Good afternoon, and thank you for waiting. Welcome to C&A's earnings conference call to announce the results of quarter Three, 2022. We have here today with us Mr. Paulo Correa Junior, CEO, Mr. Milton Lucato Filho, CFO, and Investor Relations team. We would like to inform that this call is being recorded, and all participants will be in a listen-only mode during the company's presentation. Right after which, we will open the floor for questions, and at that point, further instructions will be given.
Should any of you need any assistance during the call, please press star zero to reach the operator. We would like to inform that this conference call is being simultaneously translated into English for the convenience of our international investors. This call is also being broadcast simultaneously online via webcast and can be accessed at ri.cea.com.br, where the corresponding slide presentation is also available.
Feel free to flip through the slides during the company's presentation. The replay will be available right after the call. Before proceeding, let me mention that any forward-looking statements that may be made during this conference call relative to the company's business prospects, projections, operating and financial targets are based on beliefs and premises of the company's management, as well as information currently available to C&A.
These forward-looking statements are no guarantee of performance, and they involve risks, uncertainties, and premises since they refer to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions, and other operating factors may affect the future results of C&A and may lead to results that differ materially from those expressed in said forward-looking statements. Now I would like to turn the conference over to Mr. Paulo Correa Junior, CEO of C&A Modas, to start his presentation. Mr. Correa Junior, you may proceed.
Thank you. Good afternoon, everyone. I would like to start our call today with a brief recap of the first three years. We just completed three years since our IPO. We completed three years in October. Our IPO was in the end of October 2019, so we just completed three years. I'd like to give you a brief recap of this journey and to put this into the current context that we're living and the evolutions that we have seen so far. Let's start with this context that we call the fashion tech strategy, which was about how we could use the existing C&A platform in terms of its brand, customer base, and store portfolio, and also the retail management know-how that we had.
This all combined with a group of professionals in different fields of expertise with a lot of experience and knowledge about the C&A business and the retail and fashion business. We understood that there was a very clear value construction, a very clear value proposition based on some elements that we named as our strategic levers. Our levers were expanding our brick-and-mortar stores, so increasing the number of stores C&A has in Brazil.
Also, the company's digital evolution was another lever. The modernization and upgrade of our distribution models and supply chain, and also recovering our capacity to offer credit to our customers and expanding our customer base by offering credit. These four levers demanded and still demand investments and concrete and consistent execution capacity.
Unfortunately, in 2020 and 2021, so in the first two years after our IPO, there was an evident impact on the fashion business and the retail business due to COVID. This led to several consequences in our operations. Over that period, we validated our strategy. After all these modifications and all the external impacts, we validated that strategy still made sense. We came to a very clear conclusion that more than ever, we needed to really focus on those four levers. We really invest and pursue those four levers in order to create value for the business. In the end of 2021 and during 2022, in the start of 2022, we were still seeing the impacts of COVID.
What we are seeing since the end of last year and the beginning of this year, 2022, we saw some very relevant macroeconomic impacts regarding global liquidity, high inflation, and particularly as a consequence, an increase in the cost of capital and higher interest rates.
Considering our new capital structure, which was built after our IPO and was developed with the investments that we made along this journey, and of course, with the recent higher cost of money, of course, this brought some impacts to our operations, particularly when it comes to our financial expenses. Right now, we are at a moment that we have a lot of confidence in our strategy, in our execution capacity, the capacity to execute the strategy along this journey.
We're very confident about this capacity, but we're also being cautious in the short term because the short term requires higher cash protection, so that in the near future, very near future, I would say, we can go back to accelerating the implementation of our growth plan, considering the clear potential that it has. What has been guiding our actions are these two dimensions.
First, the dimension of our execution and our capacity to capture the impacts of the investments that we made in the past two years. At the same time, we are aware of our strong management capacity in terms of our financial resources, so that we can go through this moment of high interest rates that we're going through right now in the best way possible, but we can come back as quick as possible and very strongly after this passes.
