Quarter of twenty fourteen. For your information, this event is being recorded and all participants will be in listen only mode during the company's presentation. After the presentation, we will initiate the Q and A session when further instructions will be provided. By pressing star zero. The replay of this event will be available after it is concluded for a period of one week.
We would like to stress that any statement made during this call related to the business outlook of Magazine Luisa, projections, financial and operating goals are based on beliefs and assumptions from the management of the company as well as information currently available in the market. Future considerations are no guarantee of performance because they involve risks, uncertainties and assumptions and therefore depend on circumstances that may or may not occur. Investors must understand that general economic conditions, conditions of the industry and other operating factors may affect the future performance of Magazinha Luisa and may lead to results that differ completely from those expressed in such future considerations. To start this conference call, I would like to give the floor to Mr. Marcelo Silva, the CEO, for his presentation.
Mr. Silva, you may proceed. Good afternoon, everyone, and thank you very much for participating in our conference call on the results for the third quarter of twenty fourteen. I would like to begin by talking about the net income of the company, which reached a growth of 66%, million in the third quarter. And this stems from two major factors.
The first was the growth of our revenue by 18% in the third quarter. And I would also like to highlight the growth of same store sales, which had an increase of 15.5%. This is above the average when compared to the market. E commerce has had a more impacting share. We had an increase of 32% in e commerce and physical stores posted increases of 12.4%.
Therefore, we've had experienced a double digit growth if you look at the last quarters of the company. With 18% growth in revenue, expenses did not grow as much, 13%, and this allowed us to have a dilution of 100 basis points in the third quarter. And this is what has been posted in the past quarters due to a very good effort on the part of all of our people in reducing operating expenses. Our EBITDA grew 43.9%, reaching BRL176 million. And therefore, we had an EBITDA margin of 7.4%.
It's also important to mention Luizacred equity income, which was Luizacred's best result ever in the third quarter, 24,300,000.0 of equity income for Madagini and ROE of 37%. We must also mention that after the integration of the two store chains that we acquired in 2010 in the Northeast in 2011, when we acquired Bao, we managed to make the integration and it's already in its maturity phase. The profitability of these chains is very close to the overall margins of the entire company. So we hope that by the end of twenty fifteen, all of the stores will be fully matured. And it's also worth mentioning the growth of our e commerce stemming from a policy of multichannels, where now we have we are one single company.
We share the same processes, the same distribution centers. All of the distribution centers of the company are operating online and offline through all of the multichannels. Therefore, I must say that we were very fortunate in all of our promotional campaigns this year with the World Cup. And contrary to what people believe that after the World Cup or during it, we would have a negative impact. But for us, we had a very successful phase.
We also had other promotions to our customers. Therefore, I must say that there was just a combination of factors that led us to have a very positive third quarter, a very successful third quarter. But what makes us more confident is the consistency of these results because they've been consistently increasing. But before I give the floor to our CFO, Roberto, I would like to tell you all that here with us, we have all of the officers of the company and also our President, Luis Elena, who will also be available later on to take questions from you, if you want to address questions to her. Now I would like to ask Roberto to start with a very short presentation of the main highlights of the company.
Good afternoon, everyone. On Page three of the presentation, I show you the sales growth or sales performance in the third quarter. Our gross revenue was about 2,800,000.0 and it grew 16% vis a vis last year and it also increased vis a vis the second quarter. We did not have the hangover effect caused by the World Cup because we continue to grow down below. You can also see the growth of last year, the comparison base was high, but we grew 15.5% when it comes to same store sales growth over a base of 17%, which was already very high.
Also, our gross revenue for the Internet sales, it was EUR 15,000,000 in the third quarter, but accumulated in the year, we posted growth of almost 40%, which again accounts for 17% of our sales. Moving on to Page four, I would also like to highlight our gross profit growth, 18.7%, which was above the revenue and we increased our gross margin with a better sales mix when compared to the second quarter with more TVs and smartphones. We also showed the dilution of operating expenses and this was certainly a highlight and a great impact in our results. We grew expenses 13%, which was very much below the expense level, both in SG and A as well. Equity income increased also and that accounts for 1% of our net revenue, especially due to our good results with Luisa Cred.
