Good afternoon. Thank you for waiting. Welcome to Magazine Luiza's conference call to discuss the results of the fourth quarter of 2014. We would like to inform you that this event is being recorded, and all participants are being in listen-only mode during the company's presentation. Afterwards, we will have a question-and-answer session when further instructions will be given. Should any of you need assistance during the call, please press star zero to reach the operator. The replay of this event will be available soon after it ends for a week. We would like to mention that forward-looking statements that might be made during this call relating to the business perspectives of Magazine Luiza, operating financial projections and targets, our beliefs and assumptions on the part of the company's management, as well as information currently available. Forward-looking statements are not guarantees of performance.
They involve risks, uncertainties, and assumptions as they refer to future events, and therefore, they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operating factors may affect the future results of Magazine Luiza and may conduce to results that differ materially from those expressed in such forward-looking statements. For the opening remarks, we would like to invite Mr. Marcelo Silva, CEO, to take the floor. Mr. Marcelo Silva?
Good afternoon, everyone. Thank you for participating in our call, during which we will be referring to the results of the fourth quarter of 2014, as well as the full year of 2014. I would like to start with the highlights.
Starting with the sales, an outstanding growth of net revenue of 20.9%, and we would like to mention same-store sales increasing by 17.8%, and also e-commerce, 33.7% growth and 15.1% in stores, brick-and-mortar stores, much higher than the average for the market. Our e-commerce, with this 33.7% increase, it goes from 14.6% in share in our sales in 2013 to 16.4% in 2014. I would like to mention also that we had a very good operating leverage. We were able to dilute our expenses by 130 basis points in 2014, coming from this increase in sales of 20.9%, as well as the projects and the maturation of projects that increased productivity for the company in stores and also the management as a whole. As a consequence, our adjusted EBITDA increased by 47% year-on-year, reaching BRL 605 million now in 2014.
With that, we were able to expand our EBITDA margin by 110 basis points. Now it is 6.2%, growing consistently in the last few years. A big highlight also is Luizacred. Luizacred more than doubled its equity income, BRL 19.4 million coming as equity income, equivalent to our 50% participation and also Itaú 50%. The ROE of Luizacred was 36.1%, therefore an outstanding performance. Considering the sales and dilution of expenses and performance of Luizacred all together, we were able to increase our adjusted net income by 81%. We are comparing this on a year-on-year basis and net of the partial sale that we did in 2013. We are comparing BRL 128 million of adjusted net income from the operation of the company vis-a-vis BRL 70 million in 2013. Our net margin went up as well, and this means return on equity of 17.9%.
About 2014, 12% growth in our net revenue, same stores growing 9.4%, e-commerce 20%. This also represents a higher-than-the-market average growth. It actually grew 20% in this half year, and we kept our participation of 16.3% of total sales. Once again, we were able to dilute our expenses because the growth in revenues was this, and EBITDA growing by 33% year-on-year, and margin growing by 1%, growing to 6.3%. Luizacred was not different from the year as a whole, so BRL 28 million in equity income and ROE 40%. Net income, therefore, increased to BRL 39 million in Q4. Our net margin was 1.4%, and ROE was 21%. I would like to add that we were rather successful in our marketing last year. We participated very strongly in the World Cup and also in the Rede Globo.
We had an excellent performance as well in our promotions. We were able to dilute and hold back our costs, and we are celebrating. I would like to mention that this weekend we will have 1,300 leaders of the company celebrating our results, because this is the best result of the last few years of Magazine Luiza in all its drivers. That is to say, sales and image and operation and Luizacred, and all the pillars that sustain our results. I would like to give the floor to Roberto Bellissimo, who will be giving you details about the performance that I have just referred to. He's our CFO.
Good afternoon, everyone. On page four, we show the evolution of number of stores.
In the last quarter, we opened 20 stores, 756 as a whole, and for the whole year, we opened 24 new stores, most of them in the Northeast. 14 in the Northeast, where we already have over 170 stores. In the year as a whole, we invested BRL 152 million in new stores, refurbishing, remodeling, logistics, and we still have about 40% of our stores still in the maturation curve, and with a more accelerated growth as well. On page number five, we show the evolution. First, gross revenue for the quarter. Last year, BRL 11.5 billion in gross revenue as a whole. In Q4, BRL 3.2, growing by 10%. I would also love to mention that the growth in the last quarter was based on the highest-ever comparison base that we had in the last few years.