This search for better returns on investments has been one of our greatest focuses for our execution in the first half of 2022. All the cash management measures that I talked about are also very present in the way we are operating in the past few quarters. I would just like to give you some more clarity about what this is precisely. The results that we are announcing today, they already demonstrate the first signs of these actions that were implemented and these transformations that we are seeing. The first I mention is our profitability. Our gross margin is at a different level compared with what we had pre-IPO.
Despite all the impacts, despite all the macroeconomic effects that we said, this is the second consecutive quarter where we show a lot of strength in the increase in our growth margin at levels above those of 2019 pre-pandemic, and this tends to continue. We are seeing these changes happen due to the foundations and investments that we made during this period.
For example, we have artificial intelligence tools supporting us in our pricing strategy, pricing management. Our push and pull distribution model, which is now being implemented in part of our products. These are capacities that we didn't have before in the past. This dimension of the business profitability is starting to flourish, and we are starting to see C&A changing its level of profitability, starting from when we started to capture the results of these investments.
At the same time, there's also the dimension of productivity optimization, optimizing our productivity. We're seeing an increase in our sales per square meter, and at the same time we are evolving in digital, particularly in our WhatsApp sales. WhatsApp now is integrated in our brick-and-mortar store experience. This is what is allowing this productivity per square meter to increase in the two dimensions using these two distinct channels, our physical and our digital channels. We really strived this year seeking better cost and expense efficiency.
This allowed us to reduce our structure, increase the efficiency, and reduce the size of our structure, including, for example, third-party services. This also ensures alignment with the projects that we have ongoing. Making sure that these projects will truly generate the impact that we were planning for these projects when we defined the investments for them.
If we consider that, well, if we compare the numbers of our expenses last year, so the number of additional stores with the ramp-up that we are seeing with the start of this new credit business, C&A Pay, our expenses are going really well. This is a very important third element in this equation that we're talking about building value for the company. We have implemented several initiatives to improve our working capital within this context that we're living right now.
We have negotiated with our direct and indirect suppliers in terms of the payment terms, increasing the cash cycle, not just extending the payment terms, but also working with our suppliers to optimize the receipt. For example, the minimum value for payments installments. We adopted a minimum value for payments installments in our brick-and-mortar stores.
Right now, that trade-off between that extra 1% sales versus our capacity to bring this cash faster to the business, this is a trade-off that we have been discussing, and we have actually seen a lot of evolution in the efficiency of our working capital. The cash generation volume in this period also showed this really clearly. Also, we revisited our investment plan for this year. We reduced the number of openings planned for this year, and we redefined the scope of some projects as a whole to be executed by the end of the year. Here also focusing on capturing all the impacts and projects and investments that we made in the past two years.
This correction of our speed, which is something that we are executing really well and at a fairly good speed, considering the quality of the team that we have and the level of experience of our team, this reinforces our ambition for growth. This is just a one-off, a focal adjustment due to the macroeconomic scenario that we're going through right now.
We continue with our fashion tech strategy close to the customer, faster, more relevant, more personalized, and more joyful, providing a better and better experience to our customers. We are reinforcing our cash positions, aiming not just to fulfill our obligations and the maturations in the first half of next year, but also continuing our strategic development, building value regardless and despite all the macroeconomic uncertainties that we are facing.
We understand that despite all these setbacks, we are still able to execute both in terms of the dimension of implementing our initiatives and also capturing the impacts at a very fast and consistent pace. On the next chart, we have some concrete evidence of this execution of our strategy. First, the gross margin, 49.3%, nearly five percentage points up since quarter three last year.
We know that a five percentage points increase is a very strong movement. If we compare this with the pre-pandemic period, we are talking about two percentage points. Here, as I said, these are concrete captures of the projects and initiatives that we started in 2020, and now we're starting to reap the first results of this journey.
