Good morning, everyone. Welcome to Lojas Quero-Quero's first quarter 2026 earnings conference call. I'm Igor Sehn, Financial Planning and Investor Relations Manager. Joining me today are Peter Furukawa, CEO, and Jean Pablo de Mello, CFO and Investor Relations Officer. To begin the presentation, we will see our agenda on slide three.
On today's agenda, we will first present our strategic pillars, followed by expansion and projects. We will discuss the results for the first quarter of 2026. Finally, we will move on to the Q&A session. To submit questions, we will be using the Zoom's Q&A button. We will now move to slide four, I would like to turn it over to Peter.
Good morning, everyone. It's a pleasure to be here with you to share the main results for Q1 of 2026. We began 2026 still facing historically high real interest rates. This scenario continues to impact the company's cost of capital and indirectly the demand of our products. Even amid still challenging macroeconomic environment, we remain focused on the variables we can control: operational efficiency, portfolio quality, cash management, and maturity of stores opened in the recent years.
At the same time, we see with optimism some factors that encourage us for the coming months, such as an expectation of a gradual reduction in the interest rates, the expansion of personally income tax exemption, and the prospect of a more favorable year for the agricultural sector in the regions where we operate. As a result, we believe we are well-positioned to capture the market recovery supported by the maturity of the stores opened in the recent years. This quarter, we remain focused on executing our five strategic pillars.
Under the first pillar, gaining market share, total gross revenue increased 3% in the first quarter, reaching BRL 790 million, based on sales declines to 0.5% in the quarter, reflecting the strong comparison base from Q1 of 2025, which have been benefit from stronger demand for seasonal heat-related products and led us to post growth of 12.5% in addition to a consumer environment still pressured by the high interest rates.
When we compare most of the market indexes, the IDAT, IDV, ICVA, we can see that we have grown in our categories vis-a-vis the market. We opened two new stores during the quarter ending March, with 574 stores in operation. Under credit and collection excellence, we continue to maintain strong portfolio quality. Delinquency remained in line with our historical levels, with overdue balances in vertical portfolio at 11.8%. At the same time, the credit portfolio grew 14% compared to 1Q 2025. We were able to grow with disciplined risk control, even in an environment of high delinquency nationwide.
We reach historic levels in Brazil. Under the doing more with less, selling expenses decreased 0.2% nominally compared to Q1 of 2025 despite inflationary pressures, which is a direct result of our internal efficiency and cost control initiatives. Administrative expenses also posted a nominal reduction of 1.4% during the period, reinforcing the company's discipline in resource allocation amid high cost of capital environment. Under the digital sales pillar, digital initiatives accounted for 23% of total sales in the quarter, continuing the consolidation trend in our integrated sales model.
Under high-performance culture pillar, we trained 37 new stores managers in Q1 of 2026. Today, we have 265 employees enrolled in this leadership program being prepared to spearhead our stores. Next slide. We ended Q1 of 2026 with 574 stores in operation across almost 500 stores. 493 cities in the states of Rio Grande do Sul, Santa Catarina, Paraná, Mato Grosso do Sul, and São Paulo. During the quarter, we opened two new stores in Floresta and Figueira in the State of Paraná and selectively closed 14 stores as part of our active store portfolio management strategy.
We continue to have 56% of our stores located in cities with less than 25,000 inhabitants and 73% in cities with fewer than 50,000 inhabitants, reinforcing our vocation and strategic focus on small and mid-sized cities. Even in still challenging environments, we remained highly focused on operational discipline, portfolio quality, and capital efficiency. With this, I conclude my remarks and turn it over to Jean, who will provide more details on our financial results.
Well, it's a pleasure to be here with you to discuss the results of Q1 of 2026. Our first slide. Here you can see our revenues that show some trends compared to the past, that demonstrates how the company's revenues are in terms of sales. Pete has mentioned, although there was a drop of 1% in the retail revenue vis-a-vis Q1 of 2025, because in 2025 there was a strong growth. There were 16% of total sales. Sequentially, when we see the performance of same-store sales, according to the chart, the bottom chart here, we can see the performance of 2% of drop of same-store sales would have been positive if it weren't be, for example, to the products of seasonality and high temperature.
