Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Magazin Iluis' conference call to discuss the results of the Q1 of 2017. At this time, all participants are connected in listen only mode. Afterwards, we will have a question and answer session when further instructions will be given for you to participate. Now we would like to turn the floor to Mr.
Federico Trasenu, CEO of Magazenu Luiza. Mr. Trasenu, you may proceed. Good morning, everyone, and thank you for participating in our call. I have all the committee with me of Marazin Luis in order to talk about the figures of the Q1.
And going straight to that, we delivered figures during the Q1, but higher than the market expectations and even higher than our own expectations, very positive figures in almost all
the fronts. Putting things into context, we found a less unfavorable scenario than in 2016.
I don't mean that we are really having now tailwinds, but at least we're not having headwinds as yet according to last year. We remember there was a significant drop in the same period last year. At the same time, we found a situation in terms of competition that was favorable with the large players, the key players, both online and offline, more rational from the viewpoint of focusing on profitability. And this is a game that we at Magasinha Luna have always played regardless of the economy. So the key players are more rational.
So the scenario is more favorable as far as we are concerned because we have always used the strategy. And the small players with more difficulty in terms of supply of products and credits, credit to byproducts and also credit to finance clients. So giving a scenario of consolidation and ongoing share gain. So in this context, more less than favorable macroeconomically and more favorable microeconomically, we have an aligned team, very motivated, and the digital strategy is very well gauged and well defined. And we were able to deliver favorable results in all the line of our balance sheet in brick and mortar stores and another quarter good performance in e commerce.
We diluted expenses. There was a drop in default, and we sold more financial services. We generated cash that we use in order to reduce indebtedness and put favorable numbers in practically all lines of our balance sheet. And we are very happy with the overall results that we reached in this quarter, which is not common for our Q1. The Q1 usually is difficult seasonally, so it's difficult to have this kind of result in the 1st Q.
And Bobaco will be going into details, and I would like to finish my introduction talking about from now on, our future. We are implementing our digital transformation project at full speed with a lot of focus in the evolution of marketplace, 5 pillars and the platform pillar, which is the marketplace platform that we are emphasizing this year, we had a record of new sellers coming on board in the spirit and especially in April now. We have the highest number of sellers coming on board in one single month, and we already have fruit. We are already reaping fruit from the acquisition of Integra Commerce, the MENA startup. And what helped us a lot was its velocity in terms of integrating new sellers.
And the focus of 2017 will be on expanding our seller base and maturation of
the platform. So we are
not that much focused in GMV this year, but in the introduction of new sellers that have we are already participating in our base. And in the numbers that we published yesterday, we talked a lot about that. And talking about the scenario from now on, we do not expect large changes in competition or in the macro economy for the Q2. We expect the Q2 very similar to the Q1 in all aspects that I had mentioned at the beginning of the call, but we expect the change in the second half. In the second half, there are some questions that we should mention.
We will have a more difficult comparison base than the 1st Q and the first because we had a very good performance in the 3rd and the 4th quarters of last year, and it will be more challenging. And I think competition will be better organized, not in terms of prices or this is not an option for everybody. I think there is no way back. People have to be more rational, both online and offline. But we're talking about more focused and more organized players and a more active competition, so to say.
On the other hand, I expect and we believe that we will have a macroeconomic scenario more favorable. So having more tailwinds and growth in the sector as a whole, also reduction in interest rates and increase in confidence, consumer confidence, and this will be more significant. So it will be linked to the reforms that will be approved in the Q2, but we expect tailwinds. And for a long time, we have not had tailwinds in our sector. So having said that, we wish to continue our focus on execution, implementation of our strategy, our dividend strategy, the motivation of our team, our associates who are fundamental for the success of our operation and mainly enchanting our clients.
So now I would like to give the floor to Roberto and then we will open for questions. Good morning, everyone.
Let's mention first the highlights on Slide number 2, starting with sales. We had an overall growth of 23%,
one of the highest growth rates in the last few years, reaching BRL 3,400,000,000 in the first quarter. On the same store sales concept, we had a growth of 22%, very high 12% increase in our brick and mortar stores. And I believe it was the quarter in which we gained the most market share. The market performance was 2%, and we grew by 23%. And in brick and mortar stores, 12% and the market was stable.
