Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Magazine Luiza's conference call, referring to the first quarter of 2019 results. At this time, all participants are connected in listen only mode. Afterwards, we will have a question and answer session when further instructions will be given for you to participate. Should you need assistance during the call, please press star zero to reach the operator. Now we would like to turn the floor over to Mr. Frederico Trajano, CEO of Magazine Luiza. Mr. Trajano, you may proceed.
Good morning, everyone, and thank you very much for participating in our conference call about the result of the first quarter of this year.
Once again, we are with the whole team, our executive team. I would like to make my presentation first, then Roberto Bellissimo will give you some additional information, then we will be opening for questions. I would like to start by saying that we got into this first quarter with a new strategic cycle, a very promising one. We committed ourselves with some pillars, with some drivers of the strategy. Among them, the accelerated growth of the company, exponential growth, in fact, Chinese style growth. The leverage of our platform, Magalu as a Service. Growing the marketplace platform of Magazine and delivery services that we deliver to the company itself, to third parties. That is to say, to other companies very much focused on this pillar. So that third parties may operate at the same level that we operate with 1P.
The SuperApp, our digital platform with the main points of contact with our client, our app. Expansion of new categories. Improved experience in retail, fast delivery, both in stores and at home. The culture of data and innovation. These were the seven pillars that we detailed in our investor day last year, as well as in our annual report referring to the results of 2018. Of course, we are already executing this new strategic cycle and in practice our view is the following: Magazine Luiza became digital and now we want to have the whole retail of Brazil also in digital form.
Specifically now, in this moment, we want to bring digital inclusion to consumers and also to small and medium retailers or the companies that might wish to learn or tap into the advantages of these investments that we made over these years in the very successful digital transformation process in Magazine Luiza. This quarter, we found some challenges ahead of us. In the first quarter, we had a very high comparison base, the first quarter of last year. Already counting on sales that had already been brought forward February and March, mainly last year. We already had a higher than normal sale of smart TVs because of the World Cup. We had the end of the Lei do Bem. That is to say, the law regarding the benefits, the fiscal benefits given to technology products and mobile smartphones and some other products of other lines as well.
In my opinion, what was really a drop in rationality on part of the market and some non-transfers of benefits of the Lei do Bem and the economy that really was lower than we expected. In spite of all these challenges and take into account the fact that we are in a phase that is very much focused on growth, accelerated growth, exponential growth, as we said, but without making any concessions regarding the level of service. We want to improve the level of service and not going to the detriment of that and neither making concessions regarding trade-off of margin. We want to do it provided it does make sense in the long run and not just like free shipping for everybody and with no long-term rationale and concept type value analysis.
Also maintaining our ethics with everybody formal in the chain, guaranteeing that all the sellers in our platform deliver high level of services. With all these challenges, I can say that in the first quarter we were able to have a very good performance. I will give you some figures to show you how we evolved during this quarter with indicators and bullet points that are very significant in order to address each one of these points. First, the client base. When I talk about the exponential growth, I mean the growth of the client base because you can increase by increasing your average ticket only, but we want to have a bigger base and a more faithful client base. More clients buying over the year and more clients buying frequently over the year. In this sense, we had a very good evolution.
The client base was 18 million active clients, 34% growth year-on-year. Highlighting the website, 78% growth vis-à-vis the previous year, but also the brick-and-mortar store that had a significant growth of 23% year-on-year. We are able to grow both channels and not growing, as we always say, one channel to the detriment of the other. I consider this growth a very significant one, and I'm very happy about it because our client indicator is not only in terms of frequency and purchases, but also the level of service. Today, we continue to be the only large retailer with the RA1000 seal in the Reclame Aqui website, and we were able to achieve this in spite of the 240% growth in marketplace that still operates with a slightly lower level of service than our own 1P.
The marketplace already represents about 28% of total clients that buy on the website. Even with this very relevant marketplace, it already has this weight, and we were able to maintain the RA1000 seal and we were working to have the same level of service in the marketplace as good as we have in the traditional chain. That is to say, selling the merchandise that's in our inventory. From the client viewpoint, we had a reduction of 60% in complaints. Very good work on the part of our team, 26% improvement in first call resolutions, and we are improving the cancellation process as well with the tracking of orders integrated in WhatsApp. There is no bullet or silver bullet. It is work being done by the whole team and growing the level of service. That is to say, raising the bar for the Brazilian e-commerce.
