Earnings Call: Q2 2019

Aug 15, 2019

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to the conference call of Via Varejo. To talk about the results of the second quarter of 2019. This event is being broadcast via webcast and it can be accessed at www.tivadero.com. Prir where you also find the presentation that slide selection will be managed by you. There will be a replay facility for this call on the website. The company's press release is also available at its IR website. This call is being recorded and all participants will be in listen only mode during the company's presentation. Session when further instructions will be given. Press star 0 to reach the operator. Before proceeding, we inform that forward looking statements made during this conference call about Via Varejo's business perspective, projections and operating financial goals are based on the beliefs and assumptions of the company's management as well as on information currently available. Forward looking statements are not guarantees of performance and they involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand the general economic conditions industry and other operating factors could also affect the results of Via Varejo and could cause results to differ materially from those expressed in such forward looking statements With us today, we have Mr. Roberto Fultonberger, CEO of the company and Mr. Oris Aldo Padilla, CFO and I, our home. I now turn the floor to Mr. Roberto Pucherburger. Good afternoon, everyone. First, thank you very much. I would like to thank you all that are participating in our call. Thank you for main interest in our company. I also would like to say that I have here with me all the executive members of the company I have here with me, Sergio Abel and Allison. So, again, if we have specific questions, they might address those questions as well. We'll be talking about the figures will answer questions regarding our figures, but I would like to start on this first call To to do it differently, I would like to talk a little bit more about our business, about what we found here, our first impressions and we are what we are already doing at Via Varejo. I think this is very much in line to what you would like to hear as well. So first, I would like to say that I am very, very happy for Having taken over this company, I am fully motivated to lead the restructuring process for this company. I'm taking over a company that has it's a DNA to serve well with customers. It is true that in the past few years, not necessarily that has been the case, but this is in our G And A really. This is in the company, and we are going to resume that very quickly. And I also would like to say that I have, full approval and, or a Blanche card from the board for me to put together a team as I believed I needed. And in fact, I was able to come up with a team that I really wanted today. We are an executive, board that is united and very much focused and determined. We are not wasting energy on something differently from working on retail and changing, turning this company around. And we are very much focused. We will turn Via Varejo into a light agile and transparent company. We have already started this transformation. We want to be the best experience for consumers. Whatever the platform consumers want to relate to us. The consumers will decide how to relate to us at every moment, and it's up to us to provide them the best experience possible. I have no questions that this is going to be a a winner's game for those that have the best relationship with the customer. And this is already in our DNA. We are going to create improved tools and all the ecosystem so that we can bridge this relationship. We have taken over a very strong company. And despite of everything that has happened in the past year, This is a sound company and this is the largest retail company in the country. We have a lot of work to do ahead of us. We have many challenges and we have a lot of work in the different areas of the company, but I can assure you that we have already started to do what needs to be done. And that we are back to doing retailing. I will show you now what we have found and what we have done in the past 50 days, more or less the the period of time that we have in here. On page number 3, I will go through our history. You follow-up via Malaysia for a while now, but I think it's important to highlight some of the the topics in our history. We do have a timeline here. So between 29 20 20092012, where we had the merger between Kazas Bayan and GPA. We then started Via Varejo, and it starts with some corporate issues, but, under my point of view, there was a strategic mistake at the time. And that has to do with what we see today, which was the separation be between on and off. This was not a senses, but in fact, that was what happened at the time. I think that has caused delays and the problems that we have today to be faced. From then on? It started in 2013. 2012. Actually, we started here at Harejo. And what we see, especially starting in 2013, is that this company has a low, level of attention to core. We try to implement a model of other types of retail and to electric electronic retail. And from what we see today, this this next Saturday boobs not being very good. So there was wish to centralize decisions on the controlling shareholder. Some areas of Energia Varejo were running within the controlling shareholders and that created a retail that is very and not as agile as the retailing operation needs to be. Also, we had a reduction in our headcount around 20,000 people, and this is part of what we inherit. We have a large volume of liabilities and labor provisions that we will have to deal with and solve Between 2013 2019, the company had 5 different CEOs. This is not something common. It proves things were not going right. And for each new CEO, there was a new direction to the company. It's difficult to look at a a company that changes CEO every year and not necessarily this was the best decision for the company's score and the best one for our consumers. So very short term definitions looking at the needs the revenue needs of the company and so forth. And so in the past 3 years, the company has then put a sale they came into the conclusion that the separation of on and off was a mistake and on come back to the business which was seen over and seen over was then reintegrated, fully reintegrated to the company. On June 19th, 20. June 1, 2019. And considering the figures of the company were not good. We ended 2018 at a loss and the company was not at a good trajectory Michelle Klein led a movement along with other funds, and he invited me to participate the process. I went out in a roadshow with the different places. Showing, okay, showing