Thank you for holding. Welcome to the presentation of results for the third quarter 2023. I am Flavio Abrantes, and with me I have Peter Furukawa, CEO, and Jean Pablo de Mello, the IRO and CFO. To begin the presentation, we will go on to slide number three that contains our agenda. In our agenda, our priorities are our pillars, expansion and projects, the third quarter 2023 results, and finally, the question and answer session. We will now go on to slide number four, and I would like to give the floor to Peter Furukawa. You may proceed, sir.
A good morning to all of you. It is a pleasure to be with you once again and speak about what has been happening at Quero-Quero. If we could go on to the next slide, please.
I always speak about these five pillars, which are the five pillars of our company. But to speak very broadly, we had a conference in New York a month ago, and some of the investors came up and said to me, that they were somewhat happier than last year, and I said, "Yes," in a very conservative fashion. I am somewhat more optimistic. And they, spoke about what they had spoken about in the past and said, "Yes, the past showed us you were quite pessimistic." At that point in time, we had not seen where this business would end up, and I was significantly concerned. In my opinion, at least, it seems that we have gotten through the worst, and that we are now at a level that is much more sound. What we were seeing was a drop in everything.
We didn't know where this drop would stop, but I also knew that we could recompose our financial portfolio, as we had been more conservative in the past. We were waiting to have less profit and awaiting the recomposition, and we saw that the number of clients had come to a halt. It was no longer negative, and this allowed me to be more optimistic. This is reflected in the figures you will see for the third quarter. We still have a negative same-store sales, but 80% of the negative aspect is due to deflation. In the short term, deflation could impact our margins somewhat, but this will be positive going forward. We went through a period where we saw that the C and D brackets were being pressured. They were having difficulties. There was a reduction vis-à-vis their purchasing power in 2019. There is a recovery.
We had two years of drought, and Rio Grande do Sul has had an impact on us for two years and, of course, exerted pressure, and the construction market with very high interest rates was also impacted. All of this, of course, influenced our retail sales. It continues to do so. We're not walking through the park, but we see that there is a halt in all of this, and we foresee the possibility of improvement going forward, and this is reflected in our figures for the third quarter. We had a sales growth in the third quarter, a small drop in growth in retail of 0.5%, a CAGR vis-à-vis the third quarter 2019 of 13.1%, and once again, that CAGR of 13.1% versus Q3 2019.
Same-store sales with a slight drop, 80% of this due to deflation, which means that we're very close to having a break-even point. We inaugurated seven new stores, and we have 29 stores scheduled at present. We were thinking of 30, but we will leave one store for the coming year, and we're, of course, heading in that direction, 29 new stores. In terms of credit and collection, we have also been very conservative. The overdue on VerdeCard is 11.4%, and despite the growth of our credit portfolio of 19%, this is not because we have made more credit available. The credit policies are the same. We have had a greater growth in the off portfolio. We have had a very positive result, and everything is positive in that sense. Expenses under control.
Our adjusted debt as well, cash generation, very good. And I think it's advisable to always share with you that when we release the report for the coming year, as happened in 2022 and 2023, you're going to say you were burning cash. That's not the case. We generate cash in the second half, and we use our cash in the first half. So once again, it's not that we're burning more cash because of a lack of management. This is simply part of our cycle. Our net debt is a guidance, but it will be very similar to that of last year, and as we have managed in the last three years, a debt that is very similar, of approximately BRL 80 million for the year, which is quite sound for us.
Let us recall, in the first half of the year, we burned cash. In the second half of the year, we create cash. We have the digital platform. We have held back significantly in terms of investments to obtain more clients from the AB brackets because of the cost of this, and our focus, of course, is on cash. That's our D&A. Once we have a broader cash, we will be acting more in that segment, obtaining more A and B bracket clients in our digital platform. For the time being, we're focusing on our customer base and on our store. In terms of the high-performance culture, the focus continues. In my opinion, we have one of the best retail teams, perhaps the best that I am aware of. Highly engaged people with a desire to make things happen despite the difficult scenario.
