at about 2025 excellent very clear. Thank you so much.
Danny: Well, let me just to add on here Danny.
Speaker Change: I want to reinforce the point here, which is huge.
Speaker Change: We didn't have a change in the terms of Apple pay in the payment terms with suppliers as well, but what happened is all of the purchases of Black Friday Christmas and the January special sale. The Hana mentioned led to we had a peak with bought more and we're going to pay that off in the first quarter. When you see the amount of days.
Speaker Change: And we see.
Speaker Change: This is a mathematical issue we understand when we placed the day, it's considering the gym be and sales in 12.
Months.
Speaker Change: So since we grew the sales in the last Ah.
Six months, there's an effect of.
Speaker Change: Of days that it becomes a little more distorted.
Speaker Change: But we'll see that in the amount of days there wasn't a big modification without it but we didn't want to change the methodology in between.
Speaker Change: So we left it is as it was but just trying to give you a bit of context here.
Speaker Change: Since there didn't seem to be a big modification in the terms great very good very clear.
Speaker Change: Great. Thank you Danny Thank you know Eric now from something there we can move on what somebody got it.
Speaker Change: So thanks, guys for taking our question and I said, we have two points firstly on the buy now pay later, we've seen it advance of law school and I wanted to understand a bit more from the digital perspective, what you see as the potential for penetration that seems to have been growing quarter over quarter. So why do you guys see as.
Speaker Change: <unk> and EM still in the buy now pay later.
Speaker Change: Were you guys imagine, where we'll start seeing a bit of his effects when.
When it comes to diluting the funding costs.
Speaker Change: So then moving on to the second question here.
Speaker Change: When you consider the share shifts you demonstrated the chair data.
Speaker Change: In January and there's relevant gain beautiful conveyed at GE.
Speaker Change: Claiming X system and will help US do you guys think that you are having more regional competitors as a more generalized.
Speaker Change:
Speaker Change: You got it.
Speaker Change: And just to give us a little more color in the sense. It was an okay job. So the first question. The buy now pay later in digital form is just like the e-commerce penetration of our products now are not solved by mid April.
That tends to grow proportionately.
Speaker Change: Moving to slide six.
Speaker Change: So we can go from 5% to 9% because the base stay small of course, it seems more difficult to have the penetration of the physical store and the biomarker later not because of the house, but it is an interesting point when we look at the profitability of our buy now pay later and digital delinquencies are the same as physical there.
Speaker Change: Anti fraud tools.
Speaker Change: Actually some evolution in the mathematical models, we apply and our knowledge about the customers well, which allowed us have the same delinquency rate, but in digital we have a smaller average ticket because you have more products with a lower average ticket and a a much.
Speaker Change: Smaller average term with this the profitability with the allocation of the same capital becomes smaller so today, we don't have capital.
Speaker Change: I'd just leave it says more ganic approach and this is growing organically and so when we organize things and have a healthier operation will be able to accelerate just a bit more and it could be that this will reach may be high teens penetration batch that will take a while I'm not seeing this in the short term because the main allocation for the company.
Speaker Change: Is better in physical stores and furniture and white.
Speaker Change: Whiteline appliances.
Speaker Change: So furniture's very strong physical stores, and that's where we have the most margin. So when you consider the capital allocation it tends to grow a little slower.
But the.
Speaker Change: The growth is pretty big in the basically small, but when you get into the second point about the market share we don't see share from the others are what we hear from industry is that causes buyers actually recovering the share that they've always had and during a few years, we focused a lot of digital and we lost a bit of share in the physical stores, but when you consider top of mind.
Speaker Change: Food service, we see that our brand is very strong and bigger than our shares. So that's why it was actually quicker than what we imagined to have this share recovery in the physical stores and that's being very strong.
Speaker Change: I believe that from a competitive advantage point, we take more share from regional players then.
Speaker Change: So going from big players because our.
