Good morning, all. Welcome to Alpargatas video conference to communicate its earnings release Q4 2022. This video conference is being recorded and simultaneously translated into English. The Q&A is going to be made this way. After the usual presentation, we ask you all who want to ask a question, raise your hand in the Zoom bar tool and then wait until you are given permission to ask your question. Before we start, I would like to clarify that the forward-looking statements that may be made during this video conference relating to Alpargatas business prospects, projections and operating financial targets are beliefs and premises of the company's board being made with based on information that is currently available, not constituting or guaranteeing that such forward-looking statements will become material. I turn to Roberto Funari, our CEO, who will start this video conference. , please you can get started.
Good morning, everyone. I hope you are well. Today in this conference, I have with me Rafael Grimaldi, who is going to be presenting with me. I have the authorization of Juliano Garrido, that he cannot be with us today because he is undergoing a current issue of illness in his family, and he couldn't be here today. Since we are in this period of handover, he will be available after this conference call in case you have any interests in asking him any specific questions. Today, I'm going to be here with Rafael Grimaldi, and we are going to be approaching all the subjects related to the results of the company. I will start by Alpargatas results. The consolidated result first, where we reached a BRL 4.2 billion net revenue, which is a growth of about 6%.
Our recurring EBITDA of BRL 689 million gives us EBITDA margin of 16.5%, which retracted 2.8 percentage points compared to 2021. We have a net income continued operations of BRL 184 million. Behind this consolidated results, our Havaianas brand saw a volume decrease of 5% in the year. A constant currency net revenue with a growth of 9%, so BMU Brazil and international markets included. We finished the year with Rothy's, which we have a 49% stake with a 26% increase in the net revenue. Clearly, our performance was somehow disappointing. It doesn't reflect the potential of our business and the quality of our team. This low performance resulted in results, financial results, which were below expectations for the 2022 year.
I would like to reinforce that we have identified the main factors that contributed to these negative effects on results. That's important because further on, I'm going to be talking to you also about our action plan to make sure that these restraining factors are worked on and that we can drive gradual, sustainable recovery towards our full potential. I also want to reinforce that our thesis does not change. Our model of creation of value is based on creating volume, generating volume, and expanding our margins. I also want to reinforce with you that we are implementing right now a program which focuses on efficiency and simplification of the company. Yes, we are addressing our costs basis, but we also keep focused on growth. Our thesis for growth is growth or the expansion of margins.
We reinforce that this thesis can be materialized in the mid and long terms. The number one restraining factor is a retraction of 15 million pairs sold in Brazil. We are going to go into more details into these why we sold minus 15 million pairs, but this is a retraction in our sell-out and sell-through numbers. You know, our business model is sell-out and sell-through. Our revenue is a reflection on our selling that is generated on our sell-out and sell-through numbers, which where 70% of our volume is still in our indirect channels. If you consider all the channels, our sell-out only decreased 2%. If we only look at the indirect channel or which we call grocery channel, we went down 4%. That's a very important point to raise.
Our main issue is with the grocery channel, where we saw this very steep decrease. We are going to be talking more about this today. It's also important to reinforce that we started the year seeing a growth of the sell-in and sell-through growth. We started the year last year with a restriction in our manufacturing capacities. The turnaround happens mainly in the second half of the year, mainly in the third quarter, and still the fourth quarter still sees a decrease, trend of decrease, which was smaller than the third quarter, but it's still decreasing. To give you an idea, the second half in the grocery channel in 2022, we had a 8% decrease in the sell-out numbers. We are going to give you in a little bit more detail what the action plan is to address this main issue.
To transform it into a factor to resume growth. This effect of 15 million pairs sold, it starts to offer us a path for correction. We have a long chain, and we have some time before we can react and see the results appear. We are reacting right now, and it will take a bit to get there, so these numbers can be seen. The second restraining factor was the impact on the cost of products sold on the COGS. As you remember, since the third quarter of last year, there was an expressive growth in the cost of our raw materials, which was about 40%. We took several actions to mitigate and reduce this effect of the raw material inflation. With the loss in the volume in the fourth quarter, we started to have a sort of unleveraging.
We had a year with two distinct halves. The first half, we needed to attack the issue of the raw material cost inflation, and we did that. In fact, we finished the year already with a positive adjustment in prices. However, we saw a problem with the leveraging. The increase of the COGS was of BRL 1.32 per pair in the year. What is the most important thing to emphasize is that part of this impact is related to the additional costs we had because of the reduction of volumes. We are going to address this today a little bit later. In Brazil, specifically, if we subtracted this impact of losing the leverage of volume.
In addition to the effects of the external pressures that we had because we had to hire other distribution centers to hold all of this inventory not sold. This considered those external factors, our margins grew aligned to what we expected. However, we were affected by this loss of volume numbers. The third restraining factor was a retraction of 1 million pairs in the US. Of course, it is not a very high number compared to the 15 million in Brazil, but there was an effect in our bottom line, our EBITDA. I'm also going to update you on this concerning this subject. As I said, we always have this perspective that in the high season in 2023, we're going to see recovery in the US.
The fourth restraining factor, and which affected our adjustment in the selling volume, was the consumption of operational of working capital before CapEx. We tried to accommodate this effect, but especially in the second half of the year, this made us have a negative impact of BRL 327 million in our cash flow. I want to make it clear that we have identified 4 factors which are being addressed. As such, we can focus on a gradual recovery of our business. It's also important to notice that we had advancements in terms of our restructure in 2022. The main and foremost is our market participation in our key markets, Brazil, Europe, where we grew our market share. In Brazil, we already have a very strong market share, and we still grew 1.2 percentage points.
We also grew double-digit in sell-out in Europe and countries in the Southeastern countries in Asia. Obviously, this double-digit reflecting high market share. This is a very important reflection of the health of the business. Secondly, this is very important for our thesis of mid and long-term growth thesis. The increase of our capacity, manufacturing and logistics capacity. We saw an advancement in our on time in full indicator, which means our service levels. We saw an advancement of 12.5 percentage points, both in the channels and in the regions. Compared to 2021. Obviously, this new logistics center, our Mixing Center, our newest Mixing Center reduced our lead times and ensured us to give efficiency, especially for the specialized channels in Brazil and international ones.
