Good morning. Thank you for waiting. Welcome to Magazine Luiza's conference call to discuss the Q1 2016 results. We would like to inform you that this event is being recorded. All participants will be in listen-only mode during the company's presentation. Afterwards, we will have a question-and-answer session, when further instructions for you to participate will be given. Should you need assistance during the call, please press star zero to reach the operator. The replay of this event will be available soon after it ends for a week. We would like to remind you that forward-looking statements that might be made during this call relate to Magazine Luiza's business perspectives, operating and financial projections and targets, are beliefs and assumptions of the company's management, as well as information currently available. Forward-looking statements are not guarantees of performance.
They involve risks, uncertainties, and assumptions, as they refer to future events. Therefore, they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operating factors may affect the future performance of Magazine Luiza and may lead to results that differ materially from those expressed in these forward-looking statements. In order to open this call, we would like to give the floor to Mr. Frederico Trajano, CEO, who will make the presentation. Mr. Trajano, you may proceed. Good morning, everyone. Thank you for participating in our call. I'm here with all the members of the executive board in order to talk about the results of the Q1 2016.
I would like to start by saying that in spite of all the difficulties due to the difficult political, economic scenario of our country, Magazine Luiza, because of a lot of focus on the part of our team, was able to deliver good results practically in all key indicators in the first quarter. I will start with sales. We were able to have a positive growth in sale in spite of the drop in durables for the market. We don't have the data for March yet. We were able, in spite of this scenario, to gain market in this quarter, thanks to a very detailed work that we did since last year, identifying regional opportunities in regions and for each one of the categories of Magazine Luiza. Of course, an effort made by our commercial people in order to tap into these opportunities. The highlight is e-commerce.
We grew 27.8%. The market was stagnant during this period, according to the data published. The results had already been very great in the last quarter. This shows how right our multi-channel strategy is to transform our company into a digital company. As a final result of the company improved with participation in this gain of e-commerce, we have good results, both at the top line and bottom line of the company. Our e-commerce is the only one that is profitable in the market. We were able to evidence this in the quarter. As I said in the last call that we held about the last quarter of 2015, I said that we were going to gain market share without hindering our profitability. We thought there was a possibility to do that. This is exactly what we delivered.
A gross margin growth of 2.1% vis-à-vis the same period last year. The base of last year, if we look at all the quarters, the best margin was in the first quarter in 2015. We had a reasonably good basis in the first quarter of 2015. In spite of that, we show that we are able to increase sales and gain share without necessarily having a rational pricing policy that happens mainly in the e-commerce companies, but also in brick-and-mortar chains. You don't have to weigh profitability to gain share. In expenses, we were able to reap the fruit that we are still reaping from two major projects that we had with the Gagliardi consultancy, with VDB, NGB.
We made a big effort, especially in all the packages of the company, administrative and also expenses with credit cards and freight, and a whole series of expenses that we are working on. Very much focused on optimizing our processes and our contracts. In spite of an inflation year, like we had last year, that impacts contracts, we had an expense dilution. SG&A dropped 3.2% vis-à-vis last year in nominal terms. Boticário, after two quarters of more difficulties in terms of results, because of some adjustments in products and also credit assignment, we bounced back, and we are balanced for a year like this one. We had a good result of Boticário the first quarter, still lower than the first quarter last year.
The scenario continues to be challenging. We were able to decrease our debt by BRL 191 million this year, vis-à-vis the first quarter of last year. Have a net debt adjusted EBITDA ratio of 1.5x , which is reasonably comfortable to face the turbulences that we might have in the future. To finalize, I would like to give the floor to Roberto Bellissimo and say that our view of the political and economic scenario continues to be the same for the consumer market. We believe that operating in a market that is a market of over BRL 100 billion with less than 10% share, we believe that there is a lot of room for us to consolidate this market. With a balanced management in all retail fundamentals and continuing our successful implementation of digital strategy, we have room to gain share, preserving our profitability.
