Earnings Call: Q4 2018

Feb 20, 2019

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Via Varejo conference call to discuss the results for the fourth quarter ended the year of 2018. This call is being broadcast at the Internet at our website www.theavareshu.com.brir, where you will also find the company's presentation. By selection will be managed by you. The replay will be available after the call is finished. The company's press release is available at its IR website. Call is being recorded and all participants will be in listen only mode during the company's presentation. After Via Varejo's remarks, there will be a question and answer session when further instructions will be given. For proceeding, we should mention that forward looking statements made during this conference call regarding business perspectives, projections and operating and financial goals are based on the beliefs and assumptions of Via Varejo's management as well as on 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. Now I'd like to turn the floor to Mr. Peter Esterman, CEO of the company. Good afternoon, everyone. Thank you very much for being with us in this earnings call for 2018, I have here our CFO, with me, Felipe Negron, and our call today is going to be separated into different moments. Philippe will talk about 2018 results. And then I will talk about what we are doing in the company in order to deliver the results that we are estimating for this year as well as to talk about the continuity of our omnichannel strategy. So I'll start by turning the floor to Felipe so that you can comment on the results for 2018. Good afternoon, everyone. Thank you very much for being with us. So let's just start talking about the results for 2018 on Slide number 2. In 2018, we had a growth of our gross revenue, consolidated gross revenue of 5.2 percent, reaching BRL30.6 billion. Secondwater stores, we had a growth of our gross revenue of 4.6% and the online revenue, we also had a growth, an increase in our gross revenue of 10.7 percent on Slide number 3. On the online, we had a GMV growth of 10.2%. Invoice GMV for 3P had an increase of 4.3% and the performance of the invoice GMV for 1P had a growth of 11 point 8%. Also, in 2018, there was a significant moment in our Click and Collect a very important differential once our brick and mortar stores are an important asset for Via Validation. Turning to Slide number 4. Gross margin had a drop as a result of a lower margin in products sold, lower share of our direct consumer credit because we're more selective in our credit policy. We are maximizing the cash margins of the company and also a lower share for services. We had efficiency gains in SG And A, several lines that went from 25.5% to 25.1% of our net revenue. We expect to have even improvement in this result, thanks to all of the measures that we have implemented on our rolling out in 2019. And because of all that, our adjusted EBITDA margin dropped to 4.6%. Slide number 5, our net financial result before statements improved from 3% to 2.8% of our net revenues. We had a net loss of R267,000,000 in 2018. Slide number 6, company is maintaining its sound cash positioned with a net cash of BRL4.4 billion. Now I turn this over to Peter who will talk about the business perspective of the company. Thank you, Felipe. Very well. The topics I would like to highlight today, they are delighted to our execution agenda that is fully focused in the improvement of the purchasing experience of our customers, both in the brick and mortar stores, as well as the online stores, And also in the delivering results, the results that we are committing ourselves to deliver to you today. I will basically talk about 4 main pillars, and we are already working on these pillars since the beginning of this year, the first one is to increase revenue in all channels, we can order and online and to have the generation of cash margin And the second one is related to the improvement of the operation, both for B And M And E Commerce. And the third one an implementation of all the initiatives to reduce expenses that are not affecting the level of service and not affecting the purchasing experience of our customers. And the 4th is the continuity of our omnichannel strategy that we have started at the end of 2016. So talking about the 1st pillar, which is the growth of revenue in both channels with cash margin generation, I would like to say that this biller and this increasing revenue is fully supported by our commercial strategy. And the main driver year, we have to work in the right offers with aggressive prices in order to bring in traffic of customers to our stores to increase the sales conversion rate. And this is also with a significant participation, a significant share of media here. The second driver is focused in a sales mix that will favor the margins to try to offset that strategy of aggressive offers? And there, we are focusing specifically in 2 categories that we understand that we will make a big difference in the results. The first one is furnitures, furniture category, you know, that we of the largest furniture factory in Latin America, and we are the largest retailers of furniture selling in Brazil So we have here an important competitive advantage because most of our products are manufactured in our own stores or in our own factories. And here, we have a significant