Earnings Call: Q3 2017

Oct 26, 2017

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Via Badillo Conference Call to discuss the results for the third quarter of 2017. This event is also being broadcast via webcast. At the address www.dhabarejo.com. Pr/ir where you will find the respective presentation. The slide selection may be managed by you. There will be a replay of this call right after it's finished. We inform that the company's press release is also available at the participants will be in a listen only mode during the company's presentation. There will be a question and answer session when further instructions will be given. Before proceeding, we should mention that forward looking statements made during this conference call about Via Varejo Business Perspective as well as operating and financial forecasted and targets are based on the beliefs and assumptions of Via Varejo Management and on information currently available. Forward looking statements are not a 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 in the future. Investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of Via Varejo and could cause results to differ materially from those expressed in such forward looking statements. Now I would like to turn the floor to Mr. Peter Esterman, CEO of the company. Good morning, everyone. Thank you very much for being reserved in this call for the third quarter. I would like to mention that we have our officers here, Filip Negron CFO. Paulo Neliato, executive officer for operations. Also Victor Fagan, for BU Furniture Marcello Lopez, our officer for our supply chain and logistics, and also Our sustainability officer. Also, with us. Our IR Officer. Well, in addition, to mentioning the highlights of this quarter, we also want to dedicate some time to talk about our plans for the future. And also about the projects that we have for 2018. These projects will be crucial to pave the our path ahead. In the next few years, we have ended the quarter with operating indicators, and that's all the financial indicators presenting a sound and significant performance, both vis a vis the prior quarters as well as visavis the same period of 2016. We understand that this is crucial to bring even more trust in our teams. And we understand that we are on the right track and that everything that we are doing has a direct effect on the results as well as in the satisfaction of alcohol customers. We also understand that there is a positive point for the market because we have been able to deliver everything that we commit to delivering. Philippina Gao shortly, we'll talk more about the figures and the main financial highlights of the company. I think we'll spend around 20 to 25 minutes at the most. To tell you everything that we want to bring to you and then we'll start a Q And A session. So about the results that we have today, I should highlight 4 main topics. The first one is that we had strong growth in same store sales, 18.6 percent consolidated vis a vis the market that according IVGE is growing around the 9th 12% depending on the market segment. Also, we have had an expansion of the growth online GMV with margin expansion. So it's a market that according to EBIT is growing at 9 point 4%. And our consolidated EBITDA margin was 6.1%, also with an expansion both vis a vis the prior quarters as well as when compared to 2016. About the comments on the third quarter, I would like to highlight that in the online, we are still growing with a positive EBITDA margin consistently. Now I would like to know a little bit about the projects that we have concluded year and that we will still conclude within 2017. That is in the next few months. The first one is the conclusion of Mavi 1.0 rolling out. Here, we highlight important advancements and much better than the ones that we had planned. Before. Just to give you a few examples, we have met our sales goals that were very aggressive in the 6th 9 months of this year. And last year, that percentage was very low. Also, 40% of stores in the beginning of this year have reached around 90% to 110% of sales targets. And that percentage is already over 73% now in August. We left a level of only 45 percent of our sales persons meeting the target. And now we are in August at 65% of that. All of that brought about our brick and mortar stores conversion of sales rate. With over 20%. The version of Mavi 2.0 that we have been testing for the next, for the last 2 months in 40 stores and it's it's going to be rolled out for over fifty stores with up to December of this year. And this is going very well. The other stores to complete our total stores of 966 stores, we will be concluded up to April of next year. Will make available for our sales team additional tools that will benefit first our customers by having assertive sales, both by the supply of the right product and that fits exactly what the customer wants and also supplying the what is the best product that will adjust it to the payment the the type of payments that our customers need will have a sales team that will help customers to make the right sales those can be more profitable and also we'll be able to expedite sales this way. And finally, that's going to benefit the company that when defining a commercial strategy that is more competitive, we will be able to stress that model that we call when, when, when, generating better results for customers, employees, as well having happier shareholders. We have great expectations, very positive ones about this new model. The second topic are our 51 premium stores that still have a very positive performance, both in growth as well as in profitability. For the first half of next year, we are going to increase the number of stores under that model. We have already mapped over 49 store that have the profile, to be managed under