The growth margin for merchandise, an important driver for our total margin, is two percentage points up year-over-year and 3.5, actually 3.5 year-over-year and 2.5 compared with 2019. This evolution in our margin allowed us to have an EBITDA 61% higher year-over-year. With this increased EBITDA and with all these initiatives to optimize our expenses, our working capital and manage our investments, this allowed for a cash generation of BRL 115 million in quarter three. As I said before, I think this is very concrete evidence of the evolution of our financial health.
In the long term, we can foresee a very solid company with a lot of potential for growth and value creation through the strategic levers that we just described and on which we have been working for the past two years. However, besides these financial results, we are also very happy and we're very proud for the recognition of our strategy in terms of building a sustainable path looking forward for the fashion business.
We are working to deliver our ESG 2030 goals. Last quarter, we had a clear evolution in our objective to promote circularity with several initiatives. One of them, for example, was awarded by MGM. Among all the industries, we had companies from all the industries, and we were awarded because we were able to bring items that were donated by our customers.
These items were recycled together with leftover fabric, and they were turned into 20,000 new items that were re-shown and redisplayed in our physical stores. This is true circularity in our DNA, and we are turning this into a routine practice. This puts us ahead of any other competitor in the national fashion market. It's also important to talk about this element, which was the launch of a collab that we made, which was called Identidades or Identities in English.
This was an initiative that made us so proud because we were able to combine our capacity and our entrepreneurship and development initiatives that are led by the C&A Institute, and we combined that with our business. In this collab here, we have some images on the right side of this chart. These stylists that are on this chart, they were accelerated by the institute.
They developed products for our collection specifically. Once again, this shows how we understand and how we really in practice turn fashion into a force for the good. These initiatives also contribute for the development of national talents and allow us to promote a better diversity of propositions for our public. Speaking of engagement, as we can see here on this chart, I would also like to show you on the next chart, we have our relationship program, C&A&VC.
This has been one of the most relevant assets that we have in the past three years because much more than just a relationship program, it is a platform. A platform that accelerates and develops channels, products, and services. It's the concept of a platform per se. Today, we have a growing customer base.
We see that in the past three years, we more than doubled our base of customers with this relationship program. Today, we have more than 22 million registered customers in our loyalty program. This concept of a platform starts to be applied as soon as you launch a program such as C&A Pay, and you see the strength of your relationship program to pre-approve customers for your new platform, C&A Pay, to relate to these customers and to build a customer base very quickly. In less than one year, we already have two million people already with our new product, C&A Pay. This is what makes this possible.
Another concrete event of this lever, and this is the beauty of being a true platform that you can truly accelerate and add strength to your channels, products and services, starting from your capacity to have to establish a relationship with so many customers in a very assertive and concrete manner. This also serves as an infinite source of information and data.
This means to us that we have the possibility to build more personalized experiences and more relevant experiences for our customers. This, of course, feeds back into our channels and all our products and services, generating even more relevance, and this creates this virtual cycle. Our ambition for this program is very high, and we know how valuable it is to engage and to let us know our customers better. The next chart.
I want to once again highlight, we, like we always do every quarter, we talk about the highlights and our advancements in terms of our growth levers. First, let's talk about the expansion I mentioned. We opened 4 more stores in this quarter. We also terminated 2 stores according to our portfolio management strategy, very consistent with what we have been doing.
We finished quarter three at 331 stores in total. In quarter four, we will focus more on the format that we call Double Door for the ACE brand. This has been a very interesting growth platform for our stores. We will open 10 more Double Door stores in quarter four for the ACE brand. The feedback and recognition that we're getting with our sports category, ACE, makes us really confident that we still have room to advance further in our Double Door concept.
In digital, we continue to have the same share, the same strength of our digital business within C&A as a whole. As I said in our last conference call, now we're focusing more on the profitability of the digital channel. This channel is seeing a higher and higher share of WhatsApp sales, which generates a better, more assertive level of relationship with our customers.
