Good morning, thank you for waiting. Welcome to Magazine Luiza's conference call to discuss the results of the first quarter of 2014. We would like to inform you that this event is being recorded and that all participants will be 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 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 and will be available for a week. We would like to inform you that forward-looking statements that might be made during this call, related to the business perspectives of Magazine Luiza, operating and financial projections and targets, are beliefs and assumptions 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 performance of Magazine Luiza and may lead to results that differ materially from those expressed in such forward-looking statements. In order to start our call, we would like to turn the floor over to Mr. Marcelo Silva, CEO, who will start the presentation. Mr. Marcelo Silva, you may begin.
Good morning, everyone. Thank you very much for joining us on this call, when we will be talking about the results of Magazine Luiza for the first quarter of 2014. It's a great pleasure for us to tell you that undoubtedly, this is the best result ever for a first quarter for the company.
The first quarter has its own characteristics about sales in January, February, and March, Carnival. For our activity, this is really non-typical, but this has been the best first quarter as far as we can remember. This performance starts with sales. In the first quarter vis-à-vis the first quarter of 2013, we grew 28%, of which we stress same-store sales, 25.4% increase, 22.3% conventional stores, and e-commerce 44%. I believe that this has been the best growth in retail as a whole in Brazil for same-store sales. This was done by keeping our gross margins. 1.9 percentage point growth in e-commerce. This has been happening gradually, and we had the best performance in the Northeast as well, and we can go back a little bit, also increase in gross margin. We finished the integration in October 2012.
2013, we already started to reap the fruits from this integration. Last year, the second half, the Northeast had a much better performance. In 2014, even better. We also had the participation of e-commerce with a strong performance in high-margin categories such as smartphones and tablets. This is a market that Magazine Luiza has been conquering. We also had a major reduction in our operating expenses, 2.2%. This is very significant because we went from 25% last year, going down to 23% operating expenses. I would also highlight the results of LuizaCred. LuizaCred has been growing its results quarter on quarter, and delinquency is under total control at LuizaCred, the best indices in the last two years, and also reducing operating expenses. With that, our EBITDA margin goes from 8.7% last year to 17.8%.
As a consequence, the net margin of LuizaCred goes from 4.6% to 10.2%. Fantastic results by LuizaCred with the outlook of maintaining net margin at these levels for LuizaCred. With that, our consolidated EBITDA went to BRL 120 million, growing 1.7 basis points vis-à-vis the first quarter of 2013, and this growth in EBITDA of 92%, vis-à-vis a growth of 28.5% in our net sales. You can see that it is a significantly positive result that we bring to you with great pleasure. Net income, as a consequence, went to BRL 20 million. Later during this call, we will talk about the trend of the net income, the upward trend of this net income growing gradually as we have always been seeing. In this growth in our sales, I would like to stress our marketing actions.
We have very strong media coverage because we are sponsoring the World Cup at Rede Globo, and we made an outstanding promotion, an unprecedented promotion, which is called the Whole Building for You. One of our clients has already won this draw, and the media gave it very wide coverage. In the second half of the year, we are announcing a new building, and the promotion has been very strong. Over 30 million coupons issued already for the draw for the first building. The moment that we are living and the motivation by the whole team and strong media coverage and the care that we have in terms of maintaining our gross margin under control. Much better supply because of our inventory management efforts.
We have been advancing in this regard quarter-on-quarter, and our margin has been under control as well due to our price management model that we adopted. Those who follow us have already heard us remark about that. Also a more and more vigorous tracking of our operating expenses. With a very good growth in our sales, maintaining our gross margin and diluting our operating margins because of that, EBITDA and net income are consequence of that. Financial expenses are impacted much more by external factors like the increase in the CDI rate and the CDI. Having said that, as my opening remarks, I would like to give the floor to our CFO, Roberto Bellissimo, who will be making a presentation about the performance of Magazine Luiza and LuizaCred.
Good morning, everyone. Let's go to page number 4, where we show the evolution of our stores. Compared to one year ago, we inaugurated 13 stores and we show investments in the first quarter, BRL 16 million. Growth in same-store sales and the average age of our stores. We still have almost 40% of our stores that are not mature yet. They are becoming more and more mature, as you can see, based on the results that we are presenting today, the evolution of the Northeast and the Baú stores. This is all very clear in the evolution of our earnings. On the next page five, we have some indicators of LuizaCred. The portfolio of LuizaCred continues to grow, highlighting the credit card portfolio, which is more profitable than the others and with a better client profile as well. It reached almost BRL 3 billion.
