Earnings Call: Q3 2019

Nov 14, 2019

Good morning, ladies and gentlemen. Thank you for Welcome to Via Varejo conference call to discuss the results for the third quarter of 2019. This event is being broadcast via webcast and you can access it at www.vivareissue.com.brir where you will find the respective presentation, the slide selection will be controlled by you. There will be a replay for this call on the website. The press release with the company's results is also available at its IR website. This event is being recorded and all participants will be in listen only mode during the company's presentation. Before proceeding, we would like to say that forward looking statements made during this conference call are based on beliefs and assumptions of Via Varejo's management and online information currently available to the company. Forward looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Via Varejo and cause results to differ materially from those expressed in such forward looking statements. With us today, we have Mr. Roberto Fotiberger, CEO and Mr. Oryvaldo Padilla, CFO and IRO. So now I would like to turn the floor to Mr. Frochberger. Good afternoon, everyone. I would like to thank you very much for participating in our conference call about the results. This is our second call. We have been here 4 months and a few days. And if I were to translate what I'm feeling, considering everything that I have seen in these past few months and the future of Via Varejo, I would say that I am very excited. I am excited. All of us are about what we are seeing here. We see a company that has, way too many challenges and hard challenges ahead of us. But as all good retailers, we see that the assets that we have for the future are much greater than the challenges that we will face. And these assets, in less than 4 months after we arrived, that they are already changing if anybody has just passed. We intend to show you today the transformation process that this company is already undergoing. And not much time we have been able to do a lot and also taking this opportunity Also important, as we said in our material fact, we are in an internal process of investigation. We put together an investigation committee a month ago and in a transparent fashion and in line to the best governance practices, we will let the market know about the results of this process. And so far, we have not found any wrongdoing. Transparency is a value of this management and will be at the core of all our initiatives. Now I will turn the floor to Padilla. He will talk about the figures in this quarter and then he will turn the back floor to me. And I will tell you a little bit more about what we are doing and what we'll be doing. Okay. Good afternoon, everyone. Thank you very much for being with us. For this third quarter conference call. I will turn to Page 2, where we have our main highlights in the quarter. And remember, this was the 1st quarter under the new management. A lot of us started during the quarter, not so many of us are not in here throughout the whole quarter. And this was an intense process and we here had our action plan for our initial diagnosis. So our gross revenue has reached DKK 6,600,000,000. 8.7 percent downvisavis3q'eighteen, a special highlight here to 1P. We were 32.9% lower than the prior year. We'll be talking about this deceleration, which was on purpose. We also maintained a strong growth in 3p. In the marketplace, almost 80% growth. Gross profit also will go into the details here, but we believe that We have been able to increase the margin of the company and find that balance in the beginning year end. And the last highlight in this page is a robust cash position of BRL2.8 billion. So on the next page, number 3. In the first block, we have our gross sales. With a drop of BRL 631,000,000 vis a vis the first quarter or the third quarter of 'eighteen because of 2 main aspects here. The reduction in the sales volumes of our one fee, once again, which was on purpose and also because we had to eliminate BRL500 1,000,000 of inventory this quarter. Which have been sold at cost price and that had an impact of 300,000,000 less in total sales. Total gross sales stores, maintain the same level and the online had a drop of almost BRL 580,000,000 of 1.713 in 2018, 24%. I'm sorry. We have lost the sound. I'm sorry. We cannot hear anything at this moment. We need to clearly show you what is the level of the third quarter of 'eighteen last year. You have the fiscal or the tax benefit that no longer we have this year. It's called Laidobain, a lot of good, that would improve the back of the gross margin in 2.6%. And also, last year, we were working with a navy level that was 1,000,000,000 higher than the level that we are working on this quarter. The company And because of that increase in purchasing last year had 1.7 in gross revenue, additional gross revenue. If we were to adjust the same basis of this year so that we could compare that to the third quarter of 2019, the best comparison would be a level of 25.9% in 2018 against 30.7% in 2019, a significant improvement in the gross margin of the company. We also have to explain that in this quarter of 2019, we had that fire sale of 500 million in our inventory, if we were had not done at the real level of margins, in this quarter would have been 33.7 and not 30.7. So I would say that we are at a cruise speed is the recurring level of gross margin. The company is between 31% 32% 33%. Now about expenses, the company was stable, vis a fee the same period of last year. And we have here to consider the loss and sales. Basically explaining the growth of expenses percentage wise. 5.6.6 percent last year, 4.3 percent this year, BRL421 1,000,000 last year, BRL 142,000,000 this year. If we analyze the same effect explained in the gross margin and the in the gross profit, we can see that last year, the right margins that can should be compared to the margin of this quarter would have been 2 point 30 and not 6.6. And not considering the inventory sale, the margin would have been 5.40, showing therefore the potential to generate not only goes profit as gross margin and EBITDA, but also the potential that we have at issue has of increasing the company's profitability. In the next page, number 6, we have the our debt and net cash. In this quarter, we worked to to strengthen or reinforce the cash position. And the company, we have been well succeeded here. We have ended with a robust