We expect to see more advancements in this indicator, which is very important for our business. The Mixing Center is also going to help us to reduce this impact of the external distribution centers hired. Having said that, this is something that is going to help us to handle these extra expenses. The second positive point was an increase in our manufacturing capacity. We saw a 7% increase in our capacity to produce pairs in the year, especially in the main lines of the products. We already grew 82% of the capacity of production for our Havaianas Brazil. This is happening to specific lines of products that offer a support to give a better mixing of products to the market. We are increasing the capacity of our logistics, supply chain, and manufacturing, which will support our recovery in 2023.
In addition to that, we had important advancements in our digital transformation. The highlight in our priority for our digital transformation is in our D2C or direct-to-consumer channel. We saw an expressive growth of our e-commerce in Brazil. I would like to highlight a 24% increase in Brazil and also an increase of the omni sales growing exponentially, and important growth in the U.S. The growth in the U.S. in the second half, if you remember, we implemented the same havaianas.com we have in Brazil. We rolled it out in the U.S. and in Europe. This generated a lever and a change in the trend. In the second half, we grew over 50% in the U.S., and in the fourth quarter, over 70%. We are advancing in our CRM. Our CRM is advancing the same proportion.
This data is also very important for the strategies of channels. That is also applicable for our B2B channels and also for our negotiations with Amazon. That's a very important transformation, digital transformation. It's a continuous and gradual work that will bring benefits as this becomes more relevant. Our D2C channels are more representative in the international markets, and this is a direct driver of the pillars of growth. In addition to that, it's very important to reinforce that this is connected to our brand strength. We made an important advancement to our portfolio, both in Brazil and internationally speaking. We have a richer mix of products and more oriented to our positioning of the brand as a fashion brand. This mix effect is of 3 percentile points in Brazil, which is a very important mix indicator.
We also have this mix improvement in our sell-out and sell-through figures. There is no difference between our mix sell-in and the mix sell-out. Quite the opposite. We actually see an opportunity of offering a richer sell-out mix, which should happen gradually. This contributed in addition to the price adjustments and should continue to contribute so we can evolve even further in our revenue per pair that grew in 2022 overall. That Both was our sustainability pillar. This meeting is being recorded. Not only by releasing our investor relations strategy and our sustainability report, which was released last year, but also because of our project Re-ciclo, which is affecting positively our brand's health. Finally, we have Rothy's here. We have been present there since May. We are already participating since March last year in the company.
In this new management cycle, we see a recovery of growth of 26% in the net revenue in 2022, and a path to profitability, which is in line with our conversations with Rothy's, our Rothy's partners. I'm going to come back to that in a moment. Talking about the plan, the action plan to address the restraining factors. As I told you, the third and fourth quarters somehow were disappointing, and the fourth quarter had a disappointing and had an impact in the overall year results. Still, we reached a net revenue of BRL 1.1 billion. It's superior to any other numbers we have ever had in our history, but it is still below expectation. We want to generate more value, and we will focus our actions on that.
We had a recurring EBITDA of BRL 153 million and a net loss of BRL -21 million. Havaianas grew 3% in net revenue, we had a 5% growth of current recurring currency. We got BRL 147 million of recurring EBITDA and BRL 81 million of recurring net profit. As for the Rothy's, we can already see a path to profitability that starts to delineate in the horizon and show us the opportunities to have growth of Rothy's and expand the margins as well. The EBITDA was of $ -3 million and a net loss of $4 million. Advancing to Havaianas, Brazil.
Now speaking of the different geographies of the Havaianas operations, This is a very important slide to show you and talk more, talk deeper about the challenge we see here and address the sell-out decrease we saw, which is the number one factor to recover our business. We had a fourth quarter with a decrease of minus 12% in the volume and an increase of net revenue in 2%. A very healthy relation in our mix price of 14%. We had, again, market share gain in the grocery channel. Remember, it's the biggest season we have, so we grew 77% in volume. Excuse me. We held a volume of 77% in this grocery channel. We grew 1% to a point in market share from 81% to 82%.
That's a very important indicator to us. We are having a trade-off between value and volume here. What happened about the select, which was one restraining factor for our results? I want to take some time in this call to explain that. As I said, we started out the year with some restrictions in our manufacturing capacities and positive sell-outs and sell-through, where we saw some economical uncertainty, but good signs of sell-outs and sell-through. We saw a positive trend there at that moment. Obviously, our main constraint was the increasing inflation of the raw material prices. We finished the first quarter last year. That's an important number which we did not release because it indicated a positive trend. It's important to explain to you what happened, this is why we're showing you right now.
In the first quarter, we had sell-outs and sell-through of 5% increase. In the grocery channel, the same. In the second quarter and on, we start to see a difference between the grocery channel and the other channels. While the other channels showed growth, even though it was below the first quarter, it was still positive. The grocery channel saw a 5% decrease in volume in the second quarter. In the third quarter, it was the worst quarter in the year, which have had very bad results in September. We saw a 7% decrease in volume. In the grocery channel, we saw a minus 11% decrease in the volume. We created an aggressive reaction. You saw in our investments, quickly responding, trying to resume the growth in sell-out and sell-through.
This very steep decrease in sell out and sell through requires adjustment. This doesn't happen overnight. We implemented those actions, mitigated as best as we could in the third quarter, generating these a little bit better results in the fourth quarter. This -11% decrease in the grocery channel was still a decrease, but of 6% in the fourth quarter. In the other channels, we saw a better recovery. Why is that important to be mentioned? Because in this grocery channel, where is our indirect chain of distributors and all the supermarkets that we sell through them, they have inventory. When the sellout goes down, this coverage of inventory, which is calculated in days, grows, even though we are monitoring volume and avoiding this volume to grow in the inventory of the retail.
The fundamental mission here is to reverse this trend of decrease in the sell-out and sell-through, and that's what we have been doing since the third quarter by making investments. We started in 2020, 2023 with even more investments in distribution and point of sale, as well as in advertising. We are going to have historically the highest investment amount in the first quarter of 2023, where we'll be aiming to accelerate our sell-in and sell-out. This is something that takes some time to kick off because we have all the indirect chain to go through. That's an important movement, because when we see a decrease in the sell-out and sell-through, we have a rebound effect when we see the same for the growth of the sell-in and sell-out.
