Good morning, ladies and gentlemen. Thank you for waiting. Welcome to Magazine Luiza Conference Call to discuss the results of the Q3 of 2018. Right now, all participants are in listen only mode, And later, we will hold a Q and A session when further instructions will be given. Now I would like to turn the floor to Mr.
Federico Traziano, CEO of the company. Please, Mr. Traziano, the floor is yours. Good morning, everyone. Thank you very much for participating on our conference call regarding the Q3 of 2018.
Here with me, I have all the executive management, Arthur Mendoza, and me and Roberto Bellissimo, our CFO, will be doing the presentation. I will hold a brief introduction, and then Roberto will go into the details. In my opinion, we had very positive results considering a challenging scenario that we had forecasted I had forecasted that challenging scenario in our last call. Post World Cup, we always have a World Cup hangover. As we say it, it was a very strong growth quarter.
And sometimes, we even anticipate sales from the second half of the year to the first half of the year, especially on TD sites. We also had an FX pressure scenario, which was a major concern for me about the 2nd quarter because of the elections and all the elections and all the uncertainties surrounding elections. And because of all that, I should highlight our sales growth. Considering the fact that the Q3 of last year was one of the best quarters in the company's history, had a growth in the off line as well as in the online last year. So to grow on top of that basis and facing a challenging scenario really is something that the company should celebrate, and it was even higher than my expectations.
We have gone 24% to brick and mortar stores with an expressive share of same store sales, 16%. We are already reaping the benefits of an expansion program. We started accelerated this year of opening new stores. We have over 80 stores open. And by the end of the year, we should continue on that pace of growth.
And also, I should highlight the growth of e commerce both in 1P, an operation that is growing on top of high growth already and with a result that is very significant of marketplace that we were already expecting in the range of BRL 1,000,000,000. So that is a very significant growth when we compare it to past year, and we'll talk more about that shortly. We have new sellers coming in. Now in October, we are already with 400 new sellers. That is a record of new sellers in a month, showing that we are improving our onboarding process.
And we are still being very selective about the entry of new sellers. We are by far the company that is most selective, most strict because for us, the service level of 3P has to be the same as the service level of 1P. That is very good, very high. But what I am celebrating the most about this 3rd quarter results is the performance of our customers' indicators. We committed ourselves, and we emphasized that since the beginning of the year in all our conversations with investors in all our releases that this would be the ear of the customer.
And we would raise the bar and raise very much regarding the growth of our client base and especially the growth of the customer service level. So we were committed to put together a real operation and in fact operation that would be guided towards consumers and also customers because anything that we can have that is most important is to have a loyal customer base that would have no reason to leave us. We have been doing that. And for this term time and this release, and I would like to invite you to read the release, the message that we have sent. We are showing some indicators that we did not close to the market before.
I'll be talking about those because I believe that is crucial for you to understand the quarter visavis the significant growth of these indicators. We have added these customer indicators at the high bar so that you could see and you see in any organization in Brazil and in all over the world, but many of them are not really focused on the customer. Sometimes they lose market, and they do not have our situation. So some of these indicators are qualitative and some are quantitative. I think it's important to grow our customer base.
We had an increase in the average ticket. And this year, we wanted to grow the number of our active customer base. We have grown 31% of the active customer base, with a highlight to e commerce that has grown 71%, a very significant figure, much higher than any other operations in the market. And I would like to emphasize that we are not growing e commerce and not growing brick and mortar stores. Brick and mortar stores have grown 21%.
So we are really gaining market share, not only in sales, but especially share and client base, both in the online as well as in the offline. For the online, I should highlight our efforts to increase not only the increase of our client base, but also the loyalty. And we are working on the app. Over 75% of our access are already by the new digital auctions, the app and also and the website, we have a total of BRL 19,000,000 of downloads made on the app. And the brick and mortar stores, I should say, that the app customer will buy more frequently.
They are more loyal to the base as we provide them more advantages such as free freight so that they can have the delivery free delivery of products over BRL100. This is a better purchasing experience. We can buy in up to 10 seconds. We are one of the best evaluated apps, both in the App Store as well as in the Android Store. So we developed an app that we are always improving, and it is generating a constant relationship.
And also, what's hit a bit that our tracking of both sales in the app has improved a lot. Therefore, we are very happy about the customers that are using the app. And the app for brick and mortar stores, we consider to be the credit card because then we have a relationship with the customer that is not one time off to be more frequent. And in addition to increase our client base, we want to have a more frequent relationship with those customers. And this is a challenge because we were a company that was very much turned to low frequency products of a high average ticket.
Now we are improving the share, the participation of the light products. And the credit card customer buys more. We decided in the beginning of the year to accelerate investments and bringing in customers by selling the Luisa card. We are selling 150,000 cards a month, 86% more than last year, and that involves investments discounts for those customers that buy with a credit card, the financial dynamics of accounting the results of the credit card has that has an impact in the short term by the IFRS 9. But what time does credit card, since this is very profitable, it will improve the company's results in the long term.
In the short term, we do have an impact in Luisa credit, but in the long term, we will have very positive results, both for with the credit as well as for Magazine and Luisa. Because since this cardholder has a higher credit limit, they will buy more products and they have that profile of customer lifetime value that is more positive. So the investment on the app shows that we are investing that sometimes something that might translate a little bit less in the short term. But in terms of value generation for the long term, it makes sense. And we are making that conscious decision of doing that right now because it does have a trade off.