position with 2.8 1,000,000,000 in cash and also we had an opportunity in this quarter to accelerate our monetization plan for tax credits. In the next chart. And that's that. Basically, we had here a transfer or a placement of debts with suppliers and then we switched that to bank debt. And that's why we had $440,000,000 to $2,100,000,000 net cash is has been already explained when I explained gross cash, but also a robust position here. We have more cash than bank debts in this end of quarter. On the next page, we have a relevant highlight. We have taken over the company with very high inventory levels, over 5,000,000,000, almost 60% of those with low turnover, This was an important effort of the commercial area of the company, the operating area as well. We have been well succeeded here. We have reduced in 1,000,000,000. The inventory levels of the company, if we compare that to the quarter, the same quarter last year. That is the equivalent of 20 days in inventories. Above the beginning of the quarter, we have reduced around 500,000,000 rals. That's very relevant because It has not only impact in terms of cash, but also it allows us to have inventories with highest turnovers, therefore, with better margins. In the next page, a summary, the main highlights of the quarter, So we have concluded the integration process of Cenova. The tag integration and the system integration, which allows us to have inventory and operations integrations, especially with internet sales and click and collect and collecting the stores. Also substantial reduction of $1,000,000,000 in inventories marketplace growth of 79%, gross profit that was significant the EBITDA normalized around 5 points and the strengthening of our cash position. And Roberto now is going to continue the presentation. I will tell you a little bit of what we have done in the past 3 months. So here, we now have a team that is totally new. We had the reinforcement of our cash We are rebalancing our inventory. We now, we have been able to see a better market share we already have a digital turnaround in Chorus. So it's in already advanced steps. And I saw management operations in our stores on slide number 10. We have run a quick diagnosis and a also quick action plan. And immediately, we started the turnaround of this company. We did not have a lot of time to perform a huge diagnosis and an action plan, but we have been very assertive in what we have done just as fast as we started the turnaround, we went back to doing retailing. And I will explain in this presentation what, in my point of view, is to is going back to doing retailing. On slide number 11, we have a recovery with the operating capacity of arboric and water stores we have empowered our sales reps so that they could serve consumers with ability and power it to close deals. We have operated and we have all worked on the stores layout so that they could be more promotional And with also with a a winning atmosphere at the stores, over 600 stores did have air conditioning problems 80% of the 600 stores already had the problem addressed and the other 20% We believe that in the next 40 days, that type of problem will be fully addressed. So by the end of the year, 100% of the stores will be with air conditioning. We have exchanged over 7000 computers in the stores that were owed over 10 years of use, and that has improved the stability of the system and also the improvement of the reaction time. These machines, these old machines were impacting the reaction time and also in the efficiency of our sales reps. Also, we have chosen 200 main stores so that we could revitalize them. These are the stores that were in the worst conditions and also that had a greater selling potential on the next page we had an example of what it means to do this type of revitalization and what kind of stores we had, we have change in storefront. So our stores were not really present for our consumers. On page 13. We have another example of how the store was in the past. This store that you see here is not much different from the reality of many of other stores. We have worked on the storefronts. This is not a major investment. We also worked on the store lighting. We added the banners and We also had to work on some ceilings and in some of stores, we had to work on the floors. We have switched over to 20,000 shares our consumers and our teams did not have chairs to sit down and hold a good negotiation on slide 14. We have a before and after, we have also reviewed 100% on the IT and back office infrastructure of all the stores To the left, we see a rack where we have all the connections of the store network. To our own cloud. We had a lot of instability. You cannot see in the picture, but There is also a fan to cool off this rack. This is not a random picture. This was also the reality of most of our stores. To the right we see the after. So we have a a new energy grid. It's a new rack with the equipment over the store, and the store's already refrigerated to support overheating. This allows us to have a a huge stability. Most of the instability that we had in the brick and mortar stores that was less, some systemic issue and more of a brick and mortar, a physical issue. Now on Slide 15, in terms of logistics. We have we have changed the way we supply the stores and the way we deliver products to consumers we would have one truck out to deliver to consumers and another one to replenish the store. This was unproductive, the truck would not be at its full capacity when it left. So we brought together these 2 activities in a single truck. Therefore, we were able to supply the store not once a week anymore, but rather five times a week, Therefore, we have a relevant gain in terms of inventory level because I do not need to have an extra inventory in the store. I can run the inventory bay on a daily basis. Our stock out rate since we are in we were at 9 And now we are at 3.9%. So we have removed the 500,000,000 in inventory, and we have strongly reduced the level of stock out. We're not happy yet. We have some homework to do. The fact that we're supplying five times per week also brings a lot of benefits, increasing the click and collect. And on this next slide, we have some numbers about it. Team. Click and Collect when we closed the 3rd quarter was 27.2%. But if we focus on September only, it is 32.3% and when you focus on October November, the number is growing very significantly. Efficiency of quick and collect, brings