We can say that since the fourth quarter of 2021, I said that we would be entering the Sahara Desert to carry out the Dakar retail race, that things would be difficult. Nowadays, I can say that we're on a road that is not paved or anything, but it is a dirt road, and given what we have built during this difficult period, any improvement that we have in the road should be of great aid. We have 554 stores at present, therefore, any enhancement will have a positive impact on our results. We have almost 360 managers, 559 employees in the Desponte program, and we're in the process of selecting our new trainees. This is something that we did yesterday.
We were elected by the Best Company Board as one of the best small cap retailers because of our ESG program. So we're focusing heavily on those five pillars that continue to be the same and will be the most important pillars in the coming year, focusing on cash flow, gaining market participation, of course, controlling our costs and the high-performance culture. Here you see the 544 stores. At present, we had seven store openings and eight renovations for the quarter. We continue to focus on small cities, some medium-sized cities, but once again, this is a focus and will continue to be the focus in the coming years. Next chart, please. I will now give the floor to Jean Pablo, and I will be back for the question and answer session. Thank you.
Good morning, everybody, and I'm going to speak with greater detail on the information conveyed by Peter on the results of the third quarter. We're going to speak about the company. We have been thinking of nominal growth in revenue, and the quarter is very similar to others. We begin with the retail, where we had -0.6% same-store sales because of deflation. With the opening of new stores that we have continued to do, we ended the quarter with 1% drop of revenues in retail, but of course, with growth in the rest of the year. Since the last quarters, the financial services have been growing at a faster pace. In 2020, 2021, it was the retail that was growing more, financial services less. It is the retail that is now under pressure. The financial services are more stable.
We have 16% of revenue and credit card growing 3%. With this, as the consolidated figures of the third quarter, we have 3% of the revenues. In the next slide, this growth of 3% in revenues, in truth, becomes a growth of 16% of gross margin for the quarter, driven by the recovery of financial services in retail, even though we have this deflation pressuring the prices in inventory at a very similar margin with the same quarter last year. We read 54% of gross margin in financial services and services rendered. In the last quarters, we were around 44, 43%. We are now at 54%, returning to the levels we saw in the past.
And this improvement, first of all, is due to the beginning of the drop of the Selic rate, consequently, a drop in the cost of capital in our credit portfolio and stabilization that we have been showing you in the default of our portfolio. The arrears rate is adequate at present, and our portfolio is now showing us margins similar to what we had in the past. And gross margin over gross revenue, we have a margin of 36 for the quarter, and in the last quarters, we were at 29%. Revenues of the company grew 3%. We had a gross profit with a growth of 16%, and this, of course, has a reflection on operating expenses. Now, here we control the expenses that were done since the end of 2021, when we were expecting a more challenging macro scenario.
This quarter, we had a growth of 11% in general and administrative expenses, as well as in sales expenses. When we include other operating expenses, we have a growth of 16%. For the nine months, the growth is of 11%, aligned with the 11% that we had last year for the first nine months of the year. We remind you that we're still opening stores, and we're making the necessary investments, enabling the company to grow in the future when the market resumes its operations. We had a growth in gross margin, but our expenses are controlled. Because of this, in this next slide, you will see that although in previous quarters we had a drop in adjusted EBITDA, vis-à-vis the same quarters of previous years, you can see this in the top graph at the left for the first and second quarter.
With this adjusted base, we see stabilization in retail and financial services. Although we are below the company potential, this quarter, we had BRL 50 million of EBITDA accounting and an adjusted EBITDA that eliminates the IFRS 16, a growth of 29%, BRL 26 million, vis-a-vis BRL 20 million for the same quarter last year. In terms of net income, we still have the impact of the greatest depreciation of investments of previous years, and the company's financial results were still in a negative level, and the loss is BRL 7 million, which is being controlled as it was in previous quarters. Therefore, these are the results for the quarter, but I would like to refer to some business assumptions that I will mention in this slide, number 12. Here we see the behavior and the ninety-day portfolio. We...
As our cash flow, the seasonality of default is also reflected in our portfolio. In the first quarter, you'll see that we have a smaller portfolio vis-a-vis the second and third quarter, and the third quarter tends to be better than the second quarter. We have an improvement vis-a-vis the second quarter and compared to the third quarter of last year. This stabilization in arrears is reflected in an improvement on our margin in services. We ended the quarter with a credit portfolio of more than BRL 1 billion that is still growing, and our focus, of course, is to have controlled default, and you can see that the portfolio is under control. In the coming slide, this growth of the portfolio is due to the use of our card that has grown 15% this quarter.