And this has also posted high profitable margins for the past two consecutive years with delinquency levels very low. Next page, on Page five, we show EBITDA, the EBITDA performance. We have EUR 7,400,000,000.0 during the quarter and accumulated 6.1% over net revenue. We also see an increased performance from last year to this year from 6.1% to 7.4% due to expense reductions and also due to the results of our investments in DCC or direct credit to consumer. And now next page, Page six, I show you our financial results.
Financial expenses went from EUR 58,000,000 to EUR 89,000,000. The main increase is related to credit card discounts, which increased mainly due increases in sales because sales increased significantly, also increased in credit card sales with a slight change in the mix and also due to CDI, which also increased vis a vis the same period of last year. We continue to reduce our net debt. This half year, we reduced our net debt and this reduced our leverage, both if you compare it to June or also September of last year. And part of that is due to improvements in our working capital in this half of the year.
We had improvements in inventory turns and also the average purchasing terms or payment terms because, as I said before, we had the effect of the World Cup. Next page, Page seven, I show you net income. Now we are EUR89 million. In this quarter, we had our highest return, return on equity about 23%. And on Page eight, I have a few figures for Luisa Credit.
Luisa Credit revenue continues to grow, especially in regards to credit card, which is a very healthy position. There was an increase of 2%. And we also experienced a reduction in both loans and DCC, credit to consumer, because we try to be more conservative and this had an impact in delinquency levels or payments or overdue payments, which indicates to some improvement because of the most recent rates and that's why the Luisa Credit results were much better. If you compare this half year with the same period of last year, the level of provisions decreased and we were able to maintain the growth of revenue and also the dilution and reduction in operating expenses. Now I'll give the floor back to Marcelo to talk about the outlook.
The outlook for the end of the year is that we still anticipate sales growth in double digit terms in same store sales and this is due to better productivity at Bau and Maya in the Northeast. The Northeast is growing more than the other regions of the country and e commerce also grew more than 25% in fiscal year twenty fourteen. We think that this year, our Black Friday event will be very aggressive and it's been growing year on year. And I think it will be no different this year. And with the growth of the Northeast stores, we are gradually increasing our gross margin.
We were also able to improve our the management of our inventory and pricing projects are underway, as we said talked about it before. And better sales mix, now it's better than in previous quarters. So with all of that, we hope to increase the profitability of the company. We are about to inaugurate 29 new stores in October. We already inaugurated stores in Fortaleza, also in Sao Paulo.
So we hope to have 23 new stores in this last quarter of the year. We are very confident in the industry as a whole and particularly our company. We are all very confident in the company. Next week, We will speak with all of our managers to talk about the next initiative for the end of the year. We will hit our target.
And we've been reaching the target along the years. We've been beating all of the targets even though Brazil had low GDP growth, but we were able to grow approximately 15% on an annual basis. And we will continue to work to experience a double digit growth. But this is the focus and the target that we post to all of our employees in the company. So we believe that 2014 will be one of the best years in the history of the company, both in terms of gross sales and also EBITDA margins and net income of the company.
And now I would like to conclude the presentation. I leave the floor open to take the questions from you. Thank you very much. Now we will initiate the Q and A session only for investors and analysts. Questions that will come through the web will be answered later on by e mail, and we will be available to take your questions if they arise.
Mr. Ricardo Boyat from Bradesco Bank has the first question. Good afternoon, everyone. My question relates to expenses. I just want to understand whether this expense dilution, which you posted in your third quarter is solely related to your very strong top line growth or whether there was something one off that was one off or something very specific that contributed to the improvement of that line, both commercial expenses and sales expenses and G and A expenses.
My second question is about e commerce. We have seen that you've had very strong growth rate for e commerce and this is gaining momentum in the overall results of the company. Do you have any particular outlook for that division in the company or whether you think in terms of opening up the results from e commerce, the significance that this business is gaining in the overall results of the company. Good afternoon, Ricardo, and thank you for your question. This is Roberto speaking.