We are not going to wait for a foreign player to come to Brazil. As domestic players, we are going to raise the bar of retail as a whole, and we are doing that in spite of the accelerated growth that sometimes brings about some stumbling blocks. Talking specifically about e-commerce, we grew 68% client base, 50% in sales. We grew less sales than the client base because we are obviously wanting to sell more different items. We doubled the number of distinct items sold year-on-year, lower average ticket. We launched the books category. We are growing the Mercado Magalu. We continue to invest a lot in e-commerce in the app.
For the app, we have the strategic objective to make it a SuperApp. The first step has to do with the expansion of the sellers base, the number of items sold and category, then getting to payments, et cetera. Our first phase of SuperApp has to do with expanding the category of products and the launch of books. I will be mentioning this afterwards. I know everybody wants to hear this. Netshoes is very much focused on that as well, so that we may expand the category base. We reached 33 downloads and average users now 6 million. A very expressive growth vis-à-vis last year. 33 million apps downloaded. Besides the marketplace that grew 240% in the quarter, this helped a lot the overall growth of e-commerce and also the level of service of logistics.
The logistics team is working very well, delivering in up to 48 hours in express delivery, reaching 33% of the total e-commerce sales, a very major number. Together with the store collection, click and collect, 60% of our total sales in e-commerce already being received or collected in less than 48 hours. It's very difficult for competitors to beat this kind of service that we are delivering. This is a very positive result from e-commerce, already very much impacted by the accelerated growth of marketplace. We've reached 5,000 sellers already and 5 million and 400 SKUs in our platform. We already start to have this network effect, users attracting more sellers. Ultimately, we have more product that attract more consumers and gaining scale in this Chinese growth mode. We already have the first signs that this is materializing already.
In marketplace, we work a lot. We have two clients. We have the seller, and we have the end customer. When you work with an ecosystem, you have to understand that this is a market of two clients. We started to deliver service to the sellers as client, not only catalogs, et cetera, bringing clients via our platform, via our app. We are rolling out Magalu Pagamentos and Magalu Entregas. Magalu Entregas already has 53% of sellers that use the standard contracts of our website at much lower shipping fees than they have negotiating directly with the carriers. Also rolling out Log B, for instance, to deliver for the sellers and even lower shipping fees.
In this case, the Growth Up modality, 20 sellers that we are piloting now, many adjustments have to be carried out to allow us to roll this out with top quality. The level of service with sellers sharing what we have in 1P, Magalu, Log B, we want to transfer this to the sellers by means of the cross-docking platform. Magalu Pagamentos as well, that already has 3,750 sellers, in this case, we already having prepayment of receivables, always collecting or charging low fees. It's super important for them to work with a sound working capital, and our payment strategy is there to help the seller to be successful and grow with sustainability. We always have this view that our platform wants to be the best option for the seller and not only for the end customer.
Talking about the physical stores, we had another very good quarter and a very big challenge because we already had the same store sales last year, which was very high because of the World Cup, we were able to grow 16% of the stores with 8% same store sales over 16% without the World Cup. This is an extraordinary work that we do in all the regions, in all the categories in the first quarter with all the difficulties of delayed opening that is the bigger stumbling block in terms of profitability. In spite of that, we were able to grow it. I would like to say that we look at same store sales, but we grew the total store base. We accelerated our expansion.
We opened 100 new stores, the new stores are already contributing nine percentage points, helping the overall growth of brick-and-mortar stores. At this moment of a challenged economy, this is very positive. I think the participation of new stores in growth already indicates that these stores are operating with a level of sales even higher than the one that we estimated at the beginning. I would like to mention the announcement that we made last week, which was the purchase agreement of some commercial points of sale from the company that owns part of the Magazine Paraíba stores in the North and the Northeast, 48 stores in Paraíba and Maranhão, inaugurating our presence in the North, a very promising region, and I believe that they are underserved from the viewpoint of retail.