Speaker Change: Competition in the physical store market is very fragmented with a lot of regional players and it tends to be a if you look at my thesis and the midterm, we should have probably inorganic consolidation with big players are merging.
Speaker Change: To have more logistics credit solutions and they tend to gain the market gradually just says occurs in other industries as well.
Speaker Change: Okay, great perfect. Thank you.
Speaker Change: <unk>.
Speaker Change: Duals. So thank you Eric I wanted to call tallies from sovereign.
Nobody was unlimited and the room, yes Ann.
Speaker Change: Well bank synapse. Thank you I'll Sue just a quick question about the demand and how you look.
Speaker Change: Look at the demand for electronics in the beginning of the year. If you could give us some details about the main despite comfortable he is in categories such as white.
The white line electronics and cell phones et cetera.
Speaker Change: Well, what we've seen as demand Ah thanks valleys with Counterparties.
Speaker Change: We brought in this market from the fourth quarter, it's been a little stronger with Jones.
Speaker Change: Especially with the White line above what was expected by us whether distributor and closer towards the industry expected. So in the first quarter, we see the reality, but I went back a bit were growing in the white line.
Speaker Change: But we're growing one digital one did you instead of two digits. So we've been dropping the growth in the white line than in the other categories.
Speaker Change: So as the markets a little more tasks.
So when we look at the plan, we had for 25 and we're delivering them with revenue and the sales that was listed in the pond, but we have more share than what we expected in the plan so that damages to the market is smaller.
Speaker Change: And what was in the plan.
Speaker Change: And the online with us as a we see this at that.
Speaker Change: In the <unk>.
Speaker Change: <unk>, which we should be able to see this you have to wait for the closing of the months of it is closer in January and February.
Speaker Change: We can see the market being a little tougher the perspective in industries that will have a tougher market. This year I think.
Speaker Change: We are more and more convinced.
Speaker Change: <unk> decision.
Speaker Change: With the task with toughening. It happened the reorganization of the company was so important to make things prepared for the scenario we have a pad.
Speaker Change: That's been quite a bit.
Irma: Very clear. Thank you so much Todd is great. Thank you tallies now our next question is from Irma <unk> Goldman Sachs morphological Seagate Irma we can proceed.
Speaker Change: Okay.
Speaker Change: Yes.
Felipe: We will buy so Philipp you Harsha, Jean Luc I'm, sorry, it it'll be Felipe has shed.
Felipe: Replacing air Mummy high there and I think we had some issue with Irma assume well.
Speaker Change: Anyway, good afternoon, guys and thanks for taking my question.
I wanted to ask you about the same store sales in the physical stores alsbury strong and I want to understand what dynamics are.
Speaker Change: Of course, you have the internal dynamics with the optimization of the store base et cetera, but I wanted to understand it.
Speaker Change: Or get a bit more of what could be an external factor competitive elements that may be impacted things in this dynamic market and anything you guys can talk about in regards to the outlook for 25 would.
Speaker Change: It would be great. Thank you very much.
Speaker Change: Hey, guys.
Speaker Change: Thank you.
Speaker Change: So please <unk>.
Speaker Change: Three things that helped us grow in the physical stores.
Speaker Change: Beautiful.
Speaker Change: With all of you.
Speaker Change: This is about the structural context, a bit before some of.
Speaker Change: The company has always been a very strong brand and the strategy of being the only national player is.
Speaker Change: Really considering us as the main lever for the suppliers. So we reinforced the relationship with suppliers out of home appliances, and electronics and so we're very close.
Speaker Change: And so with the product in the store.
Speaker Change: From a macro perspective, we really see this a challenging environment.
Speaker Change: And we'll be sure to political Nebraska, when we see the capital market really look at this most of the population actually impact.
Speaker Change: The consumption, which is.
Speaker Change: Jobs and income right jobs that income really continue to be consistent with incentives for liquidity and.
Speaker Change: With these consolidations.