I would initiate my answer with the expense part of your question. In fact, this dilution is a consequence of two things. We have sales growth, which is very important, and this has helped us to reduce expenses. But also, we must consider our enormous efforts to maintain expenses on a fixed basis and also variable expenses at the lowest possible level. The difference between sales expenses was very large, which indicates that fixed expenses did not grow as much this quarter.
This also includes investments in marketing, and we started investing in marketing since early this year, and we've been maintaining this investment, and this has helped us grow in terms of sales and to grow the brand. But we are also working with other expenses such as logistics with the integration of all of the DCs and web sales that are also being delivered by all of our DCs and also fixed expenses from the stores, employees, corporate expenses, like expenses from our main office are being reduced. Therefore, what I'm saying is that we have been diluted all expenses across the board. And we've also we are trying to contain expenses as much as possible. Now I will give the floor to Fred, so he can talk a bit more about e commerce.
Good afternoon, Ricardo, and thank you for your question. In fact, in the last quarters and even throughout the last few years, we've been consistently experienced a very sound growth of our e commerce activity. We have a very distinctive operation model. We work with top players in the market and peer players, and we've been growing above market growth consistently quarter on quarter, year on year in the last six years, it was 35%. This year, we grew 39% on e commerce.
So e commerce is gaining momentum, is becoming more relevant in the company. And I think the beauty of our model is that even though we are becoming more relevant, the company as a whole increases its EBITDA and net income margins and that provides the major differential. Our model is so good in the top line of e commerce as it's also good in terms of the contribution it gets to the overall margins of the company. In fact, this is something that only Magazine Luisa has been able to deliver. Now in terms of giving further opening of the fingers of e commerce, this is a decision that can only be made at a Board level.
Today, some things are being discussed at the Board, but nothing has been decided yet in terms of e commerce. Okay, thank you very much. I would say that the relevance of e commerce as it grows should ultimately come to that, that this is not yet the time to open it up the way you're referring to. I know this would really help us from Fred's comments. We know that, that operation is very profitable and it helps the company as a whole.
And I think this is the information that I was looking for now. Our next question is from Guilherme Aziz from Brazil Plural. Good afternoon, everyone, and thank you for accommodating my question. I just want to understand, especially along the lines of Marcelo's final remarks, he talked about some projects to improve inventory turn in pricing. I just want to learn more about what the project entitles and what we could expect from the projects and when we could expect the projects to impact your operations?
And my second question relates to the dilution of marketing expenses. I understand that the company is doing a lot of efforts in that marketing arena. You did that for the World Cup and for next year. I know that you will close-up that package with global television. But we haven't seen any changes, any significant changes in that line.
How much of that is impacted by vendors? And what should we expect from now on in terms of marketing? Thank you. The first question about inventory management and pricing, I would like to ask Fabrizio to answer that part. But it's just a process.
It's a process involving systems improvements and improvements in the process per se and this has been happening in our commercial area. But Fabrizio can give you more details on that. And the second question will be answered by Fredericco. Good afternoon, Deremi and thank you for your question. This is Fabrizio.
In fact, the inventory and pricing projects that we mentioned since last year and we've been doing that with full support and it's been fully deployed by the company. The purpose is to grow to evolve in our inventory management to have healthier inventory. And since the beginning of this year, we've experienced improvements in our inventory turns. We were able to now reach four days of inventory turn. The project has been deployed and it's growing quarter on quarter.
There is a committee that just manages inventory. In the case of pricing, it was just introduced this year and it was introduced to a few categories. Our goal here is to capture some gains because considering the size of the company and the magnitude of the operation, we try to work pricing per category in regional to have better margins. This is a project that has been already deployed. The pilot project was initiated in the first quarter of this year and now it's being deployed in all of the other areas of the company.
Now about marketing, Frederico? Yes, good afternoon. Concerning your second question, we do not report marketing expenses separately. We report on sales and SG and A expenses. And in fact, sales expenses are being diluted throughout the year.