where the company was and what we could do for the company if the company were to be managed with a retailing direction, the funds believed in our case. So on June 14th, there was an auction in the Stock Exchange changed, the controlling shareholder shares were provided. Today, we have the family client as a majority shareholder and other important funds. So this became a large corporation. The largest retailer with the we are the largest retailer with the domestic control. The command is in Brazil. And here, right now, we go back to doing retailing in Via Validation. On the next page, we have the breakdown of our leaders of our executive board. I am very happy about the team. I was able to bring together. We have a lot of experience here in looking at more stores and digital, we have a senior team. They are ready, they are the right people to the right places, and we are fully focused on delivering results. I will briefly tell you a little bit about one's experience. I took over the company. I have been I have worked in GPA and covered by you before the merger. I also work her have worked at Via Varejo, in the financial area since then when I decided to leave the company, Michelle invited me to take over one of the seats he had on the board, and I have been on the board since then. I have been in, out of lunch. It and all my career was in retail. And throughout this trajectory, I had the opportunity of being in all retail areas. And so I I have a lot of baggage, and I feel very confident to take over the challenges we have ahead. In commercial and operations, vice presidency, we have a battle. Since we started the process of potentially having the this process. He is working with me and he helped me put together this team. He has large experience in retail as well. When Via Varejo started. I brought him over. He was at the competition. He was going to take he was going to work with source operation. He worked with me, Jia Barrejo, and GPA. So we have a 20 year relationship, Annabelle. Deeply nails retail. He works, brick and mortar and online stores, commercial areas, and also our marketing. Padilla is taking over the financial and investor relations vice presidency. So he's our CFO and our IR officer He also has a sound experience. He has all the governance that the CFO needs to have, and he also he has deep knowledge about retail So he he knows deeply governance and retail, and he's going to help us unlock everything we need over time. We also have work together, both here as Via Varejo as well as in Pao de Acucar, and so we know each other for a long time. Mr. Sergio Lane, and he's our administrative VP. He's going to work with logistics, customer service, Bartira, and he has a large experience in Patria in under new businesses. He has been a VP at Whirlpool. He has worked in Mexico as well. He knows the other side of the table. He made me work a lot last year, so I want him by my side as Sergio will analyze service level and cost all the time. And I am sure that he's going to deliver, the excellent service level at low cost. Allison is taking over the digital innovation in HR areas and yhr under Allison. Because, we do not have the digital area in a company of HR. It's not with them. This was, Allison's request to to take over HR. And at that moment, I knew that I had the right person in front of me. From then on, I had to convince him to take up our challenge. We explained to him exactly what was the project that we had in our hands or opportunities. And as soon as he understood it, he just embraced that the coffin said that he would be with us. He has a huge vegetable Vaggage. He was the CEO of Mercado Libre, and he was a CEO of MobaliPay. He's here with us for a week only, or actually 5 days. He was the last one to come aboard. But he was already participating, on our decisions. And some may ask, but it pure digital person, how can he behave in a, retail company with many brick and mortar stores then? For 5 or 6 Saturdays. He has been in the brick and mortars stores, and he's really passionate about them. We can see that in his eyes. And he is also very much on board to do everything that we need to do in this company. Once again, I can say that I am that I am very happy about the team I put together. This is exactly the team I wanted. Now on page 5, talking about, everyone else that are with us at the different modes and I will only talk about the companies that are new to the company. Several of directors already were there, but it's exactly Operations Director, Marcelo. We know him for a long time. Operations And E Commerce And MarketPlace, we have Ricardo Samuchi, Also, we know him for a long time. He was in Walmart, Mexico in the same area. Our marketing and communication with the channel, Elka, She has been with she was with us a while ago. She was a trainee in the past. She went out to the market, and now she is back to our team. And Ricky and Remaining, he is back to the company as commercial director for the white line. Fernando Gasperini, Also, we know him for a long time. He took over supply chain logistics. He has a lot of experience there, HR, director to assist you to open. We might have news anytime. Now Alberto is taking over commercial planning. Sandra Gemara is taking over legal compliance and governmental relations. She has also a lot of experience She is she knows a lot about retail. Has been in different retail companies and and she knows a lot of the programs that we have here She's the right person to help us. That'd be a Gregory as Finance Treasury Director. He's starting today in the company. Brand New in the company. A lot of experience as well. And Elio Muniz is taking over communication and institutional relations. He has been with us for 3 weeks, also an excellent acquisition. He's helping us a lot. In summary, we have 18, again, very seasoned, both in the online and brick and mortar stores. The right people in the right place and full focus and delivering results in the regional directors. We have 6 of them. We switched 4. 