Good morning. Thank you for waiting. Welcome to Magazine Luiza's conference call to discuss results of the fourth quarter of 2015. We would like to inform you that this conference call is being recorded and all participants will be in listen-only mode during the company's presentation. Afterward, 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 for one week after the end of the conference. We would like to mention that forward-looking statements that might be made during this call relating to the business perspectives of Magazine Luiza, operating and financial projections and targets, our beliefs and assumptions on the part 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 because they refer to future events and 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 such forward-looking statements. We would like to give the floor to Mr. Marcelo Silva, who will make the presentation. Mr. Silva, you may begin.
Good morning, everyone. It's a great pleasure for me to make my last presentation as the company CEO up to December 31st, 2015, when I completed my sixth cycle in the executive board of Magazine Luiza.
I would like to thank you all who have been with me in all the last quarters and take the opportunity to mention when I was invited by Luiza Helena in order to set up a more professional executive committee. When Luiza Helena invited me in 2009, we published a relevant material fact, which was a joint venture with a bank and renewed for an additional 20 years. This was an important act showing the partnership and how healthy this partnership between Itaú LuizaCred and Magazine Luiza is. In 2010, we established a strategic plan for the next five years. The main strategy was sustainable growth. We needed to have a much higher share of the Brazilian market. We decided that we should go after that, but with sustainable growth.
For that, we needed to consolidate our business in the regions where we already operate in the southeast and the south of Brazil. We also had to penetrate other regions, namely the Brazilian northeast, which has a lot to do with Magazine Luiza because of the predominance of the C class. We brought our headquarters from Franca to São Paulo because of our big footprint in the greater São Paulo area, and also because of the fact that São Paulo is the economic capital of Brazil. We acquired on the same year, the Maia stores, 140. In 2011, continuing with our strategic plan, we did our IPO. Afterwards, we acquired the Baú stores in order to consolidate our presence in the south and the southeast.
In the 2 subsequent years, 2012 and 2013, we integrated these chains, in 2 years, which was something really incredible, a big success because you all know how difficult it is to integrate stores, and history shows this in many different situations. We were very successful in our endeavors, and in 2014, we had the highest growth in the market, the best result in our whole history. Very important for us. We saw the evolution of our e-commerce more and more sustainable and growing more than the market and higher than the market. We started our multi-channel strategy, and we will be talking about that during the presentation in 2015. We will comment on in detail because it's the object of our conference today.
We renewed our contract with Cardif, once again, evidencing our joint governance with Cardif and BNP Paribas, and we evolved even more in e-commerce. Frederico will be talking about this in detail in a few minutes. The last subject that I would like to mention in this cycle of seven years is our corporate governance. Besides the successful joint ventures and the Itaú Unibanco, Banco BNP Paribas. For many years, we have already had a board with independent board members, and up to 2015, we had the present Mr. Cassinetta, the chairman of the board. We thought we should review our corporate governance, and this is what we did with a specialized consultancy company. We decided to have two additional committees, finance, audit, and risk. Now we have a compliance one with experts from the market.
In this review, Luiza Helena became the chairman of the board. I was invited, I accepted, of course, the position of vice president or vice chairman of the board. We have two independent board members. Frederico Trajano is now the CEO. He was already our COO, he was appointed CEO in the succession process. We think it was very good and very well done. He took this position now in 2016 together with Fabrício, Executive VP. We have Isabel and other friends that came on board and joined this team in order to reinforce our position and to maintain consistency, which is the major driver of our business. This is a big characteristic of Magazine Luiza, not only in the operation, but also in terms of the culture and the values of the company. People, both individuals and corporations, have cycles.
I have just ended my cycle in this executive position, I am very confident, this is why I continue to participate in the life of Magazine Luiza. Now the CEO is currently somebody who knows retail in-depth, ever since we started our first steps in e-commerce and multi-channel as well, he has been ahead of these initiatives. We are totally confident that we are on the right track preserving the future of the company, which is the most important thing for all shareholders, for us. I would like to end my opening remarks, thanking you very much for all your participation, all your interest in the company. Now I would like to give the floor to Frederico Trajano, who is the CEO of the company.
Good morning, everyone. Thank you for participating in our conference call.