It's difficult to grow 7.5% over 16% and 20% over almost 40% in e-commerce by the end of 2013. You can see that is a very significant and consistent growth coming from our planning. For the year, e-commerce grew almost 34%, much higher than the market average. On the next page, on page six, we show the evolution of the gross profit. I would like to mention that gross profit grew by 19%, more than the gross revenues that we referred to. If we compare gross profit over gross revenue, you can see an evolution of our margin. Net revenue, a slight decrease, but it's important to see this growth in the gross profit of 19%. That is rather big. In expenses, we have already said that we have diluted expenses in a consistent fashion during all these quarters.
In Q4, the situation was the same, mainly in administrative expenses. Equity income was a big highlight in our results as well, reaching BRL 100 million in the year, 1% of our net revenue, and representing more or less 15% of our total EBITDA. On the next page, on page number seven, we show you the evolution of our EBITDA per quarter in Q4. 6.3, a growth of 47% because of the growth in sales and dilution of expenses, and also the performance of Luizacred, that was very marked. On the next page eight, we give you details of our financial results in the quarter. Our financial expenses went up from 2.7% to 3.7%, mainly due to receivables discount and the other financial expenses. Net of the receivables were 1.2% of the net revenue, and the same for the year as a whole.
Of the total financial expenses of BRL 330 million, BRL 220 were in credit card and 1.8% other net financial expenses with the increase in the CDI in the year, which was the main factor. You look at the working capital, since June, we have been improving our working capital situation. For the year as a whole, we had a variation in working capital. We are working this year in order to revert the situation, but in spite of that, we have a relatively low need for working capital, a balance between our suppliers, and we intend to further increase this relationship and also a better relationship with our suppliers and recovering taxes that we should achieve over the year.
Because of all that, our net debt has been dropping consistently from June to December, our leverage as well, maintaining 1.4x EBITDA, and also associated to the situation of working capital that I have just mentioned. In terms of net income, we show you here the quarterly variation. We have already mentioned the return, 21% for the year as a whole, ROE. On the next page 10, we show you the growth of Luizacred billings. Also growing very much in line with Magazine Luiza, mainly in the card side of the operation. The provision for bad debts has decreased consistently as well, and personal loans have been decreasing, and the cards are more important for us, and they have been increasing both inside and outside Magazine Luiza due to the greater activation of our card base.
With this more conservative credit policy, our credit portfolio has been improving in quality as we expected, a reduction in the past dues as almost one percentage point of the portfolio. At the same time, we increased our coverage ratio, we reduced our provisions in our results, therefore, this allowed Luizacred also to get an increase in its earnings due to these lower provisions. Now, I would like to give the floor back to Marcelo.
I would like to conclude our presentation before the questions, say a few words about the 2015 outlook. I would like to tell everybody that we should continue to grow beyond the market average. Northeast consolidation of the existing stores plus the new stores is already underway. We have been investing more in the Northeast. We will be maintaining our commercial competitiveness.
Just to give you a brief history, in 2008, with the international crisis and also the ripplings of that in 2009, we started to grow more in the second half of 2009 and 2010. You remember that we took off. Then we had 2011, 2012, 2013, with lower, and in 2014 close to zero. In 2014, we invested in the World Cup in campaigns. Then in 2015, we are participating in the soccer championships at the Globo network with a strong media presence and very intensive campaigns as well. By doing this, we will be keeping our competitiveness that we have been keeping. Rationalization and costs and expense dilution better and better every year, getting to the stores and to the DCs as well.
We have been focusing on the profitability of our operations, and we trust that this year, in spite of the more difficult scenario that we are living, we will continue to be focused on the profitability of our operations. Now, we would like to place ourselves at your disposal. We have all the executives of the company. Besides myself and Ben, we have Fabrício, Frederico, Marcelo Ferreira. Everybody's here at your disposal to answer any questions that you might have. We would like to start our Q&A session for investors and analysts only. Questions coming from the Internet will be answered afterwards by email, and we will be available to answer any questions that you might have. Please press one if you have a question. Mr. Fábio Monteiro from BTG Pactual would like to ask a question. Good morning, everyone. More focus on LuizaCred.