And talking about e commerce, I think it's a big highlight. We grew 56% compared to 8% growth in the market with an extremely high share gain and participation of e commerce and our sales, had a quantum leap from 22% to 28 percent participation in total sales. So it was a very big progress in e commerce. Talking about our gross profit, we grew by 22%. Our gross profit, very high.
Our gross margin dropped 0.5% because of the mix effect. E Commerce grew much more than the brick and mortar stores. However, we were able to preserve our gross margin in both channels.
And talking about expenses, which
is also a major highlight here, we were able to dilute our operating expenses as a whole by 2.3 percentage points. We reduced our SG and A to 22% in the Q1, which is also is below its level in the last few years. And also, as drivers for this reduction in our operating expenses, we had the very strong growth in sales, allowing us to have very good operations in brick and mortar stores and very accelerated growth of e commerce, which has a lower level of expense than the average due to our strategy, which is fully integrated in multichannel. And also the maturation of the project of BBB and GMD. Many initiatives were implemented over the last year, so becoming more mature and contributing as
a whole to the expense control.
EBITDA, 61 percent growth in EBITDA, margin of 8.3%, also our highest EBITDA margin of all times, recurrent. And especially for a Q1, this is not usually a quarter that has the highest margin in the year because of seasonality. So this margin was very high for the Q1. And also, the evolution of our net income from BRL 5,000,000 in the Q1 last year to BRL 59,000,000 in this quarter, with an ROE of 32%. Working capital.
We improved our working capital, BRL381,000,000 in 8 months improvement, and we reduced our adjusted net debt as well. And as a consequence, with the growth of the EBITDA very high as well, we decreased our leverage to 0.5x EBITDA to one of the lowest levels of leverage since our IPO, for example. And lastly, Riza Creggi had an excellent performance, income net income growing by over 55% and return of Luisa Credit going back to a very high level, 28%, and also a very strong reduction in the NPLs, growing our sales, growing our portfolio at the same time, which is very good for the business as a whole. On the next few slides, on this next slide about operating performance, we show you the evolution in the number of stores in the last 12 months. We opened 18 stores for already this quarter according to the plan that we have in place and that we have already talked about in the previous quarter of intensifying the pace of opening new stores.
And our investments went up because of that, over 50% in new stores and also in technology, together with our digital transformation plan. Average age of the stores, most of the stores are already mature, which is very good as far as profitability is concerned. But the Northeast, for mature region, continues to grow very strongly, and this was a highlight for us in terms of growth as well. On the next slide, we show the quarterly performance of the gross revenue. It is the 5th consecutive quarter of growth in sales, and the pace is accelerating highest growth rate in the last 5 quarters and with almost the same level as the last quarter last year, which includes Black Friday and Christmas, EUR 600,000,000 more than the Q1 of last year, which is an incredible increase in this quarter.
Internet selling even more in the last quarter of last year with a 56% growth based on a growth of last year that had already been very high, around 27%, 28%. So a very good sales performance with market share gain, a very high one. And on the next slide, we show the performance of gross profit and gross margin. I have already talked about growth and the factors that explain the variation in our gross margin. I would like to mention here expenses as a whole grew by 12% compared to 24% growth in net revenue, So a very good operational leveraging and a very big dilution of more than 2 percentage points.
And practically, in all areas, we were able to hold our SG and A, G and A growing very little, e commerce helping a lot in this regard, ZBB, the expense matrix management and many other projects having to do with our strategy of digital transformation that have been bringing more efficiency and more automation also at the brick and mortar stores and thereby gaining productivity. Equity income, we a very interesting increase here and equity income as a whole was 0.2 percentage points better than last year. On the next slide, we show you the performance of our EBITDA on a quarterly basis, the highest EBITDA in the
last 5 quarters.
And due to the fact that we have already mentioned, growth in sales, a positive contribution to our e commerce. We have always said that there is a positive contribution from e commerce to our result and dilution of operating expenses, improvement in our partnerships financial partnerships. On the next slide, our financial results. We also diluted our expenses, both prepayment of receivables and other financial expenses, 0.4 percentage points. And reminding you that interest rates started to drop now, so the benefit from this drop should be seen over the next few quarters.