We were also able to evolve greatly in our capacity to generate a higher level of efficiency in the cost of acquisition of our customers, the CAC, and we have also been able to optimize our shipping efficiency. Our digital channel is now much healthier. Although the growth level this quarter was not that high, it is consistently contributing to our gross margin more and more significantly than it used to contribute in the past.
Now we can say we have a healthier and stronger growth platform for the coming quarters. The third lever is our supply chain model. We are already at 26% of our sales already under the push and pull model. Which clearly gives us better capacity and assertiveness in terms of our distribution, which of course, ends up leading to better margins due to the lower pressure of markdowns, the lower need for markdowns, having the right product at the right place at the right time. We have our stores that already have these technologies 100% implemented. Also in our dimension, distributing to our customers, our D+2 deliveries are already covering 50% of our orders.
The same day or next day delivery in São Paulo and Rio is already over 1/3 of our orders. This all also contemplates the optimization of our shipping costs. Last but not least, we are increasing our credit offer. As I said, we closed the quarter at nearly two million cards issued. Right now we are over two million in October.
This also allows us to increase the offer of other services, including insurance for the smartphone devices sold by C&A, which is a service that is very popular among our customers. We are now expanding our portfolio of added products and related products related with this credit offer. We are also expanding our product offer in this sense. I would like to finish my part of the presentation. Before I hand it over to Milton, I want to talk about foundations.
Irrespective of the levers, we also continue to advance in some very important foundations of our business, particularly the products and collections. Our capacity to bring very relevant fashion trends to our customers at a very high speed is very consistent when we compare ourselves with the rest of the market.
This means that we are bringing a lot of freshness and energy in everything that we do, in the collections that we offer. Now we are advancing more and more in the mini collabs with smaller volumes. Over this period, we have some of them illustrated here on this chart. We had a very unique collab, which was The Power is Ours or O Poder é Nosso in Portuguese. We had some Black artists pictured here in this campaign, some classic characters of Marvel.
We also had Children's Day, a collab that we did with MOOUI, very beautiful, truly unique. We had a very positive response from our customers. We also had a collection with Duda Beat. This was together with our launch for Rock in Rio. This was an attempt to bring the dimension of fashion together with music, very correlated.
We also had the collection Sertão Encantado, which allowed us to add some regionality and Brazilian diversity, bringing aspects from the Northeast with a lot of color, a lot of joy in our items in our collection. We also had a traditional denims week. We had Father's Day, and we had our compact stores in Rock in Rio.
This jacket here that you see on the picture became an icon of Rock in Rio this year, and it was developed and sold by our team and sold at C&A stores also inside the festival. In other words, we continue to advance in the foundations of our business, always striving to bring the best of fashion, the most relevant fashion, at a very high speed to our customers. Now I stop here, and I hand it over to Milton, and Milton is going to share with you more information about our numbers for quarter three.
Thank you, Paulo. Good morning. Good morning, everyone. Paulo, when I hear your enthusiasm, it's really nice to hear how you talked about the first part of the presentation, and I hope to have the same level of enthusiasm now that I start talking about our numbers.
Giving not only color but also sense to everything that's happening because we're very excited with the evolution that we're seeing in the company, and we're very excited about the future as well. Let's start with our revenue. The financial services revenue performance with the evolution of C&A Pay showed an important increase of 44.7%, as you can see here in the blue bar.
We also saw an increase in apparel, 4.5% year-over-year. This was due to the good acceptance of our collections and these collabs that you were talking about. We were also negatively impacted by the anticipation of the winter sales, which occurred in quarter two this year.
We had talked about this in our last call, that we were seeing an anticipation of the sales of the winter collection and also this combined with the atypical colder weather that we had in the end of this quarter. This caused the transition. We had to slow down the transition to the summer collection, so that's why we saw a lower impact of the summer collection in quarter three.