We're still in the moment of a recovery. It is not going to be a leap from the previous moment to now, but we are following up close this trend of recovery. Specifically and mainly in the grocery channel, since in the other channels we have a positive growth trend in volume. We expect that 8%-9% growth in the specialized channels. Specialized footwear stores and also in our D2C, which also shows a very positive trend. Okay, I'm going to talk about the international markets now. In the international markets, we had a fourth quarter. Reminding you that in the third quarter in EMEA, it's a low third quarter. It's not an important third quarter, just as the U.S. Still, we grew 7% in volume. Our net revenue in constant currency grew 19%.
We'd like to remind you of the RGM actions that we took last year. The international market is in a previous phase that we have already been through here in Brazil. EMEA saw closing volume close to double digit and increase of 20% in constant currency. The other market is of distributor markets grew double digit. Here we saw two different dynamics, two different movements. In Latin America, we saw very large growth. In some of the distributor markets, we had a sell-out, positive sell-out because of the recovery of the tourism. In Asia, for example, this is very important, and we expected this to grow again in 2023. We also had rupture in the supply chain for Asia.
We have a very positive outlook for this year for the recovery of the tourism in Asia. In the U.S., we still are in negative numbers. Still, it's important to remember it's a low season. I would like to reinforce the growth of our havaianas.com, which saw a increase of 70%. Quick update in the U.S., we are attacking. It's not a new strategy exactly, but inside our focus and prioritization, we are going to capitalize on the strength of our brand, a brand that is focused on fashion. All the surveys and studies confirm that our brand has a fashion appeal in the U.S. We ran very important benchmark studies in the U.S. We studied other brands that saw a recovery in growth through a positioning, fashion positioning of their brands.
We are making important movements that we're going to focus on digital first, which goes through different channels. The havaianas.com, which becomes the center, the core of our D2C and marketplaces. Amazon, which is the most important, but not only. We're also opening fashion marketplaces at Amazon. Our movement, which is ongoing right now, is already moving into the 3P model. It's a sales model where we control inventory, we control portfolio, we control the price points, and at the same time, we focus on the FBA. We start to gain priority in the Prime and also mitigate the numbers of unauthorized sellers at Amazon. It's a process to have this migration completed. We are fighting against time, so we can be there in the high season at a better position and better positioned.
This is something that is ongoing. What's important to say that the marketplace, Amazon, it starts to be, with this new model, a great generator for traffic for our havaianas.com that will impact our CRM that is growing the same growth numbers as our havaianas.com. With more data, we can use this data to what we are calling commercial renovation in our B2B. What we see in the U.S. retail landscape is that increasingly more the independent fashion stores, they search for resellers that have data on consumers and can react quickly with inventory figures and adjustments. You probably are looking at the market and you see that the retailers are adjusting their inventories. They are reducing their inventories, having write-offs for the inventories.
What we see for both for the U.S. and for the Europe is that the pre-sales have an important role, but it's smaller. Retailers and department stores are betting on the replenishment throughout the season, and we are positioning ourselves for that purpose. In addition to that, we are creating new fashion clients. We have mapped, for example, here Anthropologie among others, and we are positioning the brand with important executions just as we have in the successful results in Europe. With a portfolio adjusted to this retail U.S. calendar, U.S. retail calendar. We're going to have more frequent drops and better opportunities for execution at the point of sales in our B2B. This is a quick update. I'm going to be available to give you more details in case you have any questions.
As for Rothy's, we had a fourth quarter, growing 10% the net revenue, which reached $54 million. We had investments. This connected strictly to marketing. We ran a brand campaign in the second quarter. As such, you have a market share gain, and you have a long-lasting effect. We also have a cost of acquisition of consumers more productive, allowing us to have a better return with the same dollar we spent, and also seeing our same-store sales advancing, also being positive in double digits. Therefore, the investments also focus on continuing our expansion, responsible expansion of our own physical stores, which is very important for Rothy's ecosystem. As such, our path to profitability advances at an EBITDA of $3 million. There is this commitment of path to profitability is already inside and our model for Rothy's.
Here I break it down into more details. A net revenue that reached BRL 183 million, which it was above pre-COVID numbers. Total number of customers giving the high recurrency of consumers. More than 40% of our clients come back to purchase again another pair, and our OTP of 18 months also very healthy. We are reaching nearly 3 million clients, and it's important to show this evolution. This is below what we expected, but it's an important indicator. It's an important step for the path to profitability strategy. The evolution of the gross profits is already at 2.1%. We also saw many challenges for Rothy's, and we are working together with Rothy's team to capitalize on all of the strengths.
Once again, the investments in the year for marketing and mainly in stores, our own stores, increased, which we needed to have to see this recovery in growth. Here is also the new business. We have two important additions to the team for Rothy's team, a new Chief Marketing Officer and a Chief Merchandising Officer who were hired. Those are top talents from the retail industry in the U.S. We are soon to see effects of this new leadership at Rothy's. Here, I'm going to have Rafael here to explain to you the gross profit figures. Thank you very much, Beto. I'm going to explain to you guys the main lines of our P&L, starting with the gross profit.
Here, speaking of Havaianas only, we reached BRL 444 million in gross profit in the fourth quarter, pretty much stable compared to the fourth quarter 2021, with a decrease of 4% in Brazil and a growth in the gross profit of 70% in the international markets. When we look at the gross margin, we had 40.9, which is a decrease of 2.2 percentage points. In Brazil, 39.3%, which is a decrease of almost 3 percentile points. In the international markets, 48.7%, which is a decrease of 0.6 percentile points in the Havaianas international business. I think it's important to mention here on the right side of this slide what contributed to this decrease in the gross margin in Brazil.
We have a positive net effect in our gross profits coming from the adjustments of the price points per pair and the decrease in volume. These impacts, the cost per pair impacted in BRL 58 million our gross margin, and also an increase of BRL 36 million in our manufacturing expenses compared to the previous quarter. Out of those, BRL 28 million are related to additional costs we had in this quarter, specifically for write-offs and additional hiring of distribution centers. As Beto said, it is a consequence of this decrease in the demand and volume in Brazil, which was expected, what we had expected.
We had a higher inventory that we had foreseen, we had forecast, and that allowed us to incur into those write-offs of finished products and in additional hiring of external distribution centers. This is connected very much to our technology of transfer of our prints, which has a defined useful life. Those products have a defined useful life. If we adjust those BRL 29 million, our gross margin would have been 42.5%, a little bit higher than the numbers for the last year of 41.9%. Going to our EBITDA, recurring EBITDA. EBITDA, we had a decrease of BRL 46 million. This can be explained for what happened to the gross profit and also the growth in SG&A. When you look at this SG&A, recurring SG&A, it grew 9%.