Sales of LuizaCred continue to go up at a 12% rate this quarter on a quarter-on-quarter comparison. Highlight being the billings on the card. This means that our clients are using the card more and more within and without, inside and outside our stores. CDC has been growing and personal loans going down, and the CDC as a consequence of our conservative policy of credit assignment by LuizaCred. On the next page six, we have the evolution of our delinquency rates. Delinquency is a highlight in our results because delinquency is under total control, and the long-term indicators show a downward trend in delinquency, 10.3%. NPL higher than 90 days, lower than December, lower than September. So there is a downward trend that we see here as a consequence of the conservative credit assignment policy that we have implemented for quite some time already.
Because of that, provision for loan losses were lower on an annualized basis, around 14%, compared to the annualized pace of 17% one year ago. So we have been reducing delinquency and the provision for delinquency, thanks to the improvement in our portfolio. The short-term delinquency is more seasonable in the first quarter. It tends to go up slightly. However, the indicators continue under total control on our part, and the approval rates continue to be very conservative. On the next slide, page seven, we have the growth of our gross revenue, 26.6% this quarter. Internet, 44% growth and gross profit, 24% up. It was a maintenance of our growth margin with accelerated growth at the same time. Page eight. Here we have the breakdown of our operating expenses.
We were able to dilute our operating expenses in practically all lines and growing our revenues at the same time, and the growth in our expenses was much lower than the growth in our revenues. Because of that, we obtained a dilution of expenses of 1.7 bps, adjusted for the INSS accounting effect and non-recurring results. It didn't happen this quarter because all the results that we are showing today are totally recurrent and consistent. On page nine, we show our equity income coming mainly from LuizaCred, 1% on net revenue. LuizaCred, as we said before, had a return of 36% on return on equity. For one year and a half, LuizaCred has been delivering very consistent results, and it's the sixth quarter ever since 2012 and all the quarters of 2013. Growth in sales and maintenance of our margin and dilution of expenses.
Because of all that, the EBITDA practically doubled from BRL 63 million to BRL 121 million. I would like to highlight the maturation of the new stores contributing to this result. On page 10, the effect of each one of the lines in the EBITDA evolution, as you can see here. The highlight for the dilution of expenses, both selling expenses and administrative expenses, and also equity income. On page 11, we show the financial results. Net financial expenses grew to 53%, very close to the growth of the CDI, to the increase of the CDI rates during the period that went up from 7 to 10.5, practically. It reflects the lower indebtedness of the company. Compared to one year ago, we were able to reduce our indebtedness and reduce our leverage even more.
The cost is higher because of cards. We were able to grow our financial results nevertheless and maintain growth similar to the increase in the CDI rate. In the working capital line, we reduced our net working capital from 3.4% one year ago to 2.3% this quarter. Compared to December, of course, there is an increase because of the seasonality of the period. However, vis-à-vis one year ago, we are more efficient in working capital use, thanks to the maintenance of the inventory terms, inventory turnover, and our purchases keeping a more healthy balance, and our suppliers lying higher than our inventory. Now the evolution of our net income. In a very consistent fashion, quarter-on-quarter since the beginning of 2013, reaching BRL 20 million, almost 1% this quarter.
Now I would like to give the floor back to Marcelo Silva, he will be talking about the outlook for 2014. We maintain our trust in the sales performance of the company. In the second quarter, we will have a very strong effect of the World Cup and a greater marketing effort. You saw yesterday on TV the media coverage of the 8 sponsors, the focus was mostly on Magazine Luiza. We were the only retail company shown, we expect better productivity at the integrated chains, the Baú and the Maia stores in the Northeast, we should be keeping our gross margin at an adequate level, we will continue to conquer new gains and diluting operating expenses due to the growth in our sales and the austerity program regarding expenses in the company.
LuizaCred, as Beto said, does not expect any problem regarding delinquency or cost increase in the long run, we continue to work on our operating efficiency by reducing costs as much as we can, as well as the Magazine. We expect to achieve a result much higher than 2013. That already was very good without non-recurring effects. We had the Eagle in June last year. We trust we should be delivering margins and consistent results as we have been saying and repeating, consistent and gradual and positive results. Having said that, I would like to place all of us available to you to answer questions that you might have. Frederico, Fabrício, Beto, Isabel, Marcelo Ferreira from LuizaCred. We are all here in this room, we will be available to answer your questions and clarify your doubts about the results of the first quarter of 2014.