In Fashiontronics and beauty, there was a drop year-over-year due to the weak demand that we saw for smartphone devices, particularly in the consumer week, because last year, consumer week was a success. Also more aggressiveness from the competition this year. There's a trade-off between sales and margin, which is very clear to us here.
On the other hand, this lower performance of Fashiontronics was partly compensated by the positive performance of our beauty segment, which is advancing. This was a request from our consumers, a demand from our consumers, and we see a clear evolution in the rollout and implementation of beauty, the beauty department in our stores.
Now on the next chart. Here we have a very important highlight that Paulo already talked about in our gross margin. We saw an improvement in all categories in our gross margin, and we are already above the pandemic levels, the 2019 levels. All charts show the same thing. Both for apparel and also Fashiontronics and beauty, our margins increased compared with quarter three last year and quarter three, 2019.
In apparel, projects such as the push and pull distribution and dynamic pricing, which starts to yield some results and which includes the technology and artificial intelligence dimensions. We're starting to see the results of that, and also the transfer of the cost of inflation to our products. We estimate that 0.5 percentage point of this improvement is a consequence of these projects combined, a combination of technology and modernization of our platforms.
In fashiontronics and beauty products played the most important role here in the improvement of our margins. Now, on the next chart, financial services. The great highlight here is C&A Pay. In quarter three, we reached nearly two million cards issued, and now we are at over two million. On September 30, it completed 30 months, the C&A Pay operation.
In 10 months of existence, being at nearly two million cards issued shows the strength of the C&A brand and how C&A Pay is an important asset that allows us to see all the advancements that we are seeing. We are seeing great evolution in our store production. At the right conditions, we are seeing a very significant evolution in our credit dimension.
Own credit, compared with total sales, was at 22%, so we are recovering the levels of 2019, and we are already 15% higher than quarter three last year. The financial services net revenue, as I said, was up 48% year-over-year due to the performance of C&A Pay. This was also an important evolution. Finally, our over 90 wallet is at 11.3%, our over 90.
It is still under construction and under evolution. It is evolving with the business, and it is below the level that we expected after our operations normalized. We understand that as this operation normalizes, looking forward, it will also go back to the market levels. Now moving on to operational expenses. As a consequence of our stricter discipline and our search for profitability, operating expenses, when we exclude the line other, and this is something that we do to avoid any distortions in our analysis.
Excluding the line for other expenses, our operating expenses were up 4.2%, which is well below the inflation for the period. In sales, the main reason was the drop in our marketing expenses, particularly performance marketing for our online business. In G&A, the main factor was the decrease in our third-party materials and services line and other things.
There was also an efficiency gain in our distribution center for the e-commerce because this operation is now much more automated and requires much less human intervention. Also, when we look at the evolution of our G&A and sales expenses over the total net revenue, it was practically stable year-over-year, but it was still up 4.7 bps compared with the levels of 2019.
Here, just as a reminder, in 2019, we had a different governance model, and the structure of the company was not the appropriate structure for a private company. Today, the requirements are different than what we had. They are higher, actually, than what we had in 2019. Now when we look at our EBITDA, here on this chart, we see the evolution of our EBITDA.
We see that we are already recovering our operating results post-COVID, but there's still relevant pressure in some of our lines due to the higher inflation rate. We have not gone back to the levels of 2019 yet. We are working towards that goal, but this is the reality right now. Our EBITDA margin was at 10.5%.
As for our net income, the comparison year-over-year was impacted by different factors, and we are showing this in this chart, as you can see. First, we need to exclude the non-recurring impact of a tax credit that we had last year. This will equalize our comparison basis. The 54.4 compared with 61.4 that we also see here. The chart shows the evolution that we had in C&A Pay.
This is something that we didn't have last year, the provisions for C&A Pay. Also, there was a negative impact due to our financial results. The higher interest rates, higher standard interest rate this year compared with the previous year. This should keep pressuring our profits for a few more quarters. We are now working, and I'm going to talk more about this later, but we're working to reduce our debt.