To give you an idea, 50% of everything that we sell in the brick and mortar stores, we sell especially by the Luisa credit card. So this is a sound figure and it turns very resilient, the results of the brick and mortar stores because that credit card, the Luisa credit is still those customers are loyal to the channel. And a good part of the growth of brick and mortar stores has to do with the increase of penetration of credit card in that channel. I talked a little bit about numbers. Now I want to talk about quality, service level.
We invested a lot in post sales, especially in delivery. We opened 2 new DCs, and we invested a lot in the express delivery. Today, over 30% of what we sell online, we promise and we deliver in up to 48 hours. I think this is an average that is much higher than the market. And good part of the online growth has to do with a higher conversion of products that we promised at a shorter period of time.
Sometimes, the customer privileges lower delivery time rather than price or any other KPI that you might provide? And since we are giving lower delivery times in 160 cities where we have the express delivery, we have had higher conversion rates. And this express delivery model not only is bringing higher NPS to our customers, but also we are converting more sales and growing more at a very accelerated level on top of a high base. We should highlight and congratulate our logistics team. They are doing a great work.
We also have the Magalu delivery, such as the pilot we are running. We want to transfer what we have. And 1P to 3P, we tested with 10 sellers. And with a pilot project, we reduced that time at 60%. We want to work more on that to make that available to our sellers.
But this is a promising start for our pilot project. And as we always do, we have a strong ability to roll out our pilot at an expedited rate as we have been showing you consistently. I also should highlight indicators that are very relevant for any retail operation. We see that Our client or customer satisfaction to customer service, that has increased. The waiting time also is in less than one second sometimes to 30 seconds when they call customer service.
60% delivery time reduction when you buy in the website, the recorded key complaint site and Percon. All of those complaints have decreased 40% at every 1,000 orders. So we are with a service level or delivery level that is much better than the market average. We are improving. We are very happy about it.
So we are the only ones that have the TLRA1000. We also have that TL for our brick and mortar stores. We have our website also at the RA1000. These are very sound indicators. And all the efforts we have dedicated to improve the service level to customers, to increase the number of active customers and frequency of purchase.
All of that is showing positive results. And our store NPS improved. Our e commerce NPS is still there, and it's growing. So I am especially happy about the team's work regarding all of these indicators and how we have been able to consistently grow. We always have trade offs to reach those indicators.
We have invested BRL 36,000,000 and that brought our margin down in 1 percentage point vis a vis the prior quarter. We invested in logistics DCs. We increased the supply of stores. And also for deliveries to be able to come at 48 hours, We increased the number of people working in logistics handling the goods. We also increased our store capacity, the the capacity of customer service.
We invested into technology, some of them in the OpEx, some of them in CapEx. We also have taken action to bring in more customers to our app, to our card base, all of those investments are crucial so that we can go forward and protect the company against any market threat and also maintain this company as one of the companies that tends to have a share gain and market share gain that is relevant. These investments were all planned and our conversations, we have already mentioned that. And I would like to say that based on what we see, especially in other online operations, these are not very high Other companies that had to grow a little bit more, they had a trade off that was much higher than ours, showing that our growth is extremely healthy, and we are very much focused in generating value to our shareholders. The return on invested capital is on a base of 30%.
That's very high. Yes, we are letting go a little bit of percentage. But in absolute results, we are growing EBITDA, cash generation, net income. So I believe this is an operation that has been proven to be sustainable, healthy and the way to tap into growth with a greater potential of value generation to shareholders is this one. Yes, we do have a trade off there.
And I want you to interpret it in a positive fashion. Knowing that the company has that discipline of generating value to shareholders and this always has been our motto for the online and off line operations. Now closing my remarks and before I turn to Roberto for the financial results, I would like to tell you a little bit about the Q4. I am in terms of well, I am not as much concerned because my concern, as I had said in the prior call, was the FX pressure because that makes it difficult to negotiate with suppliers. This was what happened in part of this Q3.
And now at the end of October, beginning of November, we have a better overview of the FX. It's more positive. We were able to close our deal for Black Friday, for the last quarter, and we will start negotiations already for the Q1 of next year. So we are already in a situation where we have more visibility. And obviously, it will depend on our execution capacity because if you have a good quarter in retail, you have to execute well the next quarter.
And our comparison base is getting worse because we were very good in the Q3 of last year, and we did extremely well in this quarter. So as I usually say, our main competitor is the results that we had in the prior quarter of the past year. So we have to execute it very well with very little error margin so that we can provide you better results than the quarter of the past year. But I should highlight, it's always a challenge for our operations. But in terms of the macroeconomic scenario, the indicators show a good situation that is at least a little bit more predictable than what we had in the 3rd quarter.
And now we can plan ourselves both for the past quarter for the last quarter as well as for the quarter that comes ahead. I'll turn the floor to Roberto and then we'll be available for your questions. This is Roberto. Good morning. And I will start with some highlights on Page 5.
We have grown 34% on top of 30% growth last year. So in fact, our highest growth last year. And we sold BRL 4,600,000,000 at the same level of the 2nd quarter where we had the world's profit. It was really an outstanding sales performance. Same store sales, 16% in brick and mortar stores and new stores had a contribution of 8 percentage points in this growth, very positive since the beginning.