margin differential. This category we started accelerating since the beginning of the year, and it's already showing an important and positive share contributing to improve our margin. And the 2nd category is home appliances and electronics, and this has an important margin as well. We have a team focused in order to have a greater payment means strategy for all categories of products and price ranges, we want to adjust the installments and credit assignment to each one of these price ranges and category of products. We also are working in a very expedited fashion in order to optimize our relationship with suppliers. We always say that we cannot change the game without working with suppliers. So this is a joint work in our sales planning. So that we can optimize the production cycle in the industry. And a clear understanding of our strategy regarding categories and product mix, and which one of them can bring a competitive advantage to our suppliers. Basically the idea here is to be able to be more competitive. And we have a very low level of stock out, especially in the high turnaround products. We are also realigning incentives for our our sales force. And this is really a realignment. It's not a change. This is a realignment of incentives and this is focused on sales conversion now. And in a product mix that will accelerate our margin in improvement and also financial services and credit operations that are crucial for the company's margins. About the improvement in the operations, which is our 2nd pillar, will be concentrating our efforts in the operating stability of the system in which we have been working since the end of 20 18. This has been very strong in 2018, integration of the platforms. And in the development of new systems, we did have a few problems, as you know, in the operating instability. And the main focus that we have now for the short term is for the company to recover that operating stability, both in our brick and mortar stores as well as in the online. And here, we talked basically about our new system, VMIs, which is our brick and mortar stores operating system. I can tell you that it is already stabilized. The level of operation has improved a lot in the last 45 days. And we are already back fully operating in the system. You remember that we had to remove the long tail operation beginning of the year because of systems instability, but we are back to the long tail again and the system is operating in a stable fashion. With a very positive impact in brick and mortar store sales as well. And we, still have an important front to stabilize our app and also our e commerce platform. I can tell you that in the last 2 weeks, it has already the visibility has already improved a lot we still have an important work to do ahead. I also said that we put together some war rooms to define and to work on those instabilities. And I can already tell you that the BMM stores are operating at a very satisfactory level of stability. And we already see that showing in the store environment as well as, it comes out via our sales force. From all the war rooms that we have created, we have deactivated and we are deactivating this week, 3 of those war rooms. When we deactivated war room, it means that we have reached the level of stability and we were able to address the main problems we had. So the war rooms that we have stabilized were, click and collect fraud and marketplace. So by the end of this week, we will be leaving the war room for these three areas, and we'll be back operating with these systems and the products of vertical. And that means that they are stabilized. The next ones in line that we have to go back to work. And in terms they relate to orders development and freight. We have gone forward on those, but we still have some work to do. And we understand that part of that war room, I believe that in the next 30 days, we'll be able to deactivate. And the remaining will should take up to the end of May. And we still have 3 important war rooms ongoing fully, which One is related to mobile, and that is the stability of our app and the stability of the marketplace platform and also the Mac placed in and out platforms. And these three war rooms will move on for a little longer, but we already have positive signs of important improvements. The 3rd pillar, which is expenses reduction, is fully ongoing. The implementation is expedited. We have done in January all needed adjustments to our back office structure. So this is a stage that is done. We are reviewing the IT contracts, software and other agreements, our legal area is working And our legal platform is working in a stable fashion. We have a lot of efficiency in the process management. And there is a reduction in the new lawsuits. And you remember, this is important in the revenue of the company, and it starts to show important reductions there. And we have another crucial front working on the reduction of the cost of occupation. You're basically the leases of our P and M stores and some PCs as well. And we do have here also expenses to be reduced in consulting services. And finally, I would like to talk about the continuity of our omnichannel strategy. We have concluded our 1st stage of the Alunica. You were with us throughout, last year. And we do have the opportunity to work and to grow a lot and using the information And now our data center is