And I would like to mention that the cost of capital has already started to drop. We had just approved an issuance paying 109% of the CDI for 1 year, 112% for 2 years and at the level of spread, much lower this year than it was in
the last couple of years. So with that, we have a good expectation in terms
of diluting our financial expenses. And on the lower part, we show you the performance of our working capital.
We started to report adjusted
net of receivables that are really cash. So the best way to look at the working capital is this one. And according to this concept, we improved EUR 380,000,000 in 12 months in our working capital in practically all accounts. So we improved the turnover of our inventories, and it was 66 days, which is very good for 1 Q1. Growth of e commerce has been helping us a lot in the sense And another benefit coming from multichannel, so all our inventories are integrated and the turnover of inventory in e commerce, of course, is faster.
So it has been helping us in terms of improving our turnover. At the same time, we were able to increase the average term in a very healthy manner and sustainable manner without increasing the COGS. And also, we reduced our account regarding taxes and other accounts, both assets and liability accounts that are sustainable. So we generated BRL380,000,000 in cash coming from working capital. And with that, plus the result from the operation, over BRL 400,000,000 reduction in our net debt and leverage of 1.6x to 0.5x EBITDA.
So one of the lowest leverages of our history on the next page, net income on a quarterly basis. In the Q1, it was highest quarterly net income since the IPO, even higher than the Q4 of last year with an ROE, a very interesting one, around 32% and a net margin of 2%. On the next page, we talk about RizaCred, a major highlight as well. Total sales of Luisa Cred, 22%, total billings. Inside Magazine, it grew by 45% and the
participation of the Visa card in the sales of
our brick and mortar stores reached the highest ever level, 30% this month, Together with about 10% of direct consumer credit, we are able to finance about 40% of our clients.
And we were able to grow the billings of Magazine Visa card, at the
same time reducing all the delinquency indicators, highlighting NPL over 90 days, dropping 3.6 percentage points. And at the same time, we increased our coverage ratio and we reinforced our provisions and the coverage ratio from 1 121% to 132%. So you can see that the Luisa Caregi result was very complete, growing billings, growing portfolio, reducing the level of provisions by over 20%. Already feeling the first result of the cost of funding reduction and one
of the highest quarterly profits
growing 50% with a return of almost 30% as well. And lastly, we repeat our expectations for 2017, which are continue to capture the gains from the digital transformation projects, developing consistently our marketplace platform, continue to gain market share sustainably, focus on managing expenses, SG and A as a whole and working capital, generating cash, a very important target for us besides intensifying the opening of new stores and also benefiting from the reduction in interest rates in Brazil. So with that, I would like to give the floor back to Federico. Thank you very much. Thank you, Roberto.
Now I would like to open for questions. Ladies and gentlemen, we will start the question and answer session. The first question comes from Joao Mamedi from Santander. Good morning, everyone. Fred, Iberto.
I would like to talk about the performance of online sales in Q1. It was more positive for retail. And even taking into account this macro increase, your online performance was spectacular, much higher than anything that might come from the macro side. We know everything you have been doing the last 2 years in terms of digital and all the initiatives. But I would like to know if this quarter, Ferdi, there was something especially contributing to this performance because the comparison base was already very strong.
And on this very strong base, you were able to accelerate vis a vis the Q4 of last year. So maybe you could give us some color about that. And the second question is about something that you said about rationality, more rationality and competition in the Q1. And what draws my attention is the fact that as of last year, beginning of this year, many of your competitors, at least some of the large players, also started to tap into the benefit of that labor base. And this could be a trap because it creates a certain cushion for a more aggressive behavior on the part of some competitor, maybe wanted to gain market share using part of this benefit.
And apparently, based on what you said, this did not happen. I know it's difficult to talk about what competition is thinking, of course, but I would like to know if you have any view about that. What happened to lead these competitors to have a more rational behavior? Thank you, Jean, for the questions. There are 2 parts in your question.