Marketplace and e commerce has grown 55%, also reaching highest level, 36% of our total sales and has grown 55% on top of 65% as compared to last year. Marketplace also has grown, reaching an annual sales of BRL 1,000,000,000 in September. Our gross profit was down a little, basically details of higher share of e commerce that increased 5 percentage points when we compare last year to this year, but we diluted operating expenses at 0.5 percentage point considering the investment of 1 percentage point in operating expenses. So the dilution could have been 1.5 percentage points, but it was 0.5 percent considering all investments Mr. Pergan talked about.
We grew EBITDA in 11%, net income in 29%. Operating cash generation and ROIC also very high. In the next page, we have the performance of our number of stores. We have 83 stores that were opened in the last 12 months. We have investments that we have already started for more dozens of stores that will be opened in this quarter.
Our CapEx has increased a lot. It has more than doubled in the Q3 when you compare it to last year, reaching BRL 234,000,000 more or less of that, 50% in new stores and remodeling and the remaining in IT and logistics. And that's our strategy. On the next page, we have our quarterly sales performance, our e commerce performance, sales growth. IBGE disclosed that our segment has shrunk and we did have growth in the quarter.
So we gained a lot of share in the different channels. In the next page, we have margin performances. For expenses, you can see that we have diluted administrative expenses that are essentially fixed expenses for the company's management office, DPs, and we have not diluted sales expenses by the investments and service level, new customers and so on. And the equity income, the profitability of lease of credit decreased a little bit. We'll talk more about that, but also because of the growth effect and the IFRS nine.
On the next page, our performance for EBITDA. Once again, we have grown our EBITDA because of sales growth, profitability of e commerce, dilution of expenses, even considering all investments and customers. And the financial results on Page 10, we can see that we continue diluting a lot our financial expenses. We were able to reduce those in 1 percentage point, not considering prepayment of receivables. We have financial revenues and we also show here the cash generation starting on working capital.
And I highlight here, we continue having an average term of inventory return that's very high, the purchasing period of 90 days and also 70 days foretelling. So that's very healthy. And something that we already said in the Q2, we increased inventory a little bit. We anticipated purchases taking advantage the prices that had no effect of the FX increase or appreciation. So anticipated some of the purchases of the Q3 to the Q2 since we have 90 days to pay, we anticipated those purchases.
And so we have more payments in the Q3. So we should have less payments to be made in the Q4. The working capital is seasonal, but this effect has decreased a little bit the cash generation for the Q3, but that will favor the cash generation for the Q4. And even considering these anticipated purchases and all the increase in investments in fixed assets and everything else, we were able to maintain our net cash position at BRL 1,300,000,000 considering BRL 700,000,000 of cash and BRL 1,200,000,000 of receivables. So I believe that we still have a strong capital structure and a cash generation, and I return that as well.
On Page 11, we have the capital structure. We have reduced BRL 1,000,000,000 in debt in the last 12 months. We increased our cash, a variation of BRL 1,300,000,000 in the last 12 months. We have the net income margin of 3.3 percent in the quarter, even with all the investments on customers and on our OICF 31%. And then on Page 12, we talk more about Visa Credit.
We are still investing on Visa card, increasing our card base. We reached almost 4,000,000 credit cards in September, growing at an annualized base of almost 1,000,000 cards. We should grow around 1,000,000 cards. This year, we are selling, as Fred mentioned, 150,000 cards a month. And it's important to say that 95% of our base is active.
And that means that they are either buying or they have a balance to be paid. They are receiving the balance. And 65% do use the credit card every month in average and 7 times a month in average. So in fact, this is the main card for most of our customers. And this is very important for the bottom chart that shows the credit card sales increased inside ML and 54%, also improving the growth of brick and mortar stores.
And with the highlights for e commerce, let's start it and having the use of that share, the use of the credit card in the e commerce, it's lower, but it's growing. So the revenue of Ulythe credit went over BRL 5,000,000,000 in the quarter, a portfolio of BRL7 1,000,000,000 with all the conservative approach that Itau Unibanco has. And in the next page, we show that NPL90 went from 8 0.3% to 7.4%, one of the lowest levels. And the NPL for 15 to 90 days also is at the lowest level for the 3rd quarter at 2.8%. So we have been able to grow a lot with a very healthy portfolio, a very conservative approach and levels of provisions that are also conservative.
We show here the coverage ratio at 189%. With EIFRS 9. We have strengthened our provisions. The impact in the short term was on the results. If you show the results in BRGAAP, you see that this is still growing.
It's over BRL 115,000,000 over the year. And as Fred also mentioned, the trend, the potential of the Luisa card as well as the profitability of this portfolio in the mid and long run is very good, and it makes all sense both for retail as well as for Amrita Credit to have this strategy. These were the main highlights. So now we would like to open the floor for the Q and A session. Our first question is from Luis Felipe Buenas, BTG Pactual.
Good morning, everyone. I think the investments made in platforms and the purchasing experience are very clear. But on the side of the seller, how can we expect the performance of fulfillment initiatives for the next quarter? And the second question, can you share with us out of these new customers, the active customers, what is the percentage that is going straight to the marketplace? Good morning, Luis.
Thank you for your question. As I said, in terms of fulfillment and the use of our logistics for sellers, we started the pilot project with 10 sellers with very positive results. Now we are in the rollout process. We have a version 1.0, which is the one that we use 30 party contracts for sellers, and we have an advanced version when we use our own network. We are already running tests with Wagbi that now is considered our own network because we acquired it.
So we are still on a pilot stage. We intend to roll it out, to start the rollout in this Q4 and to accelerate it over next year. But I will not provide you guidance in that sense. We are being very careful to do that. We have to do it very consistently and to maintain that positive consumer experience.