With that, I end my introduction and give the floor to Roberto Bellissimo. Good morning, everyone. Okay, let's go to our presentation on page two. Our highlights. Frederico has already talked about our group in sales, about 3% to BRL 2.7 billion improvement in relation to the last few quarters. Growth of e-commerce, 22% share, which is a relevant share in the total. Our gross margin got increased by two percentage points. Highlighting here the better sales mix. In this quarter, we showed more smartphones and less of the category that have a lower margin, such as air conditioning, that in January was not so warm, and the sales of air conditioning were not as high as last year. Freight and assembly that we started in April last year, we started to charge for that. We had already told you that.
This is where we were able to increase our margin by charging for assembly and freight, for instance, and so on and so forth. Improvement in the whole sales scenario. Both online and offline, and e-commerce as well, an increase in margin with a more rational price scenario as well. Talking about the EBITDA, we grew to BRL 144 million adjusted EBITDA, 7.2%, one of our best margins. Non-recurring expenses of BRL 19 million. They were just one-off expenses, non-recurrent, and they were basically in January and February only. Net income of BRL 5 million, and adjusted net income of BRL 18 million. Talking about working capital, we had an improvement in our inventory, and it was positive even regarding our gross margin. We were able to increase our suppliers account, so with a positive impact on working capital.
We reduced our net debt practically to BRL 100 million, reducing our net debt, and we increased our cash. Boticário grew inside Boticário stores 5% and outside as well. This shows the quality of our client base and the activation of our clients. On the next page three, we show you the evolution of the number of stores, 27 new stores. More than in the first quarter of 2015. We invested BRL 23 million, lower than the first quarter of 2015. But it was mostly in technology, which is our major focus currently. And 25% of our stores are maturing still. On the next page four, we show the quarterly evolution of gross revenue. It is clear that last year we saw a drop in sales in our quarter, so this was the first quarter of growth in sales, BRL 10.7 billion.
In e-commerce, a higher growth of all the last quarters. 19%, 28% now from over BRL 600 million. Same-store sales growth stable with the growth of e-commerce, and better than we had in the last two quarters as well. On the next page, we show the evolution of gross profit. One important detail here, with the end of the tax benefit, we had a reclassification from last year when we posted ICMS at the line of taxes, and now for comparison effect, this is under operating expenses. The gross margin of last year goes up a bit, and in the same proportion, expenses. Here we show in the gross profit, 30.2% of gross margin. Better than the first quarter last year. More or less in line with the margin that we had around the middle of last year, and growth of gross profit of about 7%.
On the operating expenses side, expenses with selling went down. G&A also dropped. In spite of the growth in sales, we were able to reduce our SG&A. With the increase in the ICMS tax and the end, therefore, of the tax benefit. In the others line here, we have minus non-recurrent expenses. At the end, we saw a dilution of SG&A. Here we show the evolution quarter-on-quarter, also about the equity income. The first quarter was better than the last quarter of last year, recovering the results of Luizacred. On the next page, we show EBITDA net of non-recurrent expenses. You can see an evolution to BRL 163 million in the first quarter this year, reaching 7.2% of EBITDA margin. This explained by gross margin and the reduction of SG&A.
On the lower part, we have the EBITDA performance vis-à-vis last year, 2.1 gross margin, 0.4 in selling expenses, 0.2 in G&A. Equity income slightly lower than last year. Loan loss provision, other expenses. We have on the next page, the financial results. The financial results, a slight increase, but lower than the variation of the CDI in the period. Also impacted a little by the growth in sales as the interest went up with the card anticipation and the other expenses more related to the debt service, they dropped because our net debt is lower than last year. Net debt and our leverage of 1.6, as you can see here. On the lower part, the working capital improving as well. I had already mentioned the suppliers account, but we also improved the receivables account. Going back to the net income, quarter-over-quarter.
