Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Magazen el Uribe's Afterwards, we will have a question and answer session and further instructions for you to participate will be given. Now we would like to turn the floor over to Mr. Federico Trajan, CEO of Magazeni Ruiza. Mr.
Taliman, you may proceed. Good morning, everyone, and thank you for participating in our call. Together with the Investor Relations team and part of our Executive Committee, we will be available to answer any questions that you might have. And I would like to start my presentation saying that 2017 was a very special year for Magazine Luisa, 60 years of age. And with our main character, which are the capacity to change, to reinvent ourselves and to and the only motto that we have is nothing changes, but our changing every time.
So we opened our first store and then Internet, our website in 1990, the first direct sales model with over 200 people in 2011. Wiza Labs created a new area of technology development in 2011, and we continue to implement many innovations over the last few years in digital evolution where traditional companies relevant, companies all of a sudden become irrelevant overnight. And this characteristic that we have in our company of not fearing change and embracing change in innovation has never been as relevant as it is today. And thanks to this and our investments in technology, innovation and our culture, focus on people, our people and our clients as well. We were able to overcome the 3 worst years in the history of Brazil.
And with the results of the last quarter, it was the best ever result in the history of Magazine de Luiza. And then afterwards, Roberto Benissimo will talk in detail about our figures. But I would like to highlight a few things about our results, starting with the growth of sales. E commerce growing 60%, including for the first time ever, marketplace 60% over a comparison basis. That was very tough already, which was the last quarter of 2016 because we had already grown 42% and also our physical stores 20% growth, being 15% same store sales and also very strong basis or 7% in the last quarter of 2016 on this basis.
So fantastic growth on a very tough basis. So we are very happy with this figure specifically. I usually say that there are 2 ways of growing in your business and those are valid. The first one is to grow a lot very strongly to the detriment of your margins and a lot of investment in market. That is the same detriment of cash flow.
And the second one is with growing with the superior service level based on sustainability. And Magalu has always chosen the second option, growing with a very good service level on a sustainable model. And we are achieving something very, very, which is grow very quickly and at the same time delivering profits. And we're doing this not increasing our prices. In fact, we are reducing our prices, our gross margin for the year and for the quarter dropped exactly last year And also investment in free freight also increased also 50% of what we sell online has a free shipping, that is to say no shipping fees.
So we are able to increase our operating margin because of the major operating leverage that we have stemming from our model of multi channel and we have been placing our bets on this model for over 17 years and the multichannel model gives us a lot of leverage. The more we grow, the more our fixed expenses are diluted. And because of that, in our economic model, we are able to offset the lower gross margin with a very strong dilution of our SG and A. And this is the 8th quarter that we dilute these expenses on a row. And we improve our value proposal for our clients and at the same time, we deliver profits.
And more than that, there is one thing that I consider very important and no digital revolution is going to change. It is Cushing. The company has we generated BRL 1,000,000,000 in cash, over BRL 1,000,000,000, and the company that don't do that will not survive. And together with over BRL 1,000,000,000 of cash injection that we had with the capital increase that we had in September last year, we closed the year with a very sound position of net cash, and Roberto will be talking in detail about that, and which gives us a lot of muffins, so to say, in order to accelerate our investments without any risks for our long term business. We usually think, well, we want to grow, but we of course, we don't want to risk our sustainability in the long run.
So our cash position today gives us a lot of comfort in order to make investments and not to the detriment of our future. And I would also like to mention that although the short term result was very good, what makes me even more optimistic is that even with this result, we planted many seeds and that we are going to reap the fruit in the future. And there were many seeds that we planted. Evolution of Marketplaces, one of them, from BRL 3,000,000 in 2016 to BRL 120,000,000 in the Q4 of 2017, reaching almost 10% of GMV of the website in less than 1 year and following a very important assumption that we highlighted in the letter to shareholders, we are extremely selective in terms of our sellers to our platform. We refuse over 30% of the ones that submit their request and we also disconnect some others that really didn't deliver up to our standards.