As we reduce our debt, and as we see the interest rates coming down in the near future, we believe that we will go back to generating profit at levels that are reasonable for the business. Now, about our investments. We invested BRL 93 million this quarter, and the main lever for the investments was digital and technology. The year-to-date accumulated investments is at BRL 263 million.
You heard this from Paulo. We have revised the investment levels of the company to protect our cash due to the more complex macroeconomic scenario that we're going through right now and because of our short-term commitments. Another important element here was cash generation. The cash generation in the quarter.
We generated BRL 115 million, and here you see the origin of this cash, particularly in the green lever here, the operating lever. We are reducing investments as we already explained, and the cash consumed was due to the service of the debt. In the end of quarter three, we closed the quarter with a cash of BRL 1.2 billion.
As the CFO of the company, I'm very conscious about our short-term commitments that we have in 2023, and the current adjustments that we made in the management of our working capital. Also, the adjustments that we made in our expense structure in the second half of this year, combined with the relevant cash generation that occurs seasonally in Q4, we have sufficient resources to face and meet all the short-term commitments that we have established. I'll stop here. Now we can open the floor for questions.
Thank you. We will now open the floor for questions. We will take questions from investors and analysts. To send a question, please press star one on your touch-tone phone. If your question is answered at any point, you can press star two to remove yourself from the line.
Questions will be answered in the order they are received. We kindly ask you to pick up your handsets to ask your question to provide optimum sound quality. Please wait while we poll for questions. If your question is not selected during the call, it will be answered later by the IR team of the company. The first question is from Daniela Chiespain Vestimentos. Go ahead, Daniela, you can ask your question now.
Hello, good afternoon. Thank you for taking my question. I have a few questions. My first question is about your prospects, both in the short term for quarter four and also for next year. I want to understand, I know there are a lot of uncertainties. We hear you talking about your concerns about some possible negative impacts from the World Cup.
Considering this first month and a half that you have in quarter four, and from your conversations with your consumers in your loyalty program, I want to know how you're seeing quarter four or what are your prospects for quarter four and for next year? My second question is about the competitive environment.
I want to understand how you see the competitive environment for ACE, for your sports category, because we are seeing other brands, other companies also focusing on the sports category due to the very good performance that sports products are having recently. On the side of e-commerce, we're seeing Shein, for example, the Chinese company, which is, they are talking about physical stores in São Paulo and Rio in Brazil now, and also Magalu, which is now more dedicated to fashion.
How are you seeing these two movements in the market for the sports category and e-commerce? I have a third question. My third question about C&A Pay. You said that it is evolving above your expectations. Can you please give us more color about the main indicators and maybe if you can anticipate what will be the share target of C&A Pay in your business? An update of the indicators for C&A Pay. Thank you.
Hello, Danny. Thank you for your questions. I'll take the first two, and Milton will answer your third question. Our prospects for Q4, I think that everybody has been reading about this. In the end of the day, what we are seeing is not only this turmoil because of the elections, but also we are still going through. Maybe it will end this week, but we are still going through a very atypical weather situation. Just like we had that atypical weather situation in May, which was very favorable.
Now we also had a very atypical weather situation. We had a very atypical period and unfavorable in terms of the colder temperatures, which do not help us at this point. In the consumption dimension, particularly for the collection that we have planned for this moment in time, which is the spring and summer collection. What we're seeing is reasonably similar to what happened. Well, in terms of the evolution of our sales, what we saw in Q3.
The prospects for the next 50 days, I think we have some mixed feelings about the next 50 days because there will be an impact from the World Cup as we know, and there are some ways we can calculate this based on the history, particularly due to the loss of traffic of people in our stores, particularly on the days where there's a match in which Brazil will take part.
There's also a compression of this demand for summer and high summer products. The hot weather will come. My personal view, and this is something we are working on a lot with, that the weather will improve, it will be hotter. There will come a time when people will go to the beach, people will go on vacations, go to the pool.