Actually it's not a very expressive growth. Since our revenue grew below this, value, this ended up impacting our EBITDA margin. Inside the recurring SG&A of 9%, we have a few restraining factors, especially in the PDD, where we've made the provision of BRL 6.7 million of a specific client, as we said in the opening of the release. We had a increase in the marketing expenses, which also increased this recurring SG&A. The D&A decreased year-over-year in the fourth quarter. In the next slide, I'm going to explain the extraordinary items that we mentioned before for the fourth quarter, 2022. Remember that we classified as extraordinary items to our results, only what was related to the commercial areas.
We had $40.6 million in write-offs for the USA and China markets related to this accumulation of inventory and redefinition of the inventory models because of the issues we had with Amazon, the US. This impacted our CPV, our costs. In the extraordinary expenses that added up to $65.5 million, we had amounts related to the restructuring implemented at the end of the year in EMEA and APAC. As you know, we changed the leadership for this region. There was a simplification in our leadership report. We removed one layer to get the head of the region closer to the operations. There is some costs here with the layoffs of our personnel due to the simplification of this structure and also restructuring of outsourced partners. This is connected to the restructuring of our shared services center.
We had a shared services center that was outsourced. We are closing this model. We are bringing these activities in-house now. This has resulted in some one-off expenses related to this movement. Inside this other line, others of BRL 15.9 million, we had the closing of the satellite factories inside the ILEP. We closed the factories that were the least productive. Since we are advancing with the ILEP program in our main factories, we have this one-off expenses related to the layoff of a part of the personnel that were located in those satellite factories that have been closed. That way we reach our recurring EBITDA of BRL 152.6 million. We reach BRL 147.2 million, which is recurring Havaianas EBITDA, which we saw in the previous slide.
Moving on to the EBIT, our recurring operational profit. We had a recurring operational profit of BRL 110 million in the fourth quarter 2022, compared to BRL 144 million in the fourth quarter 2021. This can be explained by the negative variation of BRL 27 million EBITDA and depreciation and amortization of BRL 7 million in depreciation and amortization. This is how we explain this decrease in recurring operational profit for Alpargatas as a whole. Moving on to our consolidated profit for continued operations, we had an impact of the extraordinary non-operational factors, those adding up to BRL 106 million. In addition to that, other numbers that totalized BRL 17 million and BRL 35 million, reaching a minus BRL 21 million in our consolidated continued operation.
Speaking to Alpargatas consolidated, we closed December with BRL 612 million of net debt, consumption of cash of BRL 1.028 billion in the year, much explained because of the fluctuation in the working capital. I'm going to go into more details of that on the next slide. We had a variation of BRL 177 million. In the working capital and BRL 701 million in CapEx, out of which BRL 460 million are related to the ILEP. Our investment is in the ILEP program, I-L-E-P program. Coming a little bit into our. This consumption of working capital. We bring here the main lines, which is accounts receivable in inventory.
Inside that, we had an increase of BRL 361 million, consumption of BRL 361 million compared to the fourth quarter 2021. Out of these BRL 361 million, BRL 174 are explained. We had the debentures admission last year, we didn't have the need to have this financial. We decided to bring it to zero. This resulted in BRL 176 million. In addition to that, we had an increase of 11 days in the average price of accounts receivables. This is part of our negotiations with our clients for both price and deadlines, since we are still having problems with the volume and are challenging in volumes sold.
Our expectation is that this is going to be reduced carefully and gradually, so we don't put more pressure on our volumes in Brazil. In addition to that variation in price and volume, since we have a big adjustment in the price of our products over the year, this impacted in BRL 59 million, this line of accounts receivable. Going into inventory, we had an increase of BRL 373 million of overall inventory. Inside those BRL 373 million, BRL 279 million can be explained by finished products, BRL 84 million explained by raw material. In our finished products, we have an effect, as you know, we have been talking about since the 3rd quarter last year. We have been increasing our strategic inventory in the EMEA region to ensure a better service level than we had in 2022.
Generating an effect of BRL 42 million because we're anticipating the shipping of merchandise to this region. We have an increase of costs as well. This impacts in BRL 93 million our line of inventory. The difference is given to the decrease in the demand impact, making us accumulate inventory of finished product. Getting back to Beto now, we'll be talking about our priorities for the year 2023. Beto? Beto, you're on mute. Thank you, Rafael. Before opening up for Q&A, I'd like to also to bring to you the priorities for the year 2023, we can also address those during the Q&A. All right. We have three large priorities for 2023. Of course, we have the potential for growth, and we're still focused on that. We are making key choices here.
We are going to concentrate in Brazil, both our investments to generate sell-out volume, as well as to accelerate our specialized D2C channels, which nowadays a volume of 30% of our business, and in revenue, 35%. Clearly is a channel that has been growing, and we have the potential to generate growth here, clearly. The second important point is our international markets. We're having very specific choices there of where to invest in terms of geographical locations. We are going to prioritize Europe and US, as well as in the channels we are prioritizing. We are going to prioritize our D2C and our B2B oriented to fashion in those markets. Finally, Rothy's, as I said, with a path to profitability growth.
Rothy's is showing a very healthy growth in its core products and which is very important, so we can start developing secondary men's and accessory categories. All of that is still with path to profitability. I think the additional points are in the next two pillars. We are with a strong actions of simplification. What does that mean? In the last years, given the accelerated rates of growth that we had and the needs of the business to be structured for our strategy, for our future strategy, we made investments, and we financed with growth rates. In this moment, we feel that we shouldn't stop investing.
We will continue investing in the mid and long terms, look at our costs, both in SG&A, in our manufacturing expenses and corporate expenses, and refind reductions through simplification. What does that mean? We're going to cut off a few projects, eliminate activities, and this is going to result in an opportunity for simplification of our operations. We have already implemented a simplification in the EMEA and APAC regions. As you remember, we eliminated the international area, nowadays we have North American Caribbean and EMEA and APAC are an only BMU. We are calling EA, Europe, Asia and Africa. We have Latam, under Ana Barone, who is in charge of the BMU Brazil. EMEA and APAC, where we had several layers which were historically built with general managers and structures in different countries.