But it's important to understand that as we said last year when we signed the deal for the World Cup, the marketing package will be almost the same last year because sales increased even though we invested more, but because of sales, the percentage is about the same. But other expenses like salaries of managers, the support commissions, there are many other expenses that are part of our sales expenses. All of these expenses because of sales growth, because of a very significant sales growth that we experienced in the first half of the year. And Easter, even after the World Cup in the third quarter, were diluted. And that's why the sales expenses is diluted not due to marketing, but because of the effect that it had on sales and the consequent dilution of all of these factors.
Now about next year, in fact, because of the success we had this year with the World Cup package that was extremely profitable for the company and also because of all of the impact we had on sales and more visibility, we then decided to take the advantage of being part of the soccer package and have even greater package than that of Globo that gives 40% additional visibility than the World Cup package. And this other package is divided into other periods. It's not just concentrated in three months or more. This other package is marginally better in terms of cost. So it's a twelve month package rather than six months like the World Cup.
This will give us 40% additional visibility and it will be marginally higher than that of the World Cup. So we believe that when it comes to marketing, we will have another exceptional year in 2015 to beat the results we had with the World Cup. Thank you for the answer. Could you give me just a follow-up on your marketing area? Part of that expense or the investments you do, can you negotiate with vendors to announce some specific products from vendors?
Yes, of course. This is a common practice in the market. Some additional budgets are put forth. And in terms of marketing costs, our practice is not very different than that of the market. We do not report on that.
We do not say how much more we give it, but it's part of our it's in our balance sheet. But it's not something that the market doesn't do. We just follow the standards that are applied in the market as a whole. Our next question is from Andrea Trichera from JPMorgan. Good afternoon, everyone.
Congratulations for your results and thank you very much for the opportunity to ask you the question. I don't think it's now is not time to be concerned about that, but I would like to know what is happening with your more mature stores. If you could I mean, Daniela always showed a chart of future improvement coming from the stores in the Northeast and how long it would take for them to reach full maturity. So how is that snapshot today of the most mature stores vis a vis your stores in the Northeast and whether that gap is already much shorter. Andrea, good afternoon.
This is Roberto. Let me just say a few words about that. This evolution we had in the EBITDA margin, for instance, was present in all of our channels, in all the channels and in all the regions. The most mature stores or the older stores are also becoming more profitable. And that is due to all of the improvements that were put into place that have an impact on the gross margin.
The more mature stores also have better margins because of pricing and expense reductions. So it's also very important to us to also improve profitability in the older stores. And when it comes to newer stores, their numbers are progressively improving. Sales in the Northeast were very significant and they've been significant throughout the year. The growth has been above average.
There has been improvement in gross margin and also decreases in expenses were posted there, too. We still believe that we still have a lot more room to grow both in the Northeast and in terms of the old Baul stores. The old Baul stores do not have yet the same sales per square meter when compared to the older stores, but we still have room to grow between 15% to 20% to reach until it reaches the level that we believe it will be a more mature level for these stores. So what I mean is that we still have room to grow in these regions. And by the same token, we will continue to dilute expenses and increase the EBITDA margin of the U.
Stores. Thank you, Roberto. And the stores today, how much do they account for the overall result? We say that approximately 40% of our stores are not yet fully matured. And these are the stores that we opened after the acquisition of Maya and all of the others that followed suit.
So approximately 40% of the stores. E commerce is almost 20% of our total sales. And these stores are almost 40% of them. The Northeast, the stores, I would say, are just as big as e commerce in terms of sales, only in the Northeast alone. And we still have to consider the BAUUS stores and the other stores that were opened organically, they are not yet fully matured.
Therefore, 40% of the stores would account for about 30% of sales of brick and mortar stores today. And the trend is that they will continue to grow above our average. And therefore, they will help us increase our margins. I would just like to add that I believe that by the end of next year, both chains will reach full maturity. And then we have new stores, as Berto said, that were acquired in 2012, 2013 and 2014 that will reach maturity.
High street stores should be matured in three to four years. And when it comes to a shopping mall store, it takes about four years. And every year, the stores that three to four years ago started that maturity process, they will fall into a routine because we the two chains had two fifty stores. But I think that by next year, we will reach a reasonable maturity level of all the stores. Thank you, Marcelo.