us gains in negotiation with a significant impact on our hits on the website, conversion increase online, and also a significant decrease in our delivery costs. It's important to mention our Click and Collect is present in 100% of our stores, Today, all our stores have the capacity to provide click and collect to our consumers. On slide 17, a couple of words on deliveries. Here we can see something very significant. Some of our competitors already find a crew speed for a couple of years now. And Celebrate about 40% of deliveries within 48 hours and us in 3 months went from 26 to 47% within 48 hours. So 100% of everything was done with the company, 47% of 100% is delivered within 48 hours. And not only that, we also increase within 24 hour. From 7 to 28%. Here we can see a huge potential. Significant improvement to take place in the coming months, and we're going to have even better conditions. And the main benefit is that everything happened without increasing logistics costs. All we did was to optimize our logistics structure, with a lot of gains of efficiency by bringing even a slight reduction. For the best is yet to come on slide 18, We already implemented in the DC in Curitiba, WMS Manhattan. One of the top WMS in the world when it comes to DC Management. We are already trying in Parana with huge gain of efficiency and productivity. Right now we're not going to roll out for all these owing to the Christmas season on Black Friday. But by 2020, all our 14 DCs will have WMS up and running and we had a lot of gains to grab from this strategy. On Slide 19, a couple of words on our digital evolution. Doing retail is also making tough decisions. We have to make a very tough decision in one P. But we were convinced that losing sales at that time would be the best that could happen ships and respect with our consumers. After the integration of Cinnova on July 1st, we experienced new programs related to the integration. With serious implications on deliveries and the level of efficiency when it comes to consumer service. So we made the decision to decrease the sales in 1P. We're going to show a month on month reduction in the coming slides On Slide 20, in the meantime, our IT team worked very strongly. Overnight. And they implemented over 100 improvement packages. Reducing by 31%, the loading time and reducing 37%. Our heavy pages online with improvement of 14% in our conversion rate. We are extremely confident and fully convinced that we are definitely ready to support Black Friday. We're going to see what these sales in the next slides, and we explain why we're so confident on Slide 21. By channel, our app keeps on evolving. In October, 14% of penetration in app sales, and we are deeply encouraging the number of installations increased by 56% Octobervisavisseptember. The number of retention of active user is growing by 25%. So it's not only installation that is growing active users are also growing, We still have a lot of things to do in the app. Lots of room for improvement. On Slide 22, we show 1P growth. We already been through the valley. That was in August. It was the worst time ever for 1 P. And in the mid of September, we were already having great time of our IT growth. I'm very confident about our online strategy, so we set up our sales from minus 51 to minus 7. Unfortunately, I cannot anticipate the numbers for October November, but I can say that in October, we had very good growth. And in November, we expect to see outstanding growth online. Where New Orleans Valley is important to say that our commercial team online was being set up. Today, we are with a full set of online team both in terms of performance, commercial activities, and we're fully ready to post strong growth in Monty and Thrifty alike. What about 3P on Slide 23? We didn't have the same challenges that we faced with 1P. Considering that sales are outside the company, they happen here, but the whole logistics happens outside the company. So we sped up with those 3 P and in free P within the improvement packages, we also improved 3 P. We also implemented a new CRM, Today, we can have a 100% of tickets. And we couldn't see and visualize the delivery track These are the consumers in 3 P from the moment customers ask questions. We had a question mark in our minds that couldn't give any answer, but today we can do it. Another improvement, a reduction of 80% the loading time from sellers posting, and we want to be very strong at 3B, and we are working very hard in this direction. Now on slide 24, we show GMV consolidated GMV. Posting growth of 8%, pretty much reported by 3C, and in October November, 3p also keeps growing very fast. I'm extremely confident that we will deliver an extremely good Black Friday Our current platform after the improvement packages was set and making us comfortable that we can scale up sales in this platform. So now we have plenty of conditions As of Black Friday 2020 to scale up our online business very strongly. And in parallel, we're going to develop what will turn out to be our new online front line. It was being through a screen in brick and mortars and also with strength and logistics. We're dominating this sector. And on Page 25, now let us talk about Black Friday. Like I said before, we have been confident that we're going to have a gray black Friday in 1 P3 P. M. Brick and mortar store. Our Black Friday campaign is a breakthrough. Will be very innovative and precedentedly. It will be completely new. I cannot share detail because I know competition is listening to us. We cannot anticipate anything, but we already designed, for instance, the Casa Bahia Branks with a song which is already being summed by our consumers as they get into our stores. And we are going take this Black Friday to ourselves. Speaking of communications on Slide 26, do we have another picture of a support pillar of our company. Despite everything that happened in recent years, everything that is happening vis a vis consumer relations for the 14th time, we are top of mind in furniture and home appliance stores. We still have a strong bond with our consumers and we're very present in their mind. So we have a revolution in our communication in order to further ink enhance our footprint. On page 27, this is the change in communication with a strong reflex and impact online, we are already the most associated brand in Google, in telephony, furniture, and home appliances. This gain of image happens both online and offline. We renew soccer for 2020. Soccer is a property. Of all Brazilians. So we have all audiences, different social brackets, and it's in our interest to launch software and our platform Global TV news station did some significant changes in the soccer package allowing us to be extremely innovative in a way how we'll be communicating about soccer both on and off. We're going to have a big mix of channels when it comes to soccer. On slide 29, when we began our project So, Papa, this is also property of ours. No retail in our segment can get into this property. We already started to do the 160 degree strong with consumers during these actions I don't know if you all watched so properly, but let me explain you a little bit. You have Maria Raffas, one of the members. So during the plot, this character was thinking about buying a fridge and then sometime in the soap opera, she thinks about a real store. 