What I can tell you is that we'll be doing it very fast. But this year, logistics were concentrated on express delivery. And next year, we will also concentrate on taking in the volume of third parties. So we are confident that we will be able to bring that, which is one of the main differentials of 1P and bring that to 3P. We are still not even providing this major differential and considering that basic model where the sellers are taking care of logistics, even then, we are having significant results regarding sales curve.
I think the growth curve of the marketplace is even higher than operations with public figures. This is an exponential growth showing that marketplace is a greenfield. We have a lot of market to be used. Penetration is still less than 5%. So I believe that e commerce is an area that can be explored by everyone.
We have room for people to come in and the growth there in the marketplace shows that we have room to grow in Brazil. About new customers, that's around I think Roberto can tell it. This is Eduardo, Luis. Let me tell you about the impact of Let me tell you about the impact of Marketplace on the customer base of e commerce. We have 2 main impacts.
1, impact in the entry of new customers. 1, when we look at the participation of marketplace 13%, when you talk about the number of customers much more because the ticket of the marketplace is lower. And in fact, that contributes to the entry of new customers, but it also has a significant contribution for the increase of purchasing frequency. If you compare those that bought an item from marketplace for those that didn't, that level is higher. And if you compare that to an active base, you see that you're not losing customers.
I'm not going to the details of figures. I should tell you that this is a significant impact, more than sales in itself. Our next question is from Robert Ford, Bank of America Merrill Lynch. Congratulations on your results. People seem to think that the pressure on the margin on the quarter is over.
How would you address that? Bob, can you please repeat your question? I did not understand very well there is a connection problem. Of course, people seem to think that the margin pressure on the quarter means that, that story is over. How would you respond to that?
Well, Bob, I think this is only the beginning. If you were an optical operation, and we are a digital company with brick and mortar stores, we have to be totally focused and indicators for our digital operations. If we consider Amazon operators, Google indicators, Alibaba indicators, all of them are interactions indicators, growth indicators, indicators for active customer base. They are not totally focused in maximizing percentages. So if you want to be a digital operation, you have to play as all digital operations play.
We make a decision this year. For a few years, we have started a digital operation. And to help that game, we have to talk about exponential growth, not linear growth. To grow exponentially, and you cannot grow exponentially any platform in the world in the ramp up. No platform in the world can grow with a margin percentage.
We are very clear since the beginning of the year about that, and we have shown that we can grow, but significantly above the market with a trade off that much lower in terms of margin more than what we have seen in online operations in Brazil. So I should emphasize that if there is a vehicle that can replicate the online growth in Brazil with some level and in our high level of return on invested capital, 30%. And this company is Magazine de Luiza, but we chose to be a digital company, not a traditional company. And to be a digital company, we have to have exponential growth, both at the base and interaction with customers as well as service level and loyalty from these customers. So the operation is just beginning.
And also same store, sales were extraordinary. How do you explain that growth? And what do you think about same store sales growth over time? Thank you for your second question. And I will turn now for Fabricio, our officers for operations, to talk about brick and mortar stores.
But a quick remark. In our strategy, brick and mortar stores have a crucial component for the experience. The multichannel customer is better than the single channel customers. So we are opening new brick and mortar stores. We are renovating them.
And we also some stores we are renovating the whole stores. But we have been investing a lot and implementing technologies that turn the experience of the consumer in the brick and mortar stores much better than in other stores in the market that you can buy in 2 minutes. Now we are also developing the digital credit cards. We have a new credit card in Magadine Luisa that takes only 2 to 3 minutes rather than 25 to 30 minutes that we had in the prior model. Today, you do that through mobile sales with a seller or a salesperson in the store, all of that in the store environment using the tech process in the store.
And also we have our team, the work of the team, the motivation, our commercial team is working a lot. We have the stores well supplied. We're working on the very basics of supply and retail, very well done. Because we do have a digital operation, we are also stressing reinforcing our traditional basis. Therefore, performance.
We are gaining a lot of share in brick and mortar stores. And I'll turn to Fabrizio for more details on some categories in which we are going. Good morning, Bob. Thank you for your questions. This is Fabrizio.
As Fred mentioned, I think the same store sales are growing also because of digital operations. Our service level and stores are very good. We take advantage of all these investments. The customers also benefited. Management of categories also is going very well, not only this year, we operate well.
All the categories in this quarter now, for instance, the white line and furniture this year are higher than the store growth. Mobile phones are growing again. TVs did not take a strong hit after the World Cup. We have other categories such as IT, imported and games that are going above market rates. So the focus on the categories, as Fred mentioned, and the promotional assertiveness is really making the difference and is growing our base, not only the credit, which is also driving force for our business.
It's a whole set of actions. Thank you very much. Thank you, Al. Our next question is from Joseph Giordano, JPMorgan. Good morning, everyone.
Thank you for answering my questions. I want to talk about the growth of Luisa Card, which is amazing, but in a way it is replacing the payment slip, especially on the online with your relevant growth. I would like to understand how much of this Visa card today already represents something in the online world? I would like to understand if you want to really work with this loyal customer of Magalu or if we are still having irrelevant growth in new customers that were not traditional customers of Magadine Luis. And second, I want to understand that fulfillment initiative.
I would want to know if this is an exclusive process that is fulfillment is only done in the marketplace to Magadine Luisa sales? And how integrated those logistics will be with sellers if they will have the inventory in their own DC? How is this model? The store will work as they drop off location? How can we consider that?