In fact, 2 questions. And the first part, I think Eduardo Galantini, our Executive, our E Commerce Officer, will be able to answer. But overall, about e Commerce specifically, I think it's important to note that e commerce growth, if you look at last year, you will see that in the last quarter, we already had a good performance, about 40% increase, if I'm not mistaken, the last quarter of 2016 and now going to 50%. So the operation is going very well. We
have a very good operation with a very good performance on the
part of our team and a positive result as well. And I think I like to say this because there is a market component there besides our execution. The market is a market in which all the players were losing a very good, a very high number.
We're losing a lot. And when you
get into a crisis, when you have a high interest rate and the market is tough and liquidity is very low, the situation becomes impossible. So what I have been saying for a long time since the IPO during our call is that at some moment in time, the online market would have to become rational because the cash burn could be sustainable at some for some time, but cash burn has to end because shareholders want to have a return. And the online market and the operations that we're losing BRL 100,000,000, BRL 200,000,000, BRL 300000000 of cash burned per year, these operations will have to revise their strategy, and this is what is going on. So you have to pay your bills, you have to pay your suppliers, your expenses, your employees, and you have to generate cash for that. And you cannot count
on the market always in order to raise funds. So this change in online
becoming more rational is even more important and deeper than the off line market. And when I talk about rationality, I'm focusing on the online market that is trying to become more rational, although the model that I see, which is not a multichannel model, it's difficult to get to a rational level. And there is a cost advantage also visavis the online only because the cost of online are divided with the offline and the multichannel model that we have been developing for the last 17 years is operationally superior. So I am able to work and operate with margin levels and profitability levels that the market is not able to. Afterwards, Eduardo will talk about the specifics of this operation.
And then I will come back to answer your second question. This is Eduardo. Good morning. In relation to the growth in sales, it was very well distributed between conversion, ticket, etcetera. And regarding calls or visits, it was because of the mobile of hitch.
It is because of the mobile platform that we have 5.4, an application that has a good conversion. So the migration of traffic to this device is not impacting negatively our conversion. Conversion was also impacted by a reduction in shrinkage and also a decrease in the delivery time and all the efforts that we have been making, distributing the merchandise among RDCs, the impact of the store pickup as well. So overall, the result was driven by many factors, and the calendar was very strong. We had a fantastic sale, fantastic promotion, which is important in the Q1 with a very good result.
March itself was an excellent month with a favorable calendar with no
holidays. And we had a very
strong IT fair and we are very good in IT. We have the 2nd EBIT with a very high market share, over 20% market share in this category. So it's an effort made by the team as a whole of dealing with all the details. And it has our execution has many details, and we are
working on that. So regarding the market as a
whole, more specifically, tax issues, I believe that the market has to become rational. There were many operations in the red, and maybe they benefited from some benefiting some legal
perhaps can they can improve a bit.
I have always said, I have always believed that at some point in
time, this path
towards more rational operations and that really bring return to shareholders is irreversible, and this is what will continue to happen over this year. I do not think this is going to change significantly. I do not expect any big actions price wise from the competition. I think the competition will probably have more structured operations and maybe there will be more liquidity for SMEs. So in this sense, we can expect maybe a fiercer competition, but nothing more aggressive in terms of reducing their margins.
I think nobody is going to play this game because this is very dangerous at this point in time. And I believe that even for the future, besides being dangerous, it's not good from the viewpoint of generating value to shareholders. One last point, very quickly, working capital. Beto, you made some remarks about the dynamics and how growth changes the dynamics of working capital because of the fast growth of Internet. But can you quantify this improvement that you are achieving?
Because at the same time, the growth of the company demands more working capital. So could you give us an idea of how much came from this changing channel? Because e commerce will become more and more important. So how much more help will you have from e commerce in your working capital dynamics?
Thank you, Joao. Well, let me give you my view.
We have negative working capital receivables ex receivables. We have more suppliers in our inventory, and we are able to grow by generating cash. Regarding our receivables, well, this is seen as almost cash, and we improved even this account. But let's focus on the explanation about inventory. We improved by 7 days the inventory turnover, 73 to 66 days.