Before talking about 2015, I would like to make a tribute to Marcelo Silva, not only because of the great cooperation that he gave us, but because his personal legacy, his example in terms of ethics, consistency, he has always been a guiding light to all of us who work for the company. Going to the results of 2015, I would like to summarize the year. I think it's necessary to say that we had very challenging macroeconomic conditions. As our sector is cyclical, such as the durables, this is why we feel more or less these economic movements, the whole sector felt the effect of the deceleration that we had in 2015. As Marcelo said, the comparison base is very high because in 2014, we grew by 18.7%, the best year of growth in the history of Magazine Luiza.
We were able, in spite of all that, preserve our margin. We have the drop of 8.7%, the drop was offset by an additional percentage point in our gross margin. I would like to mention that we had the best gross margin in the last four years. I would like to mention that we do not believe it's necessary to waive margin to gain share online or offline. We have a lot of discipline in this sense, we will continue in 2016. Our focus this year will continue to be market share gain with preservation of our profitability, I believe that probably we will have better conditions for this market, I can go in details afterwards during the Q&A. I would like to mention the performance of e-commerce, mainly in the second half of the year.
For a long time, we have been saying that at some point in time, economic rationality would go back to e-commerce, when this happened, we would benefit from that because of our multi-channel strategy. Finally, this has been happening. We grew 19.1% in e-commerce. Even with the higher participation of e-commerce, we had an increase in gross margin, this shows that we have a rational operation there. In an economy of index costs such as ours, a scenario of high inflation and higher interest rate, in spite of all our effort in reduction of expenses, we had a drop in September last year. We hired a company to further focus our expense reduction, we are already implementing many projects that were the focus of that.
Cash is king, as Americans say, in a moment of economic difficulty, companies have to focus on cash generation, this is what we did last year. We had a sound cash generation, we reported a significant improvement in our cash in the last quarter of 2015. Our net debt dropped from BRL 1.2 billion in September of 2015 to BRL 489 million at the end of the year, at the close of the year. Net debt EBITDA ratio dropped from 2.3 to 1.1 in the same period. With that, we believe that we are prepared to face any challenges that we might face in 2016. All these figures will be detailed during the presentation, I will come back to talk about our strategy not only for 2016, but also for the next few years. Roberto has the floor now.
Good morning, everyone.
Let's start our presentation on slide number two. Once again, we highlight the sales performance, BRL 3 billion, a reduction of 8.6% on a basis of 10% increase year-on-year. The fourth quarter of 2014 was very high. E-commerce, once again, growing by 19%, representing already 21% of our sales. Increase in the gross margin and expansion in this quarter due to the improvement in the mix and the collection of freight and the charging for shipping and assembly, et cetera. EBITDA with a higher gross margin, but a lower dilution of expenses due to the sales performance and the market performance, but reaching BRL 100 million with a 4% margin on net revenues. We had a reduction of over BRL 700 million in our net debt, BRL 1.2 billion to less than BRL 500 million, and from 2.3 times net debt to EBITDA to 1.1 net debt to EBITDA.
An operating cash generation in the quarter of BRL 614 million impacted by the improvement in working capital that we have been working on during the whole year. For the year as a whole, BRL 10.5 billion, decrease of 8.7%, and the comparison basis was 18.7% in 2014. E-commerce growing practically 10% with 20% of our sales, an increase of more than 3 points or 340 basis points higher than 2014 gross margin, 120 basis points due to the same factors. EBITDA dropping by 100 basis points year-on-year from 6.2% to 5.2% of net revenue, reaching BRL 465 million. For the year as a whole, net debt going from BRL 651 million to BRL 489 million dropped in the quarter and in the year as well. Net debt to EBITDA adjusted EBITDA of 1.1 time.
Cash position practically BRL 300 million going up from BRL 863 million to BRL 1.16 billion, which is far superior than its short-term debt. We increased liquidity in the company. On the next slide, we show the number of stores we opened in the year as a whole, 30 new stores. We still have one-fourth of the stores still maturing at the curve. In the year, we invested BRL 158 million, highlighting a higher investment in new stores and technology. We invested BRL 54 million in IT to support the whole company and the whole e-commerce and all stores. We invested less in remodeling because we remodeled practically all stores in the previous years. On the next slide, we show the quarterly evolution of the gross revenue first.