So we can do this in a scalable manner and we will have a lot of it in the future and we will keep a high growth rate for the next few years. I would like to mention specifically in terms of the outlook for the next year, you have to remember that our comparison basis will be very tough, very high and the biggest competitor of Magazine Luiza in 2018 will be Magazine Luiza of 2017. So it's a very tough competition because we delivered quite a lot of results during the whole year, but we maintain our optimism mainly because of the recovery of the economy. So we will have tailwind and also the World Cup. Whenever there is a World Cup, we have results in the previous quarters regarding growth in sales online and offline.
So I keep our optimism, although we have a very tough comparison basis. And I would like to reinforce this message. We will have 2 major focuses in 2018, accelerated growth in the active days of our clients, and this is a major focus. We want to have a bigger penetration in clients that buy both online and offline, and this is a major focus for growth. It will be on the active client base that we have.
And the second focus it's even more relevant, a significant increase in satisfaction in NPS and reduction in the delivery deadlines and improvement in our after sales process. Many initiatives will be taken here at the company and we will be making significant investments this year in order to improve and to reach the best rates of consumer satisfaction in Brazil. And I'm not talking about one indicator, but many, both regarding our investments in cash and in energy and in efforts being made by everybody in Magazine Elite. And lastly, I would like to make a special thanks to all our employees that had an extraordinary performance in 2017 when we celebrated 60 years of age, and we also conquered the award of the best retail company to work for. So thank you very much.
And now Roberto Bellissimo will talk about our figures. Good morning, everyone. Thank you for participating in our call. I would like to start on Slide number 4 talking about our results. Once again, we grew 31%, including here Marketplace, and it was the highest growth rate in the last 5 years.
And the market grew about 8% according to IBGE. So it was highest gain, market share gain. And our physical stores same store 15% growth and the contribution of new stores, 5 points in our growth, 60 stores that we opened over last year, a very good performance from these stores. Growth of e commerce as well, with a very tough comparison basis online, overall 3% and we gained 60%. So it was an extremely high gain in gross profit.
The growth of e commerce was very high, gross margin, but helping operating expenses dilution, such as was the case during the whole year, we diluted expenses to one of the lowest levels ever in our history at G and A, 21%, which is one of the lowest in retail overall. EBITDA growing 38% in the 4th quarter, margin 8% to 8.6% increase, a record margin for us in the 4th quarter since our IPO. We reduced our financial expenses as well, and we increased our net income to 160% in the 4th quarter, margin of 4.6%, our highest net margin. Cash generation was very strong, BRL 1,000,000,000 in the year with a very important contribution in working capital. We improved it by BRL 300,000,000 in the year and we also had the improvement in our capital structure BRL 1,800,000,000, the BRL 1,100,000,000 from the follow on and BRL 700,000,000 from cash generation from the company's operations over the last 12 months.
On the next slide, a little bit about our year. Almost BRL15 billion, growing 28%, much higher than the market overall. Our EBITDA BRL 1,000,000,000 for the first time ever. Net income BRL389,000,000, growing 3.5 times. Cash position and receivables BRL 2,500,000,000.
We reduced our indebtedness, our gross indebtedness as well, practically BRL 800,000,000. So we closed the year with a net cash position of BRL 1,700,000,000 of this capital structure since our IPO. Here we have the evolution of our stores, 28 stores opened in the last quarter. It's very fast paced in the opening of stores. We inaugurated in the year over 20 virtual stores.
We inaugurated over 20 stores in the Northeast over the year. And the stores, as we said, have been helping us grow and also dilute our SG and A in investments. We increased our investments by almost 40% already last year. And the highlight here is the investment in new stores, BRL39 million to open 60 stores, which is an average of BRL650,000 per store, which shows the company's capital discipline in terms of good for very good locations and not expensive locations. And we also increased our investments in technology mainly.
And together with logistics should represent most of the investments by the company in the future. On the next slide, we show the evolution of our sales. As you can see that the growth rate was increasingly higher, accelerating the base total growth, e commerce growing very strongly. On the next slide, you can see the trend regarding our gross margin, SG and A and it's clear it's very clear that our gross margin in the quarter went from 29.6% to 29.2%. So we look forward.