The consumption of our summer products was compressed in the past few weeks, and there will be a compensation looking forward. We have a few reasons to be optimistic on one hand, due to this demand bottleneck that we had because of the colder weather. But the context is still difficult. As you said, the first 40 days of quarter four have not been very favorable to the sales of the spring and summer collections.
Now, looking into 2023 and considering all this planning that we are considering for next year, we are cautiously optimistic. We are optimistic because we're stronger, we're better, we're much better prepared as a company, but we're still cautious because of everything related with the higher interest rates that will continue to be high during 2023.
We are paying attention to all this, and from everything that we are reading, we see the deterioration of the consumers' purchasing power, in some classes more than others, some economic classes more than others. That's why we're calling this moment a cautiously optimistic moment. We will be better, the environment, not so much.
Your second question was about the competitive scenario. You talked about two fronts as examples. You talked about the sports category and e-commerce specifically. I would add a third element here, which is the end of the year and the context of the end of the year season. For ACE specifically, I think that the sports category clearly has a higher demand right now. This is something that was caused by COVID.
COVID caused people to be more focused on taking care of themselves and exercising and practicing more healthier activities. Today we have a very good capacity to develop products and to develop our assortment. That's why I think that we are standing out so much in sports because we have a fashion and joy element that we add to sports products.
This is something unique to us. I think that this is something that is more difficult for our competition. We have an interesting way ahead of us in terms of pricing, positioning and fashion positioning for our products. I'm very optimistic about our ACE brand. Now in respect to e-commerce specifically, you talked about some competitors, some online players particularly.
I was saying during my explanation, I was talking about the strength of our digital channel, particularly when we think of the omni-channel strategy. Using our customer base and our customer relationship base to providing more omni-channel experience to our customers. Our customers will start their contact with the brand in the digital channel, but this could end in physical or could end in digital, or there could be physical in the middle of the way.
We are betting more on this omni-channel dimension than just the purely online format, where indeed the entry of these competitors will bring inflation to our CAC, will increase our CAC, and will also create a very promotional context which goes in the opposite direction that we want to follow right now in terms of profitability.
I'm less bullish when it comes to the e-commerce, purely e-commerce dimension as a super growth lever. I think that our growth will be more omni-channel with very concrete capacity and which is something that we're seeing in this omni-channel dimension here. Milton, would you like to answer the third question?
Yes, Danny, thank you for your questions. One of the indicators for C&A Pay, one of the important indicators, we are at 22% share of our own credit in our total sales. 14% comes from C&A Pay. This is clearly an important evolution. What happens with the customers that are under this category is that they have a higher frequency in our stores. By frequenting more, we convert more, and we see that the spending of these customers is 80% more than the spending of a regular customer.
It's an important factor and also an important indicator. This gives us a lot of clarity on how we're closing this gap in the share of credit sales in our total sales. We used to say that, within three to five years, we should see this gap closed, and it is very clear to us that we will be able to close this gap, within the time frame established. We're very confident. Production itself, which is the main driver here, is doing really well. As we said today, we are at more than two million cards issued, and this comes from this production machine that we have in our physical stores.
Another indicator that we have been tracking very closely within our governance model, and we already talked about this governance model in other calls, is the delinquency or the bad payment indicator. The over 90 is at about 50%, so it is better than what we had planned. This does not reduce the responsibility that we have to analyze and revise and look at the credit grants, what is the rollout behavior, what is the payment behavior.
We're very confident about the work that our internal team is doing. We're very confident about the capacity, the internal capacity that we have to turn this lever into a very healthy lever and sustainable lever for the business.
Thank you. Excellent. The next question is from Victor Saragiotto. Victor, you can ask your question now.
Good afternoon. Thank you for taking my question. My first question is about your Fashiontronics operations. It's still very challenging. You just made some changes in your operations proposal. So what is the representativeness of the different categories within Fashiontronics, and what impact could this have on your top line and operating margins?