stabilized, and we are ready having more assertiveness in terms of customized offers to our customers and also another front of continuous improvement. We have our MRI to improve our marketing efficiency. We have several learnings that are already bringing positive results to the company and also the use and the improvement of our platform for the app to improve the shopping experience and also sales conversion in the online. The marketplace platform, as I said, we have important steps there. MarketPlace is growing significantly year on year, the platform is already operating in a more stable fashion. We have no products coming name new sellers coming into the platform that's already happening in the much better efficiency. When compared to what we have in the past. And finally, in our omnichannel strategy, we will tackle the 3rd wave of the credit platform and Felipe can give you additional details on that later on. And to conclude, I would like to say that just today, we have announced to the market a few guidance regarding the results we back for 2019. I would like to say that our team is focused, very optimistic. And I can tell you that the team does believe that we can deliver the guidance that we provided today that stays in facts and data and the analysis of all opportunities that we have to implement and also in the execution capacity of our team. So we do, estimated growth in Greek and mortar stores 2 percentage points above inflation, the IDCA. This is an indicator that will accelerate, will increase over a year. We'll have a continuous improvement quarter on quarter. And also here, we expect it to have an expansion of 20% to 25% of the invoice GMV this year. We believe the whole team believes that we will be able to deliver this growth in adjusted EBITDA margin over 3%. Based on the initiatives that I have already mentioned, we already have already worked in at these levels of EBITDA And I believe that we can just go back to delivering results that we have delivered in the past 6% of EBITDA in the year in order to do that. Of course, that will have appeared in the 3rd fourth quarter, a better figure than in this one. And to end our guidance, We have an estimate, to invest between BRL 5156600 1,000,000 of investments this year. And this still stresses the commitment of the company to deliver long term results for the company. So once again before I open the floor to the Q And A session, I would like to stress that we are very optimistic and confident. We believe we will be able to deliver the guidance based on everything that we have analyzed and assessed so far and also in the delivery capacity by the team here. Now I'll turn the floor to a Q And A Could you please ask all your questions at once and wait for the company to answer Good afternoon. This is Venesus. In fact, Thank you for the question. We saw a drop in the gross margin of year on year. Tacted by promotions and also financial products. So how much of the 450 BIPs was due to promotion. How much were the impacts of direct consumer loans and services? And I would like to know your view for 2019. About logistics, adaptation, and legal claims, etcetera. Good afternoon. This isilippo Negro. The first question. Well, there was free components in the reduction of the gross margin. The first one, as you said, yourself, is a reduction of credit assignment So maximizing the cash margin of the company. And because of that, we have this high approval rate that is to say higher than 50%. And when we talk about credit card, it is lower than 20. So I can reduced credit, and at the same time, increase the credit margin cash margin. Credit plus Financial Services is very much linked to credit because it is much better than in the credit operations and in other products and you calculate about 70 basis points in gross margin. So this is the number. So there are many other facts, and we do not give a disclosure for that. So part was due to that, and there is another part that is the inventory reduction. So from 3rd fourth quarter of 2017, you had the situation inventories. And in this year, There was a reduction in the inventory levels. And why do we have this result? The bonuses. So when you buy from suppliers, there is a part of the bonus that is a sellout, and this is allocated to the result So we had the situation regarding bonuses with the impact on the reduction of the bonus margin. This is a one off expense. It's a one off cost. Going back, we started increasing inventory levels when we had the market already improving when we had a perspective of the company where we had a possibility of buying. So we wanted to have more inventory. We wanted to make sure we had enough inventory. So that was something that we needed to do. That was the best option for the company at the time. And then the inventory levels went down, that happens in 2nd fixed costs. So there's Part of that is related to deceased and deceased do have fixed costs. And these fixed costs I apportioned it. I diluted to, according to the volume of merchandise since the fixed cost allocated by product now is higher because I have less products, less merchandised there. And for 2017, products went to inventory. And now since I am destocking this cost turned, and they are showing in the results. So therefore, that also impact stock reduction. So it was something needed for the company. We needed to do that in