2 of them were capped. Of the 4 of them, 2 have been promoted and 2 came back to the company. They were at the competition and they wanted to, come back as for this new game. On page number 6, talking about what we are and bringing that to figure today, is a leader in electronics and appliances retail in Brazil, as well as furniture, with a revenue over BRL30 1,000,000,000. We are among the top 5 in the global relation with most of our international manufacturers We are top of mind in the Brazilian market with Casa Bahia brand. And both brands together, we cater to all profiles of clients in the Brazilian society. We have a lot of credibility embedded in our brands. And these brands have been side by side, Brazilians, and the good moments and the bad ones to Carlos Bahia, who was with Brazilians since the beginning, believing in consumers, providing credit and credit operations are very relevant for us. So we have wonderful banners to move forward. In the omnichannel platform. We have on and off integrated since July 1st 2019. We have several challenges and problems to be addressed. I'll talk more about them about them. And here we can look at the have 4 or half empty. Considering everything that we have at hand, when we address everything that we need to address, we will have a huge opportunity ahead of us with the retail that we have. We have over 1050 brick and mortar stores fully integrated to our apps and our e commerce. We have the click and collect at 100% of the stores. In addition to that, we have 7000 pickup points such as post office and gas stations, over 4500 sellers and over 2,000,000 SKUs in our marketplace. And a little bit further on, I will talk about our vision on marketplace. Our credit business Here, we have over 5,000,000 of active customers with payments booked, and they are we're currently active in our portfolio. We have over 3,500,000,000 active in our portfolio and over 10,000,000,000 pre approved credit. For over 70,000,000 clients. We have our own cards co branded cards with a 6,000,000,000 portfolio and 11,000,000,000 preapproved. We have banking that is just starting and this is very promising for us. Several partnerships of in terms of financial products, logistically, we have the largest networks. We have 26 distribution centers over 1,000,000 square meters of storage area. We are able to have the deliveries per second today and 58% of our orders are delivered within 72 hours. And here we have something new. Very quickly, we are switching the figure to 24 hours. Most of our deliveries are done in 24 hours and with a great cost efficiency. We are able to be to be, and we will be the fastest deliverers and the cheapest delivery in Brazil. We have several solutions already ongoing, both for recurring customer's delivery, and we have news ahead. Now I would like to talk about the drivers. 2 of these first days and our perceptions. On slide number 9. Started with the physical stores. We found towards that we're not flexible. The manager and the teams. Had some missions that really occupy them for several hours a day to the back office. Was a little bit held up, and there were some conflicts in the way the team was compensated. It was very much linked to extended warranty And, so what happened is that they didn't focus on the product say only on the warranty or the extended warranty sale, and it should be the other way around. And also in terms of pricing, there was not no flexibility. It was very hard for us to follow competitors. And most of the month, we couldn't do that. And at a certain point in time, we had to reduce our prices very steeply in order to resume the level of our sales So during the 1st Saturday that we were visiting stores, we already changed this metric. That is to say the matter and the salespeople shouldn't no longer stay in the back office, answering huge questionnaires, and now they have to be there in the store. And guarantee that we will continue to have the best service in retail. We had this in the past, and we are recovering this. So We already have 50% of the team being trained in the street and in the next 60 days. We will have the additional 40% already in our cages already prepared in going to the field in order to train our team. Over four hundred people in this team with a major engagement to know that the train once again because we are going to recover the excellence that we have in the past in terms of customer service. So we have rated on that at the stores. I really need to trust the manager, the store manager. Otherwise, I shouldn't have this person in the store, so the managers can follow already what the competitors do and they do have this possibility and we can see at the same moment whether excesses are being carried out or not. And you have to solve the problems, but I would say that most of the things are already working. What happened after these changes. Well, we have been feeling this improvement in the level of revenue and also in our margins. Because otherwise, you shouldn't just wait for things to happen and then all of a sudden have a very big change carried out very all of a sudden. Omni channel. We are focused on having omni channel in this business. And we were able to integrate on July 1st. And then after that, the client can relate to us or with us the way they want so they can buy at the atypend, collect at a physical store, and or return the broadcast at the physical store, the brick and mortar store, and whatever is more convenient, and due to the transparent relationship that we have and we want to have a totally transparent company. And I would like to make a clear that we have not yet reached the level of stability that we would like to have. We had problems in our brick and mortar stores in July because of this integration interminently, we were a little bit out of the air. We still have problems to be solved. You know, online operation, but they are being addressed. And we are stable now in our physical stores. And the online problems are being addressed. We have a task for to guarantee the stability of this business and guarantee that next month or the last quarter, we will have, like, Friday and Christmas, and we will intend to be totally stable. And the consumer will be able to relate with them and the goods will arrive on time. To all customers together with that. And while we correct the details. What I'm going to talk about is a little bit later, Machira Furniture Factory. We have a major opportunity to increase our furniture production, and we have the capacity at the plant to do that. And this has everything to do with the creating our margin and our credit operations. So these two things go hand in hand margin and credit operations. And this allows us to increase our market share, increase our revenues and drive the business as a whole. So we are already addressing this. We took furniture with 12%. And we already have 4 additional parts today, and we believe that we can reach 22 cents, and we intend to stabilize furniture makers in credit and financial services The idea is to drive credit operations, and we are absolutely sure that we can have more credit and furniture will help the will help within this endeavor in talking about credit lines. And believe that we have already worked with many banks and as the treasury of this was in under GPA, our concern was to show Oh, intention for this business. Banks to order stand. They are supporting us. They have understood our position. So we have a very good position in