1 of our stores begins to interact with our team. And as magic, she gets into our stage in a non disruptive manner, and she begins to interact with Fabienne or our poster boy, and she does the payment book. And as she walks out of the store, I will break this over, she gets into the soap opera again. And in the soap opera, she mentions to friends about the sale she has just performed. So we have all internet searches both of our brands and also our partners. And from the moment it happened, we had a lot of success and hit with our songs on the web. Social media was very important. And now we have the numbers of growth. That happened behind these actions, 900%, 77%, 799% and 2.5 1000% of growth week on week. On Slide 30, about our data intelligence, more than 60,000,000 registered customers, which is another gain of this company. And we began to use and redesign several relationship strategies with these customers and we can already measure the lifetime value of each one of the 60,000,000 customers in our base. So plenty of opportunities On the next slide, Slide 31. This is a snapshot of this kickoff of use our email marketing actions already show openings 16% higher compared to the past plus 7% orders and plus 12% conversion rates. Just a small example of whatever is yet to come behind this optimization we already started exclusive offers of products and price to our consumer base, based on our knowledge of them, And over the coming weeks, we'll begin to offer product price and different interest rates for each one of our consumers. You allow digital optimization. Like I said, we keep on improving on a monthly basis. In terms of website hits, September, vis a vis June, 26%, October, vis a vis July, 30% growth. So this is happening with significant gains in ROI and also a significant drop. In our cost of goods sold. So we are all the right track. We are far more efficient. Bringing more consumers home. On Slide 33, I'll be talking about another strength of the company It's about the commercial evolution with the industry. That's a strength. It's our CUDA, be it owing to our current volume, or our current capacity to have strong trust transparent relations with the industry. So we already recover that. We were very agile with big suppliers, which hold 80% of our revenue We had meetings in Brazil and abroad. We already had several long term negotiations which will guarantee our strong supply for year end and for 2020 and also support our margin gains. On slide 34. Let me talk about another screen, which is the credit operation. We already started a pilot study in CTCI online and digital signature in some brick and mortar stores. We will continue this file as 30 until we feel confident enough for the rollout, and that's a window of opportunities. So we can start seeing the credit operation online as well. That's very disruptive, by the way. And we found a way and we already deployed in our service system when sellers teetered to consumers' needs, an alternative so sellers don't have to say no. They don't deny credit to consumers. But rather, they tell in what circumstances the customer would be approved. So we have a lot of intelligence behind our machine learning. And when we have the individual text failure number, we have the credit history with us and in the market. And we can also let him know how credit would be approved in the future maybe with a smaller payment, a smaller time, but we try not to say new to our consumers but rather create options for him to take credit with us with strong and credit operations, and we are already increasing our penetration and credit operations on Slide 35, banking, It is ongoing at 70 stores. Our intention is to have the rollout for 100% of our stores Our expectation is to do that until December. We stopped right now owing to the Black Friday event, but we have very good backs for the rollout this year. On Slide 36, let me talk about another very important asset we have, which is our people. Truizio Bravi, which is our service accident program. It is already under former three hundred people right on the field, working and training our whole sales force throughout the country in order to provide excellence in service. This program provides training for excellence and also is ready to recover Good salespeople who are not performing so well. Do you also have another program? Coming back home. The idea is to pursue great sales people who left Via Varejo because they didn't agree with our model and now are working with the competition. So we opened a campaign so that these great CAGOS people and managers come back home. And we are very successful. We already have a significant number of people who are leaving the competition crusting our project, understanding. We turned the game in the brick and mortars, and they're coming back home on slide 37. That's an image of a meeting that we held in Songhaicoder gymnasium. And this gymnasium we gather 35100 employees face to face. So this is our whole team from Songhai Colonel and part of Bartira's team. And in addition, 100% of other employees of the company were also there. With this online training. We also had a strong participation online the whole team got a very clear message directly from and to all levels of the company, we made it crystal clear where we are, what we found what we're doing right now and where we're heading to. Today, a 100% of people who work for the company know precisely where we want to be And not only that, we are having all these people engaged with a sense of ownership. Each one is the owner of the process of