In our model of multi-channel, this will help us not only gain clients, also this will help our e-commerce as well to improve penetration in the North. I would like to remind you that many people carry out campaigns of free shipping in e-commerce, they always exclude the North. Magazine Luiza will not exclude the North region in the free shipping mode. We will bring benefit to these consumers with our distribution centers and the support of our physical stores for a major part of the SKU that we have available in the region. Another plus, both for physical stores and for e-commerce. In this call, I would like to highlight LuizaCred as well.
We generally give an expectation about LuizaCred from the financial viewpoint. I would like to reinforce the figures, the more operating figures of LuizaCred to explain what is going on with this company. Two years ago, we decided to expand LuizaCred acceleratedly, it's super important for us. LuizaCred is delivering growth of fintech. The growth of LuizaCred's portfolio, the credit portfolio was 48% in the credit portfolio year-on-year, BRL 8.8 billion in credit portfolio at LuizaCred. We believe that now this is the biggest credit card company in Brazil, exceeding other names that are very well known in the market and with a very fast growth pace. The card base went to 4.4 million cards in this quarter, growing by 26% vis-à-vis last year. 50% of the wholesale that we have in the brick-and-mortar stores come from LuizaCred.
I would like to mention that 70% of the expenditures are outside Magazine Luiza. They are off store. We have an average of the use of Cartão Luiza around seven times per month. This card, for those who already have Cartão Luiza, the Cartão Luiza, this is already the first option. This is very positive. Based on the new way that we post the result of the finance company, that is no longer a retail finance, it is the IFRS 9 and not the Basel GAAP, which is what banks reported. We have a volume of provision that is much higher than the Basel GAAP at the first moment. The profitability goes down a little bit, and we see this in the equity income.
In the long run, it's a very good insurance for us because in the past when we grew the finance company a lot, the profits were high at the beginning and then they went down. In our case, we are having this result now that I described, but the future will be very positive because we have a much higher provision than a bank consumer finance company. We are reporting both models, the Basel GAAP and the IFRS 9, so that the market may analyze this very clearly from the strategic view of the company. This does not change, even if this means a lower result in IFRS 9. We will accelerate the growth of LuizaCred. The clients that use the LuizaCred card, they buy five times more than the others. We want to have this level of loyalty and the shopping frequency.
In this case, we are making a long-term decision. It's very consistent with our strategy. Okay. Now, Netshoes, the big news of last week. I believe that this will be the biggest source of questions from you during this call from analysts and afterwards from journalists. Of course, we are very happy with the announcement of the acquisition agreement that we signed last week. We consider Netshoes a major asset. As this is not a purchase, it's just a purchase agreement because it is subject to the shareholders' meeting that will be held in 30 days, and we need two-thirds of approval. We will have to make the regular comments. I anticipate that I will not be able to answer many of your questions because this purchase has not materialized yet.
We still have 30 days ahead of us and the approval by CADE, the Consumer Finance Agency, an additional 45 days probably, even if we get the fast track. We are very happy with the acquisition. The figures of Netshoes were published recently, but they are the biggest online players of sports clothing, footwear, and sporting goods with outstanding high-value brands, Netshoes and Zattini and Shoestock itself, which was an asset that they recently acquired. 24 million users, almost seven million active customers. Growing marketplace, 1,000 sellers in marketplace, an assortment of 250,000 SKUs that supplement ours, and we practically do not work in this category. GMV BRL 2.5 billion in marketplace already with 15% share in the business. The acquisition is totally in line with our strategy that we have described to you. The adding new categories, increase of the active customer base, increase in purchasing frequency.
I would like to mention talent in the wholesale because a company that has a Chinese-type growth has to hire very good people in retail, and it becomes more and more difficult because there is a possibility of the Brazilian economy soaring or at least taking off. We need talented people. At Netshoes, there are many good people. This is a big asset for us in case the transaction is approved. I apologize for the fact that I will not be able to answer many questions because of the reason that I have just described. This is the recommendation on the part of lawyers and bankers. Now, I would like to give the floor to Roberto and he will get into the financial details.
Good morning, everybody. I would like to mention the highlights first.
We talked about the sales growth and accelerated total sales growth. We had a reduction in the gross margin, 0.9 percentage point. Very much concentrated in the Lei do Bem, the end of the Lei do Bem. Our marketplace contributed a lot, practically offsetting the growth of e-commerce. I mean, it would be that continues to grow a lot as well, over 30% in this quarter. We were able to dilute our operating expenses because of the operating leverage, diluting our expenses and growing much higher than inflation. Even with the increase in level of service and investment in new clients, in line with what we said last year. With that, we were able to grow our EBITDA in nominal terms, BRL 318 million in EBITDA.