BRL 5 million this quarter, net of the non-recurrent expenses, BRL 18 million. On page nine, Luizacred. Revenues going up 2% on Cartão Luiza inside and outside the stores, we reduced the CDC revenues and also personal loans as part of our strategy of Luizacred to be more conservative and focus on the Cartão Luiza. We see here an increase vis-à-vis the margin last year, dropping vis-à-vis December. Very much because of the reduction of credit and the better quality of the portfolio, more concentrated on Cartão Luiza, and also reflected here. You can see that Luizacred had a performance better than the second quarter last year. Now I would like to give the floor back to Frederico. Thank you. I will go straight to the last slide. Reinforcing our expectations for 2016 are the main focus of our work for this year.
Accelerating the implementation of all the digital projects. We have over 20 digital projects with the objective of transforming our company from traditional retail to a digital company with human warmth. In-store picking and many other projects that we are about to launch. We already have a pilot continuing participating in the market in a sustainable way, increasing profitability, focus on reducing operating expenses, implementing the projects, being conservative in credit assignment, and with the product mix of Luizacred, as Roberto mentioned. Continuing our efforts to improve cash generation and protecting our cash in a year of crisis. Something that we implemented in the first quarter and we will continue. Lastly, maintain the company among the best companies to work for in Brazil. Now, I would like to open for questions from analysts. Thank you very much.
Now we will start the Q&A session for investors and analysts only. Questions asked over the internet will be answered later by email, we will be available to clarify any doubts that you still have. Our first question comes from Mr. Marcelo Moraes from Deutsche Bank.
Good morning, everyone. Congratulations for the results. My first question has to do with sales performance, both in brick-and-mortar stores and e-commerce. It seems to me that you're gaining additional market share now, the sales performance is very clear vis-à-vis your competition. Is it because of some specific region? Is there a region where you are getting more market share because of other stores being closed? What is your expectation for e-commerce, more specifically? Because your performance is very much a dot outside the curve vis-à-vis your competitors in this quarter. Thank you for the question. Good morning, Marcelo.
The first quarter of this year, as I said during the presentation, the results were due to the work done by our two teams in brick-and-mortar stores and e-commerce. We found very good potential in different regions, I would say every region in all categories. We worked very strongly in order to tap into these local opportunities that we identified by our project that is called Focus on Sales. Magazine Luiza gained share consistently for more than four years. Ever since our IPO, we have been growing practically every year. Even last year, when we saw some reduction in our sales vis-à-vis the previous year, and in 2014, there was the World Cup, and we had an extraordinary gain of share. The comparison between 2015 and 2014 was very difficult because the bar was very high. Now comparing to 2015, it is more normal, let's say.
Ever since the beginning of this year, or since the IPO, we have been gaining share since the first quarter that we published our results. This year, we are gaining share in brick-and-mortar stores in practically all regions, highlighting the South and the Northeast. We have been gaining more share in these two regions because of consolidation of the stores and also because of competition, specifically in each one of these regions, and also in the interior of São Paulo and other regions as well. More specifically regarding e-commerce, this is the second quarter that we have growth higher than the market. The basis from 2014 to 2015, just remind you, was very difficult. It has to do with what I have been saying the last few calls.
We feel that there is a move of rationalization of prices in e-commerce in Brazil, because many players showed prices that were below the cost price, which is not sustainable in the long run. We believe that, of course, investors want to have return on their capital invested. We see now that there is a trend in the market of more rational behavior vis-à-vis prices. Our cost base is shared, and we have multi-channel operations. It is also, of course, due to a lot of hard work done by our e-commerce people in pricing management, et cetera. Fred, when you look to the next quarters and you think about your sales mix that you will have, could we imagine different categories evolving in a different fashion?
What category do you believe will be the one delivering the best performance, and which categories will not have a very good performance? Categories in general, which ones will have a better performance, and the opposite as well? The category that shows an interesting growth in spite of the economy is mobile telephony. It gained a higher participation in the overall sales, both in e-commerce and brick-and-mortar stores. This is a product that everybody wants to have. You saw all the revolution that the blocking of the WhatsApp caused. You have all the different age brackets very interested in having a mobile phone, a cellular phone, and this product has a short lifespan, differently from a refrigerator, for instance. Many people trade up their mobile phones every year. Fabrício will add also. Fabrício is our VP.