your area of the company, and it takes an attitude of ownership I have no doubt that we managed to have a lot of engagement in this meeting. In addition, during the last 60 days, Avelle, who is our CEO, Travel Countrywide, personally talking to a 100% of our store managers 100% of the store leadership. Also making it clear, the message of where we are and where we are heading to and also the sense of urgency and ownership that we all want everybody to have. Also in this event, we launched the hashtag via here. This is our transformation plan, and I am on page 38. We have a consulting service helping us. We also have over 2000 initiatives ongoing right now. We are validating that initiative so that up to the end of the year, we can roll those initiatives out and put some into action defining what is the capture value and the curve benefits that we have in the company. Now telling you a little bit more about the future of this business. We are all here very excited about the future. We have excellent assets in house. And in very, in a very short period of time, we have been able to carry out an important transformation, and the whole team is engaged. I'm sure that we will turn this game very quickly in the online area. We have already started, I would say. And we show that and we'll be able to show that now on this Black Friday. Well, so now I would like to open the floor for a Q and A session, and I will come back with my final remarks at the end. So we'll now open the Q And A session. We would like you to ask all your questions at once and wait for Good afternoon. This is actually Emerson, and I have two questions. First, you mentioned that you had 11 stores in the quarter. So do you feel confident to keep on this expansion plan for stores? Do you feel safe to open stores since you have opened 11 while at the same time you are already with initiatives in your existing base? And my second question, yes, I under understand that you want to drive sales, and we have senior robust growth in the credit operations. So I'd like to understand how do you intend to increase integration and to add more services with banking? Can you give us more updates on that. Thank you. Thank you, Emerson, for your questions. About expansion, We are comfortable with our expansion plan for next year. I think we have a map with relevant potential areas to go into. And more than that, There are areas to be occupied, not only in terms of brick and mortar stores, but also regarding new stores functionalities, which now for us, logistics. So more than ever, the stores not only a store, And that is the major competitive advantage that we have because we have large stores. And literally, we have mini hubs. And over 1000 mini hubs all over Brazil. Therefore, we see the possibility of having a better occupation in Brazil both in terms of stores and because of sales as well as stores in terms of many hubs of deliveries above banking. Yes. We have an opportunity there. To do something different, but we would not like to say anything right now. We will be very much prepared in December to talk about the banking strategy. Thank you very Good afternoon, Roberto, and congratulations on what you have been able to do in such a short period of time. We see things are going the right direction, but really you need to say to us to pick up, right? And the e commerce, it's clear, especially what you have been in 1P over the third quarter. And now, are you thinking the fourth quarter, we start seeing a more positive result. But thinking about brick and mortar stores, and despite of all, adjustments you have made, sales were low and considering that you're we're very aggressive. So to have a fire sale, you know, part of sales have been benefited by a an aggressive strategy there and the inventory that you had to sell. So I would like to understand that also in brick and mortar operations for fourth quarter and the next year considering marketing investments. Now you have a balanced inventory level. I would like to understand sales. Now and what you can be done in the short term. Hello, Tobias. Thank you for your question. Actually, in this quarter, I think there was even a miracle to have this performance because the stores had a lot of problems instability for sales in the system because of everything that I have shown. So as everything started recovering. We also improved. Then we have over 1000 stores 20,000 people to bring back on track and to we have to lift up everyone's morale because That was not the case before. So I would tell you that we are on the right track. We are moving forward. Every week, we are recovering. And so we expect to going back to selling more also in the brick and mortar retail. So yes, we do expect to grow in brick and mortar stores as well. Obviously, in the online, we will have an exponential growth, but in the brick and mortar, we will have a controlled costs. The inventory now is at the level that you wanted. You made all the adjustments needed. Marketing is already coordinated to your inventory levels. So everything should be working now in the 4th quarter or no, working hand in hand in the areas. Well, in the inventory, we still have some cleaning to do. That will be happening now on the Black Friday. But I can tell you that I am, much better provisioned in my inventory levels, but we still have a few problems to address. And in the marketing, we are already accelerating our efforts. There are way too many innovations out for marketing. So yes, it will make all the sense of going back to growth because, everything is running well and the inventory will be well oxygenated in the short term. Okay. Now on the online, you had a sequential growth, and it makes sense. But about Black Friday, Black Friday last year, that's one of the problems really arrived. So if we compare the the the sale the sales for la Black Friday of last year, you will be able to understand it. So does that make sense? Just things like that. Hi, it should be a yes. It does not make sense. What happened was that on last 2 years, Black Friday, a lot was sold. Sales were good. The problem was that we were not able to operationalize the sales made. So we're not able to deliver. We lost orders. It was a chaos. So we did have good number of sales. The prices were unbalanced because they dropped all the prices randomly. So what we can expect for this year's Black Friday, yes, we want to grow with a better margin balance because we have a well designed