that concept, the click and collect or Hichirahap, that is growing in a consistent manner, expanding the share of online sales. And in September, we reached over 27% ineligible products we have done over 32% in the same month. We concluded the 1st stage of adjustments in our marketplace platform. And from now on, we have 3800 sellers and 1,500,000 SKUs. This is ready to redain growth with quality and service levels as our customers deserve. And finally, we are harvesting the fruits of all initiatives and all task forces that we have developed to work on the 1st 9 months of this year in order to improve the service level for our customers. Just to give you a few examples, the number of complaints in the has dropped in over 50% and is still improving month after month since January. The NPS for brand for the company has improved significantly as well, reaching 62% in September and the NPS for product delivery to customers is already higher than 76%. All of that shows that it is possible to reach the excellence level. Now I will tell you a little bit about the projects that are going to sustain our growth in the next few months. And that will also be the support for our competitive advantages. Those projects are part of what we call the transformation of Via Varejo. The first of them is the growth of our marketplace platform. Using our full commerce model in 2018, we'll be offering in addition to our online sales channels to consumers or or to sellers, we'll have available 1000 stores for the Hichidaha door click and collect will be enabled to have available all our logistics platform, which is extremely competitive, both in cost as well as in service levels. And our payment means of credit, market intelligence, the strength of our brand will be available for our marketplace sellers, and we will have the opportunity to talk more about the subject in the next corporate events that we'll have this year. And the project that we called Via Unica that we are developing with Accenture is already going to its 2nd stage. The first stage of 3 months, we had a lot of work and it was characterized by the mapping of all customers and all transactions in all our channels in order to define our strategy based on big data and the use of tools of advanced analytics. All of that is going to allow us to have greater sales conversion, better acquisition costs, as well as an improvement in the loyalty level of our customers. We will also have the opportunity to talk more about that in our corporate event. Finally, in January, this new sales platform for brick and mortar stores will be an important landmark for the company. That platform is already in its final test stage and it will allow us to have significant advancements and the relationship with our in all their journey with us. And to conclude, I would like to communicate that we have approved with the Board of Directors. The expansion plan for brick and mortar stores for 2018, we are going to grow and have 70 and 80 extra stores next year. And we have also approved the transformation and innovation strategy that will support our expansion in the next to 3 years. The final figures for these approved plans are being detail, especially the CapEx involved, and that budget will be approved by the end of the year. So now I turn the floor to Felipe, who is going to talk more about our financial results. Good morning, everyone. Thank you very much for being with us. So let's start talking about the results and business perspective on Slide number 3. We had growth and gain of more share both in the brick and mortar market as well as on the online. In the brick and mortar, we had a growth in the same store sales of 18.6%. And the online, we had growth of gross GMV of 24.4 percent with a positive EBITDA. All categories in this quarter had growth, something that we did not see since the first quarter of 2014. The Click and Collect and Hichira Hapadu has reached 27% of the eligible products online. Which is important to have happier and more loyal customers, also lower logistics costs and services efficiency, much greater Therefore, the transaction is much more profitable than a transaction of a pure play of e Commerce. The development of the online and brick and mortar stores activity integrations along with the effect of operating leverage reducing SG and A has resulted in a significant improvement in the EBITDA margin reaching 6.1%. The net income was BRL40 million, visa via pro form a net loss of BRL156 1,000,000 in the same period of last year. On slide number 4, we have ended the third quarter of 'seventeen with a high gain of market share. Growth in the same store sales for brick and mortar stores of 18.6% and growth GMV of 24.4 percent. But the beauty of these figures is not only in the growth We have grown and we have improved the profitability and we have improved customer satisfaction. Looking ahead, we have several projects that aim to increase the competitiveness of the company. And they may be translated in greater margins and or greater commercial aggressiveness. As Peter has mentioned, among those, We have the original pricing and a new model of compensation for us. Hails persons. On the online channel, we still have our strategy of optimizing our marketplace platform, in order to stress our partnership with the main sellers that are in line with our brand strategy as well as with the purchasing experience that we want to promote in our website. In 2018, we will offer our sellers and our consumer our full commerce. That is our brick and mortar and online stores, our logistics network, and our financial services. We have ended the quarter with 966 stores as Peter has said. We have had the approval, by the board of directors, the plan to open new stores. It's still this year, we will opened some smart stores. And in 2018, we'll