SG and A dropped 1 percentage point at the same time, which means that we gained 0.6 percentage point in the EBITDA margin. Equity income, very consistent over the whole year. And the highlight here is the result from Luisa Krej and Luisa Segg in the last quarter. Both grew quite extensively and giving a very good contribution to our total EBITDA. On the next slide, you can see our EBITDA on a quarterly basis going from a level of EUR 700,000,000 in 2016 to EUR 1,000,000,000 in 2017.
Margin going up every single quarter, growing 44% in the year, mainly due to the extent dilution, as we mentioned. So we were able to dilute our expenses with payroll with also our rental expenses. So our rental account grew very little over the year in fact. And in spite of these additional 60 stores and many other fixed expenses as well were diluted over the year. Talking about our financial results, we show here on the slide dropping from 4.5% to 1.6% of the net revenue, almost 3 percentage points drop in our financial expenses.
And net of the prepayment of receivables, we had a positive net revenue already. So expenses were basically only prepayment of receivables that dropped in the quarter as well. But the account as a whole or this line reflected the drop in the CDI, but mainly our improvement in our capital structure, cash generation and our offering. In our working capital account, we improved again working capital as a whole for the year, BRL 300,000,000. And mentioning that we improved inventory turnover, which is even better when the gain from capital working capital comes from the inventory turnover and not from the average term.
And as our inventories are totally integrated as e commerce grows, we tend to further dilute or further improve our inventory turnover such as has been the case in the last few years. And when we look at our adjusted cash flow, we went from a debt of BRL 136,000,000 to a positive BRL 1,700,000,000 net cash. And on the next slide, we show how we go to the cash results, starting with the cash flow from operations of BRL 1,000,000,000, CapEx BRL 170,000,000 debt payment BRL 944,000,000 and as we said during the last call, we prepaid a lot of our debt in the last quarter reducing our gross indebtedness. We paid interest and we issued stock EUR 2,500,000,000. And when we look at the capital structure, we see that we went from EUR 1,800,000,000 debt to EUR 800,000,000 further reducing our interest expenses from now on.
On Page 18, you can see the evolution of net income on a quarterly basis. Every quarter, we have been growing. And in the last quarter, 3 percentage points increase in our margin, 1 from 1.6% to 4.6% of the net revenue. And for the year, going from 1% to 3%, very high growth as well. And lastly, talking about Visa Credit, also a very good growth in the quarter and in the year.
You can see that the total billings grew by 29% of LizaCred and the participation of LizaCred in our sales is at the highest level ever. And the LuisaCards in our stores grew 52% in the quarter. And our loan portfolio of Luisa Credit also grew reaching BRL 5,700,000,000 and the total card base also grew 3,400,000 clients. And also we had a significant reduction in the delinquency rate in the year, NPL 2 point NPL 90% decrease. And if we go back 1 year, last year, we had already reduced 3 points.
So the last couple of years, we were able to reduce by 5 points NPL 2019 growing sales and increasing our portfolio and increasing the profitability of LizaCare as well. On the next slide, we show the quarterly net income with a credit. All the quarters this year were better than last year, mainly due to the improvement in the delinquency levels and the reduction in the funding costs reaching the last quarter, A ROE of over 20%, 23% in fact. So these were the main financial highlights. And now we would like to open for questions from you.
Thank you. Ladies and gentlemen, we will start now the question and answer session. Our first question comes from Vicente, BTDJ Paktowal. Good morning, everyone. Thank you for the question.
My question has to do with fulfillment. You said, Fred, that the focus of the company was well, we have been seeing this over the years, the focus on service level and the improvement, the shopping experience for the consumer. So how do you see the evolution of the fulfillment platform in marketplace, not only for 2018, but also the next few years? Thank you very much for your question. Good morning.
The focus for 2017 in fulfillment was very much on our 1P. So we have many initiatives being carried out, among them the improvement in the shopping experience for the Click and Collect mode and the increase in volumes as well, so with a significant increase in volume. And the delivery terms of Click and Collect, most of the deliveries were made in less than 48 hours and some even in 24 hours. And this will continue to be our focus. And another important point is migration of delivery networks, that is to say the carriers, the big ones going to the Luiza network, carrier network, and we were able to get over 80% penetration of the Luiza network regarding carriers, small carriers last year.