In APAC itself, we did there a work of eliminating layers. We got closer to our clients. We became closer to our clients. We put more focus on our D2C and also on our area of operational excellence for our commercial management. This has already been communicated, implemented, and this is already being deployed right now in this year. These generate savings. Mainly, we want to be close to the market. That's what we're looking for. Secondly, we are attacking two important cost centers in our SG&A. We are recalibrating our operational expenses in Brazil, looking at how we distribute our resources for go-to-market. We are attacking our variables and sales expenses.
Here, there are some important numbers such as freight and commissions that we pay, and we are also looking into the corporate areas with a reduction of our SG&A. It's important to highlight that with the business of other businesses, Argentina, Mizuno, Osklen, we still have an important job that has not been done yet, and it has to be done, of capture, of actually eliminating. This has already been mapped, and we are going to execute this plan. In addition to that, what we need to do is to have a reduction of complexity that helps in our work of efficiency. Efficiency is an important agenda. Since 2018, the line that goes up the most is in the manufacturing in our CPV. It's in our manufacturing expenses.
We believe that with the investments, especially of the last few years in automation and in gains and improvement of our machinery, now it's time to capture higher levels of manufacturing productivity. We are attacking inefficiencies. In other words, workforce to produce the same number of pairs. We have to gain productivity. We closed it in January, our biggest factory in Alagoas Nova, 900 employees. This satellite factory was closed. We are concentrating and gaining efficiency. We are accelerating this agenda right now with the arrival of Gabriel in the company, and we are attacking the lines that we are not directly connected to production. In other words, direct workforce and also overall expenses connected to manufacturing and manufacturing industrial expenses. We had these extraordinary costs. The biggest restraint for our industrial operations was our transfer line of products.
There is a technology that has a shelf life which is smaller. We're going to eliminate this technology by replacing it through direct printing. We already have two machines, two pieces of machine. We gain man productivity, and we eliminate those losses through that we have through the write-offs of finished goods that have a short shelf life. In addition to that, another thing that is in line of being implemented is the elimination of those external warehouse, extra warehouses, because we are going to have a better system to calibrate the demand and to react quickly to demand fluctuation as well. With the opening of our Mixing Center that will reduce those expenses. Also our write-offs of inventory in USA and China also reduces expenses with inventory.
That was fundamental to be done so we can have this more efficient basis. In addition to that, we have a very strong focus on extracting the gains from the ILEP program, both benefiting from the COGS, cost of goods sold, as well as in the working capital. As you saw in Rafael's presentation, there was an increase in the level of our inventory. Nowadays we have an important program of reducing. I'm sorry if we are a little bit longer than we should have taken, but I'd like to open now for our Q&A session. Since we said at the beginning, if you want to ask your question, raise your hand right now in the Zoom tool. The first person is Daniela from XP. Daniela, go ahead.
Good morning, everyone. Thank you for your presentation.
It was very clear. I have 2 questions. The first one may be a little bit connected to the initiatives that you presented to us, Beto, about the adjustments that you are working on. Looking at this, you know, trying to bring this mid and long-term sustainability and growth. I'd like to understand how we can think of that over time. Rafael, when you said that there are some gradual adjustments that has some adjustments that need to be carried out over time, so adjustment of inventory. Do you foresee any other kind of adjustment to come in the future or have you extinguished all adjustments and you have stabilized the levels of the inventory or these part of efficiency gains? What is the timeframe that you think you can actually adjust the company?
I would go into the point of the workforce. You have had this change of Juliano being replaced by André Natal. This came after several other adjustments in the structure, you know. I would also like to understand if we can see any other of changes, you know, on the people employed by the company. Also my second question is associated much more to a short term in terms of investments to the grocery channel. It's very clear, Beto, that this is a thing that is much, much outside your control since the macro effect is actually affecting the disposable income of consumers. It's not easy for you because people have to have a trade-off between the buying food at the grocery store or buying flip-flops there.
For me, it's not clear if investing marketing this moment is going, in fact, to generate effect, thinking of this shortening of the disposable income of Brazilian consumers. I'd like to understand a little bit how you are thinking about this market investment to accelerate this grocery channel, especially because you are actually marketing, gaining market share. You are outperforming the competition, even though you are losing because of the macroeconomic context in Brazil.
Thank you, Danny, for your question. Excellent questions, all of them. I think the first question is much connected to understanding how the sequence will happen of the simplification and efficiency cycles. Our program is solid, robust and complete. Many of the actions are already ongoing, so I have mentioned a few of them.
If you consider the restraining factors that happened in the 2nd quarter, in the 2nd half of 2022, which generated the negative results in the 4th quarter, the external distribution centers, the outsourced distribution centers are 1 example. We are reducing those, and I think that after this 2nd quarter, this should be normalized. I wish this was made overnight. Unfortunately, there is a whole process, so we don't compromise the service levels in our operations. We have already reduced it. We start January with less warehouses, external warehouses hired. Of course, we have to accompany the increase in sales.
It's a sequence that we should start to see in the second quarter, in the second half of the year, this reduction and the Mixing Center gaining more prominence and also, you know, gaining and adding to this efficiency. We are in this phase of ramp-up of our Mixing Center in Northeast and Brazil. It's happening right now, and it has already started in January, so we started operating the Mixing Center in January. This is going to be gradual. The same of the transfer technology to direct printing technology. This doesn't happen overnight, and we cannot eliminate totally quickly. However, we already have some locks in the manufacturing. You have revised all the policy of inventories for our raw material, and we have added a few locks in the system.
We lowered the levels that trigger purchase of raw materials. We can be more restrictive and increase in lower levels. Today, the investments we have made, and considering the capacity we have, we believe and can do that without actually undermining our service level. There is always this balance between service level and inventory. Remember that until last year, we worked with this scenario of a lack of capacity for productivity. The change kind of inverted and changed it for the best. We have this capacity of good service levels. In EMEA and in APAC, this has been already implemented. We start out the year. We enter the year with programs of hiring. We closed the factory in the city of Alagoas Nova, all of these restructurings in EMEA and in APAC. Now we are going deeper.
In eliminate activities, there is going to be an important role of the improvement of the processes. We see opportunities. This is a company that grew its cost at the bottom line. There this is a good news. We have some fat to be cut down and we are going to do that through phases. There is a first stage in the first quarter, in the first half of the year, and then we're going to advance more in this agenda. I'm going to talk to you a little bit more about the succession of our CFO. André has a very important expertise. I'm going to talk about this further in the future, it's going to be one of the roles of André to look into this, to cut about BRL 2 billion in expenses through our OBZ project.