be opening at least 7 stores. On slide number 5, We have ended the third quarter of 'seventeen with an adjusted gross margin of 32.8% and SG and A of 27.1 percent of net revenue, resulting in an EBITDA margin of 6.1 percent, an improvement of 195 basis points fees us in the same period of last year. Our projects and the operating leverage of the SG and A will allow us to increase the company maintains its own financial position resulting from a high cash generation and excellent management of the working capital. The adjusted net cash grew R665 1,000,000 totaling 1,800,000,000. It's important to mention that we chose to work with higher levels of inventory until the end of the year so that we can be well prepared for a good sales scenario in the next few months. But it does a higher level of inventory will not have cash effect once the suppliers are financing our inventories. The financial results before monetary statements has improved in 230 basis points thanks to better net cash and lower CDI. The net income of the company was positive BRL14 million visavis a pro form a loss of BRL156 1,000,000 in the same period of 2016. So now I will open, for the Q and A session. We now open the Q and A session. We would like to ask press star 1. Mr. Thiago from Itau BBA would like to ask a question. Good morning. About what you mentioned in the regional pricing, I would like to better understand where you are at in this project. I understand that you will have a special price, but what type of benefits have you been able to with that and what we can expect for the next quarters as a consequence of the implementation of this project. Can we say that this is going to have a positive impact in the gross margin in the short term. And the second question is that I am aware, I'm impressed with your click and collect or 22% or right? So what can you generate in terms of value when the customer goes to the store to pick up merchandise, can you give us an estimate of services, additional service penetration? What can you sell to those customers when they go to the store to pick up a product. These are my two questions. Thank you. Thiago, thank you very much for your question. About the platform for pricing. The main competitive advantage here and that we are already starting to use in this platform is that we are able to price for micro region Actually, today, we already can see this pricing process per store. It's not only per store because we analyze the competitive market around a group of stores. And then we can have a very assertive direction of our products per category. And, also, we are able to price those products to compete specifically specifically in that micro region, very different from what we were doing so far, which was to price it all over Brazil. Therefore, we can adjust ourselves faster to the competitive market on a daily basis and also we can have the right price for each micro region. We expect that according to what we have seen, to have a significant impact in the margin of the company and the results. I cannot give you figures yet. About this because since we are in the first quarter of this process roll out, I would not like to say anything. Anything right now, but I can tell you that the results are positive and striking. And now about your click and collect question, as well as services, penetration upsell and cross sell. I can tell you that we are in an initial stage. We have rolled out in all our stores that that process. Since February, we are concentrating our efforts right now in order that we make available in the hit you to happy do. So this first stage is going very well as you were able to see by our figures. And so now we start also expediting the process. Because of our new compensation model for sales persons. So we are able to encourage in a very much directed manner our sales team to do upsell cross sell and sales of services. So I would say that in the click and collect, we are in a consistent stage in terms of getting the right products that are eligible for that modem that customers like to pick them up at the store. And by this mode, we are able to have a significant gain in terms of logistics costs and also service level for customers because probably you have my you probably saw that in the collection collect, we are able to do deliveries within 48 hours and sometimes even on the same day in Chicago, 2 comments on services. First, not long ago, we had a redistribution to sell services to that multichannel client, the the click and collect, because we have partners in the e commerce, and also we have other partners in the brick and mortar stores. And then we would have a problem of exclusivity because I would not be able to provide those services. And now we solved the problem. We don't have that issue anymore. We are able to sell. So this is the first topic set, and I I think it's important to stressed that the services share on the online channel is low. It's going to increase, but that's not something that is going to increase to significantly because I have to change that transaction into a quick transaction in the e commerce. I cannot lose the customer in the middle of the day. Of course, we do have opportunities. It's going to improve, but that's not something too significant. But in the brick and mortar stores, that share is very high. So anything that I do, you know, since it's if I bring that online customer to the brick and mortar store. And if I can do anything or, you know, improve sales there, that is significant then. Then we have to have that in mind. Okay, excellent. Thank you very much for your answers. Next question is from Robert Ford from Bank of America. Thank you very much. Good morning, everyone, and congratulations on your results. Can you comment about the furniture growth? You had growth for Furniture, but