This last year, the rate is lower with a drop of 11% and card going up, also personal loans going down. I would like to know if you see the same trend for 2015, and if you expect a reduction in the overall level of losses on your credit portfolio.
This is Marcelo Ferreira from LuizaCred. In fact, what you see is a result of our strategy in terms of a more conservative credit policy. When you look at the card and the direct consumer credit, in spite of the direct consumer credit giving higher profitability in the short run, there is more risk involved. Because of that, we became more rigorous regarding personal loans. This is the reason why you see a reduction in our personal loan portfolio. As far as the card is concerned, we are very rigorous as well.
However, our clients are using more and more their cards as we assign credit. 10 percentage points increase in our activation. This is why you see this increase in cards. In personal loans, the personal loans are now linked to the cards. There is one that is linked to the card, and the one that you link to the card, it is under the portfolio. It grows very quickly. This is given to clients who have a good behavior, and then you offer a personal credit facility, and this grows a lot in the organization. However, the separate card, we consistently decrease this kind of loan. This is part of our strategy. You will continue to see this in the next two years. Regarding the loan loss provision and the risk, we have risk under control.
Following the same thing that we have already shown you during the last few years. A question about sales and competition. Marcelo, at the beginning of his presentation, he talked about growing this year and continuing to open new stores. This will be a difficult year, on the macro side, and I would like to know if you see the opportunity of acquiring any competitors that might go underwater. If you see a big impact on your suppliers of this difficult situation that exists on the macro level.
Thank you, Fabio. As I said a while ago, we will continue to be very competitive, commercially speaking. We will continue to invest very strongly in media, in our marketing actions, in our promotional actions, and we wish to continue, and this has been going on for many years already. It was not only 2014.
We will continue to make our best endeavors to grow more than the average of the market. We are present in the Northeast. That is growing very fast, more than the South and the Southeast, because they are more mature markets for us than the Northeast. We have e-commerce growing much more as well, and this is a natural process that is going on with the online operations of our company and certainly the market as a whole. Regarding M&As, acquisitions, no. We have no plans to make any acquisitions or mergers. That could happen. This is just a matter of identifying opportunities, but this is not our focus. We are focusing on organic growth. If there are interesting situations, more in the Northeast, I would say, and we are remodeling our stores. We are updating stores and investing quite a lot in logistics, in IT.
Our company has been in existence for 58 years. We have gone through all the good times and the bad times, and life goes on. Nobody knows exactly what will happen in 2015. It's a little bit too early. Mainly, we will only know what happened when we look back at the end of the year. We will continue our daily struggle with a very motivated team. We have a very good communication channel with our whole team, with our 24,000 employees. We have a lot of confidence in our future, in the medium and the long run, and in the short run as well. I'm not sure I have answered your question, but this is our driver for 2015 and on. I would like to mention that we are focusing a lot on our online operations, our platform.
Afterwards, of course, we can talk in more detail about that, but having more digital stores and IT in the stores and our DCs. This is our program from now on. This is the path that we intend to follow.
Thank you, Marcelo. Thiago Macruz from Itaú. Good afternoon. I would like to ask a question about product mix. What kind of product will lead your growth? We have been seeing smartphones growing a lot in the last couple of years, and I would like to understand if this trend will continue from now on. Another question You had a very strong performance in 2014, but it was very much front-loaded. That is to say, very focused on the first half of the year, and the slowdown in the second half. Is there a category that had a worse performance or better performance? Thank you.
This is Fabrício, Commercial Officer. Last year, we had a first half, which was not typical because of the World Cup, and also a very good growth in the image area, that is to say, TV sets, et cetera. As you mentioned yourself, the smartphone line grew a lot in the last couple of years, and we believe it will continue to grow at very high levels for 2015. We have a very good market share that we gained last year, and this year, we will be working to grow more than the market as well in the sale of smartphones and other categories that drove our growth. Well, the more representative ones are the white line and furniture that were slightly affected last year because of the sale of image products such as TVs.