Gabriel also, who was hired, is leading the manufacturing with this perspective. Again, the adjustments will happen gradually. We are positioned to make this happen gradually. We have the support of a consulting company that is delivering a good, an important work to help us understand the effects that these measures we have will have. I don't think this program will stop in 2023. I think we will go enter 2024 with this. We saw a large opportunity inside the company to attack this baseline of costs and to have more efficient processes. In terms of workforce, of personnel, if you look at the last 15 months, we had about 40% of the executive team in new positions or new people in those positions. It's higher than I wish it was. However, there are two ways to look at that.
It's necessary because the scenario of the company, the conditions of the company have changed. I think the mistake we could make here is to believe that doing the same things I did over the past years will generate different results in a landscape that is going to generate an agenda of simplification and gains of efficiency. The measures we took in this concerning employees was aiming at this new scenario. It's not the idea in terms of change and is stability of the team, but it's in favor of the growth of our company to generate more working capital. It's not as simple. These changes are not simple, but I think they are necessary.
I think to try to do what we did and to be accommodated in the growth rates, Havaianas now it's 50% larger than it was in 2018. Now we have to conceive a plan to balance this out. In terms of succession, the arrival of Gabriel and André, I want to focus on the stability of the team. Mainly, as any teams that has new people in new positions, we need to play as one and to work cooperatively as much as we can. Juliano had a very important, a fundamental participation in the restructuring of our businesses in supporting all of this agenda of growth. I am very thankful to his work. It's an unfortunate coincidence that he has a health issue in his family. He is going to be available to you.
He's going to support us in this handover to André. André arrive with very clear goals. The first of one is to restrengthen our processes, including investors relation area, to increase our efficiencies and also look into the allocation of capital. There is a lot of opportunities for our working capital. There is a lot of opportunities in our cash flow generation. We think this can add value, and we can invest for that purpose. Now we have the infrastructure to make this happen. André comes on board in this important moment. Maybe 3 or 4 moments, his expertise would be less relevant. Nowadays, it's fundamental, and we see that being applied in the immediate to long term. He's very excited because to join us after this successful career that he has.
He certainly would like to make a difference for Havaianas and have another successful cycle following this successful cycle he's closing right now in his career. We are very glad to see a person of this level raising our company. Gabriel, who arrived at in the end of October, beginning of November last year, has a very quick understanding got a had a quick grasp of how our factories work, connecting to our factory employees, and he's already attacking all of these constraining factors that we showed to you. I understand your concern, but we're going to stabilize the team, and this is a team that is much more prepared to this team, to this land, to land this challenging landscape of macro economic challenges. I want to go one step back.
50% of our sellout is through impulse. Therefore, we rely on investments on marketing and activation at points of sale. 50% of our sellout is planned. We have been running since August and September a model to understand econometric model in Brazil. We already know, for instance, that the revenue of customers who go to the grocery channel is key to be successful in this channel. However, the climate is also impactful. For example, in October and November, we were impacted because of the climate effects we had. Inside of this econometric model, we also found out that we have a very important work of activating products through marketing. Again, why? Because people purchase out of the impulse. People react, and we have studies to allocate our investments.
People reacted To a best positioning of the displays at the stores and a good architecturing of the price points at the grocery channel, in the grocery channel. As crazy as it might sound, our distribution in the grocery channel is still of 33%. We grew 2% or 3%, and we still have opportunities. Our numerical distribution of 33% where the brand can influence 50% of the purchase decisions is a very important factor. Another important point is that we still lose sales because of the stock out. Having said all of that, we are measuring and controlling all of that weekly in the grocery channels.
What we saw is that this increase in investments has already increased the points, the sales per points of sale, which has already reached the level of 2021. We see this recovery, and of course, with a bigger distribution system, you increase the revenue. In the specialized shoe stores, which is already 33% of our revenue, depends on marketing investments or investment in the marketing of the brand. There is not much to be saved here in terms of investments. Our thesis here is that saving in marketing here is not a good idea because our main problem is sell out and sell through. If we had the sell out and sell through moving those pointers to positive numbers, we're going to have a rebound effect.
This is fundamental. I have to gain efficiency in the other lines of the P&L. This is a re-new reality we're facing right now. We're going to have this reallocation of resources. We have to invest. We cannot go without investing. This company has as a very strong pillar, the health of its brand, so let's use it. One big point is that we are going to try to find savings where we have the fats to be cut and generate competitive advantage for us. Thank you, Danny, for your question. Thank you, Beto. Thank you, Danny. The next question is from João Soares, Citi.
Thank you, everyone. Can you hear me well?
Yes, I can.
Thank you, Beto. I think Danny mentioned two important points. I would like to explore a little bit further this matter of pricing.
Beto, it's clear that there are no positioning, no change in the positioning of the pricing of your company, and you are attacking the issues of demand and volume via marketing strategy, which is very well resolved with this econometric model you mentioned. It's important to mention here, Beto, you don't have to go into too many details, but the timing is important to have an idea. As an analyst, it's important for me to understand, to better draw up the situation of the company. When should we see this improvement in sell-out? Consequently, when should there be an improvement in the selling since those inventories have been sold? Also, there is also the issue of efficiency that should kick up even sooner than we imagined, right?
Beto, it's just important about the timing, the deadline or forecast of time. The second question that I have, it's about cash flow. We saw a challenging year. As Rafael mentioned, there was a very challenging year in the working capital aspect of the business, but it seems to be very depending on demand, both for the receivables and for the inventory. 2023 shall still be a challenging year. I'd like you to share what you expect for the cash flow generation in 2023.
Thank you, João. I'll try to be a little bit more specific. It will be available to you later on to answer any further questions you might have about details. Some overall information.
The number 1 factor here is this recovery of the sell-out in the grocery channel. Once we turn up, we are going to generate lots of cascading that's going to reach the leveraging of our numbers. It's important to say how this is gonna happen. Inside, of course, there is the matter of elasticity of a price versus volume. As I said, we have a problem of cross elasticity, which is associated to the income. Climate's not something I can control, but the income, the disposable income of the population is something that we can try to work with the our model. We are making important changes. We are coming from an environment where had a very steep increase of raw material. There was an inflation of over 40%. 40%.