Good morning. This is Fabrício. As Fred said, we identified each one of the categories we studied, and smartphones are the category. White line, very stable, we have been working on that, and it was practically zero regarding growth. TV is another category. Last year, it fell quite a lot to TVs or image. Another category is furniture. Furniture grew in the first quarter, we will continue to work to increase growth. I would say smartphones, white line, image, and furniture. In this order, Fabrício? Yes, in this order. Luizeta from Boticarius Brokerage House. Good morning. Thank you for the question. Regarding your gross margin, you mentioned three reasons that led to this increase: better sales mix, charging for freight, better operating efficiency. Could you give us more details about these three factors?
Was it more due to one of the factors, or was it the same participation of the three factors in this improvement? Regarding e-commerce, I would like to go back to the growth pace. Could you please tell us in detail, what is the reason for this growth? Are you being able to convert more sales? What is the specific channel? Is it the mobile phone? Is it traditional sales via desktop? Maybe you could give us more details about how are you converting. Thank you very much. Good morning. Thank you for the question. About margins, as Roberto said during his explanation, we operated at a level of profitability in the first quarter of 2016 that was similar to the ones in the second and the third quarters of last year.
The level of margins and profitability that we had last year in the second and the third quarter. There isn't one single factor. We did a lot of work in all the categories and all the stores and e-commerce also improving our margins also because of the fact that the market is more rational. I can tell you the increase in telephony in the mix is the main reason. We had a very big heat wave last year, this year it was not the case. The drop in white line and the increase in smartphones was very big. It was the factor that contributed the most to this increase in margin. We had the same levels last year in the second and the third quarters. Regarding e-commerce, I am going to give the floor to Fabrício.
Regarding e-commerce, our expectation to continue to grow higher than the market and gain a market share in a sustainable fashion, such as is a policy of the company, getting into more details about sales in the first quarter. Our sales are based on a sum of factors: ticket conversions, and calls, and we have gains in all three variables: increase in calls, conversion, and average ticket. Regarding the devices, the app has been contributing to the growth in hits and conversion. We had already identified that the migration of hits into conversion was becoming very fast, we had to offer an app that could have a conversion equal or similar to the desktop. We launched the app at the end of last year. With personalization and low friction. With a higher conversion, which is what we expected.
This migration from desktop to mobile devices is giving a contribution to our sales in general. Thank you. Mr. Guilherme Assis from Brasil Plural. Good morning, everyone. Thank you for the question. I would like to go back to gross margin, Fred. You made it clear that the main factor that has been driving your margin, and we know that there is the impact of your charging for collection, your charging for assembly, and freight. Could you quantify? Because year-on-year, we saw an increase of 210 basis points. Of these 210 basis points, what came from freight and assembly? How much came from your different mix? Still talking about margin, we know that your main competitor is more aggressive in brick-and-mortar stores. How do you see that?
Looking at the result, it seems to me that you didn't have to be aggressive in prices because of your competitor, your main competitor. Have you noticed a higher degree of aggressiveness on the part of the other competitors, or maybe more specifically, your main competitor? How are you reacting to this, maintaining such a strong growth with a major margin gain? How can you achieve that? Guilherme, good morning. Thank you for the question. I will divide the answer into two. The first one regarding the composition of the margin gain. In fact, there is nothing new to be added here. All the factors have contributed, and I'm not going to talk about all of them.
I will reinforce that last year, the lowest margin last year was in the first quarter because of high participation of white line, driven by the heat wave that we had last year. Many air conditioning devices and fans, et cetera. All the others, freight and assembly, rationalization of the e-commerce market that, as a consequence, improved our margin. All of them gave a major contribution, not as big as a mix, but a major contribution to this growth in margin. The second part of your question, when we established the purpose of gaining share without losing profitability, you see that the market is not concentrated yet. You have many small and medium-sized players, 70% in the main categories.