commercial strategy. And I will give you a guidance here. Our logistics team, when they hear me, actually, they will jump up their seats. But actually, we are committed to doing 100% of our Black Friday deliveries in 1 week. So the average of retail is to turn that regular from 20 to 30 days for Via Varejo. We're able to work on it in months. And last year's Black Friday. And we do have our internal commitment to turn that regular. And we are so confident about the level service that we already have today that we believe we know that in 1 week, we'll be able to address all Black Friday's deliveries. And most of that will happen in the 1st 48 to 72 hours. Okay, my last question. You already talked about the top of mind, the strong brand, but are you measuring NPS how is the consumer perception right now? You have shown the pictures of the stores. Are you being able to check that? How the perception of the brand is evolving? Yes, Tobias, we are measuring that every week, and we are having relevant gains, the consumers have seen the change. For us, that's very clear. Consumers have seen that there was a huge change. And I would say that we are in grave path to recover our image. About those consumers that didn't think so. So We know that we have lost some of our clients, but considering the level of engagement that we see now, we believe that's going to be recovered. Also, we have seen, improvement in official forums that measure complaints from consumers such as Kraklaniakian. So consumers are seeing that the online service, marketing, stores, serving Okay. That's wonderful. Congratulations again. Thank you. Good afternoon. I have many questions, but I would like, by the way, thank you for all the detail that you gave us. So I'll ask two questions. The improvement that you mentioned about logistics for 48 hours within 48 hours. What is the percentage of delivery? I would like to know what effectively changed in logistics. Was it just to fix the system or transfer information control, any effective operational change? And what about the future? If we think about marketplace, which obviously is growing a lot and becoming more and more relevant, how do you envisage the balance between 1P and 3P. And do you believe that you will have to increase the range of services for 3P or for 3P sellers, or maybe that's not a focus in the first moment. Thank you. There are some attractions here. Firstly, we are using the best of our assets. We are working. We started working 3 shifts in DCs to 24 by 7 in DCs. In addition, like I said, we also mix delivery to consumer with store supply At the end of the day, we have maximum efficiency of the trucks, and the frequency is much greater without increasing the costs. So I guess these are the main points that we changed in logistics. In addition to systems enhancements, which also happen and also our mode of operations in the warehouses. We had dramatic changes. Answering your second question. As for marketplace, 3P and 1P, We are not going to restrict the growth of 3P. We want and will be very strong in one piece. And we see 3 feet in a as a strategy so to speak. So we're going to broaden the range of the mix with categories that are related to our business, that are additional to our business, to complement our business so we can pick the competition. And we are on this track right now. And in the mid run, considering the logistics power that the company already has, It's not something that will have to start from scratch, it already exists. So I believe that we won't have to wait long so we can't deliver unique service to our sellers and therefore bring unique service to our consumers when it comes to delivery. Maybe in a short time frame, perhaps we can work full time to our sellers in many SKUs and categories. Thank you. Just to confirm, what about the flagship in e Commerce to you? Is it extra website or maybe Pazas Vaiya's website? The 3 of them are doing great. They're all recovering. The 3 of them are recovering. But if I were to choose 1, as of my year, it is standing out most strongly, but we also have a strategy for the 3 of them. Thank Good afternoon. Thank you for taking my question. I have actually two questions. The first one It's clear that you're making a lot of changes to the store, but what else do you still have to do? If you think about the current platform, what you still need in terms of investment in time. I know it's hard to measure, but how can we what do we still need in order to have the model as you want up and running? The second question about investment and state changing strategy. What about marketing for the future? The level of the third quarter? What should we expect to see in Q4? What do you intend to have in 2020 and down the road? What are the changes in the market strategy considering the new commercial positioning? Thank you. In terms of infrastructure online, it goes as follows: The first good news is that we were not convinced on day 1. But now we are convinced. We are fully convinced that the current platform with another adjustment package that is already in progress after the seasonal period after Black Friday, everything will be deployed. So we have no doubt about the potential of multi channel that this platform will give us to not considering have investments, just improvements to the current platform. As for investments in the new platform or the new huge improvements to the platform. As we speak, we are working on this plan in we cannot give you much color right now how much this will take off investments. We're just beginning to work on a budget or milestones for 2020. So maybe in Via Barrejo Day in December, maybe you can give you a preview. But maybe on December 17, but we'll be ready to talk about that. Certainly, in the beginning of next year. With regards to marketing, I don't know if I got your question well. You wanted to know about the progress and the evolution in marketing, right? How should we consider marketing expenses? There are very new strategies, right, unprecedented in the company, but I believe it entails additional talk Our marketing investment, what we are not going to post a lot of growth. In terms of investments, what we'll do is to give more efficiency to what we already do. So it has been spending quite a lot of money. In some methods of online methods, taken up a lot of cash, and it was not so assertive, so we dramatically changed it. Now we are renegotiating with all our suppliers. We had