Speaker Change: And that's really been levering this growth in the physical store, partially but.
Speaker Change: And so.
Speaker Change: That comes mainly from the buy now pay later and causes buy a card. So both of these levers relief.
Speaker Change: The strength in our growth and that's why we grow more with the white line.
Speaker Change: Appliances, and probable and furniture.
Speaker Change: Oh for cell phones, we had this issue with fraud.
Speaker Change: Cause customers, sometimes use this to perform alone and so we had some challenges with this with the card it's easier because you don't have delinquency reservoirs, but we were able to work on some solutions and we've been able to grow with credit in cell phones and without Uh huh.
Speaker Change: Hindering delinquency, so that helps us to grow if we were to summarize the alliance with the suppliers and the strategy of being a player that's focused on this category.
Speaker Change: And at a macro environmental so despite being bad for.
Speaker Change: For consumers is a considered view they have jobs and income Andy credit solutions involved that we have here. It's important dimension that credit is a it actually we increased the average rate, we charge, where nuomi charging almost 95% a month, but we filter things that even.
Speaker Change: Moreover, more selective in the rating, but we're still growing and there will be room for even more growth so but.
Speaker Change: But if we accelerate this too much theres going to be a major consumption and the working capital. So we have to do this gradually but there is space to have a consistent cycle.
Speaker Change: Of a midterm growth in our portfolio for the mine operator, great. Thank you guys.
Philippe: Thank you so much Philippe.
Speaker Change: CDP.
Speaker Change: Great. Thank you Felipe and now we're gonna call Gustavo Vaccinia from Bank of America.
Speaker Change: These Gestapo.
Patrik: But this also debating what Patrik hi, guys. Good afternoon, thanks for taking our question.
Patrik: We wanted to approach them about each of those in Iowa, We wanted to discuss the labor provisions, which was something.
Patrik: That dropped a lot year over year and I.
Patrik: I think you guys, even expected a bit more.
Patrik: The details on this but.
Patrik: But when you take a look at this it seems like there.
Patrik: So a big amount, that's provisioned and there's a big amount that you've been greater that is not provisioned and we know that this is a topic that not only affected us but there's many other companies that also have the same topic and obviously you guys have the controls are about what's not provision and what is provision, but I wanted to understand what.
Patrik: Ben the issue and these are big amounts you know so how has this taken place.
Patrik: When we consider this recognition between well.
Patrik: What's going to be provisioned, what's not going to be provisioned.
With regards to goodwill.
Gustavo: Well thanks for the question Gustavo.
Gustavo: Gustavo for Labor claims, we are really confident about our models and the evolution, we've been very careful with.
Gustavo: This and importance with regards to Paris to possible surprises that could appear I don't want to deliver anything beyond what it can deliver better.
Gustavo: This really indicates that it is a lot greater so when we look at the legacy we see that really influence things a lot. So.
Gustavo: We're paying a one and a half billion in each processing costs.
Cost us more than 300, so we're talking about maybe two or three years ago and this process was already coming into ticket up 35 mm and so since.
Gustavo: Since there was a lot of fragile aspect are.
Gustavo: We were losing about 80 or 90% of the processes now we're gaining almost 90% we're winning almost 90%. So that's advancing and that has really allowed us to have the evolution and the numbers you're seeing so when we look at this the inflow of lawsuits is lot lower than what we had expected. So we had a lot of.
Gustavo: We had over 13000.
People in total, but the inflows Joe low, but theres timing right. So let's say we have all the provisions capex will be and when we perform the analysis, we call companies to discuss this and consulting firms.
Gustavo: And we bring in AI et cetera, and there's people that even think that they are excess of provisions where they know there's never been access its provision, especially in this country ran right zone to be very transparent here, we're comfortable with the numbers, we see and my expectation is to try to anticipate the gains.
Gustavo: So we had the spine or brain, a 2024 to one level and reached 26.