And when this company when this operation becomes very smooth, then when we said during our message to our shareholders, then we have to start to pilot, so to say, the availability of this model to the sellers. So we started on the basic level, that is to say, dependent in the market. But afterwards, we will be giving you some figures about that. And now we want to include mainly this network and the stores in the process for this year. We will have some pilots with some sellers.
And as we see that this experience is okay, then they're going to roll it out. Our focus will always be quality. So we will have pilots this year with some sellers and probably roll this out over 2019. So our focus will continue to be on quality, on our platform, a good shopping experience for our clients, and we are not rushing anything. And our main focus for the marketplace is not even GP, it's an additional take rate or an additional take rate.
Our main focus of our delivery platform available to consumers is to guarantee the level of service to our customers at the same level that we have in 1P. So one of the assumptions is to have the 3P service level equal to the 1P service level. This is a big challenge and we believe that this is the only way to do it. This is Eduardo. In the last quarter, We have about 10% of our seller base already participating in this product and they have been able to reduce the cost and at about 15% to 20%, both the delivery terms and the cost.
Thank you very much. Just a follow-up regarding this Eduardo. You talked about penetration of Magalu delivery. Do you have any data that you could share about conversion or recurrence of purchases and delivered via Mazalu delivery visavis those who are delivered by other logistic platforms? Well, not in relation to the frequency.
What I can say is that the main conversion rate is the cost or the shipping cost and the delivery term as these sellers have been seeing that their conversion has been improving, this is all we can say for the time being. Thank you. Robert Lust, Bank of America. Thank you. Good morning.
Congratulations for the excellent quarter. What could we think about margin? Because the competition will probably copy your structure, will emulate your structure. Thank you, Bob. Thank you for your remarks and for your questions.
So our focus here in the company is not guided by competition, and this is something that we also expressed in our letter to our shareholders. Our guideline is our strategy and mainly our clients. So as I said at the end of my initial remarks, we will be focusing this year on 2 things: the increase in our active flight base, we will be making intelligent investments to increase our base with calculation, the SLV and looking at the long term value investments both in marketing and other investments in order to acquire more clients and marketplace has been helping us a lot. I told you that we grew 60% our GMV last quarter in e commerce. And if we look at the items sold, almost 90% in items sold to market base makes us sell with a higher ticket and with a higher active base client base.
So this is very relevant in this context. And the second focus that we will have and that will require investments as well is the improvement in our service level. And this could sound as a platitude maybe, but this is a true fact. We are placing very high targets, both for the stores NPS and website and the delivery terms and this will involve investments by the company in the frequency of deliveries and the increase in the overall cargo and general investments by the company. And looking ahead, it will have some impact, maybe not on cash margin, but on percentage margin.
So we cannot give you a guidance for margin, of course, but we will be making our model more and more efficient in terms of improving service level. And I say this with the same consistency that I have been repeating since 2,001. We have never weighed profitability to grow significantly. We do this with a lot of consistency. And when we started e commerce in 2000, we have ever since that, we have repeated this to you.
And this year, we will have some kind of investment being made. And this potential gain that we would have will come from investments in both in active clients and to improve the level of service as we do not give guidance. So I cannot quantify this to you. Thank you, Fred. And what about your conversion into sellable centers, distribution centers.
Well, we have just started to do this in some stores. We will be starting in March and we will start the pilot now. We have a high number of stores that we intend to convert into this model, about 100 stores that we intend to convert to the model that you mentioned, but very carefully to see whether this is going well or not, if the number should be kept lower or higher. And not to mention the new stores that will be opened already in the new format. And from the viewpoint of impact, it should be positive that the medium and the long run.
Today, some stores are already having structural problems because of the amount of products in the store pickup model. So in the back office structure sometimes it was is not prepared for that, for instance, in the Black Friday. So other categories as well. And we will have sellers delivering to the stores as well. So we have to prepare all that for this gigantic number of store pickup that we have.
We have a separate NPS for the store pickup model. But so far, things are going very well, but we have to anticipate that if you look at companies abroad, you will see that some have 40%, 50% of the total that is sold in the store pickup model. This is a possible number. So we have to prepare our stores to deliver very good level of service for our consumers and also having a very good structure for our team. So of course, I'm worried about the team that does that.