Even considering the zero to zero result of Luizacred, if we were to consider in BR GAAP, the EBITDA would be BRL 336 million, with a margin of almost 8% or 7.8%. Net income pro forma, net of the effects of IFRS 16 was BRL 339 million, would be BRL 156 million considering Luizacred in BR GAAP. ROE 23%, it would be even higher. We continue to generate quite a lot of cash. We continue to have a very high ROIC, 20% in the quarter, 27% in the last 12 months. Net cash, very robust, BRL 1.4 billion. Net cash position, BRL 1.8 billion. On the next slide, we show the evolution of active users of the app. From 2 million-3 million to 5 million-6 million active customer base from 14 million to 18 million.
They have the number of new stores, over 100 new stores in the last 12 months, an increase in investment. We more than doubled our investment in the first quarter. Highlighting technology and logistics here. We show the quarterly evolution of our sales. You can see that we sold in the first quarter almost the same level of the last quarter last year, which is usually much higher than the other ones. Another highlight here is e-commerce with BRL 2.4 billion in sales in the quarter. In annualized terms, this is already almost BRL 10 billion in sales and representing over 40% already of the total sales without Netshoes, and including Netshoes, it will be even higher. We show the gross profit expense evolution concentrated in selling expenses, a dilution of fixed expenses. Equity income, practically zero vis-a-vis last year.
We had 0.6 percentage point drop. On the next page, you can see that it has an impact on our EBITDA. The pro forma EBITDA, BRL 319 million. In IFRS 16, almost BRL 400 million with a margin of over 9 percentage points. We have the financial expenses, which were very similar to last year, 1.7 to 1.8 percentage points. Due to the growth of Cartão Luiza, net of prepayment of receivables, we had net financial revenue. On the lower part, we show you the working capital. We continue to improve our working capital position, the net one. By that, we improve our net income, increasing practically BRL 100 million from BRL 1.3 billion to BRL 1.4 billion. We show cash generation, the evolution of net income that we have already mentioned. Some data about LuizaCred.
In 12 months, we increased almost 1 million cards on LuizaCard base, almost 500 here, the app users of Cartão Luiza that we launched about six months ago. Penetration in new account is almost half. More and more our clients will be taking advantage of the Cartão Luiza app with an even better experience. LuizaCred grew a lot, selling BRL 5.7 billion. Highlighting growth inside Magazine Luiza, participation of LuizaCred increased even more, reaching almost 50% of sales of brick-and-mortar stores and 40% total. We talk the evolution of the portfolio past due, practically stable at a historically low level of 7.7% of the total portfolio, one of the lowest in the market. With that, we had the evolution of the quarterly net income with IFRS 9, and we had a loss of BRL 900,000.
In BR GAAP, a net income of BRL 36 million, which continues to be very strong. ROIC 17%. With a big contribution to our strategy as a whole. We would like to open for questions.
Thank you very much. Ladies and gentlemen, now we will start the Q&A session. In order to ask a question, please press star one. In order to remove your question from the queue, please press star two. Our first question comes from Bob Ford from Bank of America.
Thank you. Good morning and congratulations for your growth. Roberto, could you talk about your credit operations? You are adding many new users with default risk and with the IFRS 9, are you happy with the performance? Is it according to your plan or how are you thinking about the growth in the number of users from now on?
Good morning, Bob, and thank you for the question. In fact, we have a very low level of approval. We continue to be very conservative in this regard, and we are not placing more risky clients in the Luiza base. What happens is that we have a higher number of new clients, and they usually bring about a higher provision in the short run, but then they bring about a higher return in the medium and the long run. The risk profile of the portfolio and the level of delinquency of LuizaCred is totally under control. We are, yes, very happy with the operation, and we are further accelerating. We want to accelerate. We want to grow even more.
