Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Magasin Iluis' conference call referring to the Q1 of 2019 Results. At this time, all participants are connected in listen only mode. Now we would like to turn the floor over to Mr. Federico Tragiano, CEO of Magazine Luiza.
Mr. Tragiano, you may proceed. Good morning, everyone, and thank you very much for participating in our conference call about the results of the Q1 of this year. Once again, we are with the whole team, our executive team, and I would like to make my presentation first and then Roberto will give you some additional information and then we will be opening for questions. I would like to start by saying that we got into this Q1 with a new strategic cycle, a very promising one.
And 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 and the leverage of our platform, Magalueza service, growing the marketplace platform of Magazini and delivering services that we deliver to the company itself to third parties that is to say to other companies very much focused on this pillar. And so that third parties may operate at the same level that we operate with 1P. And the Super, our digital platform, with the main points of contact with our clients, our app, expansion of new categories, improved experience in retail, fast delivery, both in stores and at home and the culture of data and innovation. So these were the 7 pillars that we detailed in our Investor Day last year as well as in our annual report referring to the results of 2018. So of course, we are already executing this new strategic cycle.
And in practice, our view is the following. Magazine and Luisa became digital and now we want to have the whole retail of Brazil also in digital form. And specifically now, in this moment, we want to bring digital inclusion to consumers and also to small and medium retailers or 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 de Luiza. But this quarter, we found some challenges ahead of us in the Q1. We had a very high comparison base in the Q1 of last year, already counting on sales that had already been brought forward February March, mainly last year, we already had a higher than normal sale of smart TVs because of the World Cup.
And we had the end of the late du bien, that is to say, the law regarding the benefit, the fiscal benefits given to technology products and mobile smartphones and some other products of other lines as well. And in my opinion, what was really a drop in rationality on part of the market and some non transfers of benefits of the Laidu Bay and the economy that really was lower than we expected. So 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 either 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 comes a type value analysis and also maintaining our ethics with everybody formal in the chain guaranteeing that all the sellers in our platform deliver high level of services.
And with all these challenges, I can say that in the Q1, we were able to have a very good performance and 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. So, more clients buy over the year and more clients buy frequently over the year. And in this sense, we had a very good evolution. The client base was 18,000,000 active clients, 34% growth year on year, highlighting the website 78% growth visavis the previous year, but also the brick and mortar stores that had a significant growth of 23% year on year.
So we are able to grow both channels and not growing, as we always say, one channel to the detriment of the other. And I consider this growth a very significant one, and I'm very 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 SEO in the Requiem Yaqui website and we were able to achieve this in spite of the 2 40% growth in marketplace that still operates with a slightly lower level of service than our 1P. And the marketplace already represents about 28 percent of total clients that buy in the website. So even with this very relevant marketplace, it already has this weight and we were able to maintain the RA1000C when 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 in our inventory and from declining 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 and many 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. And talking specifically about e commerce, we grew 68% client base, 50% in sales and 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 ever ticket and we launched the books category. We are growing the Mercado Magalu and we continue to invest a lot in e commerce and the app. And for the app, we have the strategic objective that to make it a super app and the first step has to do with the expansion of the sellers base and the number of items sold and category and then getting to payments, etcetera. But our first phase of SuperF has to do with expanding the category of products and the launch of books. And I will Net Shoes is very much focused on that as well, so that we may expand the category base.
And we read 33 download and average users now. 6,000,000 is very expressive growth visavis last year and 33,000,000 apps downloaded. And beside 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 and the logistics team is working very well delivering in up to 40 hours in express delivery, reaching 33% of the total e commerce sales, a very major number. And together with the store collection, click and collect 60% of our sales, total sales in e commerce already being received or collected in less than 48 hours and it's very difficult for competitors to beat this kind of service that we are delivering. And this is a very and this is a very positive result from e commerce already very much impacted by the accelerated growth of marketplace.
We reached 5,000 sellers already and 5,400 SKUs in our platform. So we already start to have this network effect users attracting more sellers and ultimately we have more products that attract more consumers and gaining scale in this Chinese growth mode. And we already have this first signs that this is materializing already and in marketplace we work a lot. We have 2 clients. We have the seller and we have the end customer.