this third quarter, it seems to be very high growth in furniture. Right? Thank you very much for your question. I will turn that question to Victor because he's responsible for the furniture view. Hello, Bob? Well, addressing your question. What have we seen is that this category is recovering itself. Whether by a recent recovery of the market, but also because some actions that we have rolled out in the company. Among those actions, I should highlight 4 of them. So over the year, we implemented a new standard model for furniture sales that involves adjusting the team, having, campaigns, training, and also review our samples and store layout and in order to have a better sales service. And also important is the development of new products. We have improved the design. We are trying to have also an accessible design to everyone. And so far, we tried to launch 70 new products that are much more in line to our consumers' desires. We also have communication process that we changed, not only integrating offline marketing, but also digital marketing, the marketing 360 but also directed to our consumer. But especially creating some seasonal events, such as furniture festivals, we already have 3, along the year, we'll have another one, and that is helping us not only to bring to the consumer new launches, but also having here that is or either Casa Baya or Punco Prio as a destination point, a reference for the furniture category. And finally, integration, of the whole process, that commercial process, the retail and production, allocating more profitable products to our production, and also having a partnership with several other manufacturers to then have the products that Bartsila cannot supply us about the growth. It's important to see that in the last months, the market is changing, especially for Furniture. That's a category that did not perform well in the past years because of the crisis and now we see a change in the trends in the last few months. And so we we are taking these actions to be able to take advantage of that and leverage even more the results. And right now, of course, looking for a wide combination of growth and profitability in this category. And how do you position yourself with the competition? Do you have working capital, enrollment in the stores. So how how does it work? Yes. True. We have a higher margin in this category, but it has a greater added value. We could see this as an opportunity to differentiate ourselves from the competitors. This is the category, which we have to be careful with the assembly, delivery, These are services which we could render and we can be different from our competitors, but we must not forget online. Services. This is something recently, but recent in online, and we have a great opportunity. Online. So this is one of the drivers of the activities which we are carrying out at the moment. We have a project of changing things online and making it adapting it to furniture. And we have had positive results. We want to bring the con furniture consumer to a special service And in the fourth quarter of 2017, we will do more of this and will help us to make the best of the opportunities of growth in this market. Mr. Richard Gertad from Bradesco has a question. Good morning. I would like to repeat a question which I asked 3 months ago. When I was talking about the online channel, it's gone up, yes, but it's still below your competitor's level. So perhaps Flavio could talk about this. What? If this rate is going to improve and the marketing that you have to do in the next months to improve things? And another question about the click and collect, I think. Most of the click and collect is available and 24 hours. And, some stores are quantity of 48 hours. Could you make it 24? This is Flavio speaking. Good morning to everyone that harris harris is. You're right, Richard. We still have a lot to do to improve our client service, but it's worthwhile recognizing the size of what we have already done. The rates, which are shown here, contain a consolidated position for 12 months. So we still carry over in these rates. We still have some months from last year, this year when we were in an initial phase of the task force that we had to improve our rates. If you look at all the banners, we have all the banners at good or excellent. There is there are no more regulars. So for some time now, we have had a well recognized position by our client with the numbers that Peter has already mentioned, which and complaints have been reduced 50%. And it's very important to know whether things are delivered on time and complaints in general. All these rates have had a very significant improvement, and they are already rates comparable or better than the March benchmarks of the segment. This assures us, therefore, that this and this action of them will continue to improve. We have still to improve. We still have room for improvement. We have an important project coming in in the next few weeks, which will automate the electronic service via telephone and the implementation of an automatic service, we'll talk about that at our corporate events, but it is a very good project which will expedite, client service even more. And we are also investing in our website using an artificial intelligence from IBM to serve our clients. And we also believe that this will grow and bring greater advantages. Another thing connected to your second question to improve our client service is the growth of the click and carry. The planned satisfaction of the check that Gary is will improve even more. And the term that we offer today has a chance of being quicker. We have 2 modalities. 