the long term, and this is something positive regarding a G and A and expenses. Other expenses here, A 551,000,000 ras. So what part of that 74,000,000. I would believe that's 21. So that 74,000,000 coming from the write off assets, software development, and the stores that we have closed and nonperforming stores. And so assets write off and also the sale of 1 or another asset that we ended up selling, Okay? So here we have an accounting write off as well. Okay. We have other another line with related parties, there was an agreement, and we are more efficient in some criteria. That we had here, we had a loss of 82,000,000. I believe this is going to be the last agreement we signed. We are reviewing all topic in the contract. And I don't think there's anything else to be returned here to the client family. And finally, restructuring expenses So up to the third quarter of 2018, we used to close a store or to have an expenses because of the company's restructuring and that expenses would go to other expenses, other operating expenses. So even when people would, so the company only would have legal judicial expenses because of lawsuits that we going through operating expenses in the company where other new sales are administrative. And for us, since these expenses are related to restructuring, they have to go to other expenses and other operating expenses. That's why we did the reclassification in the third quarter. In the year that has no impact. And that's why we are now reclassifying that from the first to third quarter and to the second, to the 4th quarter. Okay. It's very clear. Thank you very much. Mr. Ruben Coutu from Santander has a question. Regarding the expectation or what do you estimate for expenses in 2019? Can you give us more color there? And also I understand that 2018 is over. The focus is on 2019, but can you also give us more color what he happened with the products with merchandise in, the fourth quarter, why didn't it bring sales of Black Friday and Christmas the problems you had have been addressed, do you believe you have a better reaction in the beginning of the year, can you tell us what happened at the end of the year? Should we expect to see something more normalized? Okay. I will address the first part of your question. And Peter will talk about the second part. The first, we are not providing guidance neither net income and not ignore of the other revenues. And this these revenues are part of the EBITDA. On the other hand, if we compare that to the level of results and we go back to make $7,000,000 adjusted EBITDA, we can see that in 2017, we had $340,000,000 that was high in 2018. 551,000,000, also very high. It tends to be reduced for some reasons. And the main one and I think that's 1st the 2 years we had a write off and because of this agreement that we had with the client family, we believe this will no longer be there. 2nd, we had a restructuring expenses. 2015 2016, we had a reduction in the number of personnel in our headcount. And also we from then on, we had expenses in the legal area. And those expenses have been reduced significantly. And we did also have any lawsuits. And we had opportunities to improve them in the company so that these losses won't happen anymore. We don't have any employee suing the company. And therefore, we have a possibility of gains, whether by the new law, by documentation, or how we manage our headcount every day. So if we look ahead, we expect to have a reduction there as well. It's very important to stress of the whole management of the company. And also considering the compensation of the company, all of us have an important KPI here, which is net income. So anything that changes in the company that will affect the net income and also adjusted net income and So we are fully aligned about the margin result of the last quarter. Everybody knows that the last quarter has quite a big, seasonable impact because of Black Friday Christmas and in the brick and mortar stores. We had a black 5 day in terms of sales that was, as we expected. Capital as the margin was lower. So there was a very competitive situation in the market, and this impacted our volume that was concentrated in brick and mortar stores in It was the same level that we expected. This is what I mean. And for 2019, you saw or you heard in my remarks that we radically changed our commercial strategy. That is to say today, our commercial team as a target for sales and for cash margin as well. So we're working with a much more assertive offering policy. And with a focus on products and mix, that is quite different from the one that we had before, So what I can tell you is that the answer is GAS, we are being able to grow our top line with the reconposition of our margin. And what we expect is that we will continue in this direction and, of course, with better results. Thank you very from JP Morgan. I would like to know the evolution of both growth and commercial margin over the 1st 2 months of the year. Can we see some positive change already? And Peter talked about improvement in payment means and the composition of margin products So what about the strategy of AirFox, Fintechs, vis a vis credit? Thank you. I would like to let Felipe answer afterwards about payment means and fintech And I think this is a very timely question because things are going on very well, very evolving quite well. And Philippe