Now we will start the question and answer session for investors and analysts. Questions asked over the internet will be answered afterwards by email, we will be available to solve any doubts that may remain. In case you have a question, please press star 1. Mr. Fabio Monteiro from BTG Pactual would like to ask a question.
Good morning, everyone. About the growth in sales, could you give us some idea about the growth pace in smartphones and tablets? How much they represent in our overall sales, help us think for the next few months?
You talked about 2-digit growth for 2014 in conventional stores, but I would like to understand how you see in Q2 and Q3, on one hand, the benefits from smartphone and tablet sales, and also the benefits coming from the increase in productivity and the ramp-up of Baú Maia stores in the Northeast. There is this plus on the one hand, and on the other hand, during the World Cup, there will be many holidays, so stores and malls will be closed probably. How do you suggest we think about sales for the second and the third quarter of 2014? For the second quarter, well, we already have April and, of course, the figures have not been published yet. May is starting well, and we expect to continue this in this IT area, smartphones, tablets, cellular phones, and even TV sets.
We have been achieving very significant sales levels, and regardless of the World Cup, you're talking about the second and the third quarter. After the World Cup, we will go back to normal. There is a specific seasonality now in place because of the World Cup, mainly TV sets and all the IT equipment, other IT items. The second quarter should have a very strong growth in these items. We should be achieving a very significant growth. In the third quarter, we believe we will go back to normal levels. I would like to remind you that the first half-year will be compared to the first half-year of 2013, of course, maintaining the same performance as the second half of last year. The comparability of the second quarter of 2014 will be much better than 2013.
The second will be more difficult to compare. You must remember that last year, the third quarter was very strong and the fourth quarter as well. However, we expect to reach the end of the year with 2-digit growth in our conventional stores and very robust growth in e-commerce as well, continuing to grow as we have been growing quarter-on-quarter in our e-commerce. We understand that this media that is called MediaNet, that covers the whole country for Rede Globo, also favors our e-commerce because municipalities in which Magazine doesn't have conventional stores, we are there by means of the World Cup advertising and coverage. We place our bets there, and we have been very successful in this regard. This is the reality for the World Cup. Also regarding, I have another question, Marcelo.
For 5 quarters, you have had a gradual evolution in your margins. Of course, some of your stores are not mature yet, and growth in sales is very good. In 3, 4 years, for instance, what do you believe could be the EBITDA margin level? Of course, we have to reach the point that we showed in our IPO. You have the figure, I believe you have the figure in mind. At some point in time in the 3 years that you mentioned, you remember that in 2010, we already had 7% EBITDA, 10% EBITDA, and with the maturation of our stores, we will get to this level that we placed for the future. When you say 3 years' time, this is a level or this is the horizon that we believe is achievable for our activity.
We do not have Maia and Baú yet, we did not have Maia and Baú at the time in 2010, and we got to 7% EBITDA. As we still have about 40% of these stores in this maturation curve year-on-year, quarter-on-quarter, we have the maturation of these stores, and it takes about 4 years on average to have full maturity. The improvement in productivity and efficiency is checked every single quarter. We are achieving improvement in the profitability of our Northeast stores, and the Baú stores are totally integrated with very positive performance already. This is why I always mention integration, because this is a period in which we set up the compensation ways of our people. Of course, all this is on a maturation curve. We are very happy with the results obtained so far.
The company places its bets on the growth of the market itself, and even with adverse circumstances, we can go up. The best defense, as far as we are concerned, is the best attack, so to say. We grow same-store sales, and we trust that at some point in time, what we achieved in 2010, and that we mentioned as being reasonable for our activity, will be achieved, and we are very close to that. Thank you very much.
Thank you, Marcelo. Thank you, Fabio. Guilherme, this is from Brasil Plural.
Good morning, everyone. Thank you for the questions. What is the company's strategy in terms of commercial aggressiveness, so to say? As far as I understand, based on your comments and your results, and given to the maturation level of the integration of the Maia stores, this should have a positive impact on your gross margins.
It seems to be lower than expected. I would like to understand if you are using the gains from Maia to be more aggressive in terms of gaining additional market share. From now on, how will you be reacting to your competition in order to continue growing at the pace you expect to grow up to the end of the year?
Frederico Trajano, our Operations Director, will be answering. The COO, our COO.