What Roberto was saying is that 40% of the 80% without e commerce, right? So if we multiply 40 times 80, that is about 30% of the total revenue comes from high growth stores, just to make sure. Yes, 30% of the revenue from physical stores and they are 40% of the stores. And as sales per square meter is still low, they are not so representative in terms of the total results. Thank you very much.
Our next question is from Thiago Marcuz from Itau BBA. Good morning, everyone. I think 2014 was a very good year. Your top line growth came particularly from TV sets and smartphones. But what about next year?
What product line you think should lead growth? Can we just say that this replacement process, like the sales of smartphone is about to be exhausted? Thiago, it's Fabrizio who is speaking. In fact, the sales of TV sets next year will be slightly lower than this year because this year we had the World Cup, but that's just natural. But we believe that some categories should have a good performer next year.
Smartphones will still grow. This is a trend still. It's a replacement market in the telephony industry. The consumers keep changing their phones for a better phone, so we do not believe that we will experience a drop in the sales of smartphone. Whiteline, while this year was that market was pressured by the sales of TVs, but it's already picking up in the second half of the year.
Therefore, we think that we should have a very good white line sale next year. And the furniture side should also recover next year. So we think that next year, we will have a good performance in addition to tablets. It was good this year and it will continue to be good next year in all of these categories. Magazinha Luisa is very strong.
We believe that all of these items will replace the sales of TV. And also air conditioning, which is part of the Whiteline catheter projects or products. Thank you very much for the answers. Our next question is from Irma Scott from Goldman Sachs. Good afternoon and thank you for the question.
My first question, I just want to make sure because you said that you hope to go by the end of the year with Maya and Bahu should get mature at the end of this year or the end of 2015? 2015, yes, fine. And my second question, we've seen that Luisa Credit's results were very robust for many reasons and many factors. But what caused my attention is that provisions continue to go down. You had a decrease in provisions for loan losses at Luisa Credit.
There was a drop of 20% year on year, whereas your portfolio continues to grow. I understand that this is probably due to the fact that you are very comfortable with the quality of your portfolio and even the write offs are lower as we could tell from your results. But I would just like to understand how much longer this dynamic will prevail. I mean year on year, these numbers should be going down whereas the portfolio is growing. Well, thank you, Irma, for your question.
And I will give the floor to Marcelo Prejeda. He's from Luisa Credit. Well, hi, how are you, Irma? Let me say one thing. Provision for loan losses if you look provision for loan losses in the third quarter of twenty thirteen, it was BRL 13,200,000,000.0 of the entire portfolio.
But in the third quarter of twenty fourteen, it's BRL 13,300,000,000.0. So provision for loan losses for that portfolio, I mean, the balance is not coming down. What shows that I mean, any losses will be posted under allowance for loan losses or provision for loan losses. But potential losses in the portfolio, I mean, the value of PLL is very much adequate to the portfolio that is in the balance sheet. But what is coming down?
What's coming down are all of the PLL expenses. And why is that coming down? Because our credit portfolio is better, so we don't need all that provision for loan losses for the risk associated to the balance sheet. So it's coming down because of the reasons that you mentioned, because the risk or things are better now even because now our credit granting is better, we are being more conservative. So with all of those things put together brings less risk to the balance sheet.
But how much longer do you think this will continue? I know that expenses with P and L, PLL are coming down, whereas the coverage ratio is also very stable. But if I look at the delinquency levels, the overdue payments between fifteen to ninety days, I mean, on the contrary, this was up by 30 basis points. And I know that the market is very cautious. Income levels are not growing as much as they were earlier during the year.
So there is a certain level of caution in that consumer credit. So how do you manage? Or how do you see that loans for loan losses portfolio performing next year? In our credit operation, every week, we look at delinquency indicators. The delinquency KPIs are very stable.
We look overdue above ninety, fifteen, 90. There is a downward trend. You look at the overdue fifteen, ninety days and you see that there has been a decline. If you look at the numbers, that overdue fifteen to ninety days was down. And this is a very positive indicator showing that I mean, because from 15 to 90, I mean, the lower overdue will be in the future.