We improved the inventory turnover in both channels. So inventory turnover of e commerce improved a lot, and it was already lower than the brick and mortar stores. It's important to say that in the brick and mortar stores, we also improved our inventory turnover, and we grew again. And so it becomes much easier to improve inventory turnover when sales are growing as well. Last year, we didn't have growth in our brick and mortar stores.
And you have the sample inventory that is almost
a fixed cost. You cannot dilute that. And
when we started growing by 2 digits in our brick and mortar stores and improving inventory turnover of these samples in the brick and mortar stores, e commerce also improved and the turnover was lower than the average. So all the factors were positive drivers. I cannot quantify that how much came from e commerce and how much came from conventional stores, but the 2 channels improved a lot their inventory turnover with a positive effect of the mix, which is the higher participation of e commerce. And as you said, well, this is a trend. As e commerce grows structurally more than the brick and mortar stores, we have the opportunity to continue progressing in turnover of inventories.
And on
the supply side, we have joint purchases.
So if we have the opportunity to improve that, that will be good. But we already have a very healthy condition there. So we tend to increase this gap as e commerce grows and helps in the working capital dynamics as a whole. However, it's already positive. Our working capital our net working capital is already negative.
And marketplace also helps even more in the same direction. So we are very comfortable with our trend for working capital from now on. Very clear. Thank you very much, Beto. Richard Catcarp, Bradesco.
Good morning, everyone. I would like to
ask a question about online and offline
Do you have a higher conversion rate? Do you have current clients working buying more frequently? I would like to know about this growth in sales on both channels. Richard, good morning. Thank you for your question.
As Eduardo said, just to elaborate on what he said, it was everything. We grew average ticket. We grew conversion. We grew sales to new clients In order to reach the 56%, you have to have a good performance in all fronts. And highlighting mobile, we invested very much in the mobile platform.
So we made a high investment in our app. We have over 5,000,000 downloads of our app. It's one of the most frequently downloaded apps in Brazil and one of the leaders undoubtedly or maybe the leader in U. P. So it's by itself significant.
So the right execution and the right decisions, all that generated this result. And I would like to remind you, it's very important that the e commerce dynamics in the long run is positive. So I'm not surprised with the growth of e commerce because this is a trend, the participation of e commerce in the Brazilian retail is still 3%, 4%. If you see the figure of MercadoLibre in Brazil, it's about 60% growth. So if the operations are well organized with good teams, very well trained teams with a lot of focus on sales and on growth.
If you have all that, then you will have a good performance. It's not just the Magazine Luisa. It's a long term trend. There is no way back about the increase of e commerce and the total sales of the company. Thank you.
Another question. What about the performance of the Tercea Lodge? We have 100% of stores the participation of the store pickup, it has been growing a lot. And it's a major difference of Magazine Luisa because the clients that choose picking up their merchandise, they do not pay for freight. And also, the delivery time is better.
And we are working to have 48 hours in many stores, in almost all the stores. And this is our target to have 48 hours for the store pickup. It's not the case yet, but the Greater Sao Paulo area is already working with this time frame as of April, if I'm not mistaken. So it tends to increase participation and give an additional contribution for the advantages of the website. When you compete with other chains that don't have this and that are online only, we will have a very big tramp in our hands
a tramp in our hands, which is
the delivery and the cost of the cost of delivery and the time frame for delivery. So in over 17 states, we have really an invincible value proposition in this regard. Thank you. Excellent. Luis Felipe Gonais, BTG Pactual.
Good morning, everyone. My question has to do
with the growth of marketplace. In the release, you said that the assortment of the marketplace platform is 98 percent complementary to the B2C and Magazine, and this has to do with an exponential growth in the number of SKUs for the company. I would like to understand, Fred Eduardo, how you see the evolution of assortment between B2C and marketplace over the next few years as Marketplace grows and if you think about leaving some categories in B2C in order to favor some specific sellers in the marketplace platform. Thank you for the question. The focus today, well, mainly in the core categories, we do not intend to lead them because we have a very comfortable position in which we are making money with UP, with the categories that we buy and sell.
So we are having a good profitability from these categories differently from some players that have losses in this category and that have to accelerate marketplace in order to offset that. And we have a very profitable operation in these categories. So we are among the 2 or 3 and sometimes the biggest buyers from vendors. So for a commodity category that would be it's very difficult for somebody to beat us. Maybe some special line of products and inventory balance maybe.