will give you details. In relation to the outlook of sales and margin growth. What I can tell you is that in the brick and mortar stores, we have found the path for sales already with better margin results than we had before. So I would say that brick and mortar stores today, we can tell you that we are on the right track we have already found the right track. And we are making the necessary adjustments so that we can have the margin according to what we already see more positive results in the last couple of weeks, and we need a little bit more consistent see in these results so that we made 100% sure that we are on the right track. But our feeling and what we are able to analyze in terms of the evolution already happening in the first 2 weeks of the year is quite positive. So we believe that this path is very promising. And of course, you cannot change the game overnight. So we need consistent deliveries quarter after quarter. So this is our objective, and this is on we're working on that, and we have good expectations regarding this. Good afternoon, Diego. Installment and how we are working with that together with Faisal, the commercial director, commercial officer, We are activating a few things for credit cards in general. We had a more promotion of policy and a lot of non interest bearing installment. And now for each product, we have we are checking now how many installments and after a certain number of installment, then we start to charge interest. So this is the first point. And how to do that without causing an impact on our sales. This is something. And in direct consumer loans, the reiterate rates, we have always worked at a company in a way that my area, credit area, we established the interest rate that we are going to charge and this interest rate as it is distributed, the average weighted interest rate, you ultimately do this distribution and today, the average rate that we have is around 7% per month. And this is for all products end to end with only a little bit or a slight variation between one and the other. Myself is doing the distribution of the 7% with among products that have a higher rate and then the ones that we have a lower rate. So we have a balance in our credit operations. Regarding this strategy for direct consumer loans, what is important about that? Now we are getting into a phase which is very important because we already have automatic credit in a major part of that. And how can we do that without waving the quality of credit So what are we doing? This is a very important initiative at the stores We have a different credit assignment process at the store. In the past, you've got to the store and you had, oh, I want a direct customer loan. And we analyze the credit. And first of the credit, we said, well, okay, we're going to give you credit. And that's all part, we did not assign the credit. And many people were standing in line there for quite a long time. And when they got to their turn, then they didn't have the credits approved. And today we have already changed because the salespeople didn't have stimulus in order to offer directly to our loan. And now you just put there your taxpayer number and immediately you have the result of your credit approval or not. So assertiveness in the credit assignment operations was the person applies is much bigger and this helps the salesperson to make a better offer for credit at the store. So this is very important this year. So we have better credit this way, and we can increase the participation of every consumer loan not waiving the quality of credit. And the second point that is not going to give results as quickly as that is a digital online credit assignment. So we started with a website. And first for our employees, and we always streamline the process and we correct this and that, but it is already on. After our employees, we are going to open this opportunity for the pre approved credit. And then afterwards, in a 3rd stage, we are going to open for the public in general so we can increase the participation of credit operations, which is profitable for the company, not waiving the quality. And luckily, we have pilots in two stores. We have good news about that. People who are to download the app AirFox, and this is very productive for the company. So it is working quite well. We already have the new brand for AirFox. We told you that we were going to change the brand and we will be launching this new Now we are planning the launch of this new brand. Then we will have the prepaid card with AirFox And this week, at the beginning of next week in March, then we will decide about the banner, the flags And this will be very good business for us, and this will help us a lot in terms of growing AirFox. And with funds from Rio Parisio for this growth. Just to follow-up about their folks, do we intend to do a bigger integration with GPA between digital and intact? Do you think they should be totally segregated? Or well, this is a very difficult question. We are always evaluating opportunities so that we may leverage our businesses whenever we see an opportunity regarding synergies or any other opportunity that has to do with the expectations on the part of each one of the companies. And we assess on an ongoing basis, we have not decided anything about that yet. Good afternoon, everybody. Thank you, Felipe, and Teeter. The first question has to