We should see a growth in these two lines this year, not the ideal year, but it should be going up. That is to say, white line and furniture. The TV market this year is a challenge, and we intend to keep the same size that we had last year. Last quarter, it was the weakest in this line. We intend to grow in smartphones, and also we will see growth in white line and furniture and the maintenance of the image market as well, TVs. Another question regarding your focus more on white line than on TVs because of the World Cup in 2014. Do you think this would further improve your profitability because TVs maybe are not the most profitable line? Well, white line is better in the sense it could bring a better profitability over the year and more stable over the year.
Perfect. Thank you very much.
Alexandre from Credit Suisse. Good afternoon, everybody. Regarding the potential impact of the change in the tax rate. Regarding the impact on your payroll from 1% to 2.5%, what could be the potential impact of that, and how do you see the situation? Good afternoon, Alexandre. This is a very recent measure, and we are still assessing it. What we can tell you so far is that when there was that relief of payroll taxes in 2013, we estimated that the impact would be about 30 basis points in 2013. The company grew more and more revenues in 2014. This is what we expect this year. The higher the revenues vis-à-vis the growth in the payroll, and we have been trying to decrease our payroll, the more the benefit is important.
It would be reasonable to estimate that the effect of last year and this year would no longer be 30 basis points. It was lower than that in 2014, and this year, it should be even lower than 2014. Something between 20 and 30. If we consider that it will be enforced in the second half, it could be between 10 and 15 basis points. This is just a preliminary analysis. It would make no sense for us to go from 1% to 2.5%, so no way. What we should do would be to go back to the previous situation, which is slightly higher than 1% of our overall revenue. This is what we can share with you so far about this measure.
Thank you. Mrs. Irma Sgarz from Goldman Sachs.
Good afternoon. Thank you for the question. I have a question about CapEx.
You're saying that you intend to open 50 stores in 2015. You have already mentioned the CapEx associated to this. It's very similar to the CapEx this year. You only opened 24 stores. I believe you will have more allocation, of course, maybe of expenditures because of expenditures with remodelings and IT. Maybe they will be lower this year. Could you talk about the size of these new stores? Of course, the CapEx expenditure will vary a lot depending on whether you have a brick-and-mortar store or if it's a virtual store. How much are you growing in selling area? You had a slight worsening of your working capital. What is your expectation in this quarter, year-on-year?
Your expectation, was this just something, a one-off situation, or is there something you expect for 2015 for working capital, like maybe new opportunities? Irma. We expect to see an improvement in our working capital in 2015. We are not going to give you any figures or a specific guidance. We are working to improve our working capital. Our net debt EBITDA continues to be at a very comfortable level, 1.4, as you saw. Regarding CapEx, we are maintaining basically the same volume as last year, BRL 150 million. A little bit more focused on new stores. 40, 50 new stores. We already have 10 that came from Pontofrio, that we are starting to remodel already. Less remodeling of already existing Magazine Luiza stores. IT, logistics also having big investments.
This level of BRL 115 million is what we have been doing in the last couple of years. This is quite comfortable for us. We feel comfortable with this level of CapEx.
Thank you. I would like to remind you that in order to ask a question, you should press star one. In case you have a question, please press star one. There are no more questions. I would like to give the floor back to Mr. Marcelo Silva for his closing remarks.
Thank you very much, everybody, for attending our conference call. I would like to reiterate that we have been in existence for 58 years. We have survived all the good times and the bad times. We are very much used to that.
We face the situation with a lot of strength. We trust that when difficulties come our way, we just have to face them and overcome them and wait for better moments in the economy. We do not know exactly what will happen in terms of the economy for 2015. We are carrying out our work as usual, working with a lot of austerity, considering very carefully all our investments, our expenses, and focusing on sales in order to keep our market share. As you see, we have been growing substantially in the last two years. This is our position. This weekend, we will be celebrating the best year ever for the company in all aspects, quantitatively and qualitatively, this was the best year ever.
Satisfaction on the part of our clients, our employees, and improving consistently our results, such as we have been showing you every single quarter, achieving better results than the previous one. Thank you very much and see you next time. Thank you.
Thank you. Magazine Luiza's fourth quarter of 2014 earnings conference call is closed. You may disconnect your lines and have a very good afternoon