The level of current sales is stronger than what we saw in Q3 last year and Q4 as well. This already establishes a sales base per day. This leads us towards a positive trend in the upcoming quarters. We can see financial services growth. This is an increase of revenue of 13% and credit card that has grown 13% and e see the three activities, there was a total revenue growth of 3% in the retail side. This is a trend that has been improving throughout the last quarters, and this demonstrates a positive pathway for the upcoming quarters until the end of the year.
When we go to our next slide, you can see the pressure mainly in the margin of financial service. There was an increase of capital costs directly connected to the interest rate. In Brazil, we can maintain these margin of financial services, that is, maintain control at a sound level. Mainly now during the first quarter, there is a greater cost of capital, greater provisioning, and the option of the company of being restrictive in granting credit to manage risk. We want to focus on products that present greater credit quality in detriment of products that could bring higher revenue at the short run, but with higher risk.
As our focus has always been the control of the quality of the portfolio and delinquency, we've decided to follow with a portfolio that is more controlled, more sounder, in order to guarantee that we continue with this level of delinquency aligned with the historic levels of the company, even when we consider the current level of the indebtedness of families in Brazil.
Now, on our next slide, here we can see one positive point. Here you can see our effort in expense control. We here yes, focused on delinquency, on the quality of the portfolio and cash management. In cash management, we want to control expenses. Here nominally, we see a drop in expenses and sales and SG&A during the first quarter. We've seen this from the past quarters, and this also sets a foundation of expenses throughout 2026 that enables an operational leverage when the growth resumes in terms of sales.
When we go to our next slide, here you can see that although we've seen an increase in the sale and even with the pressure in the margin and controlled expenses, we have BRL 26 million accounting EBITDA. That is a drop like the adjusted EBITDA. When we compare it to Q1 of 2025, this is a level of profitability before the past quarters. We are resuming our growth, especially when we see sales and expense control.
Our next slide. Here we have the pressure mainly as well as the margin of financial service, the pressure of capital cost that is a result of greater financial expenses. There is an increase in the cost of funding the adjusted net debt. That pressures our net revenue. We have the adjusted net revenue of BRL 35 million vis-a-vis BRL 15.7 million of Q1 of 2025.
After seeing these slides, here you can see what we're doing in order to control this portfolio and delinquency. We see the portfolio growing 14% and 11% with interest rates, with a level of the delay of the. It is highly above the first quarter of 2025, but aligned with the historic level of Q1 of 2024. This is a positive result which is relevant from the macro scenario and on the target and w e will continue pursuing this throughout the upcoming quarters.
Regardless of the macro scenario, we want to maintain controlled delinquency and to have a sound credit portfolio. On our next slide, you can see that there is a credit demand. We continue to see the growth of the use of our cards and because of our selective positioning, it's a growth below Q1 of 2025. This is a result not because of a drop of demand, but yes, our position, we want to always control delinquency rates.
When we go to our next slide, we see the growth of the use of the card and the credit portfolio. As previously announced, we have a guidance of new stores below the past years, and this is reflected in the investments of the first quarter. This has dropped. Our CapEx has dropped half in terms of investments during Q1, and this is the trend for this year. This is an option to maintain cash flow with smaller investments where the capital cost is at a high historic level.
Despite this, we opened two new stores. We invested over BRL 6 million focused on logistics and IT and n ow next slide, you can see something that is very positive in the sense that we can control our cash flow and the financial leverage of the company. Last year, we also focused on this point, and it is possible to verify here that historically speaking, we have a cash consumption on the first semester, mainly on Q1.
During Q1, the cash consumption was below what we consumed on Q4 of 2025 and 2024 and t his is a result of all of our initiatives that have been adopted throughout the past quarters that point out towards this trend of stabilization of our financial leverage. It's important also to highlight that the current cash level and the debt with very little amortization in the short run.