It's the same as the approved figures for the nine months of the year, 15%, and this growth is aligned with the growth of CAGR that we have had since 2019. At present, of course, we have greater use of us. We have not changed our credit policy. It is the stabilization that leads to this growth and the use of the card on- us and off- us in a profitable fashion.... Well, we go on to another topic, which leads to discussion with a controlled credit portfolio with controlled default. Of course, we have a focus on cash flow this year. Because of this, we have decreased the CapEx for the store opening and for store renovation. We have not stopped investing. Quite the contrary, we have 544 stores.
However, we have made timely investments in previous years with the opening of distribution centers, something that will not be reiterated this year. We invested BRL 11 million in the third quarter, BRL 34 million for the nine months of the year. We're holding back on our CapEx because of the macro situation, and here you will see our slide of net debt. Below, we ended the quarter with BRL 213 million, compared to BRL 196 million at the end of the third quarter 2022. And you see the seasonality of working capital, so it is seasonality that is impacting our business. We have cash burn in the first half of the year, and in the second half of the year, we generate cash as we did in previous years, and we keep our debt as one of our focuses.
It is controlled and is highly aligned with the adjusted net debt of previous years. We also had the ninth issue of FIDC of BRL 300 million for VerdeCard, and we have maintained our brAAA by S&P Global Ratings, pointing towards the quality of our portfolio. We have been able to maintain stable revenues and enhancement in margins, especially in financial services. We have default under control, as well as our debt, and we will continue to invest so that when the scenario improves, we can make the most of a more favorable environment for retail sales, and we will present results more similar to the past of the company. With this, I would like to end the presentation of the company results, and I will return the floor to Flavio so that we can begin the question-and-answer session.
Well, thank you, Jean.
We will now begin the question-and-answer session. The first questions are from Vinícius Pretto from Bank of America , and they will be answered by Jean Pablo de Mello.
How do you see the performance of new regions in São Paulo, and which is the acceptance of VerdeCard in these areas?
Good morning, Pretto. Always good to talk to you. I'm always happy to do so. As I had mentioned in the past, in Mato Grosso do Sul, we began very well since the beginning. We were lucky. We had very good managers, and we're doing well. In São Paulo, we had some problems with management. They have been resolved, and the stores we have opened are performing according to our expectations. When we speak about the card, let's remember São Paulo is more similar to Santa Catarina and Paraná. What does this mean when we open our doors?
We don't work with advertising, so the first 20 stores will suffer from this. We're going through this. The first 20 stores, of course, are better than the others. There's a cluster now regarding the card in that region. VerdeCard is Elo, and Elo has activation in half of the time that we activate our VerdeCard, and there's almost double of spending off- us, so it is worthwhile. We carried out this test for six months. We tested it in our customer base in the south, our card, VerdeCard, and Elo. The acquirer is working with us, and now is with Elo, and this has helped us, aided and abetted us in the new regions. I hope this has answered your question.
I apologize. Thank you, Peter.
The next question is from Thiago Macruz from Itaú BBA, and the question will be answered by Jean.
Thank you for taking my questions regarding your retail operation. Do you have deflation in most of the categories?
And besides this question, we're going to add the question of Robert Ford from Bank of America.
Thank you for dissipating my doubts. Could you speak more about price deflation? In which categories do you see price deflation, and what percentage of sales do they represent? Which is the percentage of drop of prices, and which are your expectations regarding prices going forward? Thank you.
Yeah. Well, regarding the question of deflation, we began to observe deflation at the end of last year in some categories, and it proved to become more consolidated in the first quarter of this year.
What we observed in the first quarter, where we had a drop of 1.5% in same-store sales, we would see a stabilization in the number of customers and products sold, but there was this deflation that led the same-store sales to a negative scenario. The digits are low, but the deflation has increased sequentially in the second and third quarters. We still have this one-digit deflation in the category of construction materials, as well as in the home appliances category, and it is consistent. What does this mean? We have deflation vis-à-vis the same quarter the previous year, and when we look at the drop of prices month after month, the first quarter and the second, the second and third, we do observe a drop in prices. So the same-store sales in the company during the coming quarter should continue to be lower.