So we do not need a lot of provision for loan losses. But in addition, we are very positive because we are now controlling the new credit lines. We are very conservative in terms of granting you credit, granting you loans. And this is a way of protect ourselves from future currencies in the market as a whole. Thank you.
Our next question is from Renata Cochinho from Citibank. Good afternoon and thank you for accommodating my questions. I have one question now about the conservative position in terms of credit granting. I've seen an impact on sales vis a vis the first half of the year. Do you see any reflection on the sales of merchandisers?
Maybe this conservative position should probably affect your figures in the future? This conservative approach, it's been around since 2011 and it was just increasing year on year. So we do not believe that this was the limiting factor in terms of our sales because despite that, we've been growing double digits above the market average. Macroeconomically speaking, Renata, only problems related to unemployment would lead people not to pay. If they were granted loans, it's because they deserve that.
And we don't see that possibility, macroeconomically speaking, of any major problems caused by unemployment. That's why all of the outlook or the provisions that we do, both at Itau and Luisa CREG, which follow the same criteria, I don't think there will be any changes or whether there will be any impact on our sales because of that. You're not losing new clients that could apply for a lose of credit. The first purchase in the first purchase, we are very rigorous. That's when we may encounter problems.
But those that are already with us, we already know how they perform. But for new clients, we are more conservative. But this has not affected our sales by no means. UNIDENTIFIED Enasa, let me just say one thing. We have more active clients in our Luisa Credit portfolio.
That's why our credit card line is growing. That's also an important dimension. The growth of this active customer base is very important, and this helps also to grow our credit card portfolio as a whole. The active space is growing. And we were able to grow in this quarter.
I mean, we already had a conservative approach and we were able to grow this quarter as well. Congratulations, congratulations and thank you, Our next question comes from Guilherme Aci from Brazil. Just a follow-up question. When you talk about margins and opening of stores, we've seen that you expedited your store opening in the third quarter. And then I think in the fourth quarter, you would enforce that even further.
Should we expect any impact coming from the opening of the stores in your margins and whether there was also an impact on the third quarter after you delivered like 20 stores during the quarter. And how will be the how will be this dynamic? And what should we expect for the next quarter? We shouldn't see any impact on the fourth quarter because it's a very short period of time and there is not enough time to experience that impact In the second half of the year and even in the first half with the World Cup, we were concerned whether there would be a problem during the World Cup, but that didn't happen. Now pre operating expenses are very minimal.
Even for accounting reasons, we appropriate almost everything in our CapEx. Therefore, this will not impact our results, neither sales, new own sales. Many stores will be inaugurated in November, particularly in the Northeast. Therefore, I must say that this will not impact the company as a whole, the overall results. Have given we even put it as mean, we haven't been doing EBITDA adjustments because these are almost irrelevant expenses in this quarter.
Was 1,600,000.0 of expenses with rent and things like that before the inauguration of the store. But it's not that significant. Roberto, so the fact that this level of expenditure, should we expect that to be slightly higher in the fourth quarter? You were talking about preoperational? Yes.
I believe that in November, all the stores will be inaugurated and then this line will go to operating expenses. Yes, but considering the whole picture, this will be almost like irrelevant expenses. As there are no further questions, I would like to give the floor to Mr. Marcelo Silva for his final remarks. Thank you all very much for joining us during this conference call.
I would just like to reinstate that we are very confident with the last quarter and we are getting ready for 2015 as well. We will have several events coming very soon like Black Friday and the Christmas campaign. All of these are very good opportunities for us at Magazinha Luisa and we will then have our Liquidacao Fantastica in January. We will have a very robust result, much better than that of last year. Last year, we had good results, but this year, we will post even better results.
All in all, we are doing what we said we would do and the company is prepared from now on to present increasing results, gradual increases and very consistent growth. So let's wait until we go through the fourth quarter and we will see how the year ended, but we are very confident that you will all be very pleased, both the company and investors. Thank you and I hope to see you soon. Thank you very much. Magazine Luiz's conference call on the third quarter of twenty fourteen is now concluded.
You can now disconnect. Thank you very much and have a nice afternoon.