As you can see, the performance was better than the second and the third quarters, with the evolution of e-commerce growing 19% based on 20% growth on a year-on-year comparison and exceeding BRL 2 billion, the total sales of e-commerce. On the next slide, we show you the evolution of our gross profit. The gross margin better in all the quarters than the previous year. In general, gross profit had a reduction of only 4%. In the operating expenses line, we can see that selling expenses in this quarter, for instance, were lower than in the previous year, administrative as well. Overall, these expenses dropped in nominal terms in spite of the expenses in marketing that were higher because of our sponsorship of soccer. You can see the sales performance and nominally dropping due to the equity income line.
We see that in the year as a whole, we have BRL 36 million, a little bit less than the previous year. That was BRL 100, and now BRL 76. The result of LuizaCred was impacted by higher provisions for delinquency for non-performing loans, of course. In the quarter, BRL 8 million, and the year, BRL 123. LuizaCred, BRL 5 million in the quarter, BRL 28 million in the year, growing more than 50%. The net income or the gross profit of the insurance company. On the next slide, the quarterly evolution of the EBITDA, once again impacted by the increase in gross margin and lower dilution of operating expenses and a slightly lower result from LuizaCred for the year as a whole. We had a variation of 6.2%-5.2% in EBITDA margin. On page number eight, we show the financial results.
We have a prepayment of receivables impacted by the increase in the CDI of over 20%, considering the quarter and the full year. It does not reflect yet the improvement of the cash situation of the company and the renewal of Cardif happened at the end of December, so we increased quite a lot our cash position at the end of the year. We show the reduction of our net debt here. In the last quarter, you can see a reduction of over BRL 700 million, based on the improvement of our operating cash flow, cash generation, and also the renewal of the insurance contract. The improvements in the working capital happened in all sites, all accounts. You can see receivables, discounted receivables, inventories. You can see that the main accounts of working capital were addressed over the year.
On the next slide, we show details of the cash flow of the operations. For the year as a whole, the cash flow of the operations was BRL 428 million, and we received from Cardif and LuizaCred BRL 288 million. We invested BRL 158 million, and with a total BRL 299 million cash generation, BRL 300 million practically, that increased our cash position and cash availability to BRL 1 billion and BRL 160 million. In the next slide, we show the evolution of our net income. In 2014, we had BRL 129 million, and this year we closed with BRL 66 of negative result. Net margin of minus 0.7%, impacted by the sales performance, higher marketing expenses that I mentioned, and the higher CDI in the period that also impacted this side of the account. On the next slide, we show the LuizaCred revenues. We can see lower in the CDC in the quarter.
CDC dropped 52%, CDC of LuizaCred, plus the card, but the card grew by 3%, showing how important our Luiza Card base is. For the year as a whole, the same. CDC, for instance, dropped from BRL [1,200,700,000] . Our reduction, over BRL 500 million, come from this conservative position in terms of our CDC operations that has been partially offset in the last couple of months by the Losango project. For the year as a whole, we show you the highlights. Sales with Luiza Card increased inside Magazine Luiza. The participation of this card in our mix increased. Now we show you the portfolio of LuizaCred. It's lower sales in CDC, going from BRL 1 billion to BRL 600 million, and card BRL 3.6 billion to BRL 3.8 billion.
An increase because of the change in our sales mix and the profile of the LuizaCred portfolio and the performance over the last few years. Finally, we show you the overdue payments. We see an increase in past dues higher than 90 days, in line with the indicators of the market, and a reduction in the short-term delinquency, mainly in the last quarter, dropping by 3.4% to 3.4%. The coverage ratio is maintained 118, 120%, increasing our provisions, of course, and maintaining a conservative position in the approval rates for CDC and cards credit as a whole. I would like to give the floor back to Frederico.
Talking about our strategy for 2016. I have a very clear mandate for my position vis-a-vis the board, which is to accelerate the digital transformation of our business.
We are a traditional retail company with an important digital operation, we want to be a digital company with physical or point of sales and human warmth. Many projects are going to be followed in this digital transformation. The first pillar is digital inclusion. The purpose of the company is to bring the access of many to what is the privilege of a few. This is the objective of the company and of all of us, and the raison d'être of the company. The current focus of the proposal is to make products and services more democratic so that people can not only own, but really master the technology. 70% of Brazilians do not have a smartphone, 90% do not have a smart TV. Many business opportunities exist in these areas, we want to be the top in these categories.