1st, the client can take a product from the store, which is in inventory. So the process can happen even the same day that he made the purchase. And the second case is when the product is not an inventory, but we go for it. So there, it takes a bit longer up to 48 hours. And there is a general movement in the company to increase the quantity and participation of sales of this 1st modality more. That is of the project in inventory. And this movement involves people from all areas. And basically, we are giving more intelligence or dynamic movements and will bring about the opportunity of sending a greater share of products as well that are already in inventory. This will happen, and we are working hard on this because the greater the share better our service and the better the satisfaction of the plan. Mr. Tobias Itineris from Credit Suisse has a question. It's a question to Flavio. I would like to know about that process of integration, the alteration of e Commerce it continues to grow, but what are you doing? Are you investing in technology and 1000 incentives, unifying the company for the service. So could you elaborate on that, please. You're right. We have done a lot in the process of integration. We have mentioned this in other calls, and the speeds with which we managed to do this integration and how it reflected on operating quality and the quality of our figures. Is very clear in all our financial statements that we shared with you. This integration process is now entering a final phase and this final phase will be characterized by the technological issues and the fiscal issue. By the next semester around April or so, we will already have this process integrated and complete, we are not going to do a big bang of integration. As from February, we will start a continuous migration migration just complete in the 1st 2 or 3 months of the year. As a technological platform and fiscal issues. But regardless, we still managed to gain a lot of operational synergy. And this is reflected in the case in the cross of logistics, of delivery, of inventory, but we have not yet finished this systemic integration. What exactly is it? It is to it will help us to expand our capabilities. Of the quick and carry, the faster sale turnover of the inventory and marketplace. For all our stores, the famous infinite corridor, the many stores to receive all the products that perhaps the client might want to return, and he can go to the store and return them. And several other kinds of multichannel that we have not yet done. But as from the beginning of the year, this will all be released and we're working very hard to be able to do this. And Peter also said to you, about our ambition and the size of the investments that we are making in technology and the via Unica project that we are doing together with Accenture. This will inject very quickly and has already started doing this. And now on the 2nd phase where we have a greater possibility of injecting capability, analytic and CRM, which will make very, many people quickly increase the efficiency of all our efforts. Both media and conversion in our channels, bringing about more segmented experiences or even customized 1 to 1. We continue to have our agenda with Watson, which is a tool that will help us both in our sales process and service in the sales process we have a pilot already running. And in point of view, for the sale of smartphones, where the service is 100% by IBM Watson. And with cognitive identification and based on questions and answers indicates the best product for that particular client. So as Peter has said, we will be able to sit down with you and show you these projects in greater depth very soon. And I'm sure that you will see that there are some wonderful things about to happen. Peter, what would you be investing next year? You talked about several projects and marketing, etcetera, and investing in technology. And what about CapEx? Tobias, we are just finishing the numbers. Obviously, the investor will be great. Greater, greater than what we are doing this year. We have not yet approved these final numbers we will be approving this by the end of the year with the 2018 budget, and we will communicate this to you. But we are very optimistic regarding what we have to do. And on the other hand, you have this challenge of investment that we have also represents a huge increase of profitability. For our team because if you have integrated 70 stores and all the fronts of improvement in our stores will demand from our team concentration and dedication. And we will continue to do what we have done up to now to deliver what we have promised to deliver. I would say that our execution challenge continues and will continue very strongly next year. But as we have shown up to now, we are We trust that we will deliver still a lot during the first half of next This is Edmund Sakh from Goldman Sachs has a question. Good morning. I have two questions. First to Flavio. About the full commerce model. What are you thinking about? The benefits and the economics of this project. Are you going to absorb the incremental costs? And focus in bringing the maximum of sellers from marketplace to this model Or are you going to try and increase the take rate? So I'd like to know what your strategy will be. If you could elaborate on this, especially about the costs and attracting the sellers. And the profitability of the operation. The second question is about regional pricing. I think it's a very good idea. It's great that you have this possibility to do the pricing by micro region, but My problem is how this is going to be married to your online strategy. The prices in the store generally are higher than they online. So how as you're going to offer products online, more and more? There will be no migration and obligation of having a convergence between online prices and store prices. This is Fabio speaking. We will be acting aggressively on this, but our basic assumption is to do this sustainably. We believe that