But in most items and in most sales, this will continue or we will continue to be one of the most important. And this is the view and the focus that we have. It's just to supplement our categories. We already have suppliers selling directly, Electrolux and Versitib and others will sell directly as well. So we are at multilaser and many vendors are many sellers are selling directly.
And the focus is on supplementary categories where the turnover is not so fast. We are not going to exit categories. We are probably leaving some SKUs that sell not so much and the turnover is slow or maybe the profitability is lower. But this is not a significant change such as the one that we have been seeing some players in the market. Thank you, Fred.
Hello, Fred and Roberto. Thank you for the question. You talked about sales, and I think this is quite clear and your competitive advantage as well. There is a remark in the last slide in which you see a potential for growing stores as well. Is there any specific region with a higher potential for market share?
You opened 18 stores in the last 12 months, if I'm not mistaken. And I would like to know if this is a pace of expansion that could continue or with the rebound of the economy, you could accelerate your expansion? And one second question.
Among the highlights of your results, you have
the good cost control with all the initiatives that you have been putting in place and also the dilution of SG and A with the growth in your revenue, with the digital transformation, with all the initiatives, mobile cash, etcetera, could you have a higher productivity gain, reduction in headcount in stores or efficiency increase of efficiency in sales for store employees? Vladimir, thank you very much. In fact, we have resumed the opening of stores. We are opening well, we opened Quevelo, Sechilagoas now yesterday, today. So we already have some many locations already contracted, and we intend to open new stores over the year.
And the stores, the brick and mortar stores are very important. I would like to remind you that our strategy has
to do with digital, however, having the brick
and mortar stores because this is very important for our online proposal. In the pickup store pickup, we can have much better conditions, Very competitive vis a vis the market to increasing our base of brick and mortar stores, it makes all the sense in the world because it gives a positive contribution and also because it's a very important competitive difference of our model visavis the online only players. So we want to continue our pace of expansion. They are relatively small stores visavis the competitors, and we have a good moment in the market in which you do not pay key money and you get very good cost per square meter. So we are very well disciplined in terms of opening locations that can stay open for 20 years, very lean stores, small stores, because a lot of what we sell does not have to be there physically in the store because it's sold on the mobile phone, because with the automation of the store, which is one of the pillars of our store of our strategy, we can gain a lot of productivity.
I don't need a lot of space because my inventory is in the cellular phone. I do not need a huge team because the salesperson received the money in his mobile POS. So I don't need a lot of people. 40% of our store people are in the back office. And looking ahead, we want to transform this back office in generators of revenue for the company and sellers selling people.
And we reduced the SG and A of our stores, And we still have a lot of opportunity to reduce by means of automation and by means of mobile sales. And it helped January, for instance, was excellent for the company. And a lot of that was because of our sale, big sale or promotion, which was very good also because as we had all our stores with mobile sales, you can close the sale in 2 minutes. Without the mobile sale, it's 40 minutes. So they gained a lot of productivity in peak days such as this promotion where you have 100 and 100 of people coming to the stores.
And we were able to grow our sales with a staff that was the same as last year. We grew sales with the same number of people, the same headcount. And automation in the stores is fundamental to reduce expenses. And when we invest in store automation, there are 2 focuses: improve the shopping experience and reduce the cost of the store. We want to have the store with a cost very similar to e commerce, so that it may be competitive.
And I believe that structurally speaking, the best way to do this is by having investment in all these projects that we have been carrying out to automate the POS and many others as well that we are implementing now. 2 things. In the first answer, you talked about the synergy in your model. Does it mean that you're going to open more virtual stores as well or not? Or do you believe it will continue more in the brick and mortar stores vis a vis the virtual regarding dilution and your strategy?
Is it possible to quantify this?