This year we will be selling much more cards than we sold last year. Yeah, the result of these cards in the medium and the long run tend to be very positive for retail and for LuizaCred as well. There has not been any change in the risk profile. We look at the rate of activation, delinquency per bracket or per period of sale, very consistent ones. The operation is very well-balanced, and the IFRS 16, unfortunately, has this impact that it brings forward provisions. This is only an accounting factor and a very conservative one. Bob, I would like to add two things, the efficiency ratio of LuizaCred at all-time high, which means that lower expenses of the operation over revenues 36%, 38% by the end of the year, one of the most efficient consumer finance companies in the whole market.
With this kind of scale, we are able to dilute this, and we are capable of increasing revenue per user. They are using the card more often inside than outside and also consuming personal loans and also installment purchases. We are able to bring or to make each one of the users more profitable. This is very positive in practice, although the numbers in the short run don't look like that. It is very positive in terms of the revenues for LuizaCred for the next few years. Very, very clear. Thank you. Fred. There are many hardline assets available in Brazil for sale. Are you more willing to do this kind of business? Fred asks him to repeat the question. It was not clear. There are many hardline assets for sale in Brazil now. Are you more willing to accept a leasing contract?
In the Armazém Paraíba mode. Well, the sector left the crisis, but it was much weakened, and many regional operations had the very bad sequels of this economic crisis in the country. There are companies that are giving up acting in this category. As far as we are concerned, the acquisition of these points of sale is decided on a very rational basis. We bought only the point of sale and not the company, and the amount is in line with the amount that we pay in terms of inaugurating each store. It's less than BRL 1 million per point of sale, and this is what we achieved in the negotiation. For me, it's very important because I will always give preference to expansion with a very sound rationale from the commercial viewpoint.
If it is a shoppable distribution center, we must have the value of rentals and the investment made, which may be compatible with that. It would be nonsense to pay high premiums for points of sale. We have been following this rationale for a long time regarding the value that we pay for each unit. I believe that we will still privilege organic growth because we have even more vacant points of sale. In the case of Pará, for instance, the Pará State, maybe the best alternative is to carry out a negotiation in the wholesale, not only in retail. It is just a case-by-case thing, and we will never waive rationality in terms of investing because the trend is to have a digital platform with some physical points of sale when made.
If you make a large investment in these physical stores, you will not have the necessary return on the capital.
Joseph Giordano, J.P. Morgan.
Good morning, everyone. Good morning, Beth or Fred. Thank you for the question. I would like to talk about the top line of e-commerce because it continues to be very strong. I would like to understand two major factors. Diversification of categories such as Netshoes. These new categories and the lower frequency categories, maybe, are they contributing to the growth in e-commerce and stores and brick-and-mortar stores? How should we see the evolution of marketplace? It is slightly higher than you estimated in terms of short-term penetration. What is your target for the end of this year and for next year? What about fulfillment by Magalu for this seller base, which is growing very strongly? Joseph.
Well, first, good morning, and thank you for the question. I will answer very quickly, and then I will ask Eduardo Galanternick to answer about this quarter in the outlook. I believe that the major driver of e-commerce growth in the first quarter, there were two. One was marketplace, going from four to 5.4 million SKUs and increasing the seller base. You have a much bigger number of items available in our digital platforms, and you end up converting a sale that you did not even have the category before. Because very often the client comes through a search engine looking for a certain category or a certain product. More items bring about more customers that bring about more sellers, and then consume more products, as we said.
Marketplace, as we said in the past, this will be the big driving force of e-commerce growth in the future, in an exponential pace that we did not have in 1P. This is very important, and we are very much focused on this in the client base and not only GMV. You have to look at the GMV and the active customer base, and the number of categories, and the nature of a lower ticket in marketplace and some other categories, as you said. All this helps bring growth. 1P continues to grow on the base of last year. The major driving force, beside the very good work being done by Edu's team, you have an outstanding work being done by logistics, and the level of deliveries is much better than our competitors.
So much so that we already have 33% of our deliveries in up to 48 hours, and over 95% of deliveries in one day in the greater São Paulo and greater Belo Horizonte. We will probably reduce this to one day, the delivery time for São Paulo and Belo Horizonte for some product categories this week, because logistics, they're doing an outstanding job from the deliveries viewpoint, and this helps us convert more sales. Delivery time, even more relevant than price in conversion of e-commerce. This means that the growth is sustainable. We are not doing this by increasing our free shipping. We are doing this with an economic rationale, which is what we have always done in Magazine Luiza. Just adding to what he said regarding the growth of sales and the positive network effect. The major driver is traffic generated by this expansion in assortment.