do with the 2 categories that you mentioned. Furnitures and home appliances. What is the installed capacity of Akshita In one of our talks in the past, I jotted down that you had almost 100% in thought capacity already. So I don't know whether you're working with products that have a higher margin or whether you want to increase penetration of your sales, and that would mean an increase in CapEx. And your CapEx for production is already at a considerable level. And Peter, what about mobile phones, smartphones. This category is quite profitable and you didn't see anything about that. Is it, was it because there is no big marginal gain or is there an impact of delayed to paying the law of good, as we call it. So what about the evolution of the late domain and the impact on your sales margin? So these are my questions. Thank you. Well, the first one is the following: Natcheera, we are working in 2 shifts And this means that we still have opportunities to increase our production. And the second point is the poly. We have been working in order to have a better strength in the entry level products. And this is fundamental for you to have this build traffic into the stores. And but On the other hand, we are also working with higher ticket. So you have the 2 strategy is going in parallel and we have installed capacity to increase production further. So we do not need any additional CapEx in order to increase production capacity of Achera. What we have in Achera are some investments that are not significant in order to remove bottlenecks in production and in approve operating efficiency and having a better cost, ultimately, but but it is very well operated and the plant has had an incredible improvement in the last couple of years, and this brings us an even bigger competitive advantage So we are very bullish about Bachita. Regarding the smartphones, as you said, this is a category that is already very pervasive, both online and in brick and mortar stores. And now you will see the long of the new product and the whole industry in the next three months will be launching new products. We'll be introducing new products to the market And so we are bullish and we are still very strong in smartphones and we will continue to beat. So this is an clearly important category, plus it gives us very good margins. Regarding the way to be that low, I want to be very clear and transparent. I don't know what you have been hearing in the market, but the labor base, not something that happens automatically. There is an endeavor that is needed in order to transfer it to prices. And we are making strides in this direction, and we are not transferring all of it yet. And I believe that this new moment that the industry is living could savor the acceleration of the inclusion of Leda Bay, the final price of our products, but this takes time. This is not going to be done overnight. Well, this margin did not expand, I understand, because of the Laidu Bay. I don't know whether it is right to imagine that this margin would go down or it is already sold down in the fourth quarter, but it became easier. So I would like to understand it because you said 6% if you adjust. Based on the others, if you take away the adjustments of the other ones, this is a rather modest guidance for your margin. So are you considering an ongoing effect of gross margin with no recovery? Do you see an impact on your gross margin besides the labor impact and what do you see for this first quarter? As I said, There are opportunities ahead of us. And the discussion about the change in prices and the transfer to the margin, you know how it works. If we wish to grow, if we want to increase our market share, there is a balance between what you transfer to the margin and what pressure because of competitive reasons. So we are paying keen attention to that. And this is the challenge that we face. How can we grow sales? And bring margin together with this growth in sales. So it will depend on how the market behaves, how much margin, how much competitiveness. So this is a game that we have to play all the times. Well, the base is quite challenging. And our guidance of 6 percent EBITDA consolidated EBITDA for the year is challenging because you know that, as we said before, there's a growth trend, trend of the EBITDA. Quarter after quarter. In order to get to this average of 6, we have to accelerate in the 3rd 4th quarter, but This is a challenge that we discuss a lot about internally and our team is very comfortable with the fact that we have so many initiatives in place and so many actions that it makes us comfortable in terms of delivering the 6% but the base is not easy and the challenge is not easy. This is a big challenge, but we will deliver Certainly. It's Fazondes from Bradesco BBI. Taking my question. I would like to have a follow-up regarding the online. Can you go into details there, please? It's about, the main bottlenecks that you find and, which are your priorities in this channel. I think we see a lot happening at same time. You have the stability of the system, the competitiveness, the changes regarding freight, the rollout of the full commerce. So if you can tell us in your opinion, what was the main bottleneck for you at the end of the year, and what are your priorities for 2019 that would make make it much more clear for us And, second, about a comment made by Peter in the