And when you work with an ecosystem, you have to understand that this is a market of 2 clients and we started to deliver service to the sellers as clients and not only catalogs, etcetera, and bringing clients via our platform, via our app. But we are rolling out Magalupa Gamentos and Magalu Intregas. Magalu Intregas already has 50% of sellers that use the standard contracts of our website at much lower shipping fees than they have negotiating directly with the carriers, but also rolling out Log B, for instance, to deliver for the sellers and even lower shipping fees. And in this case, the growth of modality 20 sellers that we are piloting now and many adjustments have to be carried out to allow us to roll this out with top quality, but the level of service with sellers sharing what we have in 1P, Magaluisa, Lot P and we want to transfer this to the sellers, I mean, of the cross docking platform. And Macalupagamentos as well that already has 3,750 sellers and in this case we already prepaying having prepayment of receivables, always collecting or charging low fees.
And it's super important for them to work with a sound working capital in 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. And talking about the physical stores, we had another very good quarter and a very big challenge because we already had a same store sales last year, which was very high because of the World Cup and we were able to grow 16% of the stores with 8% same store sales over 16% without the World Cup. And this is an extraordinary work that we do in all the regions, in all the categories in the Q1 with all the difficulties of delayed domain that is the biggest assembly block in terms of profitability. And 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 and the new stores are already contributing 9 percentage points, helping the overall growth of brick and mortar stores. And at this moment of a challenging economy, this is very positive. And I think the participation of new stores in growth already indicates that these stores are operating with the level of sales even higher than the one that we estimated at the beginning.
And 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 Amazon Parais stores in the north and the northeast, 48 stores in Parais Maranel inaugurating our presence in the North, a very promising region. And I believe that they are under assisted from the viewpoint of retail. And in our model of multi channel, this will help us not only gain clients, but also this will help our e commerce as well to improve penetration in the North. And I would like to remind you that many people carry out campaigns of free shipping in e commerce and they always exclude the north and Magasin de 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.
And in this call, I would like to highlight Luisa Cregg as well. We generally make an give an expectation about Luisa Cregga from the financial viewpoint, but I would like to reinforce the figures, the more operating figures of Luisa Care just to explain what is going on with this company. 2 years ago, we decided to expand Luisa Care accelerated and it's super important for us and LuisaCred is delivering growth of Fintech and the growth of VELIZA Credit's portfolio, the credit portfolio was 48% in the credit portfolio year on year, BRL 8,800,000,000 in credit portfolio at Luiza Crede. And 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 and the card base went to 4,400,000 cards in this quarter, growing by 26 percent visavis last year and 50% of the wholesale that we have in the brick and mortar stores come from Luisa Crede. But I would like to mention that 70% of the expenditures are outside Magazena Luisa.
They are off store. And we have an average of the use of Cartao Luiza around 7 times per month. So this card for those who already have Carton Luiza de Luiza card, this is already the first option. This is very positive. And 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 by saying GAAP, which is what banks reported.
We have a volume of provision that is much higher than the by saying GAAP at the first moment and the profitability goes down a little bit and we see this in the equity income. But 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. And 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. And we are reporting both models, the basin GAAP and the IFRS 9, so that the market may analyze this very clearly from the strategic view of the company does not change. Even if this means a lower result in IFRS 9, we will accelerate the growth of Visa Credit and the clients that use the Visa Credit card, they buy 5 times more than the others.
And we want to have this level of loyalty and the shopping frequency. And 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, and I believe that this will be the biggest source of questions from you during this call from analysts and afterwards from journalists.
And of course, we are very happy with the announcement of the acquisition agreement that we signed last week. And we consider Netshoes a major asset. And 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 2 thirds of approval and we will have to make the regular comments. And 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 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, Net Shoes and Zaccini and ShoeStock itself, which was an asset that they recently acquired 24,000,000 users, almost 7,000,000 active customers, growing marketplace, 1,000 sellers and marketplace, an assortment of 2 150,000 SKUs that supplement ours and we practically do not work in this category. And GMV, RMB 2,500,000,000 and marketplace already with 15% share in the business. The acquisition is totally in line with our strategy that we have just we have described to you the adding new categories, increase of the active customer base, increase in purchasing frequency. But I would like to retail and it becomes more and more difficult because there is a possibility of the Brazilian economy soaring or at least taking off and that we need talented people and that Netshoes there are many, many good people. So this is a big asset for us in case the transaction is approved.