Guilherme, good morning. As we said before, last year, at the end of last year, vis-à-vis 2014, the World Cup had a growth in some specific categories. Ultimately, generates a different margin mix. It does not mean that you are being more aggressive or giving more discounts. Theoretically, our margin should drop. But it did not drop because we are integrating positive factors in our management in Baú and also mainly in the Northeast.
We are not being more aggressive in terms of pricing this year. If you look at our gross margin over the last 10 quarters, you can see a very stable gross margin. Magazine Luiza works with a remuneration model, a compensation model to our sellers, which is linked to our gross margin. We are not aggressive price-wise. This is not our culture. This is not our characteristic. Historically, we have stable gross margins, and the market is always asking, "When are you going to drop your gross margin?" But historically, we have been keeping our gross margin, even with double-digit growth and even with the effect of the World Cup and the sale of TV sets, which is very significant in our mix, and that would tend to press your margin down. We are being able to keep our margins with some specific channels.
E-commerce works with a lower growth margin than conventional stores. Proportionally, the expenses are lower. Even with a 44% growth in e-commerce, we have been able to keep our growth margin. We are working with the same pricing policy, an intelligent pricing, and a healthy one, a mature one. We are not doing anything extraordinary to gain market share, but very good media actions and very good work in our stores and growth in the Northeast and also take advantage of these inventories in these categories. This doesn't mean at all that we are being more aggressive in prices, and we have not given this guidance to the market in terms of increasing our growth margin.
I would like to add to this answer by saying that we improve our margin per category and our salespeople, they are paid based on sales and margins based on categories. It's not margin per category. Conceptually, if you want to know our position regarding aggressiveness, I can tell you that Magazine Luiza is competitive. We do not aim at changing our prices. We are competitive. Our focus is not to have a low price every single day. We want to be competitive. We want to attract our clients, and we have very good on-store service and the relationship with our clients, very good, and also with our employees.
Thank you. Another point. I understand about the margin and the negative impact of the mix and how the Northeast helps to neutralize it, but that you have not changed your commercial policy.
I have understood all that. Just to follow up on this question, about the campaigns, the draw, and the World Cup, and the whole building draw. Do you think this explains the market share gains that you are achieving, or are there any other factors coming into play in terms of commercial aggressiveness? Do you think you are similar to your competitors?
Going back about growth in sales, we had a very strong bet on media and inventory for the first quarter. We had a lot of inventory available and a lot of media visibility because of this bet that we placed on the World Cup. This generated a very high growth in our sales vis-a-vis last year.
In a market that tended to buy technology products, not only we had very positive factors, but e-commerce grew a lot, and this is inexorable trend for the long run, and this has been happening in the last few quarters. The Northeast grew a lot. This is something that we had already been watching and growing much more than conventional stores. The Baú stores grew a lot due to the improvement in the supply of the stores and the improvement in training of the teams. Besides the technology sector, the white line, due to the seasonality of the very warm season that we had in the first quarter. White line performed very well with air conditioning and fans and portables, and helping a lot.
Many different factors came into play, all this together, not necessarily a competition in terms of low prices to gain market share. Reinforcing what I said before.
Thank you.
Luis Carvalho from Finch Capital would like to ask a question.
Could you talk about the e-commerce channel? How do you see the e-commerce margin? Given all this growth, how do you see the final contribution, not exactly the growth margin, but in terms of the cost of the channel itself, and if you are happy with the growth rate that you are achieving. Thank you very much.
Luis, good morning. This is Frederico again, answering your question. As we have always said to the market, our e-commerce is one of the only, or maybe the only profitable operation in the market and the whole market.
Unfortunately, we cannot disclose any specifics regarding the margin and the margin contribution. We have a very unique model, which is a multi-channel model, in which e-commerce is fully integrated to the supply chain of the conventional stores. We have the same distribution centers, and all distribution centers are operating but one that will be concluded still before the end of this month to supply both e-commerce and conventional stores. This integrated model gives us a very competitive advantage in terms of SG&A because this is shared with the conventional stores. We do not have a duplication of cost, such as is the case of most of the other operations in the market or that are under another taxpayer number, for instance, taxpayer IDs. The final margins of our e-commerce contribute positively to the overall margin of the company.