Gustavo: Well at the end of 'twenty, six we would be more comparable with what things should be but theres a possibility even of this may be anticipating itself and being quicker because it will bring in a benefit to the cash flow it'll help us start directing their cost of capital on the structure of it when you look at the monetization of a tax N.
Gustavo: Credit basically like one pays off the other but now we can generate cash so we paid less labor claims. So there is again when we look at 25. This game becomes even more relevant so I will probably haven't have monetization at the same pace and then labor will be lower than 24, if you look at the fourth quarter and annualize that.
Gustavo: So.
Gustavo: There's an important gains in the cash flow that will come from this but we're very confident and.
Gustavo: Not sure if else he wants to add anything.
Gustavo: But just dimension and this is one of the topics that's fundamental.
Gustavo: M. A digital model, we didn't change it is with.
Gustavo: With any provision methodology.
Gustavo: As you can mention ever since the events of the relevant facts we've seen.
Gustavo: Rigorous discipline validated buyer audits and during this period, we've seen this actually been reviewed by three of our four other consulting firms. So we really keep a more conservative approach with the same methodology.
Gustavo: To provision this and so I think this has been very consolidated and we continue to work on this now what happens is really the legacy issue and things like that.
Gustavo: Okay.
Gustavo: A more robust stance you've been planes the classing as well great. Thank you hang up and also thank you so much doubtful.
Gustavo: Thanks, Gustavo filled up our next question Gabriel from BTG brought us in and writing if to your question set up in a house here. The first one is when you look at the performance that comes from E Commerce and the perspective for normalization.
Gustavo: One b and the second is.
Gustavo: When we look at the long term, what's your expectation of the.
Gustavo: Company when you have this breakdown between the B and the online channel as well.
Gustavo: How do we see this in the long term.
Gustavo: We'll go to the moment as I said the first.
Gustavo: First question the normalization of won't be everything it's correlated here to the second question.
Gustavo: And our commitment and one P. A.
Gustavo: It's complimentary right it's important for the commercial scale is important.
Gustavo: For the volume of we have with suppliers, but if its not profitable we won't have one P. So I'm being very transparent here and I see a challenge.
Gustavo: She had the growth in one P online and without the evolution of the penetration of the buy now pay later and so this is all help me grow in the one P. Online is about alpine data that can help explain this grow a little more and be stronger and with this weekend.
Gustavo: At present, some growth as well so with the market as it is we don't need to have is concerned right now, but if we look at this up ahead, obviously disappoint here the first quarter of 'twenty to be had more volume.
Gustavo: From noncore categories, when you get into the first quarter of 2024.
Gustavo: The volumes a lot lower but we start this.
Having this comparison, that's better to look at and at the relative perspective, you'll see a base improvement.
Gustavo: When you look up ahead I see the company, having a bit of gains in the e-commerce penetration.
Gustavo: The penetration of E Commerce in Brazil is 14%, but when you look at home appliances, it's already 50%.
Gustavo: So we actually thought it could be seasonality because it was around 40, some but it grew definitely January kept up in February as well. So e-commerce for the for home appliances reached 50%, which is like what we see in the U S and Europe, China has more it's like 60 or so but it's also not that different but when you look at the forecasts.
Gustavo: For the growth of e-commerce, and preserve bathroom fortunate to 'twenty because of the increase in penetration and other categories right. When you look at toys food clothing beauty products everything grows a lot so.
Gustavo: It grew maybe a 100%, but if it was nothing and it became a little bigger right, but if you look at the business you'll see this e-commerce growth of 20, 25%.
Gustavo: But it's not what we see in home apart and home appliances electronics, though when you look at our company in the midterm.
Gustavo: It's about six year 40.
Gustavo: 60, 40, but when you look at the expansion cycle will prioritize physical stores.
Gustavo: Which is where I have more profitability and so E. Commerce is important a general scale, we're not giving up on this.