We still have not a set vision on how long this deflation will continue. We believe that this is at least a one-year cycle. There should be deflation at least until the end of the year, but we still do not have a good idea. This will depend on the macro scenario and if we will have an inflation in the price of products sold. Now, we always speak about categories, but this situation will continue until the end of the year, hampering us in the short term, but will be beneficial in the mid and long term. Our customers can plan better to carry out works or renovations once the prices are controlled, as they are dropping now, which means that consumers will be able to afford these products better. In a certain way, this deflation is beneficial, and it is in all of the categories.
We do have an impact on the margin of products sold. In our inventory, we're working with older prices, and we're working towards maintaining a stable retail margin vis-a-vis previous years. As I mentioned, deflation is quite disseminated and has been sequential in practically all of the categories, and this should extend until the end of the year.
If you allow me a comment here, Bob, it's a pleasure to speak to you. The composition of deflation has two elements: the drop in the price of the products, and there's a part that is trade down. Instead of buying a floor of 80 by 80, a person will buy a flooring of 60 by 60, which is cheaper, and it's a trade-down basically that is part of the deflation. We do have questions so that there will be no surprises in the fourth quarter.
Questions about what will happen with the home appliances that come from Manaus. There's a great deal of speculation. We also have real facts in terms of the delay of the products that will come for Black Friday and the end of the year. If there is a lower supply, perhaps you will see less inflation in the white line and the brown line, but all of this is based on speculation. We truly do not know what will happen in terms of the white line, the brown line, and telephony, simply as a comment.
Well, thank you, Peter and Jean, for your answers. The next question is from Thiago from Itaú BBA, will be answered by Jean.
Regarding the operation of financial services, will the share of VerdeCard return to what you had in 2019?
Jean?
Yes, this is a very important point.
In our financial services, we do have a lever for the retail market. We want to sell more on us in our stores and continue to grow. Now, historically, in 2019, we reached a penetration of 60% of sales carried out in our stores with our card. In the last few years, because of the pandemic, because of a lower demand for credit, we were more assertive in credit. The card penetration was of below 50. When we look at the last quarters, it has grown 51, 52, and has now reached 54%, still below the 2019 level of 60%. This difference of penetration is the company's sale potential once the macro scenario becomes more favorable. Now, why do I refer to the macro scenario? What is maintaining the penetration low are the default levels in the market.
Once the market resumes, once the default is more controlled, we will be able to offer our consumers more credit, increase the card penetration, and bring about more sales. I don't think that this will happen overnight, a change from 54% - 60%, but this is something we will be doing in the short and medium term. We will be able to get close to those 60%. In previous quarters, we see that this is stepwise and gradual, and we do have to maintain default control as well as a controlled cash flow.
Well, thank you, Jean. With this, we would like to end the question and answer session. Thank you very much for your questions. If we haven't answered your question, we will send you the answer through email, and I will give the floor to Peter and Jean for the closing remarks. Peter?
Well, once again, thank you so much for your interest in the company. At the Quero-Quero side, we're quite engaged in capturing all of the possible opportunities. We're very enthusiastic, although this is a difficult year. We're also thinking about the coming year. We hope that the interest rates will drop. This should aid the market, and especially in the construction material area. If the interest rate is less than two digits the coming year, we hope not to have problems with the drought the coming year. It has not been easy for some regions to deal with this. We have offered support to these regions, and this is what Quero-Quero does. It helps the populations. We oftentimes sell products at cost price. We offer more credit, enabling people to build their homes and their own environments.
If we are able to have a better harvest in Rio Grande do Sul, this should help us to offer, or to offer a lowest cost of credit, and we will see the C and D bracket, recovering its purchasing power due to the deflation in food. The deflation in food prices has helped us a great deal to work with the C and D brackets. That is all.
Thank you very much, and we're at your entire disposal for further questions. I would like to thank all of you for your attendance. Our IR team is at your entire disposal. Have a good day and an excellent week. Thank you again for your attendance.