this regard and Padilla will be talking about that later in BANK. We are on schedule 30 two stores. In the next week, we will have the prepaid cards to the plastic and that is a very important component for the full bank key because not in all places in Brazil. Can we have the reading of QR code yet? And we are happy with what we found here. And very frankly, I would like to go into details here because there is a very big strategy behind all that. And I know that our competitors are listening to us, and I would like to go into details for this specific reason. In terms of people, we have improvements in our business. In all stores of your studies, we started the program, the Vauxhall Casa back home. And the people that did not believe in the model that we had in the store, they are no longer with us and now all the salespeople know that we have established this program and that good salespeople who want to come back and that left the company because they didn't agree with the model that was enforced, then they can come back home if they do agree with our model. So we are totally focused with energy in order to turn this business around We are increasing engagement diversity. We will have a very well trained team with very good proposals and values in commercial and marketing. We are sitting down at the table with the main industries. We have already sat down with most of them. In fact, and together with and we want to have partnerships and strategic partnerships and represent between 40% 50% of many of these companies and sometimes even more than that. So it would be nonsense for us not to have a long term view and a good strategy for the industry. We are going back to that very quickly and the industry is happy with our return. We have been holding excellent talks And the industries know that now we have what is said is done. And they know me and they can give me a call at any point in time if they think, well, we have not complied with 43¢ in terms of marketing. We are changing all our communication to multi channel. We are making many surveys, many proposals going on and we will not be able to give you details, but a lot of good things will be coming for marketing. We have the program called leaders for the future and in which we value our in house team and we build a career for this team So the store manager comes from the shop floor and the regional manager as well and the regional manager comes from operations. And in the future, piece and the new seal when I retire will come from our ranks. So this is what we want, and we are driving this and we are making this very clear to our whole team, all the value that we attribute to them in logistics We are towards the full integration of our business as of July 1st when we integrated It's seen over, and we are doing the systems integration in order to become more efficient. We have a major capacity to act and to accelerate our deliveries, reducing costs, So there are many, many news to impart to you in the next few quarters, and we will be accelerating click and collect for Black Friday and the technology and logistics team are already working on that. And we will be able to deliver this improvement for our Black Friday in terms of technology. Here, we have a major challenge because we have the integration of the on and off that has already been done. As I said, we saw a few instabilities in. We are in a quest for stability. The team is a 100% focused on guaranteeing a stable company and guaranteeing that we will be able to run very smoothly with the tools that we have with some fine tuning being necessary. And and is coming out a major diagnosis of our technology. And together, with that, we will be restructuring this business so that we may have a top technology standard and the relationship with our client, please, on that back office. Well, concluding the administrative separation from GPA. I think we need an additional 22, 30 days in order to finish the process. We still have some things related to payroll that runs here and runs there, but top 30 days. We will need in order to have a full de integration total separation from GPA. And we are carrying out major transformations in our back office and adapting our back office in order to make it lighter more agile and more adequate to our core. And back off. It should serve the stores and not the other way around. So we are working for the stores and we are working for our customers here. And before I close, I would like to leave an additional message with you. We have just signed with McKinsey. Well, the amount of consultancy that the company had in the last few years is incredible, but I would like to tell you why we have contracted McKinsey. We have hired McKinsey to do RTF, which is our transformation short term transformation process in order to help with our digital transformation and also to design our strategy. And the difference between our having this consultancy now and what was done in the past is that this is being focused by the top management of the company, and they will be helping us in the necessary definitions and I am 100% involved in the new drivers that this business will bring us and totally involved in this transformation. Which is totally linked with our core with our customers first and foremost and of course with our bottom line. And The increase in our product profitability for us. Shareholders for us, and Padilla will be talking about some figures now. And when we wanted for when we start the Q And A, if we do not have an answer to give you right now, we will look for the answer and we'll come back to you. So we apologize in advance if we are not able to answer some questions. During the 20. So I would like to get the phone out to Padilla and I will come back during the 20. Hello? Everybody. Thank you very much for your attention. I would like to add to some information that Roberto mentioned. And one of the things that we did in the 3rd 40 50 days was to build a direct relationship of the company with our partners banks some have been working with the company for over 40 years. And in a lot 6, 7 years. This was done directly by the controlling shareholder, and there was practically no direct interaction for the company. And when We took over. We wrapped in an agenda, and we went to all the banks talking to all the CEOs and all the VPs and the people in customer service and doing a lot of work in terms of building a relationship with a credit people, the credit assignment people of the company had the construction of the credit ceilings. So it was mandatory for us because part of the contract regarding debts and refinancing and the fundings in the short and the medium term had not been carried out yet. That that Roberto mentioned, the banks are giving us their