I have to give them all the equipment, all the infrastructure, everything that is necessary so that they can really deliver and give our clients the best experience. You have many software engineers involved in market integration and stores and everything. Could you talk about how you hire and how you retain good engineers? Well, Andre will be answering your question. This is Becca Thala.
Regarding our development team. Since last year, we have integrated Luisa Labs and they are in charge of the whole IT part of the company. We organize, we organize the way we divided the teams and decide to achieve the profile in order to have more and more developers, in order to cater to the demand that we have in development. And now in 2018, we are working in the expansion of the teams. We're going from 41 to 48, and we will be focusing on the expansion of the team that we will be working in marketplace.
And also in the support of this change or digitalization of the stores and transforming them into sellable dishes and about retention. We have been doing quite a lot of work in Luisa Labs and the culture is very strong. And last year, we had over 400 people and only less than 10 left. So our focus was on being developers and the international companies and building this culture in which these people are contributing to face these challenges that we face. And our engineers want to stay here and they want to build national technology.
They don't want to go abroad. Just to give an idea, Bob, we mentioned this number in our letter. About 30% of our whole payroll is in Luisa Lab. So the proportion of Luisa Lab visavis the total team, administrative team, I'm not considering the store personnel or the DC operators. I'm talking about the administrative people.
And you can see that the company is becoming a tech company in fact. Thank you very much and congratulations again. Joseph Giordano, JPMorgan. Good morning, everyone. I would like to ask about the investments to be made in fulfillment.
And when you look at your marketplace today, what would be a feature that is still lacking and that should be your focus? And what do you see as the major challenge in order to make this platform soar or take off? And we saw digitalization of the company. And I would like to know if you have any projects, something that will help your seller in the focus of marketplace this year, I'm going to split it into 2 large groups. The first one is what we call findability.
So many SKUs being put inside the platform from 40,000 items to over 1,000,000 SKUs. And the change that you have in the whole tree of the company and the search algorithms is brutal. It's a very significant change. And the process of finding a product both for the consumer and for our team in order to have this structure, it becomes more and more complex, of course. So working with this complexity and simplify it because we do not want to waste simplicity in our shopping process and the ease of finding a product.
So it requires a huge effort on the part of the business people, we do others people, and Ushi and Fatale, the IT and all the algorithms in order to make things work and so that the shopping experience at the website continues to be simple and straightforward and also finding the best offering. If the offer of the seller is better than it has to be shown as a priority in the search. So I would say that the main endeavor from the view point of the consumer is this one. From the seller viewpoint, we have already acquired Integra and the integration of the team, everything that has been done already. So we have already improved the onboard process of the seller.
So we integrated many platforms and re tax and trade and the ease for the seller to upload the catalog. And then Magalu is already very good in spite of all the steps and all the filters that we have because we are much more demanding in terms of documentation than most of the market that are not as concerned as we are vis a vis the onboard process. But I see that we still have room for improvement in the process in terms of integration and also some difficulties with some platform that is integrated. And the NPS for the client and the seller because at first we are concerned the seller is also a client. So we have to give a very good service.
We have to be very agile and respond very quickly. And if we have any cancellations, we have to solve it very quickly. And we talk a lot about Matalu deliveries, but there are some basic things in our daily routine that we have to improve. And we have very high targets and very specific targets for that. Would you like to add something, the cycled up market?
One point that is important is the consumer model or the consumer service level that we have to deliver. And I think we still have to innovate there and not follow the same model of client service. And this is a big investment that we will be making our platform to improve that in 3P in terms of scale. As Fred said, main challenges to scale and we launched a new onboard process at the end of the year, a platform that will further accelerate all this process. It has many steps, but this will ultimately reduce the inclusion of a new seller or the time for the inclusion of new seller and also increase the participation of marketplace in all the channels of the company.
So besides everything that Fred said about the challenges in the platform, we launched the sale of these products in our physical stores, 17 already, and we are closing the cycle because you have to sell and then the after sale, so it's a cycle. We already have 30 sellers there and in the small universe, we are projecting this. So without wanting to make this happen everywhere, but anyway, we see a major opportunity in this regard. We launched the Magazine Youssef as well. Some sellers are already selling there and there is a commission paid on each sale.