The more it grows in the bottom line, it does help the company to expand. Also it's capital light. We can grow e-commerce with a very small CapEx, which is rather positive if you think about the company's ROIC. We will continue to grow a lot without the need to invest a lot in new DCs or anything like that because we are sharing this infrastructure. One further clarification. Within e-commerce, the B2C, could you update us about how many orders you're processing per day or some physical data that you could give us about the growth of this B2C channel? What goes directly to consumers and doesn't go through the stores. Luis, I don't know whether I have understood your question. The figure that we report is sales, and it is totally B2C.
They go exactly from the website or from our electronic operation to the final consumer. This is where we reported 40% growth in sales, and this is the only figure that we have to report to you. That shows how much this operation has been growing. The number of orders processed. What is the growth? The 40% growth, you mean about prices or volume? Well, we do not talk about the average ticket for the operation. We are growing both in volume and in average ticket, okay?
This is Andrea Teixeira from J.P. Morgan. Would like to ask a question.
Good morning, and congratulations for the results obtained. I would like to know something about growth, which is rather strong as we see, but I would like to know the results from your advertising campaign and the effect of this campaign on your SG&A.
How are you allocating this expense, the higher expense? This quarter was very interesting. You had an improvement in SG&A, a dilution of SG&A. I would like to know if you expect something similar for the next two quarters because of the World Cup campaign, also now turning to e-commerce. What should we consider in terms of growth for the second half? What is your expectation? I apologize because I was in the queue to participate. Maybe you have already talked about that. I apologize for the question if it has already been answered. Have you changed your expectation, or do you continue with your double-digit growth guidance?
In the case of e-commerce, it's about 30% growth. In the first quarter, it was even higher than that. Regarding SG&A, dilution of two percentage points already includes the increase in our marketing expenses.
The first quarter absorbed the previous quarter in this regard. It will happen in the next two quarters. The marketing expenses are the only ones that grew more than the others because the others are within a normal range of variation vis-à-vis the previous year, also vis-à-vis the growth in our sales. We have already absorbed on a quarterly basis the marketing expenses such as they are. We had in December the World Cup expenses appropriated in Q1. In Q2, we will be appropriating these expenses of Q1 and Q2. What I mean is that it is appropriated on this phase.
Thank you. The weight will be higher in the second quarter?
No, because we are expecting a robust growth for the second quarter as well. June? It would be speculation.
If we said, "This is going to have this or that effect." Let's see, what about holiday, for instance? We are discussing this with the IDV because we have to check what kind of impact that could possibly have if we have all these holidays because of the World Cup. We will take advantage of June because of the World Cup. We will sell a lot. Fabrício.
Fabrício, good morning. Regarding June, the mayor is requesting a holiday only for June 12. That would be very positive because if we speculate, we could have up to six holidays. This will not happen if the bill of law that was submitted by the mayor is approved. June is still a big question mark. The news that we are receiving are positive.
What about Mother's Day? Mother's Day is non-typical because there is a lot of campaign.
I know that this is a very relevant event for retail. The mix of this month is not typical because the participation of the image line is much bigger. This happens every four years because of the World Cup. The demand for TV sets started already in April. The demand for smartphones is very strong as well. There is a change. The TV category has a much higher participation than in the normal months because of the World Cup. We have a strong Mother's Day plus the image sector because of the World Cup. Both have a positive impact. I believe many children would like to give their mothers a TV set to watch the games.
Yes, I am a little bit concerned with the variation on the weekends that precede Mother's Day. Maybe the mix was a little bit impacted negatively because of that, and you have to take advantage of that, and it might cannibalize ultimately. Well, the mix changes because of the higher participation of TV sets, but the other portables and white line continue to sell very well. You are still selling more, or the sales are growing for these categories? Yes. Regarding credit, just to finish the effects on credit. Of course, you achieved an outstanding result with the improvement in your delinquency levels. What has been happening with delinquency more recently?
Marcelo Silva from LuizaCred will be answering.
The short-term indicators show a high degree of stability in delinquency, and the approval rate is not changing. We have been improving our credit assignment model.
We are leveraging other bureaus, and the approval rate is maintained, and we expect it to go down. That is to say, the losses to go down. The new crop, so to say, are showing that things are very much under control regarding delinquency.
Thank you.
Tobias Dissinger from Credit Suisse would like to ask a question.
Marcelo or Frederico, everybody is focusing on growth besides the results, of course. How much do you believe the market overall grew this first quarter? Because you had a very good performance, you gained a lot of market share, and within same-store sales, you mentioned a few factors that explain the strong growth, some stores maturing and the integration of the Baú stores. How much do you believe these 22% can be broken down among the different drivers? Maturation of new stores represented so much, or how much same-store sales is growing in mature stores?