full support and we are maintaining our caps, our cities with all the banks we are opening new relationships in such a way that we have already solved our need for the next year. And we will now start discussing the structural part of the company's financing. So It was a very promising beginning, and the banks believe We believe in the project that we are championing and talking about the result of the 2nd quarter. Well, you can turn now to page number 10. It's a little bit difficult for us to talk about results because we have not really lived the construction of this result. We are only giving an interpretation. So it's sometimes difficult to explain some detail, but you do have a snapshot on page 10. The company has a total gross revenue of BRL 7,000,000,000, 4.3 percent less. Year on year. Then last year, there was a World Cup. So gross revenue from the stores growing by 1.9, reaching BRL 5,700,000,000, which is good already, a certain stability also in same store sales with a very slight drop of 0.7. Then we start the negative point. Our Invoice GMV 1.68. 1.6000000000, a 15% drop. Both in 1 P and 3 P and then click and collect. And quick withdrawal, there was a reduction in all these funds. So 1,000,000,000 a reduction of 23 percent, a penetration of 80 percent, 3p going almost by 50% for each $322,000,000 with a 20 21 percent penetration and click and collect 26.6 it was 31.9 in the second quarter of last year. And here, there is a point related to product mix that also affected click and collect. But as Roberto said, we are not at yet. Now we can get to full capacity, which means a huge cost reduction for us. Gross profit reaches BRL1.7 1,000,000,000, 11% lower than 2q 'eighteen, twenty eight percent of gross margin, a drop of BRL1.6 PPEs. And I will explain why shortly adjusted EBITDA has reached BRL388 1,000,000. And this quarter, point 7% below 2Q 'eighteen. The adjusted EBITDA margin of 6.4% is already under the new format IFRS 16. The company ends the quarter then with a net loss of BRL154 million and net cash of 1,100,000,000. Now turning to page 11. We have the drop of the revenue. So as I said, 6.6, the consolidated, gross revenue, a drop of 4.3%, brick and mortar stores. 5,600,000,000, 1.9% growth, and the underlying was a 23% drop reaching 1,300,000,000. This is highly impacted by the online business And basically in the last month of the quarter, it was impacted by the integration processes between brick and mortar stores and dotcom, Cinnova. And this process was more intense in the last month of the quarter, And that's when we had the highest loss in online revenue. Now on page 12, We'll have more details in voice, the GMV, and this is the online, these are online details. Info GMV dropped percent, CHF 1,500,000,000, 1 PE GMP with 23% to drop. That's where we had the fact of integration process in the systems and just addressing, once again, as Roberto said, this integration process of Cinnova, the legal and fiscal and the same tax ID number and the the whole system, the inventory logistics, all of that integration happened starting July 1st. So since the prior month was June, so all the impact of the process was really more intense in June and therefore reflected here in this quarter. Basically, this drop happens in 1p and because of the whole integration process. And that integration between brick and mortar and online, Now financial performance, the gross profit of the company on page 13 reaches BRL1.7 1,000,000,000, a drop of 1.6 percentage points. SG and A slightly grow in RAS 1,300,000 1353 visavis1321 for last year, an increase of 2.4 percentage points, and this increase is basically a reflects of the loss of around BRL400 million in the revenue when we compare both quarters. The gross profit basically refers to the loss and sales. And Also, because we had the end of late domain all good. Therefore, our EBITDA goes down to BRL388 1,000,000 a drop of 3.4 percentage points because of the reasons we already mentioned. Now turning to page 14. We have that indebtedness of the company from 1.9to2.4. The financial debt goes up to 928,000,000 short terms. All all of them and I already mentioned we are renewing the debt and our net cash has a drop of BRL1 1,000,000. Reduction in the net cash of the company basically is because of two reasons. Loss and sales, as I have said, and last year, the company had a program to extend payment date, which was not renewed to this in this quarter. So we had an adjustment here of more or less a fifty-fifty of this impact. And this reduction. Okay, Rebecca. So these were the financial results. We now open the Q and Mr. Luis Felipe, one eye from BTG Pactual has a question. Good afternoon, everyone. Actually, I have two questions. The first one is in the results release, you talked about some systems instabilities that you have found in the 2nd quarter. So my question is, have you been able to identify all these temporary stability and which will be the initiatives that we can think of to address them over 2019 and also in the beginning of 2020. And my second question is about the inventory level. How do you think that this normalization will happen in the inventory 11 over the second half of the year? Hello, Roberto. Thank you for your question. About the system instability, we had impact because of the integration in the first half of the year, we had a instability that came from Black Friday last year when we tried to implement some new modules. But now what we really have is stability post integration of Cinnova. And I'm being very transparent. This has an impact in our sales for June. And we still have some impact on August. So we made a decision of decelerate our website just so that we would not be hurting our consumers. This instability also happened in the brick and mortar stores. The impact was lower, but it did have some impact about the solution. Yes. There are several fronts, already operating on top of that, and we can tell you that we have been more stable in the brick and mortar stores and we are on our way to being more stable in the online channel as well. And we have, confidence and a great expectation. We believe that will be fully Yes. We have an opportunity here, but we need to have 2 or 3, inventory turnovers to get to what we would like to have. And I'm sure that, we do have a few opportunities that we'll be implementing in terms of digitization that are going to help us having a better inventory dynamics. We are also remodeling the way we replenish the stores. We are working on the frequency, but there is a timing for everything to happen. And as they happen, we will see a difference in the inventory level at which we operate. That's it. Mr. Thiago Matruth from Itau BBA also has a question. Good afternoon, everyone. Thank