And I apologize for the fact that I will not be able to answer many questions because of the reasons that I have just described. But this is the recommendation on the part of lawyers and bankers. Now I would like to give the floor to Hubert and he will get into the financial details. Good morning, everybody. And I would like to mention the highlights first.
We talked about the sales growth and accelerated total sales growth. We had a reduction of the gross margin, 0.9 percentage point, very much concentrated in the delayed domain, the end of delayed domain. 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.
And even with the increase in level of service and investments in new clients in line with what we said last year. And with that, we were able to grow our EBITDA in nominal terms BRL318 1,000,000 in EBITDA. And even considering the 0 to 0 result of Luisa Crede, if we were to consider in BR GAAP, the EBITDA would be BRL 336 1,000,000 with a margin of almost 8% or 7.8 percent and net income pro form a net of the effects of IFRS 16 was $139,000,000 would be $156,000,000 dollars considering Luiza's credit in the RGAAP. At 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, BRL1.4 billion and net cash position BRL1.8 billion. On the next slide, we show the evolution of active users of the app from 2,300,000,000 to 5,600,000,000 active customer base from 14,000,000,000 to 18 $1,000,000,000 Then to have the number of new stores, over 100 new stores in the last 12 months and increasing investments, We more than doubled our investment in the Q1 and highlighting technology and logistics here. Then we show the quarterly evolution of our sales. You can see that we sold in the Q1 almost the same level of the last quarter last year, which is usually much higher than the other ones.
And another highlight here is e commerce with 2,000,000,000 and 400,000,000 in sales in the quarter. In annualized terms, this is already almost 10,000,000,000 in sales and representing over 40% already of the total sales without net shoes and including net shoes, it will be even higher. Then we show the gross profit expense evolution concentrated in selling expenses, a dilution of fixed expenses. Equity income practically 0 visavislastyear, we had 0.6 percentage points go up. And on the next page, you can see that it has an impact on our EBITDA.
So the pro form a EBITDA BRL 319 1,000,000 in IFRS 16, almost BRL400 1,000,000 with a margin of over 9 percentage points. Then we have the financial expenses, which were very similar to last year, 1 0.7% to 1.8%. And due to the growth of Carton Luiza, net of prepayment of receivables, we had net financial revenue. And on the lower part, we show you the working capital. We continue to improve our working capital position, the net one.
And by that, we improve our net income increasing practically BRL100 1,000,000 from BRL1.3 billion to BRL1.4 billion. Then we show cash generation, the evolution of net income that we have already mentioned. Then some data about Luisa Creggi in 12 months, we increased almost 1,000,000 cards and Visa card base, almost 500 here the app users of Cartel Louis that we launched about 6 months ago and penetration in new accounts is almost half. So more and more, our clients will be taking advantage of the Captain Luiza app with an even better experience. Luiza created a lot, selling BRL5.7 billion, highlighting growth inside Magazine and Luiza, participation of Luiza Crede increased even more, reaching almost 50% of sales of brick and mortar stores and 40% total.
Then we talk the evolution of the portfolio past due, practically stable at a historically low level, 7.7% of the total portfolio, one of the lowest in the market. And with that, we had the evolution of the quarterly net income with IFRS 9 and we had a loss of $900,000 and then BR GAAP net income of $36,000,000 which continues to be very strong ROIC 17% and with a big contribution to our strategy as a whole. Now we would like to open for questions. Thank you very much. Our first question comes from Bob Foehn 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 Luisa 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. So the risk profile of the portfolio at the level of delinquency is accredge is totally under control. And we are, yes, very happy with the operation. We are further accelerating. We want to accelerate.