75% increase in traffic year-over-year. When we see the number of items sold with GMV of 50, was over 90% items sold. They buy the new products, and they buy the traditional product. Regarding marketplace, as Fred said, we will continue with the growth pace that we have. That is a sales trunk one, and one of the major drivers of marketplace sales is the number of sellers and our capacity of onboarding sellers that are getting into the platform, and this is growing consistently. We already have a much higher pace of seller entry than we had initially. In relation to Magalu Entregas, we have two modalities. We have the concept that we said 50% of the sellers already in this mechanism and growing on a monthly basis.
Today, we have a higher figure than we had at the close of the quarter. The pilot for the cross docking, we made many adjustments, fiscal ones and operational ones. Ready to scale at the end of this quarter and beginning of the next, then we will be scaling up the Magalu Entregas.
Perfect. Thank you very much.
Romeo, go to Santander.
Good morning, everybody. Could you give us some color about the performance of gross margin? Because there was a sequential drop vis-à-vis the last quarter, and mainly regarding merchandise. Was it because of the product mix and also the Lei do Bem end, or is it mostly because of the increases of e-commerce and total sales? What could we expect for gross margin the next two quarters? A drop?
I know that the first quarter is more difficult in terms of comparison, how are you thinking about gross margin for this year?
Good morning, Romy. Thank you for the question. I will start, and then I will give the floor to Beto if he wants to add something. Here's the deal. The major impact on the margin, as we said in the release, was the end of Lei do Bem, because you have to collect PIS and COFINS over a super relevant category of revenues, mainly the main one, which is smartphones. There is a very significant impact on our margins. You see the results published by the market, and you see that there was a huge impact on gross margin of everybody that works with this important category, and this will continue to happen. This was offset by some positive things on our side.
We already won one suit, one claim, which is the PIS/COFINS over the ICMS. In the first quarter, this has already mitigated the PIS and COFINS over the smartphone category and a major part of that. It tends to continue because this is recurrent. We won this because we published a communiqué of BRL 170 million, and we gained or we won a suit at the Supreme Federal Court, and we will be recognizing this over time, reducing the PIS and COFINS, this is an accrued amount of the previous years. In the first quarter, it was a recurrent one, the next quarters, we will be debating the correct way of posting this will offset the PIS and COFINS in the smartphone category.
In the first quarter, specifically the recurrent part of the PIS/COFINS over the ICMS, has already mitigated this increase in part. Besides, we have other things that we get here. The growth of marketplace increased the take rate, this grew a lot and helped generate revenue that offset this. The trend of marketplace growing is that it will help the gross margin of the company, we have already offset this. We have services and other sources and the expansion of margin of other categories in order to further mitigate this smartphone situation. The long-term dynamic, well, I don't see quite a lot of room in the market to absorb the non-transfer of the smartphone PIS and COFINS, such as was the case in the first quarter. This is not sustainable.
The market, over time, will be obliged to transfer this because we see margins that are not positive in the market. We will not transfer these two prices if the market does not transfer these two prices. We have this point of our victory in this PIS/COFINS claim. If the market continues to be irrational, we will not waive growth, we will continue to play this game.
Very clear. Thank you very much. Between offline and online, do you see any changes in terms of absorbing this impact? Does it generate a level of competition between the channels? If you exclude the marketplace effect, was the impact similar between offline and online? I would like to understand the dynamics.
Yes, we felt on online and offline as well. There was no adaptation of prices because of the return of this tax.
Pedro Fagundes, Bradesco BBI.
Good morning, everybody. Thank you for the question. I would like to understand a little bit better the expansion of your assortment. Do you have any bottlenecks that might prevent you from scaling up faster in these new categories that are under-penetrated on online? Maybe integration, warehousing, because some have a shorter replacement cycle. The purchase of Netshoes, the acquisition of Netshoes would help you if you do have these bottlenecks.
Good morning, Pedro. Thank you for the question. Any category that is added to your base brings about some necessary adaptations, both in your systems, in logistics, even in shopping experience, because there are many changes that you have to make in the filters, in the search engines, the media, they are marginally different. We have not gotten into perishable products or regulated products yet.