you. That now the company has more autonomy in the relationship with the industry. Can you share with us which measures are being taken there? And how do you believe that you can be benefited? Maybe with better payment conditions purchasing price, offer, product offers, and so on. My second question is about the online channel. I know you had a few challenges in the e commerce. And can you go into the details which are the main challenges that you have to overcome. And you also, if you can tell us a little bit more about the marketplace. You said that there will be news. Can you tell us anything about that? Thank you for your question. I'm sorry. What is your name again? Anderson? Emerson. I'm sorry. Okay. Emerson. Okay. About the relationship with the industry. Well, we cannot be as large as we are and not having a long term strategic relationship with industry. If you have that, do you have major possibilities in terms of product assortment of ensuring delivery, replenishment, can you share your margin and several other fronts? There was one thing that I should mention. We were doing something which was we went out to the industry and look for a good position and we had an in house area that would be fighting with the industry and the small retailers. And more than that, a lot of times, this wholesale of ours would be feeding our seller to bring down our price in our own marketplace. This is a strategic mistake. So we ended the wholesale area and we have signal that to the industry. You're not here to compete with the industry. They are our partners. And so we have different areas here, and I would not like to go into details, but in the face to face, you can do that eventually because there are a lot of topics that are very strategic to this relationship, and we would not like to disclose. Now about the online challenges, I cannot tell you about it on a specific front. We have several fronts, several challenges. But what I can tell you is that Allison after saying all that is, giving us the confidence that we are on the right track. And that will be very well at the last quarter of the year. Now about the marketplace challenges and how we see them. I have no doubts that the marketplace is very important to our business. 0 doubts about that. And this is something that we are going to encourage, but what we would not do is the following. Well, today is more or less considered that the more sellers you have the higher is your share, but we do not believe that once you start having sellers that are not aligned to the way you serve customers or sellers that are not really serving consumers. In the short term, the seller is not going to be heard, but the owner of the marketplace brand is going to be heard, which is ourselves. So no question about it. The marketplace is a great opportunity for us to adjust several categories that are in line to our business and that we did not sell. And I am sure that this is the way of providing the best service possible to consumers in terms of assortment. But we will want to qualify sellers that work with us, we are starting doing that They want to make sure that they have a service level that is compatible to the way we serve our consumers. And we are going to be very careful about cannibalization. It doesn't make any sense when it's a dollar. That is a cell phone, the wholesalers, and my business will be very careful about cannibalization as well. And about eventually you've been in the competitors marketplace. So, look, today, we have a relative volume the industry. So considering the volume that I purchased, it just makes any chance to competing to other retailers. If eventually I have a distributor of an industry that is selling at a price that they should not be selling. I don't We are burning their margin. We are going to talk to the industry, and we are going to address that at the origin. So basically, That's what we foresee. Another thing that does make any sense is that today, you there is an incentive to some sellers in some marketplace. Honestly, this incentive should be deduction or to 0 commissioning or to generate, a fund for that period, a rebate, for instance, for the sellers And honestly, I do not believe that. I don't think this is sustainable. This is just an adrenaline injection that's temporary. It's nice. You close the quarter very nicely. The marketplace is beautiful, but it's very difficult to sustain, to maintain that. Without having to add money to it. So we want to have an excellent marketplace, very present in our business, but with quality. Okay, Roberto. Thank you very much. That's very clear. Joseph Giordano from J. J. Morgan has a question. And in the short term plan, you mentioned improving the purchasing experience. And I would like to understand from you how is the renovation strategy for brick and mortar stores? I would say that maybe CapEx is spent up in the past few years And second question is that we still see some nice fees in New South in the North And Northeast and I want to understand if you have an expansion plan in your mind. If and if you foresee assets that could be acquired to leverage this expansion. And going back to Digital One Systems, When we look at the system today, the system standing up in its architecture that was developed for the past 2 years, do you believe that this expecture is sustainable in the long term or maybe you need to develop a new system. And if that's the case, how long we would need to make that money. Oh, thank you very much for your question. Okay. The first one is store CapEx. I'm sure that we have work to be done in terms of renovations of our stores. We do not have that volume yet. We are looking at all of our stores in a strategic fashion to have a better understanding of how we want this model to be. And we are also checking what would be the needed CapEx for this renovation. We have many stores that only need water and paint. And other stores need more renovation, but we believe that with water and paint, a little bit of salt, we will be able to address a lot in the middle term. And then yes, in the longer term, we'll do a deeper renovation about expansion. I think our priority right now is to look at the stores that we have and make this huge planning, as I said. And to recover sales in our stores and recover the share that was all on the table for a long time. So we want to have more productivity in the stores that we have today But of course, do we have room to grow and expand? Of course, North And Northeast still have room to grow. We have room to take there and also in other cities. And eventually, we are not present yet or we do not have that, strength. About the architecture in the system. We will try to make the best use of what we have. But if we look