Tobias, we do not break down this kind of information. As we said, it is a whole set of factors that we mentioned and that led to this growth and the comparison base with the first quarter of last year. It is a whole array of different factors. Your other question? You asked two questions. I remember just one.
I asked about the market as a whole. How much was the growth of the market? Do you think?
The data that we have are published by the IDV and the IBGE. IBGE published up to February, so it says 13% growth in February. We do not have March yet because they only publish 45 days afterwards, so May 15th.
The IDV has been showing that supermarkets have been growing less. Winter has not arrived yet, so the winter collections are not selling yet. The IDV figures are closed. What we know is that we have grown more than the average of our own market. Each company has its own strategy, its own model, and we cannot really draw a comparison there. GfK? We do have GfK. We just observe GfK. When there are some data that are not included in the GfK, so the degree of comparison is hindered by that. I have two questions to confirm my understanding of what you said. Regarding the proposal or the bill of law submitted by the mayor to have one single holiday on June 12th. What if it is not approved? What are the legal implications?
Well, the bill of law goes to the City Council of São Paulo City. You have the Greater São Paulo, and you have the São Paulo City. The president said that she's not going to declare a holiday for the whole country because this is specific for each city. One thing is a city that is hosting a game. In that specific city, of course, nobody's going to work on that day where the game is going to happen. The IDV has the biggest stores included, and we are all working together in order to avoid this. You have most of the people who are just going to watch TV, okay. For the Brazilian team, okay, great.
You want to watch the Brazilian team, but it doesn't make any sense to have a holiday for people to stay home and watch TV And watch other teams play. The bill of law that was submitted by the mayor of São Paulo City is a very good initiative. Thank you very much for this information. Of course, there will be a very strong reaction because the cities and the state, everybody has to collect taxes. The less holidays we have, the more taxes. Talking about the IDV, Marcelo, next year, the benefit of the INSS has a validity date. It is 2015. This law will have to be reviewed. Well, you know that as sales increase, the law loses value for certain companies because the percentage gets higher.
Walmart, Carrefour, Pão de Açúcar, of course, they are not in this plan. There will come a time when this will no longer be interesting. We do not know. It will depend on whether the same administration is reelected or whether a new administration will come to power, but we will fight for it.
Mrs. Irma Sgarz from Goldman Sachs would like to ask a question.
This is Bernardo Cavalcanti, not Irma Sgarz. A follow-up on marketing expenses. I would like to better understand this. You are recognizing expenses as you disperse. Is this what you mean? Will you have a higher disbursement in the second quarter? Let's say you will spend 100 coins, for instance, with the World Cup. Are they being appropriated linearly, or could you please explain how you're going to account for these expenses?
Good morning, Bernardo. This is Roberto. They are appropriated as they happen on an accrual basis. This coincides with the payments being made, or they're very close for the year as a whole. This is the only expense that shouldn't be diluted. It should remain stable as a percentage of our net revenue vis-à-vis the previous year. All the others, we are working on them, and we are diluting them, and we should continue to dilute them over the year. Marketing expenses due to this investment that we're making for the World Cup, this is helping us grow more than we would have grown otherwise. Marketing itself for the year should be similar to 2013. These marketing expenses were slightly higher in the first quarter and will be higher in the second quarter because of the World Cup sponsorship and the building campaign, the draw.
Two other questions. As there was a more significant maturation of the previous acquisitions that were being integrated for quite some time, are you considering new acquisitions? What about LuizaCred?
We see a worsening year-on-year of 13%-15% in the NPL90, and provisions went down. You went from 147%-126% coverage ratio, and this is compared to 150% or 200% for banks that have a less risky portfolio because they lend with collaterals and real estate, et cetera, and your credit has less collateral for individuals. How do you see the coverage level that will be stabilized, and are you comfortable with this level? How you compare this to a bank's coverage? These are my last questions.
The first question I will answer, and the second Marcelo Ferreira will answer. The first one is the following. We always say that, we would never do this.