And how is this going to work from now on? Well, thank you for your question. I'll turn to Beto for the first question on the card and then I'll talk about Jose. About Luisa Card, so far, most part of the growth comes from brick and mortar stores, also new cards. That is happening in the brick and mortar stores.
We reported that we increased the IPP, the share of Luisa Card and the sale of Luisa Luisa card in 7 percentage points when we compare the Q3 of 2018 to the Q3 of 2017. And just the card itself, we have more or less 50% of share of leased credit card and brick and mortar stores. The card is over 40% of those 50%. And then direct credit to consumers is 50% of sales in brick and mortar stores. Of those that share in brick and mortar stores and credit card with credit cards and the Internet, it was 4% and this year is already at 6%, turning to 7% 8%.
And this is in a constant growth month by month. And we do have a lot to do. We are working hard. A lot of things will be available in the e commerce very soon. Improving customer experience with customized offers for preapproved customers with experience, promotions, discounts.
So they will be able to purchase right there and then with a discount, with no interest, with a series of benefits for the e commerce customers. Well, this card is started for our brick and mortar stores. We are adapting that for the e commerce customer. We believe that we do have a potential to increase the share of the card in the e commerce. And we are also considering developing a new card focusing on the e commerce customer specifically.
So there are several opportunities to get that bente. And the e commerce, we expect to have the same success for with the card that we have on the stores. Okay, Joseph. Now Joseph, what I would like to say is that once again, one of the assumptions of our marketplace strategy is that everything that we do for 1P, we'll be doing for 3P everything, all functionalities of store pickup, all of that we are working on. We see the store is a shoppable distribution center.
We are adapting all the stores. We are adding all the stores. We have already renovated 44 stores up to September. We'll be renovating 100 up to the end of the year, and we roll it out for the new stores. All the new stores are being opened with this new capacity, 30% of the area for storing and inventory handling.
And all of that will be available to sellers. That is to buy on the website and pick up at the store will work for 1P and 3P and the stores in the future. We also the collection points that is the seller will be able to deliver a product in a store, then it will be directed to the VCs so that it can be sent to another store or even to the home of the final consumer. So in our almost 900 stores now, we are seeing those as distribution centers that sell and they will be in full operation for marketplace. That is our long term view.
Obviously, we have the rolling out process, which we are executing very carefully. This is a goal. This is an objective also of our logistics and tech team, our operation back office, legal. Everyone is working to turn that into something where we already have the go ahead of our legal department to be able to operate through 3rd parties because that also requires an approval. So we are working at full speed, and we will not give you guidance of the rollout.
But as every other rollout that we have made, we do have a great capacity to accelerate and grow once implemented the view. And we what I always have advocated about the omni vision for our retail LNP, it will be just as strong and powerful for 3P and will give us a competitive advantage for pure marketplace operations. If it is not the most competitive advantage, the point that we will have, it will be a great one. Perfect. Thank you very much.
More question, if I may. And you involve the seller and you involve the customer and we already see a digitization for consumer credit. I would like to understand the company Understand you have a lot of services for sellers, but now we start to extend credit for the sellers and probably bringing these two sides together in a payment term and in a payment, I mean, well, of course, now we are in the first stage of Magalupe Pagamento, a prepayment of receivables. There are no risks for the company here. And at the same time, this is very important for sellers because the need of credit is there in receivables.
And in our new process, it's frictionless for the seller and also it has a better rate than the average of the market because we have also as an assumption for the marketplace that as the better option for the seller, we will not tie the seller with logistics or with payment. We will be the best option for them. For me, the seller is our client. So we are in a market here with 2 clients. We have the final consumer.
We have the seller. I see the seller as a client. Our mission here is to provide the best option to the seller. I don't want to tie the seller to me, But I want these sellers to make sure that the best operation to work with is Margazone de Luiza, one of the digital companies in the world that I like the most are the ones that have an open mindset in China, in the U. S.
It's not to limit the sellers' options on the contrary. And in short period, what I can tell you is that we are doing the rollout of Magalopagamento through payments that are at full speed. We will be accelerating that very soon. Most of the sellers will be operating there, but we will not make anyone to work with that. So it's up to them.
We will not tell them not to work with the competitor. We want to provide them the best option, and that's how we are working. That's our strategy. That's Louisa way to do. Perfect.
Thank you very much. Next question from Thiago Macruz, Itau BBA. Hello. Thank you very much for answering my question. It has to do with the investments that you have made in customers.
You did have a positive reaction in all your KPIs. You mentioned 4 points, logistics, credit card, customer service. And I want to understand the growth in them, considering that also part of this investment will be diluted in the next quarter, We are not receiving this investment. We're not breaking the account. This information is not open in the release, and it's not published by the company.
But I can tell you that the most part of this investment is in logistics, especially in quick delivery, expert delivery because we believe that the differential that is most competitive in the market is the investment in UDC, the investment in capacity, investment in automation and log being increasing log being and supply frequency, all investments in converting the stores and shoppable distribution centers. So logistics has been benefited from these investments, Vasyl and his team, because in fact, that's what where we believe that the structural bottleneck of Brazil is higher. The market average operations are difficult. So I would say that our main investments are guided to better logistics, express delivery, better level of return, better experience in the store pickup. We are already working with inventory in the stores for a store pickup.