strategically, to the longer term, we will have to rebuild the business. Mr. Victor Sarajoto from Credit Suisse has a question. Good morning, Roberto and Padilla and everyone. I have two questions. The first one is about this timing, this improvement. You said it yourself that the company is going back to retail. You have the system instability. When you have disability of the system and you know, unlock the Salesforce in the stores, but can you give us more information on how much of this improvement we should see of this improvement and, when we will see that. And also, I would like to understand a little bit about the past vision to the Turner store in the past was quicker and digital was more challenging. What about now? And the second question about the opportunity that you're seeing furniture it seems to be relevant, right? Maybe out of 12% of the sales and you're talking about 22% of sales if not mistaken. I want to understand where this is coming from, if there is, in fact, a change to the type of products that you were offering if this was not as well considered in the past, and I would like you to to know I would like to know more about that. Well, well, we want to do it as fast as possible. But we know that we have a lot of challenges at hand. So And I don't want to provide any guidance here, but I think we have a 3rd quarter in which We have an improvement, but maybe not in in sales, but in our margin. Because we see improvement, we show signs of improvement, and that's our expectation for 3rd quarter, I would like to have an improvement of 4th quarter, actually. I would like to say better margins and better sales and starting next year, we would like to follow improving in both fronts. This is a huge challenge. Ahead of us, these 3rd and 4th quarters, especially the third one considering the instabilities. And not only in the system, but also we are we are changing. We are moving, the whole company. So There's a lot being done, but we have that sense of urgency whenever possible. About the brick and mortar stores and online stores turnover. Yes. In fact, it is quicker to turn the brick and mortar stores in the digital channel. This is more difficult, but we'll we'll be doing it. We are going to focus We will be fully focused because we need to unlock digital as fast as possible. We want to be in the market in the last quarter. I think furniture, this company made a decision at certain moment to stop selling module, furniture. Now we're selling plants here furniture. That's not our core to sell planned furniture. So it went back and forth in the strategy in the past 7 years. So It had it was back to selling module furniture. Today, we have a bARTier, the largest furniture factory in Latin America. So how am I going to do that? I have to focus on furniture selling, and I have to remodel the assortment, and I have to expand this assortment as needed. And I have a factory capacity in Bajita to do that. In addition to potato, we also have other supply options, and we'll get this mix right. And we'll be able to boost sales. Great Roberta. Good luck and success for all of you. Thank you. Mr. Rachel Katakari from Bradesco. Good afternoon. First, about your relationship with suppliers. Your strategy of negotiation is quite clear, but I would like to know if we should expect some impact in terms of, deadlines, etcetera. And the other one has to do with the extra brand How is this going to work, vis a vis GPA? Thank you for the question. What we have today is the following. Today, our inventory is supported by the industry. So we have a deadline for payments depending on the level of inventory that we have. So this is supported. And of course, there are no free lunches and there is a cost associated to that. So our wish is to make this inventory remakes more agile. However, you have to do this only after you turn over the inventory once or twice or twice or two times or 3 times. So we will only be able to see this more clearly at the beginning of next year. So this would be more clear at the beginning of next year. So regarding this, Of of course, this is a strategic business, and I believe that this brand is important for the GPA. And at some point in time, We will be trying to sit down and discuss the valuation of this brand and the potential sales in the future. So we are going to do the valuation and sit down and talk about it. Thank you Mr. Gustavo from UBS. Good afternoon, everybody. Thank you for the question. I would like to go back to the system's architect through question. For the end of this year or maybe up to December. Let's say I understand that your intention is to stabilize and turn over the inventories, but how long would it take for you to recreate the system's architecture? Because it seems it's clear that it's going to be in the long run. However, can you quantify that? Will you be running on the new system, let's say, in 2020 already? Thank you for the There is a legacy for us to use, and what we expect to do is to give stability to it and that this legacy will be with us too during the transformation it's not going to be in 1 year time that we will have a totally new system. The market usually work with something like 3 years to carry out the stock in a company such as ours, but we do have the target here to do this in less than 2 years. This is our target and the advantage of of having the situation such as it is, is because we are going to have new technologies. We will start already with new technologies. We can do it faster because the technology has improved a lot. And, our situation will be better than our competition. We want to transform this business in terms of technology, at the world level. Regarding the 3rd fourth quarter. And together with the discussion about the inventory, you talked about turning it over for 2, 3 times. So I don't understand why the margin should improve in the third quarter already. Is it because you are very confident about your stores already and you're ready working with the new system and, better pricing situation for the salespeople? Or If you need to turn over your inventories faster, you will have to carry out promotions in the short run. You want I understand you have some instability in the system, so I believe that you're not going to have such good such a good performance in the 3rd quarter yet in relation to the margins. Well, if you want to do retail right, It is easy and complicated at the same time. We see Via Vareza with all the stores being blocked up, so to say, you can get a good margin for 10 or 15 days in 1 month. And then organized, then you start not selling, and then all of a sudden you you reduce your margin all of a sudden and very steeply for all categories. So this imbalance makes you lose margin. And when you