We feel that these companies felt the crisis more than the companies that are more capitalized and better structured, and they suffered with shortage of products, and many companies are closing stores. We have been reading quite a lot of news about companies that are closing stores, and we are increasing our number of stores. We opened 28 new stores vis-a-vis the first quarter of last year, which means that we're being able to deal very well with this competitive scenario. The crisis is rather big, and it affects everybody, of course, but it affects more those who are not so well prepared. I don't see any need to reduce margin to gain market share or to protect ourselves because of the scenario that I have just described. Very clear.
Thank you. Regarding the cost reduction that you achieved, in spite of the increase in the tax burden over your payroll. I would like to understand your process of ZBB with the Gagliardi consultancy. Do you think there is more fat to be trimmed with the zero-based budget process? We still see weak sales. Inflation is still high. What could we expect regarding your operating leverage that you showed for the first quarter? Roberto will answer your question. Good morning, Guilherme. Over last year, we showed a very consistent work done in expenses. In this quarter, we were able to, once again, reduce expenses. We reduced our marketing expenses even. It was a lot of work that we did to reduce our expenses without jeopardizing our sales. You have to plan all this very carefully. We started last year, ZBB, we started last year.
We started in September, October. Our whole budget was drafted with this new methodology with zero-based budget, and we have to adjust every single month in order to comply with the budget that we have proposed. We have the potential of further reducing the company's expenses. We are also dealing with all the contracts and freight, and rentals, et cetera. We are on the right track in order to continue to deliver growth in our sales and a very strict control on our expenses, focus on all the opportunities, marketing, rentals, and freight, and all the expense lines of the company, we are addressing all of them consistently. Thank you, Roberto. from Credit Suisse. Good morning. Thank you for the question, but my question has already been answered. Congratulations. I would like to remind you that in order to ask a question, you should press star one.
Our next question is from Mr. Leonardo Cavalcanti from Nova Gestão.
Good morning, everyone. Congratulations for the excellent results. I have two questions. About your short-term debt, are you comfortable with your debt level? As you have a multi-channel strategy, your margins are different between e-commerce and brick-and-mortar stores, of course. Could you describe this in detail, please? Well, the call was very bad, and we were not able to understand your questions. The quality of the call was very bad. We ask you to please repeat your question. The debt profile. There was an increase in your debt in the short run. How do you see that for the next few quarters? Are you going to the market to raise funds? You have synergies between e-commerce and brick-and-mortar stores. The improvement in your margin, was it because of the e-commerce, or was it because of your brick-and-mortar stores?
I will answer the first part of your question regarding the debt. Ever since the end of 2014 and beginning of 2015, we worked very hard to extend our debt profile. Last year, we were able to reduce our net debt in nominal terms. This year, we continue with this reduction in the first quarter. Our net debt was much lower than the first quarter of last year, and our cash position is better. On the other hand, in this quarter, we had just a few maturities, and this year we do not have a major concentration of maturities because we have rolled over our debt. We have some maturities more toward the end of the year. Our cash position is very comfortable, and we have enough time to negotiate and continue to roll over our debt.
The costs in the market are higher now. This is very clear based on the recent issuances of the bonds, et cetera. The cost of money went up for everybody. As we have a small part that should be refinanced this year, this will not be relevant in the short and medium term of our debt. This quarter was even lower than the cost of the debt than the same quarter last year, with the anticipation of credit cards coming from higher sales on credit cards. This is the way we will continue to deal with our debt. We will continue to generate cash and working to improve our working capital to generate cash and refinancing debt in the best way possible. Having a comfortable position of cash and net debt to debt to ratio.
We are comfortable and working to maintain this level of comfort for the company regarding margins. The answer is the same that I have already given to other questions. The main factor was the mix. All the other components were important. They played an important role to allow us to deliver this result. There's nothing to add. Thank you. Thank you, everybody. We thank all of you who have participated in our conference call. Thank you very much. Magazine Luiza's conference call about the results of the first quarter of 2016 is closed. You may disconnect your lines now, and we wish you all a very good day.