We reached the peak of 120% of the oil barrel. Now we are at 80, we implemented an important strategy to make our inventory to go through the pipeline. This is not the most important thing right now. Inside that, if we look historically, we were a little bit under inflation in the readjustment of prices because we had a better economic scenario. In the fourth quarter, we grew the revenue per pair above the raw material increase. This has changed. The new scenario that we are drawing, in this scenario, we are focusing primarily on the elasticity of volume and also especially in the grocery channel. We don't have a problem of elasticity in the other channels.
In the grocery channel is where we have to see adjustments. We are making changes to the architecture of pricing for the grocery channel. What is interesting to see here is that we didn't see a trade out in our line of products and a trade down in our line of products, and we didn't lose market share, but we have opportunities to improve those volumes sold. Secondly, adjustment, readjustment of products, I'm not talking about RGM. This year overall is going to accompany inflation. We don't have why to increase prices above inflation because of adjustment to raw material inflation. We don't want to go behind inflation, otherwise we're going to have to pay this price later on and create instability. Based on that, we can see a continuous improvement of mix, product mix and channel mix.
Again, we are growing in the channels where our average price is 30%-50% higher than in the channel where we are losing our volume right now. What we see, again, we see the carryover of prices going into next year. There is a new collection aligned to the adjustments made based on inflation, and you see the benefits of the mix incorporating and integrating an increase of gains in Brazil. It's not going to be the same you saw in 2022. In 2022, we saw an average increase to our products of 17%. It's going to be a level this year adjusted mainly to the lower inflation we see this year, not only for the raw material, but the overall inflation to the market.
This is what I can tell you in terms of pricing and volume. In 2023, we're going to have a better balancing of volume and price, the mix of volume and price. I think the first half of the year is still a moment for transitioning, making this transition. I think that we are going to see this happening better when we change the collection in May or June. I think that in this moment, we are going to be getting into this new phase. I think up to there, we are attacking the extra costs and working hard to bring the cost of the company lower, to a lower level, which is the second part of your question. As I said, it's a process. We are eliminating those restraining factors, these constraints.
This should have a stronger effect in the second quarter. We're working, having those efficiency improvements, which is a continuous work. I will be reporting to you as we advance. Again, a first quarter of transition. I don't see this immediate recovery, and we are going to look at the end of the first quarter, and I will update you about how we have evolved after the first of the first quarter. You're right, efficiencies are costs that are under our control, and I think this is an opportunity for us to regain efficiency and the macro scenario and the top line, the volume, is more based on the macroeconomic, you know, indicators and effects.
In terms of cash flow, which is an important factor, we have a program already implemented looking at our inventory level, aiming to reduce our inventory level. That depends a lot on the sales volume as well, so we will be working on that throughout the quarter. I think our inventory will see a downward curve, so it's not going to be in one quarter that you are going to see this inventory decrease extremely. We shouldn't actually, because otherwise we're going to have a stock out problem, and this would affect our service levels. Yes, we are planning in 2023 to have a gradual decrease in our inventory levels.
It's important to say that we started out the year, when we entered 2023 with very low inventory levels, and now we have to find a balance and adjust this inventory level for 2023. We are selling, if you look at the last months, our new portfolio of orders placed is already stronger against our inventory. This is a new policy we also have internally. We have improved our processes for demand forecast. This is all a continuous improvement program that also goes through the reduction of the complexity. Once we reduce the number of families, the number of colors, we're also going to have a smaller variability. This is a continuous process to invest on, to invest in. As for receivables. Rafael mentioned we had a change in the policy, which is beneficial for the company.
We reduced our operational costs, financial costs. Here we have a program for receivables to go back to our historic levels, the historic levels we had. We are looking at historic levels, especially for at the year 2021. 2020 is not a good basis for a comparison, but I think the main point here is to go back to the 2021 levels. Not in absolute numbers, but the indicators, you know, in terms of days for receivables, the receivables deadline. In terms of payment, there is probably less upside. We also have an important program being deployed right now, and we also have opportunities. It's of course, a smaller impact, but we have a program focusing, which is going harder into the goals.
Not only my goals, which I already have, but the goals of the entire company. We're having this cascading inside the company so the cash generation can be better. In terms of CapEx, we're going to go into the phase of carryover of the ILEP program. The CapEx level is going to go down, and we are also looking at efficiencies in this ILEP. There is still a little bit more investment to go into the ILEP this year, but we're already looking at the opportunities for savings and better using those resources. I think the peak of CapEx was in 2022. This is the overall financial situation. I think we can book calls to help you understand better details in case you need more details.
Thank you, João. Our next question by Vinicius from Bank of America. Good morning, Vinicius.
Thank you for taking our questions, actually. A quick follow-up on this inventory. You mentioned gradual decrease of inventory. We would like to understand as well, what is your understanding about the quality of this inventory after the adjustments you have carried out in the fourth quarter? The second question is if you can tell me about the competitive dynamics that you see for the industry in Brazil. If anyhow this has made you more worried, you know, these counterfeit products or these products arriving from international competition. Thank you.
Thank you, Vinicius. I'll start by answering the second question first, and Rafael will answer the first. The competitive landscape, let's say, the traditional competitors in Brazil specifically.
I think we work with tools that we can use to leverage our competitive advantages. I think right now we have a framework of data analytics that allows us to react quickly, and there are some decisions we make also from the perspective of sustainability in our business. We have not started in November, not only in our category, but also we did not onboard the, you know, the discount market, which has revealed from the commercial point of view a good strategy. In December, we had much better selling with higher, fuller prices. We keep monitoring the market, and we understand here that this is a long-term gain here to capitalize on our competitive advantages. This generates this focus that I mentioned about our specialized markets.
We also have our D2C to be used in the Brazilian market. As for price competition, we monitor the prices nowadays. Of course, monitoring in an environment with more normalized prices of raw material, we start to compete more with the strategies of price channels. We have the team better structured now. In the grocery channel, we have a better structure. We also have another structure segregated for the specialized channels. We have a D2C segregated structure. We have operational excellence in each one of those areas, in each one of those channels. This is the competition landscape in Brazil. I think we are well structured. In Brazil, this thing about counterfeit products, this existed, of course.