Gustavo: But as long as this profitability and I think there are still some players exploring our categories maybe in the wrong manner, because it's not a consistent thing.
Gustavo: Without profitability et cetera, but I don't believe in the sustainability of businesses that are not profitable so.
Gustavo: This comes in at the moment it'll go back but.
Gustavo: We have to be disciplined if we need to take our fee of the accelerator, we will but when things are doing well, we can be more present interactive itself.
Gustavo: I think a 60 40 ratio, let's say.
Gustavo: Is also valid and our priority is the physical sales channel.
Gustavo: Great. Thank you so much about is.
Speaker Change: Any other questions. Yeah now we have a question from Andrew at Morgan Stanley Andrea You May proceed.
Andrew: Hi, Thanks. Thanks for the question most have been answered I guess I'm just curious how youre thinking about the Capex budget for 2025, there's been a couple of years of reduction are there areas. This year, where you're potentially see room to cut more looking to spend more and you mentioned with a focus on stores I'm curious how the potential.
Andrew: For new store growth features into the outlook, whether that's 25 or about yours. Thanks again.
Andrew: Well, thank you, Andrew our western or can see youre looking at.
Andrew: You were on the soup transmission work.
Andrew: So when we talk about the Capex, if we we expect pretty much the same level of capex. So.
Andrew: Yes, we do have a capex, it's a little bigger for stores. This year, but this is for refurbishing stores not opening new stores the opening stores have been taking.
Andrew: Taking place with support from industry. So we use retail media, which is what has helped us to.
Andrew: You open up new stores without consuming our capex in the company so.
Andrew: We have very kind of a story of our flagship it here at the headquarters as well at a carnival was the refurbishing and all at 60% growth with just 20% more on the average price was the big gain for the whole ecosystem will have more mega stores, but it's not going to impact our capex, we do have capex for refurbishing work.
Andrew: For the projects that are maybe.
Andrew: Jeff less intense, let's say than the big Mega stores like Eddie can Dover, but that do bring gain improvements in the purchasing experience in revenue and margins for some stores, though perhaps did a small refurbishing works that has been not too much cash, but one thing I also noticed is that the more sort of capex as norm.
Andrew: Is more effective because you can guarantee that the priority projects are delivered when he tried to do too much in the efficiency of the invested capital was also lower so we evolved a lot with that and our technology processes. When we really look at the governance and the management of each process somethings that would generate some hiccups or fragility.
Andrew: We were able to solve we were able to address a lot.
Andrew: <unk> and logistics also with W. M S working well, which is going to optimize a lot of the capital invested in logistics. So maybe 400 million rise a bit higher or lower is going to be a level. That's about adequate for the for this company without going Crazy if interest rates go way down of course will take advantage to do a little more but that's not the reality at the moment.
Speaker Change: Very clear thanks for Adam. Thank you very much thank you and Joe.
And optimal long term was much better go into vintage of Buffalo with no. Other questions. So before passing the word back to you and I. Thank everyone for their presence, thank our audience and I'll pass the part D. You have somebody gotcha. Thank you Gabriel. Thank you everyone for participating today I think as we mentioned at January demonstrated a market share that was very strong and there.
Speaker Change: As new facts with the engagement of everyone really reaching all time highs we've been gaining the great place to work all time burglar and engagements also very high.
Speaker Change: We created a more efficient model with these tools to facilitate the sales that we're getting 37% productivity and we'll have another 20% this year.
Speaker Change: And we're going to really see.
Speaker Change: A conclusion of this.
Speaker Change: And really we write this benchmark profitability and we want to thank everyone for their trust. We have a lot of work, let's continue with our financial discipline a lot of discipline in capital allocation. So that we can gradually improve and get to the other point with the possibility of discussing EMR are intense expansion cycle. Thank you so much everyone.
Speaker Change: Good afternoon.
Speaker Change: Thank you bye bye and can get to know our flagship store.
Speaker Change: Take care.