a great package now with global TV station. So we still have a lot of things to do in our customer base with CRM, and this radically minimizes the cost and investments in marketing. So being very straightforward, I don't expect to see significant increases in our marketing investments. Great. Thank Good afternoon, everyone, and thank you. I would like to follow-up on a comment regarding the store's revitalization. You said that you have already mapped 200 store front. So that you could work on them on the next few months, maybe not this year. But do you have an estimate that you could share with us about the level of investments for these renovations. On how complex are them. And estimate in productivity that you might tap into after those renovations. About the two hundred stores that we mentioned. It has already been done already. We concluded the renovation process. They are already operating and operating well for the next year. Right now, and we are also considering the budget for the next year. We are analyzing what type of renovation we will need to do in our total stores. And we'll have that information further ahead. Unfortunately, we do not have that yet. But I can tell you that to work on these two hundred stores that we have worked on, the investments were low. Obviously, some in some of the stores, we will have to invest a lot more. But we believe that in and most of the stores will be able to have a lot of investments. We already have a plan today, but we are still monetizing the plan and checking how much it's going to cost. Actually, the plan is ready and we just now have to monetize it perfectly. I understood and the 2 hundred stores that you have already worked on. I know it's not much time, but did you measure impact in terms of store productivity? Oh, yes. We have measured that. These stores are operating for a short period of time, but we did see relevant gains. And 2 digits again in the stores that we have renovated. Perfect. Thank you very much. AFF Ford from Bank of America has a question. Good afternoon, and congratulations on your call. Can you tell us the nature and the nature of the accounting allegations that you have saved. And also about Black Friday, how do you feel about the competitiveness of regarding assortments and price in general? Hello, Bob. This is Roberto. I will talk about competitiveness first. Okay. Thank you for your questions. Obviously, Black Friday, the Black Friday is challenging for everyone in retail. The price of seasonality is strong. But we are prepared for this Black Friday. We have negotiated it, and we feel confident. We know that we will go to this Black Friday selling a lot with no major problems. 90% of our inventory for Black Friday is already in house, and it's already in the distribution process. So, being very straightforward. Yes. It's going to be competitive as it always is. We are very well prepared in terms of competitiveness. There is a drop of margin for this period of time. But we are not counting on a significant drop of margin for the Spirit because we are we have prepared ourselves very well. Now I'll turn the floor to Padilla. Thank you for your question. About the material fact? Everything that was found is there. That's what we said. The investigation has not found anything real, anything material, the feasibility, the allegations, this is, work that is ongoing. So as soon as we have anything new, we'll but I can communicate to the market. But so far, really, that's what's on the material fact. That's what we have. That is nothing. And, Padilla, would that be an indemnification if that were to be related to the prior controller? Well, as I mentioned, and as we have published in the material fact, this was an allegation that has not been proven so far. Up to this 1st stage conclusion. We will have a second stage, a second phase of this investigation. This is ongoing, but we are not considering any type of indemnification so far. And because also the investigation has not found any anything wrong so far. Thank you very much. Gustavo Rivera with UBS has a question. My first question What about same store sales from brick and mortars this quarter? Is it inventory sales? It was not so clear to me. Could you give us more color, please? Thank you. The 500,000,000 basically sold at cost. So it's cost of goods sold. I cannot tell you the market share if I didn't have 500,000,000 as a problem. I would have as a solution, and maybe I could have sold 1,000,000,000 so I cannot do the math. So ratio for approximately 500,000,000 of inventory between 901,000,000,000 sales. Undoubtedly, our sales, if we didn't have 500,000,000 problems, but 500,000,000 solutions, undoubtedly we would have sold much more. That's clear. 2nd question, just out of that, you said the margin will be much higher. But you stopped with a sale of 1P. I imagine that the margin was slightly lower as well. So maybe it has also helped with the margin that you mentioned, the normal margin of 20% to 30%. And you also said that the margin in Black Friday may not be affected by the negotiation with suppliers. So what I want to steady. If the strong come back in 1b sales, in addition to Black Friday, what about the impact on margin, the gross margin of the operation large. The margin is much lower and competition pressure is much higher. Correct me if I'm wrong, Gustavo considering 1P. He's already significant. And if we'll become increasingly more significant to our business, we cannot count with this option of 1P margin being significantly lower than 3P margin. Our expectation is to ramp up 1P maintaining levels close to our store, our brick and mortar store margins. But I can tell you, not just to be on assumptions, In October November, we already post growth in 1 fee. Sorry. I cannot give you any figures right now, but we are also having call margins. That's all I can say. Got it. Now will this come back of 1P? Are there any categories that are more competitive? The the whole competition. I would like to understand how you pursue the 1P sales everybody is speeding up. So I'd like to understand how you expect to have this come back. Did consumers have a pent up demand? What about digital marketing? So how are you working on this on this come back? But we don't have specific categories we are targeting everything that is already our strength. And there is no doubt that we are acting very strongly long tail with SKUs that are not part of our daily routine, but they will