beginning, the focus on media Should we expect any changes in the marketing policies of the company and its specific focus on any specific channel or commercial strategy or something related to the app. So if you can tell us anything on that, that would be great as well. Thanks. Thank you, Pedro, for your questions. So first question, the main bottleneck, well, we had 2 important impacts at the end of the year in the online. And we started the year with these same two bottlenecks having a significant impact on sales. The first one was a stock out. We ended the year and it started the year with a high level of stock count. And that has held back sales. And we reduced the stockholders by AF, this that we had in the beginning of the year, and we are still reducing it. This is an internal work of category management, and focus on the commercial strategy that is which are the products that I will, have offers, which prices, I will with just price which products I would have just prices and so on. So this work is going forward. We back to that in the beginning of March, we have that level of stock out addressed at the levels that we need to expedite sales. So this is the 1st bottleneck. And by the beginning of next month, it will be fully addressed. There are no risks of not solving it. And this has an important significant impact in the second. You will set operating stability broadening and functionality of the app. You know that we launched the app in the second half of last year, This was a better version launched. It did have many improvements to be applied It was very difficult. You know, your clients, you navigate in our app, you know, some of the problems that we had. The app is not 100% at the level that we wish to be, but it has improved a lot So I would say that both the app as well as the stability of the platform of the e Commerce also have affected our performance in the online channel. And here in the second part, we are going very well with some things that we have implemented, the whole company is focused on solving that, not only IT, it also involves business areas that are crucial so that we can accelerate the solution, the returns and the adjustments that we needed in the system, And we have a positive expectation, thanks to the progress that we had in the past 5 weeks. Therefore, I believe that as soon as we address stock outs and we go forward in the shopping experience for our customers, And we stabilize our platforms. I believe that the conversion rate will increase a lot. We do have a great expectation there, but there is a lot of work to be done, a huge work to be done, but we have been able to move on to move forward. And second, about marketing The marketing strategy, we have our marketing strategy for V and M and for all and of course, omni channel strategy as well. And that affected directly the brick and mortar sales, but also has a positive impact in the online sales, we have been we are being more aggressive and more assertive. We have to find an agenda for our promotions that have a visibility more on in the long term so that we can buy the merchandise, supply the stores, and put together communication plan that is more assertive than what we were doing. And it a media that has more to do with point of view in Casa's Bayou adjusted to each one of the channels. It has been very positive we have an important hard sell every month. And the first one we have done with a positive impact, both in sales, as well as in cash, March, So we are, changing. We are on track to change. In the online, we have learned a lot over the last year. The team is much more structured this year so that we can have that media directing in a more assertive, assertive fashion in a different media that we have. And the search engines and also conversion. And we are learning a lot, and we are learning fast. So we have no expectation to a reduced marketing. We want to increase sales. And we have to have the best use of our marketing budget to support that sales growth and also a better return or or bringing back more our customers to stores and to the online channel. Okay. Follow-up on the online, please. I would like to hear from you, Peter. Do you believe that the lack of personnel or maybe a lack of talent in the IT area is something that the company facing today, whether, developers or product developers, that type of professional do you what do you think? Well, talent is never enough, right? We always have to improve the quality of the team. We are not lacking talents. I believe that we do have a great team. But what happened? And we have already talked about this. We did have significant volume of systems integration as well as development of forms integrating that to our legacy system. And we did have several interferences in our legacy system, and because of that, we actually have problems and the talents and people that know about it, they are in house. So we have concentrated, as I said, and some skilled people technically is skilled people, people that really have knowledge about technology and product. And we brought together our business team so that we could expedite all adjustments that need to be made and the results are there. And this is focused focus on the main problems that we have on the main opportunities of development that we have. The result is very positive. The way that we are working has been