The second question is about your apparel margins. You showed your numbers compared with 2019. Now you had better assertiveness in your assortment with a positive impact of your logistics changes as well. I want to understand if there is still more room for an expansion of these margins relative to the supply initiatives that you're implementing. Thank you.
Thank you for your question, Victor. First, about Fashiontronics, I think that we are still going through a moment of a lot of pressure when it comes to the consumption in this category, particularly for smartphones. We see that supply is not yet normalized. There is a very promotional competitive dynamic. The prospects are still negative for this category, for this segment specifically.
The technology change to 5G, which we believe will start impacting consumption in 2023, this shouldn't cause any changes in the next quarter. For the next quarter, I think that this category is still concerning this segment specifically. Meanwhile, we are focusing on the beauty segment, which is now present in more than 200 stores, and we keep expanding it in our digital channel. This category is at nearly 15% with clear prospects for growth of this share along the journey.
If we think globally, there are two different factors. We see a clear growth factor for the beauty category and a clear decline factor for the smartphone category. The energy that is coming from the beauty segment is helping us compose a better margin for this segment as a whole and having a positive impact in our results.
Now, as for the apparel margins, I think we have to see this from different perspectives. First, of course, there was if you improve your commercial proposal and the assertiveness of your commercial proposal, this will always help. Regardless of this, the context, regardless of the scenario, that's why I think it's so important to see our evolution in terms of our products and assortment, which was very important in this journey. Second, we have the levers themselves.
The levers should bring more and more either digital levers, so with more technology or with different distribution models. These levers should keep contributing. We still have elements that are still to be captured and implemented, so there is room to evolve. My answer to you is yes. An example of that is the push and pull distribution. We are at 26% in terms of rollout, so there's still room to expand and increase, and we believe we can reach 40%.
This is our target. Yes, there is room to improve. The price management algorithms, for example, such as dynamic pricing, are algorithms that are continuously evolving. They are continuously being developed and evolved, so there is room to advance and evolve in this sense as well. Our opinion regarding our apparel or merchandise margins is a positive look. We have a positive look about this subject.
Next question is from Felipe Correa, Citibank.
Thank you for taking my question. We want to understand a little more about the modernization of your supply chain or RFID and push and pull, which we know is very important for your industry. When are you planning to finish this project? And what is the additional capital that will still be required to finish this project?
You talked about the 0.5 percentage point margin gain coming from the evolutions of your supply chain. Can you give us some color about the expected gains for your EBITDA margin in 2023 with the final implementation of this project? Thank you.
Thank you for your question. The push and pull dimension, specifically in our RFID. We are now at 23% and month after month, we are seeing an evolution in this implementation. We believe that 2023 will be an important year. We are now in the middle of this journey. There's still a long way to go. There's a lot to still evolve in capturing this sense. Investments, I think that when we plan our investments, our budget for 2023, we're thinking of how we can ensure that 80/20 relationship.
How can we bring the maximum impact with minimum investments? We still have a significant volume, but most of it is already done, is already completed. There are two steps to this journey. The first step is capturing the investments that we already made. There's still a part of these investments that we are still to capture.
The second phase of these investments, which would bring further opportunities to capture these investments in push and pull. We still have room to advance in the two dimensions. In 2023 will be an important year in this journey, where we want to ensure at least 80% of capture of this impact.
Thank you. This question and answer session is now closed. Thank you for participating. Now, I would like to hand the conference back over to Mr. Paulo Correia for his final remarks. Mr. Correia, you may proceed.
Thank you everyone for participating in our call. We are here once again talking about our journey, our consistency, our execution capacity. Of course, with all the setbacks and challenges that we are facing right now, either in our industry or in the country, we are still very confident about our evolutions and our progress looking forward. We're very confident about our growth potential and the value creation potential that our company has. Have a great afternoon. Thank you everyone for participating.
C&A's earnings conference call is now over. Thank you all for participating, and have a great afternoon.