we have a series of exclusive assets to Villa Varezzo Via Varezzo, and which today only for our clients, and we must and we should use these assets to generate value for the sellers. In a way, we will try to modularize this service And on a service menu, it will be possible to choose what you want. Are you going to just use inventory or inventory plus, transport or whatever. There are several other compliments that we are putting in our value statement proposal that will differentiate things that are on the market now. And, obviously, what we are going to charge, this seller will be associated to the amount of services that has chosen, always in a way that the seller sees value So we, on our side, will try and make our assets more profitable. We bring value to the bottom line, and also that the seller realizes that if he, carries out these services with another company. They won't have the same value as with the variation. And therefore, we think it would be a conjunction the charge will be according to the services chosen. So we will have this as a strategy and and next year, put it into practice. Thank you for questions. Regarding the regional pricing. I would like to say that this tool today is already implemented growth for the brick and mortar stores and online. The team that deals with this is, T2 channels at once and has a very good interface with our commercial area activating products so that we have the best balance between the online prices and the offline prices. Today, we already know, and we know clearly what the categories are that tend to be better on one channel or the other. And likely kick and carry and say, this has become even more evident just to remind you, we have been working hard in reducing distance between the online prices and the brick and mortar. Ever since we integrated the companies, we've been doing this. And today, we have already different prices between online and off off line, which are very healthy. And just a year ago was not so. Today, we have through the price pricing on a Soul platform, We have price levels, which will allow us to live harmoniously with the two channels. The difference between the two channels has been reduced significantly. And today, I think we are at a very good level regarding price difference, and we are competitive on both channels and no cannibalism, quite the opposite. And you can see this from our earnings. We sell on both channels. Gustavo Oliveira from BTS has a question. I think in the first quarter, you said that you were holding back the growth of sellers in the marketplace to adjust the service level quality. Had this has this been done? Or How quickly can you do this? Oh, you have to wait till next year. And I know that other competitors are growing, maybe a 1000 sellers per semester. And so I'd like you to talk about this growth, please. Thank you, Gustavo. In fact, that phase that we commented about if we managed to improve the quality of our sellers' base, it would be great. We've already done that. We have chosen the deteriorating, but our intention is also always to help them to overcome their difficulties. We don't wanna get rid of them. We want them to improve. But unfortunately, even with the support we offer, is it possible to do this? So the cleanup that we did was of these cases where we couldn't do anything, but we have success stories where we have been together with the sellers been able to revert a position of poor quality. We have a much more healthy basis And this is reflected on all the operating and measures And contrary to what some people imagine, this does not mean a sales reduction of our marketing but it's not channeled. It is growing in sales. And So with, approval, so we continue to focus on having more and more offers for the clients, but not necessarily more sellers. So we're not really concerned if we have an extra 1000 or 5000 or 200 sellers. I'm not our concern is to a portfolio growth that makes sense for our clients. And that this pro portfolio be delivered with quality. So there's no point putting on the 25th seller selling the same products, what value added in secret to offer, but it is important that we have another product that we don't yet have and make sure that this product will be delivered according to our quality standards. So we want to maintain this service level. We want to maintain this expansion with the quality of, selection and assortment. And strengthen this process because besides supporting people today with information, and management, we can also support with our assets, our good delivery, our good storage, good services, etcetera. So we think that this expansion will grow with quality So there's no euphoria or no excessive enthusiasm about putting the maximum number of sellers a month, which some of the competitors have done. I'll have one more question regarding the plan of of store stores. You're gonna put in 70 eight stores. What brand will it be? Can I ask this by year or point of view? Well, as Peter has said, we're going to expand both brands. Today, we have extremely detailed studies, which show us that both these brands are very strong. And these brands compliment one another. So what would be the rule in our competitive scenario? We're going to expand both brands, both in we can still have an impact also expanding in shopping malls and the models of what we're going to do start off very closely to the Casa's Bahir brand and the point of Peru. Mr. Gilaire Viacis from Brazil Plural has a question. Thank you for I would like to know more about this expansion plan. If you could give us more information, you talked about internal surveys, which validate the numbers. Well, how do you see the kind of store that you're going to open. Will there be different from the current model? Or for different public or regional opportunities