So we are focusing very much in these logistics investments that really require investments. So it's not as much in marketing, which is an investment in which you would spend 1 year and next year you have to spend again in marketing. For logistics, you develop the raw, then you increase frequency. We start at a lower capacity and also at a lower density. And while you provide the customer lower delivery time, you have to increase the delivery time and you decrease the idle time of our drivers.
So now we are promising a due date. And when we have a growth in orders, all of that is optimized. And so in terms for the next quarter, we'll be maintaining focus on these investments. We will not give you guidance on percentages. But I can tell you that this operation is going to focus on growth of absolute numbers and less than margin percentage.
This is what's guiding the company, a high growth, accelerated growth, less percentage in margin because in fact, the better digital operations in the world are guided by the same KPIs. We will be disciplined on that. Without losing sight, in our case, the discipline on return on invested capital. So lower margin, but absolute growth in sales and margin math and results. Okay?
Thank you very much for your answers. Next question is from Maria Paulo Cantujo, BD Investment. Good morning, everyone. Thank you very much for answering my question. But still following this prior question, how these levels of investments will be for the next year?
Next year, we already have a pressure on gross margin because of the end of late demand, a lot of good. So what do you foresee for next year? Also, I would like to talk more about exponential growth, and that's what you're focusing on from now on. And in my opinion, the marketplace would be very important there. So I want to understand how do you see the criteria to bring sellers into marketplace?
Will you be able to reach this exponential growth even being strict? Or when you have a complete platform of services, we will be able to bring down the bar so that you can bring more sellers to your platform. Thank you. Good morning. Thank you very much for your questions.
About guidance, we will not provide anything. I will continue emphasizing that the company's focus will be the growth of customer base interaction with customer service level for customers, also with the discipline of cash generation and return to shareholders, less right. Because of all the channels that's where we have more exponential potential to grow, because we have their investments in other areas. So this is really a market that it has a platform dynamics. And then everywhere in the world, it tends to represent larger growth.
And we are growing that on an established investment base logistics, as I mentioned, that we'll be sharing there. It has better dynamics of ROIC, both for 1P as well as 3P, and I think this will be maintained, this possibility of growing, generating value to shareholders in a very clear fashion. Once again, even with all the selective process that we have to take in new sellers, last month, we had a record of 400 new sellers. We have a lot to improve in our process. This is just a 2 year old platform.
We have reached in the quarter and the year already $2,000,000,000 with less than 2 years in the operations in the platform. We have a lot of process to improve the onboarding, the sellers' approval, which can be improved. We are able to reduce the period of time to introduce a new seller. We believe that there are a lot of people that are not in the market yet and they will be more mature operations. You're talking about 16,000 new sellers, 35,000,000 and millions of tax ID numbers here in Brazil that could be selling because so we have a huge market to grow.
And our ambition about having sellers and the platform is huge. But those sellers have to be formal. They have to follow all legal and ethical issues in Brazil, and they have to provide the same service level that we provide to our customers. We are not going to grow if we have to lose service level. Once again, the indicators for customer levels was just as high as sellers growth and also growth for active users.
So we have no shortcuts here. We'll be growing at a very high bar for service level. And obviously, sometimes the seller does not provide a good service level because they don't have a good logistics to provide that. But if they can use ours, they can benefit from us. But I will not tie the seller to my logistics process.
I will give these sellers the option to choose because we believe that platform company has to be an open company. So if I have addressed your question, that's it. Thank you, Fred. So for next year, we will continue investing in service level as you did in 2018. Yes, we'll continue investing in service level and the impact of that in the P and L will depend on the level of growth and sales that we will have.
So we will not give any specific guidance for profitability percentage, but customers are not 1 year investment. We will maintain that focus because once again, we do believe that companies, digital companies, and that's how we see ourselves today, a digital platform with a brick and mortar store, these companies have to evaluated using those criteria and increase of the client base interactions, investments and cash generation as well. We'll be focusing on maintaining cash generation, but with less focus on margin percentage, which is how the traditional retail market works. And a digital company cannot be assessed as a conservative or average retail company. Our next question is from Mr.
Richard Cathcart from Bradesco. Good morning. I have two questions. First one is about Log B. I want to understand your opinion about the end of the tax break for next year.
And second question, analyzing the growth of e commerce and marketplace and also retail companies that has low penetration e commerce. We know this is a category that is difficult to operate. How are you preparing the company and the company's logistics to see the potential of this category in the future? Thank you. Hello, Richard.
Thank you very much for your question. Actually, good afternoon, Ray. About your first question, what is it again? Okay. The Le Dovin, the lot of good.
It's very difficult to understand what's going to happen because this is going to change for the whole market. Everyone that has benefited from this tax break now is going to transfer this new tax cost to prices. Historically, what I see is that usually the market ends up transferring that because if you look at the results of market operations, I don't think anyone can let go margin right now. So from what I see in the competitors and in the market and everyone that has published results, I believe that everyone will need margin. No one will be able to let go margin.
Therefore, I believe that we'll see these taxes being transferred almost totally. But we have no guarantees there. So again, conservatively, I think that the transfer will not be of 100%, especially in the Q1 of next year. This will be a stabilizing quarter. We that's where we have our main concerns in our budgets.
We probably are contemplating a non full transfer prices. I think in the first half of the year, we'll have a normal situation. But once again, I have no crystal ball. I don't know what's going to happen, how the market is going to react. We will have to be following the situation up and closely.