have a management in which the store has the degree of autonomy and starts this way already, then we can have the 1st 15 days, which are stronger already unlocked. Let's say, then you will not see the need to all of a sudden hinder your margin in the 2nd part of the month. So having this commercial strategy in place is a very big competitive difference that we have in our DNA. So at the end of the day, the fact that I'm more competitive at the store will bring me a better margin The fact that I work and I gain more than every single day already shows us that we can increase our margin and And of course, this oldest financial margin brings us a better margin overall. And what about your credit business? This is a second question. In the last few years, the previous management said, that they were interested in having a bigger penetration and seeking this in order to increase profitability and to increase sales. And so far, this target has not been achieved. So what are you going to do differently? No. It I'm not talking about the bank key only because I believe that are many other things adjacent to that, but What about the competition in terms of the fintechs and the access that consumers have to fintechs does it hinder you and to which extent The credit strategy is very much linked to category. The 2 things go hand in hand. So when I say that I'm going to drive furniture. And in the past, it was exactly the opposite. And then this came back and then went off again. So if you have consistency in that. If you do things right and with all the necessary synergy, the immediate effect is to drive furniture and driving as well our credit operations. So this is one of the tools that we will be used things. Furniture certainly will be a credit driver, and there are many other tools that we know how use and how utilized in order to drive our credit operations. Thank you. Thiago Vettolucci from Goldman Sachs. Good afternoon, everybody. The first question has to do with your guidance. Are you going to keep the guidance? And which of the of the areas you think is the most challenging? How should we think about the balance in this positive trajectory offline and for your investments online. He took it to apologize because it's how just this shortage here. Well, your question was not clear. The company says. So your first question has to do with our guidance. Is this the gist of your question because we couldn't understand this. In the first half of the year. We already see very clear that the trade of the guidance for the year. So this means that we are revising the guidance. And as we have, it's already revised, we are going to publish it to the market. And the second question, we apologize once again, but we cannot understand your question. That sound very bad. We imagined that there will be a margin gain consolidated into our business because if I carry out this long term strategic negotiation with the industry. It does make sense for us. Our company our company as a whole, achieving margin gains. I cannot tell you one specific figure, but it does make all the sense And one thing that is important and that should be mentioned is that we have no doubt that the stability of our business in the very short run comes from the physical stores, and we are going to correct very quickly everything that must be corrected and HEV in our cruising altitude very soon. So generating better margins and stabilizing this. But on the other hand, we have no doubt whatsoever that the exponential boom of sales come from the online operation and we have to build the company for that specific purpose. So if you have any doubt, if you think, well, are we going to focus more off and on? No. We want to be excellent online. And we want to be excellent online and offline and integrating these 2 channels. This is what makes this a winning situation because online, supplementing offline with a very accurately trained team at the stores. And so when the person, let's say, bought on the online and goes to click and collect, then the person comes and collect something at the store and then buy something else. It's a who've been quoted from Santander. I would like to ask a question. This is Gabriel. My question is more focused on the salespeople, the store people. You said that you already have a plan to bring back the salespeople that had left the company for some reason. So how do you see the level of payment that you have your organization vis a vis competitors? And how is this project going? Thank you for the question, Gabriel. Well, salespeople mean productivity. If you look at the percentages of commissions, they are not going to be very different among the different retails, but what really Master's is productivity, theoretically. I will be looking for a much higher productivity than my competitors per salesperson. We already have the situation, and they are going to make more money. So if they make more money, they are happy and they come with us or stay with us. So, you know, that they talk with each other and know how much are you made came from us and how much this and that. And then this attracts the people, the good people that have left the company. Which doesn't mean that we don't have excellent people in house. We have excellent people in house, and we have 18 to train people even better. So our doors are open. Very clear. The Q And A session has come to an end. I would like to give the floor back to the company for their closing remarks. I would like to thank you very much for your interest in the company. And please continue to look at our figures because We want to have a major interaction with all of you and make it more and more clear everything that we are doing here. So please contact our Investor Relations team. And if you want to see some information differently from the way we are showing today, so all you have to do is, well, just make a suggestion. Because we want to adapt our information in order to make your life easier and your analysis of our business easier. So our obligation is to make our figures very, very clear so that you may have a good interpretation and a much more friendly user friendly. We have a lot in our hands, and it's not going to be very fast. But the big message here is that we can do it. We have the retail DNA and we are going to recover that. Our first stage is to go back to doing retail. Afterwards, we are going to do retail as nobody else. And then we prepare the company to go beyond retail. So this is a goal. This is our target. Thank you very much. Have a good afternoon. The operations conference call has come to an end and the Investor Relations department will be available to to enter any doubt that you might have. Thank you very much for participating, and have a good afternoon.