We never say never. Let's say there is a great opportunity ahead of us, then we might study it, but our plan for 2013 and 2014 did not foresee any acquisitions whatsoever. Now in 2014, we have no intention of making any major acquisitions. We intend to open 30-40 new stores, and Ponto Frio is the divestment that was mandated by CADE, and this has to be published, of course, and communicated to the market. Plus organic growth, mainly in the Northeast. We are talking about between 30-40 new stores for 2014. As far as acquisitions are concerned, no, they are not on our radar screen. Let's say in a certain month of 2014 or 2015, let's say we see an opportunity. Of course, we will study it. I repeat, we are not talking with anybody.
We are not being approached by anybody. We are not planning anything in this regard.
Ladies and gentlemen, please stand by. Magazine Luiza's conference call will return in a few minutes. Please stand by. You may proceed.
This is Roberto again.
Roberto. Good morning.
Okay, now let me answer your question properly. The 90-day portfolio. You have to look at the more recent evolution of the 90-day, and it has been dropping vis-à-vis the last two quarters. If you compare with the results one year ago, what happened was the following. You have to go back in time a little bit. In 2012, we started to sell more CDC, the direct consumer credit. We reduced our approval rate for the card, and we changed our strategy with preference to CDC and more balance between the CDC and the card.
In the CDC, the loss is a little bit higher, but it is offset by a much higher interest rate. With that, we started to grow our CDC operations in 2012, direct consumer credit. We knew that the NPL would be going up a little bit in 2013 because of the growth in the CDC in 2012. We made a lot of provisions in 2012. This is why the result of 2012 was not that good for LuizaCred. It started to improve by the end of 2012. In the last quarter of 2012, LuizaCred already obtained a very good result, but the NPL was still low. In 2013, we had a very high balance of provisions and a low NPL. This is why we had 147%-150% coverage ratio. As we had said in 2012, and all this is calculated by Itaú very conservatively.
Over 2013, the NPL went up slightly and the coverage ratio started to drop gradually because we already had these provisions built in 2012. As we maintained a very conservative position and we continued to improve our models and reducing some approval rates, our expectation was for the NPL to go back to lower levels. It went up over 2013, and now it is dropping back to previous levels. This is why your comparison of the coverage ratio today with one year ago doesn't make sense. You should compare this with June, September, because this is where you can see the stack of improvement and also because of the CDC being stabilized now, we are no longer growing CDC as much as it grew in 2012 and early 2013. This is why we are comfortable with the NPL trends and the coverage ratio as well.
We do not compare LuizaCred's coverage ratio with banks. The coverage ratio is not a target for LuizaCred. It's simply the result from a calculation, which is the balance of provisions that Luiza has vis-a-vis the NPL. The balance of provisions is a consequence of the expectation for losses that is made by Itaú based on the analysis that it carries out of the portfolio and the client and all the models. We are comfortable because LuizaCred has been building more provisions than the minimum required by the Central Bank, for instance. Last year, I said that the result of LuizaCred in IFRS was BRL 89 million in BR GAAP, which is a minimum required by the Central Bank. By law 2682, it was BRL 116 million, so it was higher.
This quarter, once again, in BR GAAP, the result was higher than the one that we are publishing of BRL 40 million. It was in fact BRL 58 million. The provisions are very conservative, and the trend is consistent in our opinion.
Very clear. Thank you very much.
This will be the last announcement. In case you have a question, please press star one. Monsieur Natasha Bigger from "And you would like to ask a question?"
Good morning. Congratulations for the results. In millions of reals, how much were your provisions for profit-sharing programs this quarter?
We do not disclose the figures. We are provisioning on a monthly basis based on our results, and I can tell you that the amount nominally will be very similar to the one used last year for our profit-sharing program. This is just a normal expense during 2014.
In this cost dilution, we already include the normal profit-sharing program of the company, which is extended to many of our employees. Last year, it was extended to 9,000 people, and this year, depending on the performance of each store and each area of the company, we are already provisioning for that. We can assure you that it will be very similar to last year's in nominal terms.
Thank you.
As there are no more questions, I would like to turn the floor over to Mr. Marcelo Silva for his closing remarks.
Thank you very much for participating in our call. We would like to reiterate our commitment and our trust that we are complying with what we said in previous years, the integration of the stores and the commitment to delivering results, gradually positive and consistent results over time.
We have already delivered that in 2013 and in the first quarter of 2014, and we trust this will continue to happen in 2014, leading us to better results for 2014 overall than in the previous year. Thank you very much and see you next time.
Thank you very much. The first quarter of 2014 earnings conference call of Magazine Luiza is closed. You may disconnect now and have a good day.