And as much as possible, we will be working on that in our calls and public interactions. So the market will be making it very clear how we are going to deal with that. But what I want to say is that no one today is able to take in our margin is above the market average, is much higher. We were very one of the very few profitable operations, both in the on and the offline. In the online, I think we are the only one.
So I don't see anyone with that capacity of taking in that margin drop. But we never understand the market and each competitor has a different strategy. So I cannot anticipate anything about the Le Domingo law of goods. Now on fashion, it's a factor that has low penetration in Brazil, but it has great potential. It has great representation And other countries in the world, in China, 20% is one of the main sales channel.
I think this has a huge potential. And we want to be an operation of co categories. We want to operate in all categories. We want to have developed competencies such as we have already developed for consumer goods products. And so this is an operation to be full commerce, full categories.
Therefore, we'll be preparing ourselves to go into different categories. And they are very important if we consider that increased consumption frequency. They increased our indicators for frequency customers. And Log B was an acquisition that allowed the company to do the last mile for the lowest added value product because LogD was very good at higher item, but or higher ticket volume. So it provided that type of category.
It is specific in the story, but it's nothing that we have not faced before with other challenges. Thank you very much, Fred. Next question from Franco Abelardo from Morgan Stanley. Hello. Good afternoon.
Congratulations on the results. Two questions. The first is about the gross margin. I want to understand the drop in the margin. This was because of mix?
Or did you have an investment of gross margin per channel in brick and mortar stores and your online? And my second question, should we see a positive contribution from Marketplace in the gross margin? Or if you had it, does it help to offset the drop of the gross margin that you have seen on the quarter? This is the first question. The second one is about working capital.
We have seen lower inventory levels as well as in payment terms. Roberto mentioned that there was purchase prepayment in the Q3. And should we see this working capital going back to regular rates in the 4th year or Q4, I'm sorry, or we should see any different movement ahead? Thank you for your About the gross margin, the main factor here for the quarter, obviously, is the exponential growth of e commerce growing on top of a high basis already. And we always say that the gross margin of e Commerce is lower, and it is more than offset by a lower expense.
And in this case, we did not see the stable EBITDA margin because in fact, we had investments, especially in logistics. And as I mentioned in the quarter, but e commerce, when it gains market share in the company, it reduces the gross margin of the company, but it offsets it with lower expenses, providing us a stable EBITDA. Since we invested in all these factors that we mentioned, new DCs, higher purchasing frequency, we had also a reduction in our EBITDA margin. But obviously, this was as planned, maintaining a high level of return on invested capital. We also had a little bit of transfer of the FX rate.
We then you have the impact of the 15 days of July for the oral cup. But within the categories, the margins are well behaved. I think the main impact is the e commerce mix. At this time, it was not as much offset by expenses dilution because we had investments in consumers, which is part of our strategy. Good afternoon, Franco.
About the working capital, it's like I explained, The inventory in the last 12 months has increased around 35%. And if they had gone at the same page, we had a difference of BRL 200,000,000 that the supplier of the country be higher. And why it's not because these BRL 200,000,000 we purchased in July and paid in September. If we had purchased in July August, we will be paying in October or November. Therefore, what should be happening now is that we have the right level of inventory, 7 days of turnover, that the average e commerce is even better than that.
We are very much prepared for the increase of sales in the Q4, and the average purchasing time is right, is of around 90 days. What happened specifically is that we anticipated purchases from Q3 to Q2. And so payments went from the Q3 to the Q3 more or less BRL 200,000,000. So what you will see in the Q4 is that in theory, in average in this quarter, since we have 90 day term, our balance of suppliers of what we had in September, since it is lower because we already paid for that, the cash generation of this quarter should be $200,000,000 higher than it would be in the cash generation for the Q4, which is already good usually. And this is going to be better because of this anticipation and for the end of the year.
And we do not foresee any changes. We will have the same inventory turnover and the average purchasing time that we had estimated. And this is really a one time off thing because of the dollar rate in the middle of the year. We took advantage of that. It was a onetime off situation in that quarter.
In the year, that will not change. And the focus on the working capital and also on the cash managing, management is still there, as Fred has mentioned. It has not changed. Okay. Very clear.
Roberto, if I may, a follow-up on the gross margin. When the marketplace gains a share of total sales, should we see an improvement in this gross margin or not? Maybe because of this a lot good and the e commerce and 1P growing faster, we should see more pressure on the gross margin from now on. Franco, yes, I forgot to mention that. Once again, a laid ban, a lot of good is we don't know.
We don't know how the market will behave. Let's consider that if the market transfers 100% of the tax to prices, in theory, we would not have a margin pressure. And I'm sure that the ramp up of the marketplace should improve the gross margin of the company, especially for e commerce. When the e commerce gains share in the company as a whole, it tends to help the total margin to drop less. But obviously, next year, we'll see other factors.
We have a gross margin, which is a mix of e commerce with the brick and mortar stores, that's 1. And the level of the transfer that the market will be doing because of this large good, all of that will have to be part of the equation. If we consider the variables and consider the marketplace specifically, we operate marketplace in a very profitable fashion. This is a positive business. We are not holding takeaway promotions.
Since we have always operated with OneP, the marketplace is a rational operation. We have trade offs that make sense for the long term cash generation for the company, not otherwise. So this is already added to our gross margin. If it were not the marketplace, our gross margin would not be as good. And as it gained share in the e commerce and in the company as a whole, the trend is that we should have a better result.