There are many points that, well, we have not entered any categories that are very different from the supply chain viewpoint. We have some that have a different life cycle, but nothing that is not adaptable by us. The major point is the delivery cost for lower ticket categories because they have a lower penetration e-commerce because the traditional dynamics of the large delivery companies, carriers, et cetera. This becomes very expensive if you have a BRL 15 delivery. For a product that costs BRL 20 or BRL 10, the shipping fee or the delivery fee is higher sometimes. When you have the lower ticket, the cost or the weight of the delivery prices becomes bigger. For instance, if you buy OMO powder soap, the delivery price will be higher, and this is the reason why you have this situation.
This is the beauty of our multi-channel model. This is where we have a very big competitive difference. Books, Magalu Livros, has been growing a lot in the click and collect mode. 80% of our purchases are through the physical stores. Magalu also started store pickup with a marginal cost because you already have a truck going to the store every single day from our DC. We can have a very big advantage over the purely digital platforms, the delivery channels. The delivery cost via the click and collect is much lower. The problem of the market as a whole is a very big competitive advantage that we have playing in our favor.
Okay. Understood. One last question. Do you work with a target of number of SKUs?
No. Our target is the active client base, and that's it. Thank you.
Rodrigo Costa, Goldman Sachs.
When you think about the expansion cycle in your brick-and-mortar stores, as these stores are taking on the function of distribution centers and more integrated with e-commerce, what about the correct density or maybe catchment area that would be correct for each one of the stores? I imagine that it varies according to the size of the city, et cetera. Maybe you could help us understand omnichannel and the different mix of stores, how this impacts your plan for opening new stores in the short and maybe the medium term as well. Irma, thank you for the question. Well, the answer is quite simple. We still have a long way to go. We're getting to 1,000 stores with the Pará stores. Almost 800 cities. In Brazil, we have 5,000 municipalities. The potential of opening new stores in Brazil is still quite high.
We are able to open a store in a very small town of 20,000 inhabitants with a virtual model. In the large capitals, we have formats for standalone and mall stores. We have a whole array of formats, and this is very flexible, and this gives us a return in the whole market. We want to cover most of the Brazilian municipalities, and we give preference to new regions. This is why we got into Pará, and last year we got into Goiás. There are other states where we are not present, the Federal District and Espírito Santo, Rio, and other states in the north, Mato Grosso. There are many places in Brazil and many municipalities in the current state that we have no stores. We are not opening a new store in the same district and the same neighborhood.
No, they are distant from each other, they generate totally new client base and automatically helping us have a better level of e-commerce. We still have a long way to go. This is a very simple decision, where we want to open, where we do not have stores or many neighborhoods in other cities. A quick question now. Can you give us some figures about the marketing campaign that you're airing now, the #Magalu thing? I believe this is to associate Magalu with the higher mix that you're building. How should we think about this campaign? Do you have some initial figures that you could share with us about the results, or how much this has been helping bringing new traffic or new client base?
Irma, well, in the last few years, because our institutional marketing endeavors online and offline, the focus of the last few years was on the app. We worked on the app for a long time in the mass media, I think this is what you're referring to. Our social networks as well, we worked a lot. We will continue to do this with marketing on the app, for the app. Added to the fact that we have a user-friendly app, the hashtag Tem no Magalu is a big endeavor that we are making now that we have a huge diversity of categories. Trying to show to customers that they can buy much more than a refrigerator or a piece of furniture or a smartphone. That they can buy, well, exception made to perishables and some regulated markets.
Well, I cannot give you any figures now, only the figures that we have already published. We grew twice its distinct items in the first quarter in e-commerce, we grew the number of items sold in the brick-and-mortar stores, we are selling to more people, different people, in different categories. These are concrete figures already. We have this institutional campaign, the hashtag, in the Fausto program, TV program, talking about beauty products and some 30-second spots and some campaigns, one-minute campaigns. We are talking about many different products in our communication endeavors and our marketing endeavors. We need time. The short-term indicators, what I can tell you is that they are very positive.
Now we close the Q&A session, we would like to give the floor back to Mr. Frederico Trajano for his closing remarks.
Once again, I would like to thank you very much for participating in the call. Thank you. Magazine Luiza's conference call is closed. We thank you for participating and wish you a very good day.