Another point that also strengthens this is the funding of a new series of CRI that maintains our B rating by Standard & Poor's. Here we extended the term and reduction of spread. This shows the quality of our credit portfolio and the cash management. Now we go to our next slide. We will bring our results to the end, and now we can go to our Q&A session.
We will initiate the Q&A session. We are using the Zoom's Q&A feature. This is to receive. The first question comes from Vinicius Pretto from Itaú BBA. Peter Furukawa will answer this question. How do you see the recovery in sales throughout the year? Have you seen an impact of the Reforma Casa Brasil of the exemption of taxes up to BRL 5,000 and w hat about the close of players that has this given you some type of competition?
Thank you for the question. The index of IDAT. When we see construction material, we have gained more share in comparison to the market. We've seen the evolution of the market. We're at a better position in electrical appliances and furniture. We're side by side. The share gain is more would be our competition. Our competition closing, as you stated, some local networks closed many stores.
Here we have space for growth. This positioning to grow more where the economy improves. Regarding Reforma Brasil and the reduced income tax, in my opinion, this is very timid. We cannot see how this reflects on durable goods. The gain of share will be a result of assuming space where other people are leaving but it is very positive that our performance has been positive when we see a negative market, actually.
Thank you, Peter. Vinicius Pretto will be answered by Jean. The financial service margin has suffered pressure because delinquency is evolving. How do you see the risk level in the market and the request for credit? What is the expectation for the evolution of this margin in the upcoming quarter? How do you see cash generation in 2026 and the evolution of the working capital dynamics?
Well, good morning, Pretto. Well, regarding the credit card portfolio and delinquency, we've seen this market trend with macro debt and the increase of the indebtedness of the family. Their income has been compromised throughout the year, and this is why we've performed some adjustments. Regarding delinquency, well, we are more restricted throughout the months to maintain the quality of the portfolio, as I mentioned, even focused on products that at the long run present lower delinquency. This can pressure the result and even the margin in the short run because I waive a product that could be more profitable in the short term, but there is a greater risk but w e don't want to run this risk because of the macro scenario.
Although we still are not seeing an improvement in the macro scenario in the short run, we believe that we should control our delinquency. You can see this, what we're doing in collection, in credit, that engages all the companies, even the stores. This is something that we expect and something that we have been able to do historically. I'm talking about controlling delinquency. There is credit demand that currently we prefer to be more conservative to avoid an additional risk in our credit portfolio.
This being said, delinquency and provisioning has increased throughout the past quarters, and we have a sounder base to improve the margin of financial services. When we see the other point that is extremely important, that is the increase of capital costs. During Q1, there was a nominal increase in capital cost, very relevant above 2025 because the portfolio still grows and the Selic rate is higher than 2025.
With a trend to drop, we've seen a reduction in interest rate that results to a lower capital cost. If this trend should continue here, we have the possibility of gradually seeing a positive impact and going back to the margin, to the margin historic levels in terms of financial services so w e want to maintain delinquency control. Regarding cash flow, t hese two are the main focuses of the company, delinquency and cash flow. Well, cash flow, we mentioned throughout last year that we consume cash, especially during Q2 and Q3 of last year. They were a result of a drop of sales.
As we started stabilizing our sales, strengthening with exemption to the lines focused on climatization. The other lines have posted growth during Q1. Here we see a positive impact for working capital but w e are doing this in all our working capital line. We've consumed less cash than what we've seen historically. This relative improvement should also continue throughout the upcoming quarters. We should maintain this leverage, this financial leverage control and go back to the historic level throughout the upcoming quarters. These are the two main points of focus for the company for the year, and we have seen this already in Q1 and the beginning of Q2 to everything aligned with our established plan.
Thank you, Jean. Our next question will be answered by Peter. My question is regarding the maturity of sales 1/3 of the company's days, it has been less than five years in operation. Could you tell me how the performance of this store has evolved throughout the maturing or maturation process?