be at what fee, for instance, tires, diapers, other SKUs. So We are ready. Just about to strengthen this long tail. We're going to be very strong in the core of our business, no doubt about it. It's our obligation, our duty, and we also want to be very strong in long tail, which has a direct impact As a real first question about profitability, so things are more balanced as we have a stronger, long tail. We know it's possible, and we already started. We're not just about to start. We already started. We are far more active in Long Tail. The new team at took over in the commercial era. It's very much focused all my intelligence, commercial operations, several online segments, so the team is fully focused on making things happen in all categories. Just one last question, if possible. I guess on the last conference call, you're a lot about negotiation with suppliers in long term contracts, maybe 1 year. According to what's possible in the industry. So what about the progress of these negotiations? Have you met 1 year or for the moment you're only focusing Q4 and you still have a lot of gains to be captured over time. Gustavo, Great point. Like I said, this is our core business. We were extremely welcomed by the industry. Owing to this strategic vision, the long term view that we are giving to this business. We also have credibility with the industry. We're confident in the sense that we are waking up from long term strategies, and we will deliver. So I can say that our negotiations are ongoing We've been very successful. We already closed many long term deals. Some of them are still being negotiated, but no concern. Like I said in the beginning, both in Brazil and abroad, We had a fast trip to Korea to strengthen our relations with 2 partners, And we also had meetings in Brazil with several different manufacturers. So everything is running very smoothly. Thank you. I would have like to have more color about what we could expect to see in terms of improving the cash cycle of the company and more detail on what you envisage for Q4 vis a vis the same topic. Maybe relief in inventory downsizing. Carlos, Roberto speaking. Thank you for the question. We can see a trend of improvement in our cash position. Like I said, we still have a little bit low turnover inventory to eliminate in Q4, we will work on this. And we will not go back to our operations of the inventory levels when we took the company over, it makes no sense to It does drain our agility. It is not healthy for the company to run With the same inventory level when we took over the company, I guess we already reduced around 20 days. We can either reduce further. But now we're getting to this scrutinizing phase and it's more gradual now. We expect to have this improvement over different quarters consecutive improvements on the inventory rates? Will Ben Koto from Santander also has a question. Good afternoon, everyone. Two quick questions. And this process to review all the stores. Did you also check the portfolio of categories. In the last call, you talked a lot about furniture, for instance. So do you have any changes in the strategy? To change or to adjust to the categories mix of the company. And it's still on the this topic. And I saw a few comments on the last call regarding the relevance that the strength that you believe that the payment book has ended company, that level of 11% in sales that we have now, that's what we will have, or should we expect that now in the fourth quarter, this will pick up and maybe go back to the levels, the to the 15% that you already had in the past. Can you talk more about that, please? Hello, Ruben, and thank you for your questions. Yes. We already reanalyzed all the categories for brick and mortar stores. We will keep on strengthening our furniture line because that line got weaker over the years. And we already have everything in house to grow. We are already increasing our furniture sales. And I would say that furniture will bring the payment book with it. And for us, this is a fantastic credit operation because you can have very low interest rates there. So I believe two things will happen, hand in hand. Strong growth in our payment book, in the 4th quarter. I don't know. We have Black Friday now, and there are a lot of opportunities. We have a lot of credit cards there. We have a a lot of online purchases, cash purchases. So I think consumers get ready and save money to purchase in, in this period of time. But our strategy, yes, is to increase our credit operations, but I cannot tell you at which levels we will be. We will try to go to the highest level possible, of course. And as I said, We have a lot of intelligence invested in our credit operations. And so as we work on our CRM, I think we'll be able to provide credit operations and credit by individual tax number. The customer will have a pre approved credit depending on the consumer, even they will have a more aggressive interest rate. So there are several opportunities to grow in our credit operations. Can you tell us what is the share today for furniture? Can you give us that breakdown within your total revenue? Yes. Let me find that that information. It's around 15, 15, 16%. It has increased 1.5 points in the brick and mortar stores and close to 10% in the online. Okay. That's very clear. Thank you all. We now end our Q And A session. I would like to turn the floor back to the company's management for their final remarks. Well, I would like to thank you all for participating on this call. We are very happy about the volume of questions we had this shows how interested you are in the company. And as I said, I want to repeat myself. We are extremely confident about the turnover in this company. We'll be placing this company back to a special position from which you should have never left both in the online and the brick and mortar stores. And I would want the code the way we end all the meetings we hold here. Let's go out and retail. So as good retailers do help us, unlike Friday purchase, purchase on our website also on our stores. You are all invited. To our Investor Day on December 17th when we will be providing more details. Also, you have more details on our website, and we would love to you all there in person. Thank you very much. The conference call for the results of the Eparaiso has ended. The IR department is available to address any further questions you might have. Thank you very much for your participation, and have a nice afternoon.