You talked about having store productivity similar to the virtual stores. What is the
difference today? Can you quantify that? And how much can you achieve
more? [SPEAKER UNIDENTIFIED COMPANY
REPRESENTATIVE:] Answering your first question, yes, we intend to open more virtual stores vis a vis conventional stores this year. So this is a strategy of the company increasing this proportion. However, we will continue to on both. Today, we are inaugurating a conventional store, and we have many virtual stores already programmed and scheduled and that were already opened in the
last few months. But the proportion between conventional and virtual because this is very similar
to what we believe it will be the store of future. It's very high. So the answer is yes. So the second point, Guilherme, we don't really disclose this. We can even talk about this after the call.
But this is not something that we disclose. I cannot say anything that could be represented or understood as guidance. But overall, it's very difficult because e commerce, the main cost of physical stores is the payroll, 70% of the cost of conventional stores, 60%, 70% of the operating cost of this brick and mortar store is payroll. And so you don't have the situation in the virtual store. So it's very difficult to get to the same cost base and the website, but we have to work on that ceaselessly because retail needs to understand that they have to reduce this gap, bridge this gap between conventional stores and the WAGs.
So I cannot quantify this right now. Thank you. Ruben Coutu, Itau BBA. Good morning, everyone. I have two questions.
Could you talk about the progress of mobile, how much it represents of the total e commerce sales? What comes from the app and what comes from the website via mobile? And is there a very big difference between the average ticket and repeat shopping? And
another topic, could
you talk about your gross margin in this dynamic? Could you talk about the evolution of each one of the channels? Are they relatively stable? The drop has to do with mix because e commerce growing more? Or is there some change happening in each one of the channels separately?
Good morning. This is Eduardo. Traffic is over 50% in the last quarter, 54%. Sales already exceeded 30% of what we call B2C. Most of the sales come from the app, although traffic is not the biggest part.
In sales,
it is the biggest part. And
we are improving our platform of the mobile side and continue to invest in the app and improving the platform of the mobile site. So doing that, we expect the participation to continue growing. Maybe Beto can help me to answer that. This is not a big mystery. E commerce works with a lower margin than the conventional store because the expenses are lower as well.
What happens is that what we have in our results, what happened in the Q1 was the following. There was no change per channel in the margin. So the margin of congressional stores vis
a vis last year was stable. The margin of
e commerce vis a vis last year was stable because the market is more rational. There is no reason to have many changes there. So the general figure changed because e commerce gained share. A slight drop in the overall gross margin was because of the participation of e commerce and not because of the dynamics of each channel. And the counterpart of that is that the EBITDA more than offset this reduction of margin.
So as e commerce is a business that has a lot of operating leverage, when we grow and we increase the participation, SG and A drops because you don't need to contract people to grow e commerce such as you have to do with the conventional stores. It's more productive. It's more asset light, so to say, than the brick and mortar stores. So and marketing as well is much more efficient than the conventional stores. It has a higher return than the conventional store marketing.
So with this scenario, what happens is that we end up having an increase in EBITDA with the growth of e commerce. And this is what we have to look at. The operating cash generation, it tends to contribute to the operating cash generation. Not to mention, and this is something that everybody has
to think about, the ROIC, because e commerce, due to the
fact that it is less applied, it requires less capital, less investments. So we are able to grow a lot. The CapEx level, historically low, much because of that. And looking ahead, we will have to increase CapEx a little bit because we want to continue to open stores because of our multichannel view. We are a multichannel operation.
We do not prefer one channel over the other. So we believe this is a winning model, and it is the best alternative to tap into the growth of e commerce in Brazil. And e commerce depends, in our case, the success depends a lot on the conventional stores. They are they go hand in hand. So they benefit from more items available in some moment, for instance, over this year.
Market based products will be available also to the salespeople in the stores. So 1 plus 1 is 3 and R2, if you add up the channels, it gives a much positive result, much more positive result. It's the old synergy that we're talking about? Thank you for the answers. Maria Paola, Centuzio, BB Investments.
Good morning. Thank you for the results congratulations for the results and thank you
for the questions. Could we talk about
the marketplace? Maybe you could give us some color about the number of sellers that came on board in the last 12 months and how much marketplace already represents of the e commerce sales? And what have you been doing so that the SKUs be really a supplement to your portfolio? Have you been choosing the players that sell different products from the ones you already have? Or you only allow them to sell part of their portfolio in your e commerce?