effective. And as I said, I expect that we will see if that war room system of working and go to the product systems of working. And that will not take long. It will become more productive. It will happen in the first half of the year so that in the second half of the year, we are already in the vertical of the product and we'll have our platforms stabilized bringing better results. Good afternoon, Felipe and Peter. And this change that you have made, this accounting change of transferring these expenses regarding, restructuring and to the non operating, so there is impact of BRL400 and something million for 2018. What was the impact of this line specifically? How much did you take away from this space? And increase your margin in 2018 because of that difference because of that change. Good afternoon, Tobias. What we can see is 9 months. Looking at page number 7, I can see 9 months of 2018, and we had BRL168 1,000,000. And we do not break it down for the fourth quarter. And this is already something that's recurring in the company. But I can tell you that 9 months, I have been 68,000,000, but just to make it clear, there's 168,000,000 was just regarding reclassification, something that was been for under SG And A and people that you had to lay out. And now you transfer that's another line. Is that it? Yes. So my question is, we are looking at a guidance of 6% for If the reference is 2017, you had a margin of 6%, but you had a gross margin of 32% and now you have a gross margin of 29. So my question is, is 6% let's say that we had in 2017 that cannot be compared to what we have now, right? And also considering this reclassification that you had. And if we had that in 2017, probably your margin would have been much higher, right? So it looks like the margin is improving. As you said, sales are improving. Margins improving as well, but believing and checking that reference in 2017. That you have a margin that is the 300bps lower And then your that difference will have to come from expenses. We will have to wait for or to affect big performance on expenses. Is that right? Well, it's partially right. But yes, you're right, Tobias, you heard me saying that we have several fronts, several initiatives to bring down expenses. And yes, we do need to bring down expenses in the company, you know, that we believe that expenses, I have always to be analyzed, to be assessed and optimized as much as possible. And as I said, in my opening remarks, yes, we will be optimizing expenses but it cannot affect sales level of service and the experience of our customers and the stores and the online other than that, yes, we'll be concentrating in reducing expenses. And do you have the reclassification impact for 2017 Yes. We do. But we can tell you right now. We don't know it right now. I can tell you later if you want. I think maybe we have that in the explanation note. Just one second. That's fine. I'll check it later. That's okay. No problem. Okay, okay, Talia. So Felipe can send that information to you later on, okay? Thank you. Thiago Bottoluci from Goldman Sachs. Good afternoon, everyone. We have two questions here. The first one, as Tobias mentioned, has to do with seasonality over 2019. You mentioned that our guidance was a significant improvement in the margin throughout the year. Should we then expect a gradual improvement quarter on quarter or more concentrated in the second half of the year benefiting from the comp that you will have ahead. And you're still talking about guidance. My second question is if you will have a number regarding the impact of the IFRS 16. Thank you. Thiago, this is Peter. About the results improvement, yes, it was going to be quarter on quarter gradual. But as you know, the last quarter for retail is a quarter where we have the greatest seasonality. It's a very important quarter. And we have at least 1 third of the results of the year concentrated in the last quarter. That's what we usually have. So the fourth quarter is extremely important in our strategy, but you will also be able to see a gradual improvement quarter on quarter. In the explanation note Tiago, we also have the impacts of the IFRS 16. I'm looking for this note here. Is Page 17 of the quarterly reports, 37, 38 of the quarterly return. Just confirming, it's not in the guidance for 2019. Right? No. Our guidance is of revenue, EBITDA and for CapEx, that's on. EBITDA under the current criteria, we are not considering IFRS, okay, 16. Thank you. I would like to turn the floor back to the company for their final remarks. I would like to thank you all for being with us once again. Thank you for the questions you asked. And I would like to stress that we are very optimistic about Brazil in 2019 in order also to deliver the results that we expect to deliver. I'm sure that an important part of it will be related to our execution capacity and also our capacity to look for all the opportunities that we have on our hands so that we really have these results, but we also expect that Brazil in 2019 is much better than it was in 20 saying, we are very bullish, and we are very confident about delivering the guidance that we have just announced. Thank you very much. Conference call for the results of Via Varejo has ended the IR department is available to address any other questions you might have. Thank you very much for your participation and have a nice afternoon.