We want to grow even more. And this year, we will be selling much more cards than we sold last year. And the result of these cards in the medium and the long run tend to be very positive for retail and for Luisa Crede as well. So 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.
So the operation is very well balanced and the IFRS 16 unfortunately has this impact that brings forward provisions. But this is only an accounting factor and a very conservative one. And 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. And with this kind of scale, we are able to dilute this and we are capable of increasing revenue per user. So they are using the card more often inside and outside and also consuming personal loans and also installment purchases.
And so we are able to bring or to make each one of the users more profitable. And 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 Luisa Caix for the next few years. Very, very clear. Thank you, Ferdi.
There are many hard line assets available in Brazil for sale. Are you more willing to do this kind of business? Could Fed ask 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 Armasim Paraiba mode.
Well, the sector left the crisis, but it was much weakened and many regional operations had very bad sequels of this economic crisis in the country. So there are companies that are giving up acting in this category. But as far as we are concerned, the acquisition of these points of sale is decided. On a very rational basis, we bought only the points 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 $1,000,000 per point of sale.
And this is what we achieved in the negotiation. And for me, it's very important because I will always give preference to expansion with a very sound rationale from the commercial viewpoint. And if it is a shoppable distribution center, we must have this value of time. And so we have been following this rationale for a long time regarding the value that we pay for each unit. So I believe that we will still privilege organic growth because we have even more vacant points of sale.
And in the case of Para, for instance, the Para state maybe the best alternative is to carry out a negotiation in the wholesale, not only in retail. And it's 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 and make. And if you make a large investment in these physical stores, you will not have the necessary return on the capital. Joseph Giordano, JPMorgan.
Good morning, everyone. Good morning, Bert, to 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 2 major factors, diversification of categories such as Netshoes.
So these new categories and lower frequency categories maybe, are they contributing to the growth in e commerce and stores and brick and mortar stores? And how should we see the evolution of marketplace? It's slightly higher than you estimated in terms of short term penetration. So what is your target for the end of this year and for next year? And 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 Grantaniki to answer about this quarter and the outlook. I believe that the major driver of e commerce growth in the Q1, well, there were 2. One was marketplace going from 4,000,000 to 5,400,000 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 didn't even have the category before because very often the client comes through a search engine looking for a certain category or certain product and more items bring about more customers that bring about more sellers and then consume more products as we said and marketplace as we said in the past.
This will be the big driving force of e commerce growth in the future and in an exponential pace that we did 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 and 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 Sao Paulo and Greater Belo Horizonte.
We will probably reduce this to one day, the delivery time for Sao Paulo and Belo Horizonte for some product categories this week because logistics, they are doing an outstanding job from the deliveries viewpoint. And this helps us convert more sales and delivery time even more relevant than price in conversion of e commerce. And this means that the growth is sustainable and 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 on year.
And when we see the number of items sold, GMV of 50 was over 90% items sold. And this they buy the new products and they buy the traditional products. And regarding marketplace, as Fred said, we will continue with the growth base that we have that is to say a Trunk 1 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. And we already have a much higher pace of seller entry than we had initially. And in relation to Magalu deliveries, we have 2 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. And the pilot for the cross docking, we made many adjustments, fiscal ones and operational ones and ready to scale at the end of this quarter and beginning of the next, then we will be scaling up the Magalu Intragas. Perfect. Thank you very much.
On your call to Santander. Good morning, everybody. Could you give us some color about the performance of gross margin because there was a sequential drop visavis the last quarter? And maybe regarding merchandise, Was it because of the product mix and also the Le Dube and or is it mostly because of the increases of e commerce and total sales? And what could we expect for gross margin the next few quarters, a drop?
I know that the Q1 is more difficult in terms of comparison, but how are you thinking about gross margin for this year? Good morning, Hu Bing. 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 Les Dubes because you have to collect PIS and COFINS over a super relevant category of revenues mainly the main one which is smartphones. So there is a very significant impact on our margins. And you see the results published by the market, as 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. And this was offset by some positive things on our side.