So we have to capture all the selling channels that we have to our sellers with quality. About Fintech? Good morning and thank you for your question. We are developing a new platform, which is called Magalu Paganienti or Magalu Payments. And we will start the pilot momentarily and this will allow the seller to discount their receivables in a very easy manner, in a digital manner with highly competitive rates and the service of prepayment of receivables today.
We're not doing it. The seller can do this differently. So it will be a new source of services and revenue for the marketplace as a whole and that we will be launching in the short run And in the medium and the long run, this platform will evolve towards a digital portfolio where we will be able to deposit the ceremony in his own account linked to Magasin de Luiza and not directly in his account. And then we can have some other gains such as the float and also financial services, etcetera. And the second step will be the creation of this digital portfolio.
And the third step, a little bit more in the long run, will be to extend credit to the seller besides the receivables, that is to say finance their working capital and their investments. And this should be done when we already have a longer history in about these transactions and sellers and very possibly with a partner from the financial sector. So this is our goal. Thank you very much. Thiago Macruz from ITAU.
Good afternoon, everybody. In the last Magazine, Melunrizette, you mentioned that you will be starting free shipping for the clients that would use your app. And what drew our attention at the time was the following. A source of upside that we should be seeing in the 4th quarter? Or if this is a source of upside that we should be seeing in the next few quarters?
Hi, Thiago. Thank you for the question. This is Frederico. About the express delivery, This is only in the app. So in the app, we already give free shipping.
So it had more to do with the 4 to 8 hour delivery than the free delivery. So we are still testing in the cities as we mentioned during the magazine deliveries a day. We have a good participation already, but it's too early to extrapolate it for the future. In the last quarter, it didn't really represent a lot. More the other initiatives were more representative.
But we wanted to deliver this service and in express delivery. And if you buy through the app, you know that we do not charge shipping for more cities and more categories all over Brazil. It's too early to say because we only have 10 cities included in this program, and it's too early to extrapolate those figures. But we are certain that we will have a killer offer there for the future. Thank you.
The next question comes from Guilherme Assis, Brazil Purao. Good morning, everyone. Thank you for the question. I think it's very clear that the major highlight here was the growth of e commerce and marketplace and all of the initiatives that you have been putting in place and your operating leverage. Now shifting the focus a little bit, could you talk about your initiatives and your plans for the brick and mortar stores, talk about the digital transformation in the brick and mortar stores and what is still lacking?
And what kind of gains do you believe you will have in your physical stores operations? Could you have additional efficiency gains in 2018? And could you talk about the opening of new stores? You opened 60 stores, if I'm not mistaken, in 2017. And the objective, is it to keep the same pace for 2018 and for the foreseeable future?
Thank you. This is Fabrice Guillemi. Good morning About digital transformation, 93% of our sales are this way And we mentioned this in the letter to shareholders. We have to facilitate this and increase digitalization of credit, improving the shopping experience. And we have already digitalized part of our back office team, and we will end this by the end of this year, transforming the store in a mini DC.
And Roberto mentioned that selling marketplace in the stores will also help us improve frequency and offering more categories. So these are the initiatives that we have to do with your question, then that will bring us additional benefits. And besides, for this year, we do intend to continue to gain share in our categories. We gain share in all categories and in terms of white line and TV and smartphones, we gained more than 1 percentage point market share. And this year, we will have the World Cup, which makes us very bullish.
We will have a very high volume of smart TV, so we will have a very good availability of products and also good promotions. And we improved this management of the management of this area, being very successful. So we believe that we will be growing a lot this year as well and expanding the number of stores. I cannot tell you exactly the number of stores. We should be opening more stores than last year.
That's all I can see about the number of stores. Thank you very much, Fabrice. Now we close our question and answer session, and we would like to give the floor back to Mr. Federico Translarna for his closing remarks. Once again, thank you very much for participating in our call.
And I would like to congratulate all our team for the excellent results delivered in 2017. And I reiterate our commitment to maintain efforts to make traditional retail into digital and into a platform with physical presence as well and human warmth. Thank you very much. Magazine and Luisa's conference call is closed. We thank you for participating and wish you a very good afternoon.