The second pillar is the digitalization of stores, of the brick-and-mortar stores. We want to revolutionize and bring digital technology to all our points of sale, the best example of this pillar is our mobile sales initiative. We have already trained 2,000 people. We want to reduce from 45 minutes to two minutes, improving the shopping experience for our clients. By the end of the year, we want to roll this out to all our brick-and-mortar stores. The third pillar is multi-channel. Today, we are the only retailer that are really multi-channel, we want to bring this integration to the next level. In 2015, more than half of the online sales in the South and Southeast were catered to by this logistics network, we reduced the time and the cost by over 70% for these regions.
We trained all the salespeople of Magazine Luiza about the over 40,000 items of our website. They have a commission. This is all fully integrated, the stores have to be distribution centers of our e-commerce. The fourth is transforming the site into a digital platform. We already have our first test to sell via marketplace, we will be launching our marketplace initiative also to other online stores still within the first half of this year. We want to increase the categories and the items for over 15 million consumers that hit on our website, we acquired a subsidiary two years ago, you have this information.
This is a new category for us, in fact, which is health and beauty, growing 70% last year with net income of BRL 8 million, another sales operation that can get into e-commerce and evidence of being able to do this with a profit. The fifth is digital culture. It is not enough to want to be digital. You have to have the technical capabilities, and we created Luiza Labs for our transformation, and we innovated, and we have all the projects that are described in our pillars. This is fundamental for the digital transformation, and I would like to say that we have many challenges that have to be tackled very seriously. I believe that these challenges are much, much smaller than the opportunities that we have in the future. I finish my presentation now, and I open for questions from you. Thank you very much.
Now we will start our Q&A session for investors and analysts. Questions asked on the internet will be answered afterwards by email. Of course, we will stay at your disposal if you still have any doubts. Mr. Fabio Monteiro from BTG Pactual.
Good morning, everyone. I would like to hear from you your projections about market growth for 2016 in your segment, both in e-commerce and in brick-and-mortar stores. Whether you gained share or not this year, I would like to know what are your projections for the sector as a whole.
Good morning, Fabio. Thank you very much for your question. This is Frederico. I have already given an interview about this. Our view is that the market will present the same figures in terms of a downward curve as 2015. I believe that macroeconomic scenario in 2016 will be very similar to 2015.
I think the opportunities will be microeconomic in terms of gaining market share, et cetera. Our focus is gaining share online and offline, but not to the detriment of our margins. We believe that there is the opportunity and the possibility of gaining share this year. Once again, and you know our history, we can gain share still in a profitable fashion, generating value to our shareholders. In e-commerce, last month it was one digit, but the top of one digit, and with an increase in the average ticket. I think we can grow more than this for the year with the increase of our online operation.
Thank you, Fred. Another question about LuizaCred. This year you have the effect of the increase of the PIS and COFINS taxes, and probably higher provisions are part of the scenario.
I would like to understand, what kind of scenarios should we consider for LuizaCred considering all that? Do you believe there will be a relevant drop in your net income, or what level of ROE do you expect would be reasonable for LuizaCred for us?
This is Marcelo Ferreira from LuizaCred. We don't give a guidance, as you know. We cannot give a guidance. What I can tell you is that the scenario, the same way we have for retail, is very challenging for credit as well. At LuizaCred, we are focusing on lower risk assets. If you look at the balance sheet of this year, you will see that we are focusing on lower risk assets this year. You see that revenues didn't go down. We were able to increase our revenues because of our focus on Luiza Card.
There is a lot of loyalty on the part of our client for this card, and we can sell credit based on this card. What I see for 2016 is a continuation of the strategy, in a deteriorated environment vis-a-vis credit, as we saw in the last year. It's more towards the fourth quarter than the first quarters of the year because we still had a slightly better scenario for credit in the three first quarters of 2015.
Thank you very much, Marcelo and Fred. [Lisa] from Votorantim [Bankers].
Good morning. Thank you for the question. I would like to ask a question about e-commerce. This growth of 19% is really flabbergasting. Could you describe how you were able to achieve this growth rate?
Was it via organic growth, or did you buy any clicks, or was it the app that is improving the performance for mobile access? Could you explain how you were able to get this growth? What about the marketplace project? Is there anything new that you could share with us? We thank you for your question. I will answer, if Eduardo wants to add, please feel at ease. If you look at the last four years, we grow more than the market every year in e-commerce. You can see that we achieve very consistent results regarding growth in e-commerce, always very rationally. As you know, this is one of our characteristics.