And also same store sales, how much came from price and how much came from traffic? I don't know if you give this kind of information. Thank you for the questions, Paola. About marketplace, we reached 220,000 SKUs from third parties and we exceeded 100 partners. And in April alone, we signed over 30 partners, 32 to be precise and very good ones such as 5 C, Avon, Primanid, Van, which is going a lot in Brazil and one of the big sellers in Brazil, Konec Parcel, which sells automotive components and Drogario Noffri getting into this segment, Mabera Mabera, which is a category in the furniture area, do Gaglia Sao Paulo, Parcheco, chocolate.
Now in Easter for the first time in the 60 years of history of Magazin de Luiza. And this partnership with Madeli was very good with Alacte Chocolate. So it's going at full steam total focus in the introduction of new sellers and also introduction of new categories. And you can see that they are complementary this year, and we will have competitor products and all kinds of products in our website. But as we had to choose, we had to choose first the categories that really supplement what we have in about 98%.
So we are very enthusiastic about this. And the focus this year is not GMV, and it is really quality. And with the same quality of service that we have and improving the platform. And when with all these SKUs coming in may lead us to have a very user experience, a very good user experience. It's very user friendly.
And we are very much focused on doing this in the best possible way. We have to do this consistently and accelerating it, but not in a hurry, not to the detriment of our service level or and we are very focused on adding new sellers and doing this by maintaining a good shopping experience and such as we have on the website and also very much focused on the product. When we say product, we mean platform, having a very good platform for the seller and for our customers as well. This is our focus. What is your second question?
Same store sales of conventional stores, what came from price yen from traffic? Well, we do not disclose information unfortunately. What I can say is that we grew in 2 aspects, average ticket and traffic. Just one more question about retail. What is being done regarding your pricing policy to gain gross margin that you mentioned in your release?
It was in e commerce, Nana Paola. What we said in the release was that one of the aspects that helped conversion was the improvement in this area, maybe because our competitors were more conservative and our competitors got closer to the price situation that we had. And because of that, we increased our conversion. So vis a cred, the dynamics that we have been seeing, a reduction in your direct consumer credit and personal loans, do you intend to continue to reduce and offsetting this with a partnership with Los Ango? Or have you already reached a level that you consider as very good?
And maybe from now on, you will be able to increase these portfolios? Maria Paola, thank you for the question. This trend is ongoing in Luisa Caregi. The focus of Luisa Caregi is the Luisa card, which is the instrument that brings more loyalty and we bring the better relationship with the clients and better service, etcetera. So most of the actions of Luisa Crede have to do with the Luisa card that is having, by the way, a very good performance.
In direct consumer credit, for 1.5 years, Luisa Credit reduced the approval rate and allowed us to have this partnership with Los Angeles, which is also going very well. And recently, we are piloting, we started a partnership with Santander Consumer Finance in a model similar to
the one that we have with Zosango. So the idea in client financing is
to have this marketplace. We sell Riza credo products, but we can sell products of Los Ango and also Santander and so on and so forth. As with the credit, these portfolios of personal loans and direct consumer credit should not go up. We could grow in these areas with other partners. And Luisa Credit continue to focus on the Luisa Card and growing Cartel Luisa, the Luisa Card.
There is room for growth for Cartel Luisa. The Luisa Card in the conventional stores, e commerce, and we have many opportunities for growth. Also, Magazini, Marcelo is going to add to that. This is Marcelo Figueroa. Thank you for the question.
I would like to clarify one point. Personal loan is a product called Grana Extra, the extra money. This is
a card. It's a personal loan.
The credit card also has a category of personal loans, and we intend to continue expanding it. But you don't see this in the portfolio. You don't see inside it. So it doesn't mean that we have stopped giving personal loans, personal loans that are not linked to the card. We give to old clients, clients that we have had for a
long time. Thank you very much for the answers, and good day.
Now we close the question and answer session. I would like to give the floor back to Mr. Federico Tragena for his closing remarks. Once again, I would like to thank you all for participating in our call, the analysts for the questions and our team for the good performance in the quarter. Have a good day.
Magazine Ulyso's conference call is closed. We thank you for your participation and wish you all a very good day. Thank you.