We already won one suit, one claim, which is the PIS coffins over the ICMS. And in the Q1, this has already mitigated the PIS and COVID over the smartphone category and a major part of that. And it tends to continue because this is recurrent. And we won this because we recognized last week we no, not recognized. We published a communique of BRL170 1,000,000 and we gained or we won a suit at the Supreme Court and we will be recognizing this over time reducing the PS and COFINS which is this is an accrued amount of the previous years.
And in the Q1, it was a recurrent one and the next quarters we will be debating the correct way of posting this and this will offset the PIS and COFINS in the smartphone category. But in the Q1 specifically the recurrent part of the PISCOFINS over the ISMS has already mitigated this increase in part. Besides, we have other things that we get here. The growth of marketplace increased the tech rate and this grew a lot and helped generate revenues that offset this and the trend of marketplace growing is that it will help the gross margin of the company and we have already offset this. And so 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 Q1. This is not sustainable. And the market over time will be obliged to transfer this because we see margins that are not positive in the market. So we will not transfer these 2 prices if the market does not transfer these 2 prices and we have this point of our victory in this Piesco claim. But if the market continues to be irrational, we will not waive growth and 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 Good morning, everybody. Thank you for the question. And 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. And 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 and in logistics and even in shopping experience because there are many changes that you have to make in the filters, in the search engines and the media and they are marginally different.
We have not gotten into perishable products or regulated products yet. So 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. And 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, etcetera, this becomes very expensive. If you have a 15 rail delivery for a product that costs R20 or R10 rail.
So the shipping fee or the delivery fee is higher sometimes. So when you have the lower ticket, the cost or the weight of the delivery prices becomes bigger. For instance, if you buy an OMO powder soap, the delivery price will be higher. And this is the reason why you have this situation. But this is the beauty of our multichannel model.
This is where we have a very big competitive difference. Makalul Books, Makalul Livru has been growing a lot in the click and collect mode. 80% of our purchases are through the physical stores and Magalu also start to pick up store pick up with the marginal cost because you already have a truck going to the store every single day from RDC. So 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.
So 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, no.
Our target is the active client base and that's it. Thank you. When you think about the expansion cycle in your brick and mortar stores and 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, etcetera. But maybe you could help us understand Omni, Chen, who 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're getting to 1,000 stores with Ipara stores, almost 800 cities. And in Brazil, we have 5,000 municipalities. So the potential of opening new stores in Brazil is still quite high.
And we are able to open a store in a very small town of 20,000 inhabitants with a virtual model and 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. So we want to cover most of the Brazilian municipalities and we give preference to new regions. This is why we got into Para and last year we got into Goya and there are other states where we are not present a federal district and Espirito Santo Rio and other states in the North, Mato Grosso and 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, in the same neighborhood. No, they are distant from each other and they generate totally new client base and automatically helping us have a better level of e commerce. But 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 MAGALUTEN? Because I believe this is to associate Magalu with the higher mix that you're building. So 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, one of the focuses in the last few years, we closed our institutional marketing endeavors online and offline and the focus of the last few years was on the app.
We worked on the app for a long time in the mass media and I think this is what you're referring to, in our social networks as well we worked a lot and we will continue to do this with marketing on the app for the app and added to the fact that we have user friendly app, the hashtag thingmanotalou is a big endeavor that we are making now, now that we have a huge diversity of categories and trying to show to customers that they can buy much more than a refrigerator or a piece of furniture or a smartphone, then that they can buy well exception made to perishables and some regulated markets. We want to published. We grew twice in distinct items in the Q1 in e commerce and we grew the number of items sold in the brick and mortar stores and we are selling to more people, different people in different categories. And these are concrete figures already. But we have this institutional campaign, the hashtag and in the Falestone program, TV program and talking about beauty products and some 32nd spots and some campaigns, 1 minute campaigns.
And we are talking about many different products in our communication endeavors and our marketing endeavors. We need time, but the short term indicators what I can tell you is that they are very positive. Now we close the Q and A session and we would like to give the floor back to Mr. Federico Trajanu for his closing remarks. Once again, I would like to thank you very much for participating in the call.
Thank you. Magazine Ilviza's conference call is closed. We thank you for participating and wish you a very good day.