In the first quarter, we had a comparison basis of over 40% growth in 2014. You can see that the economic slowdown reached e-commerce in 2015, some moves of rationality in the first quarter of last year. In the second quarter, we had normal growth rates again. We resumed our growth, which is our history in the last few years. If you have an operation with a rational management and a good competence regarding client acquisition, this gives you an advantage. Also due to the fact that we have multi-channel operations and very good logistics delivery, South, Southeast, and the Northeast, which have different needs, in fact. There is no silver bullet there. It's just a whole array of competencies. Rationalization of the e-commerce, at some point in time, the cash ends for those who sell below their cost.
I think all this movement towards rationality is very healthy for the whole market, we already benefited from that last year, we will continue to benefit this year. I now give the floor to Eduardo.
Just adding to what was said in terms of conversion. We made a bet in October in terms of platform, what we saw was a higher conversion. This contributed to this result that we achieved at the end of the year in relation to marketplace. We are already having a test with the Época, doing our operational and production tests. In the second quarter, we expect to expand in preserving our whole operations and our relationship with our clients. Thank you.
Guilherme Assis, Brasil Plural.
Good morning, everyone. Thank you for taking my question. I would like to understand how you see the competitive environment.
In your message, I understood that you recognize that this will be, or this is a challenging year, that you intend to gain market share. I would like to know how do you see the competitive environment in the strategy, how can you really preserve your margin? With such an environment of a drop in sales, which is the estimate for this year, how can you preserve your margin? Are there any players who are either regional or national that will allow you to gain more market share because of their poor performance?
Thank you very much, Guilherme, for your question. Good morning. Yes, we believe there is room, both online and offline, to gain share, preserving our profitability. We do not believe it's necessary to waive your margin in order to gain market share.
You have to have a performance that is better than the market. I believe that for two reasons. We believe in e-commerce that there will be a trend. There is a trend. There is a higher rationality of prices, this is necessary for the financial balance of the companies. We benefit from that, such as already happened in the third quarter. In the brick-and-mortar stores, I think the same. Economy, of course, impacts companies as a whole, all players in the market. You know that we are a BRL 140 billion market. Even if it drops 10%, or BRL 530 billion, we still have a lot of share to gain. This is not a monopoly. This is a market that has many players. I believe that the better structured and better capitalized structures, and our company is one of them, well-structured and well-capitalized.
These companies have the opportunity to gain market share because some suppliers may have a problem regarding shrinkers or a reduction in the number of stores. We intend to continue to expand our base, we have to tap into this opportunity. In this macroeconomic scenario that we mentioned during the presentation, opportunities do exist. However, you have to be careful. You have to do this cautiously and doing this very well and with a very good execution of all the processes. There is no silver bullet. Gaining share is difficult, you have to be very focused in order to do well what you have to do. If you look at our history, we have been achieving this over the years. We have grown more than the market, we have been preserving our gross margin.
Fred, looking at the promotions of the year-end and January, have you noticed any change in the strategy of your competitors in terms of pricing? Be it because they are more aggressive or because problems regarding cash flow of some player that is changing their strategy. How do you see, in the beginning of the year, the pricing strategy on the part of competitors? You said that the market is going back to a more rational approach, you talked about that in e-commerce. What about the brick-and-mortar stores, looking at January and your radar regarding competitor prices? What can you say about that?
You know me, I would like to talk about January and February. Talking about the market, what I have been saying here regarding what I believe will happen in the market, I think will materialize this year.
Nothing in January or February goes in the opposite direction. I believe there is room for us to execute our plan for the year, and with a lot of discipline, regardless of what one or other competitor might do. The competitive environment is being like I described to you.
Thank you.
I would like to remind you that in order to ask a question, you should press star one. Once again, in order to ask a question, please press star one. As there are no more questions, I would like to give the floor back to Mr. Frederico Trajano for his closing remarks.
I would like to thank everybody for participating in this call.
In summarizing our message, we will have a challenging year ahead of us. We are very confident in our company, in our team, and in our plan regarding costs and just to tap into the opportunity that we have ahead of us. Good afternoon. Thank you.
Thank you very much. Magazine Luiza's conference call is closed. You may disconnect your lines. Have a very good afternoon.