And but I once again should say that we cannot forecast what will happen with this loss of goods. Thank you very much. Next question from Tobias Stingon from Citibank. Good afternoon, Fred and Roberto. I know you had several questions, especially about the margin.
Well, first, congratulations on the results. I think the strategy is right, the focus on growth. Now my question is, what is the fair growth? But in order for us to understand, Fred, how can we think about it considering that you are capitalized, you could improve your growth. So how are you going to drive that cash generation, breakeven cash generation?
I'm trying to bring in the conditions so that we can better understand this trade off of vis a vis growth vis a vis profitability. Forgetting the margin, I'm thinking really about the growth here. Well, to be it's very difficult to address your question without providing guidance. So I'll have to be very cautious, and I will try to be more qualitative here in order to give you a general overview. So about this overview, once again, I want to make it clear.
And since the beginning of this year, we saw that we were adopting strategy of growing above the basis with, at the same time, an increase of the service level and the growth not only focused in GMV, but also driven to the increase of our active customers because we were from 2010 to 2014, we did not grow our active customers. We had 10 to 11 active customers those years. So we understood that in order to be a digital operation that was significant, we had significantly increased our base of customers, not only GMV active customer base, we had to increase interactions with these customers a number of times. We have a relationship with them both financially as well as a number of users, MAU and so on. All investments we have made were made analyzing the customer lifetime value.
We invest it heavily. We worked with a consulting service in the Q1. We identified the investments that will give us more return in the long term. So this is a customer lifetime value. We saw that credit card, the customers that have the credit card, that have the app and other segments that I'm not mentioning here, these are segments and profiles of customers that can in the long term to be more profitable customers for the company.
They tend to have a buyback profile that is better. We accelerated investments in these customers. So I'm sure that over the year, the results of the company will explain these investments and will maintain a high return on invested capital because if we compare what we are investing to what the market invests, we have a higher return and we have additional sales to what has been invested. The CapEx and everything else today, we have a machine that is producing a growth at a cost of investment that is much lower than what we see in the market. So this is the way we are going.
But guidance in terms of margin percentage and all these impacts, we cannot provide you. I can tell you that we do believe that in Brazil, you cannot choose you cannot say so what we will not accept at all, a higher indebtedness level return on invested capital, that is not something out of the rationale. We do not accept operating at a loss. So the company has always focused on a very rational growth. And so now we are considering the long term, not only in the short term, that's how the best operations in the world work.
Okay. Thank you very much. Next question is from Rodrigo from Goldman Sachs. Good afternoon, everyone. Thank you for answering my question.
About brick and mortar stores, I see that you have very good returns in terms of technology. But in terms of new stores, I see that you had less productivity gains. So does it make sense to have much to receive from the stores that are for the stores that are opening from now on? And also, if you have more cars in these stores? And my second question is about customer service.
When you had another quarter with results, still consider the impact of the IFRS 9. So we see here a change in a more normal level in the results. When will we be able to see that next year? And when do you see that maturation of this new batch of credit cards? Thank you.
Thank you for your question, Rodrigo De Teixe Saabrescia. About new stores inside PS. The first thing that happened to new stores this year that are not performing very well is that the strategy was right. We were very good in the execution. So we identified the market, who was going in, investment in stores, occupation and so on.
We went very well in different markets. We went in markets offering digital operations, very good service level. We opened 2 DTs to cater to these markets, promotions, new products that is the strength of the brand. But in fact, these stores performed above our expectations, but they do have a maturation time. I'm sure that next year, they will have a better performance than this year.
So we do have a great opportunity to grow in these stores because we are into 2 new markets, Maranhao and Goias. We are starting our market share in these two areas that is lower than what we have in mature markets. So considering that we have a great growth opportunity, and I believe that we'll be maturing with 2 or 3 years of these stores. And also, we are having good sales on these stores as part of the strategy. Good afternoon, Rodrigo.
About credit cards, all card portfolio, when you grow a lot, in the beginning, usually, you have some problems, you suffer a little bit, both because of sales costs, because they are relevant and the number of cards is also relevant. And also now because of the IFRS nine, you have to make provisions and sometimes the customer is not using the full credit limit of this credit card. And that's why our older customers are more profitable. So we have a portfolio that is new. This year, we have more customer on the base.
That's why they are less profitable. But once again, in terms customer lifetime valuable, it is very profitable. And we are adding a lot of new clients, maintaining delinquency at very healthy levels. And Itau, as you know, is very conservative in this approval rate. The approval rate is very strict.
It's less than 10% actually. So we expect that well, this year was a year where we accelerated growth. We are selling 150,000 cards a month, much more than past year, which was around $80,000,000 $70,000 a month. So we doubled the expansion here. So the issuance costs are here affecting the results in the IFRS nine and the BR GAAP.
And also the new provision criteria for the limits and the trend for the results is to have a convergence and also to improve in the mid term and in the long term with the maturation of the portfolio. And we will continue investing and increasing a lot this base of cards because of the strategy we already talked about. This new credit card can have to benefit the retail and Louisa credit, but it makes all sense in terms of return on invested capital in the long term. So investments, I'm sure, are profitable. Thank you very much.
We now end the Q and A session. I would like to turn the floor back to Mr. Georgiano for his final remarks. Please Mr. Georgiano, the floor is yours.
I would like to thank you all for participating on this call. Thank you also to the team and to our partners that helped us have a positive quarter in spite of all uncertainties of the market. Thank you very much. The conference call of Magadine Luisa has ended. Thank you very much for your participation and have a nice day.