This is an interesting question. I believe that it is a crucial point from our enterprise. Four, five years ago, when we started with an aggressive process of opening stores, we saw that we could face a more difficult moment but we believed that this would last two years and w e opened many stores. Nonetheless, we had the payback story of these stores but t here was a longer macroeconomic challenge for durable goods, construction products. These stores are taking a longer period of time to reach the level of success of the past stores so t his is reflected.
The payback has increased, but they are at a level of low profitability. We still don't see the expected return, but any change in the economy, this goes directly to our EBITDA. This is the thesis that we are following. We currently closed some stores, but this was to optimize the working capital and in cities where there was another stores, because we can reallocate the inventory. We try to optimize our cash flow. This was our rationale when we think about the current level of our stores.
Thank you, Peter. The next question will be answered by Jean. Well, how can the drop of the dollar impact the sales and margins of the company in the upcoming quarters?
Now, dollar, there were a number of macroeconomic variables that can impact us. The dollar is positive when the drop is positive because we can control the expense inflation and the price of our products, and turning some product lines more competitive, this is something that can stabilize itself. On the other hand, there were other macro factors like the increase of oil that is the other way around. It exerts pressure on expenses cost. We still don't have a clear view regarding what will happen in the upcoming months and how this will impact the company. According to the current scenario, we are reassured that we will deliver the plan of operational cost, better margin and financial leverage.
Thank you, Jean. The next question from Thomas [Pedduy] from [FA Capital] that will be answered by Jean. The retail gross margin improved after the last quarters. Could you give us more color which factors allowed it to improve, and how do you see the evolution for Q2 and for the year?
Thomas, regarding margin, we've seen a bit of this effect, and the cost of our product is a big control, so it's better to manage the margin. When there was a drop in sales last years, we saw a very competitive market, and it is competitive in price. This doesn't mean that now sales are growing, but we are at a sales level much better than during Q3. Here we can better manage the margin. When I compare it to Q1 of 2025, well, we mentioned this when we announced the results that one part of this additional sales of Q1 of 2025 was in line that present lower margin.
Although there was an increase in the sales volume, there was a margin pressure. During Q1 of 2026, we can say although there is a strong comparison basis of sales growth, we believe that this is more stable when we see the retail margin, and this is the trend. We do see pressures like the price of oil, the increase of the price of diesel.
Of course, this can impact our margin. What we have to do is to manage things suitably to maintain this margin stable in comparison to what we're delivering right now and i f there is a drop in the interest rate, if we see a stabilization in these prices, here there is room for improvement for margin, but this is something that will happen gradually. You will not see the result next month or next quarter. In the short term is to maintain this margin stable and doing things, you know, like we're doing them right now.
With this question, we bring our Q&A session to an end. I hand it over to Jean and then to Peter for their final comments.
I would just like to thank all of you for your participation. We're reaching the end of our call. Now I wanna hand it over to Peter to wish Happy Mother's Day to the mothers, and I hand it over to Peter.
Yeah. Jean just choked. That was funny. Just to come to an end, I would like to highlight two important points. One is when we do same-store sales performance, if we exclude the seasonal effects, we are growing. I believe that it is highly gratifying to see the efforts being recognized, the efforts of the sales and commercial area focused on sales. Retail sales have been very important here. The teams have been restless to achieve this result. We are growing more than the market. The market is slowing down and w e are growing and t his is an important point. I congratulate our entire team for this.
The other point is that we are controlling our cash flow. Currently, we have to focus on our cash and t he target is to reduce our net debt closer to a level from the past. During Q1, we delivered what we had to deliver. We trust that we will be able to achieve this result and w e will be able to control our cash flow throughout the year.
The second important point is that a good way of growing is providing credit. It's not what we're doing. We are being very conservative. We see that the market is suffering. We will continue being extremely responsible when it comes to managing our credit portfolio and always focus on dropping our delinquency rates and to work strongly with our customer base, giving them guidance and helping all of them to recover themselves so I believe that. I would like to wish everyone Happy Mother's Day and thanking the effort of our employees of our suppliers, everyone engaged with Quero-Quero.