that you could go after. And so in sum, what is your plan for integration with online? Is there any model which might bring an advantage? And if the in this plan you How you will do this? Thank you, Guilherme for your question. First, Regarding the store expansion, all these stores will come about with a different concept from the concept of the stores that we have today. They are stores, which size wise, are smaller than the average that we have today, they will be according to the smart concept. Just have they will have more technology. They will be much more in interconnected to online. But in the agreements that we are writing in terms of these new stores, We will also have everything will be expanded to our current stores. So we will have a strong movement of coming in with these new stores, integrated with online with and physical space and occupation and high activity and less inventory. So In the smart concept, we have 3 sizes of stores, 500 square meters, those between 50700 and those stores up to a 1000 square meters. And we also identify Which store, what size we need? Besides these models, with these three sizes that I mentioned. We will be also inaugurating this year. The project is on track. First. Digital store for furniture. It will be a laboratory to produce on a technology And also the scientists, we will start testing this year some kiosk stores. So that we can occupy this space and mark our presence in some areas where we think there is an opportunity of having greater contact, small kiosks of 15.40 square meters, and which will make our presence more felt in test new entrance entances into smaller markets. So the survey was exactly this, and we presented this to the board. And hopefully it'll start to the beginning ofnextyear. And we will have 8 Bismarck stores, 1 digital, and the kiosks. We will start as well. So I'm very confident about this plan. We are much better prepared to understand the model of the store we need in the future and how will these stores be integrated with the multi channel words? Okay, Peter. Just to make it clear, please, so within those seventy eight stores for the next year that you have proposed to the board. That includes the Smart Stores kiosks also. And that includes some traditional stores. How is that? What is the breakdown there? Well, that's a good question. That's not included kiosk. That is in a different plan. It has 1 digital store and eventually during this year, the year, we can have another one in another region. As I said before, we could have 2 digital stores and the other stores, all of them will be under the smart concept in the in the all the channels. So I just would like to add it to this when you asked if we need more logistics infrastructure for that? And the answer is no, because we have rolled out a lot of efficiency in the last few months. We have productivity that we were able to place the DCs and also the improvement in the logistics work efficiency. We are ready to meet that volume for the new stores. What's the efficiency with the structure that we have today? Thank you, Peter. Now just one final question then about The furniture category, which was a highlight, as you mentioned. And we see that really that is improving. You have new competitive advantage with Bartietta and new lines, as you said, So you have new products there. So can we separate the margin gain? What was that contribution? Because Furniture has an interesting margin for you, right? So can we know what was the gross margin gain for Furniture alone? Do you have any idea of that? Can you comment on it? Guilherme, this is a piece of information that we have not published and neither talked about because that is really part of our category strategy. You know, that the furniture share of the avagao sales, that is very significant. We really had better performance, more worse performance than the competition because of that bad performance in the furniture BU. And as you know, this category is the one that suffers the most that the crisis comes up And, also, this is the category that has a greater leverage potential when the crisis is over. So we understand that the furniture BU is extremely important and significant for Via Varejo. We took advantage of this crisis period of this difficulty to improve all our internal processes, both for sales forces in Albert And Mortar stores as well as in the understanding. And also going into the details of what we need to be more competitive and to have a greater presence in the online world and also placing Marquera and a different production process improving productivity as well as cost. So I would say that we are very optimistic for about this, about this new project. We hope that the market it shows improvement signs and really improves in the short term. And then we are sure that Via Varejo will be at a very special situation, vis a vis our competition, considering furniture is the category that has the greater share in the company. We now end our Q and A session. I would like to turn the floor back to the company for your final remarks. Well, I just would like to thank you all for participating on another conference call. I also would like to thank the team that is here with me for all their hard work the commitment with the results that we have been able to deliver. And also, I should say that we are very confident. We know that we can continue delivering the results we are delivering. And especially preparing ourselves to continue having that force and that rolling out capacity that Via Varejo has. This is a competitive advantage in our industry. Thank you very much. The conference call for the results of Via Varejo is concluded. The IR department is available to address any other questions you might have. Thank you very much for your participation, and have a nice day.