You are going to go into large urban areas in Brazil, and you are going to find counterfeit products. We have a continuous program, legal program to attack this kind of the sales of these products. Outside, it's a more cross-border, you know, discussion. It's an important, actually, topic for discussion. In some countries it happens. For example, in Israel, in Australia, in some of those countries, this is a serious conversation. We are working strongly in areas that we can actually influence. Such as the unauthorized resellers at Amazon. We have solutions that can be implemented there. We have the same program in Europe, which have shown a very positive in effect there. In China, we use the tools. We also have a program.
Right now, I don't see this for as a risk for the company. We keep monitoring. I think that nowadays the biggest challenge really is the grocery channel in Brazil, where the players are the players who play inside the rules of the game, you know. The legal competitors. Answering your first question, Vinicius, about the quality of this inventory and the mix of inventory. As you know, as any companies that is vertical and carry out raw material and finish the product, we recurrently have this kind of assessment. This is part of the regular assessment of the business, this recurring assessment of the quality of our inventory. We ran this assessment in the fourth quarter.
Given all of the points I have already explained to you today, considering our worst demand, we had a number higher than the normal expectation of the write-offs of the finished products and also of raw material. In this moment, we believe that the quality of this mix of raw material and finished product is adequate to what we see as sales for the future under normal conditions of price. We think that what needed to be done has been done at this moment. In terms of raw material, it's much more concentrated to the transfer technology. Here we are replacing this, there is a substitution for the technology direct to printing, where we're not going to have any more the problem of this raw material with a defined shelf, you know, shelf life.
Next question. Next question. Guilherme from J.P. Morgan.
Beto, Rafael, thank you for taking our questions. In this context of higher inventory in the fourth quarter, you know, connected to the previous question, Vinicius' question, the reason, in addition to the points you have already mentioned, and thinking that in the first half of the year there was a logistics problem. You wanted to have more finished products to try to address a future demand in Europe for this year, already stocking inventory right now, because it's the highest inventory, right? Looking at the prices, the quantity of inventories. Is this assumption true? How do you see .what is your forecast or your visibility of the forecast for the first half of the year in Europe?
Thank you, Guilherme.
What we see today. Just to recap, in the first quarter, we saw a growth of 20%, 2022, we have a strong basis of growth. However, we had that problem of replenishment in the second quarter that moved the sellout. The sellout was positive, the replenishment happened in the third quarter and happened exactly the way we anticipated. However, with a phasing, a different phasing between the quarters. The problem of the replenishment of products, the supply of products has been resolved. We saw an opportunity nowadays, since we have more capacity in the second half of the year, especially after September, to build inventory, to protect volumes and ship all of that to Europe. There we are also have an ongoing of a migration into the new 3PL.
We are having the ramp up right now to this 3PL, and we have higher bases of Europe. Two fundamental points here. We have a better balance now between the second and third quarter. You are not going to see the same sequence of quarters as you saw last year. It's going to be a little bit more linear, the growth between the second and third quarters. From the point of sale of the open-to-buy or pre-sales, what we saw in Europe today is a healthy scenario. In the U.S., this scenario is a little bit more negative. Clients are very clear to that they are not going to bet in building inventory in the U.S. They're going to build in replenishing inventory throughout.
Even though they are facing the same problem, the VPs in the US are a little bit more cautious compared to the European VPs. A second important factor in Europe is the tourism. I think this is going also to provide us with a better phasing. Our forecast is that in terms of considering the tourism, which has already increased it in 2022, in 2023 is going to see an increase, considerable increase, which brings again us to the discussion of the replenishment of our inventory throughout the season. Both Europe and US, we are starting with a higher percentage of our D2C in our mix and channels. This is also an important opportunity for us, for our business. I think that's it. I think that's the message I have for you.
Both in the US and Europe, the wholesale are cautious right now about building inventory and betting on building inventory, and much more focused on replenishment of the inventory throughout the year. We are trying to prepare to capture the opportunity in this on time in full and replenishment opportunities. We are ongoing with our work of ramp up of the 3P model and place the right orders for the right clients who have those bets in inventory right now. We have all of the products and innovative products ready, you know. All of the problems from last year are gone. We don't have to face those problems this year, quite the opposite.
The inventory, a good part of this inventory, this extra inventory, is already in the inbound of GXO, and part of it is in transit. It should be in the ports in Europe in February, in the month of February. We also have the clients that we do ship directly from here that it doesn't require this inventory. Here we have a healthy inventory to meet all of those orders, you know, to placed. Better phasing, more linear phasing between quarters compared to last year. Thank you very much, Beto. Thank you, Guilherme. We don't have any more in line here to ask questions, so let's go to the final message by Beto. Well done. Well, before reinforcing the points for our outlook, of course, I would like to thank Juliano for those four and a half years of services.
Juliano was here even before me. He did a tremendous and relevant job in restructuring our portfolio of business, in accelerating our growth. I have a lot of gratitude for what Juliano did and also for all the support he provided to me with you throughout those years. Juliano is going to have a programmed handover with André. André and Juliano is also going to start a new cycle, and I wish him a great new cycle. André is looking forward to arrive. He has very defined goals in this, with this agenda of reinforcing our financial processes, working with the investors relation team, with this agenda of simplification and efficiency and better usage of our capital. Back to my final message. We are going to have today our focus. Our focus will continue on growth.
Our thesis for the brand has not changed. We are focused in prioritizing Europe and U.S. outside Brazil. In Brazil, we are focused on a short-term recovery of our integrated sell-out and sell-through. Mainly here, we are looking at an advancement in our specialized channel. Our pillars for the business are preserved: brand health, market share, volumes. We are attacking opportunities to grow the fat we have in our operational costs, and let's do it in an intelligent manner since we are a company that is still transforming. Let's look at all of that and give new priorities to projects and gain efficiency and generate simplification.
We are going to focus increasingly more on a gradual recovery in the short term and look closely at those growth rates, because we are facing right now a macro scenario of uncertainties, you know. From the point of view of the top line, we have control over a few levers, but over other levers are still dependent on variables that we don't control and are very volatile in Brazil and abroad. We're going to work continuously with re-adequation of our working capital for the generation of operational cash flow. Rothy's is getting stronger with its growth and its path to profitability, which is fundamental in this new environment we are navigating right now. That's it. I thank you for this call. We are not proud of the results we have reached in the last quarter.
I hope it's clear to you we understand what the detractors were, and we are addressing them. Me, Rafael, and Juliano are available for any conversations you might want to have with us in the sequence. We are going to be totally available to speak to you. Thank you very much, guys. Have a good day.