Good morning, ladies and gentlemen. Welcome to Grupo Panvel's Q2 2023 earnings call. This conference recording will be available on the company's IR website. The slides are also available for download. All participants will be in listen-only mode during the company's presentation. Following that, we will have a Q&A session, and further instructions will be given. Before we proceed, I take this opportunity to state that forward-looking statements are based on the beliefs and assumptions of Grupo Panvel's management, as well as information currently available to the company. These statements may involve risks and uncertainties as they relate to future events, and therefore, depend on circumstances that may or may not occur. Investors, analysts, and journalists should take into account that events related to the macroeconomic environment, the industry, and other factors that may cause results to be materially different from those expressed in these forward-looking statements.
We have Mr. Julio Mottin Neto, CEO, and Mr. Antonio Napp, CFO and IRO, with us today. I would like to hand over the floor to Mr. Antonio Napp. Please, Mr. Napp, you may proceed.
Thank you. Good morning. First off, thank you for attending our Q2 earnings call. Welcome. Before I start talking about numbers and the deliveries, I think we should start our call to reinforce the reasons that bring us here. Our purpose is translated into our mission, vision, and our values. We want to provide health and wellbeing to people. That is what makes us get out of bed every morning. When we say that we want to be the best in health and wellness products and services, we are concerned about the quality in everything we do. With that vision and quality, we think about our stores, our products, and the way we take good care of our customers.
Rest assured that what brought us here will be the basis to take us even further. Thinking along the lines of this journey, we would like to share with all shareholders and stakeholders yet another quarter of delivered results. Onto the highlights now. That is on slide three. We have a couple of pointers indicating that we have had good results. Exceeding our expectations, actually. We will be discussing these metrics in further detail, but all of them suffered some pressure when we had a strong comparison basis of Q2 of last year, both in sales, gross margin or EBITDA. But since we look at these numbers historically, thinking about average growth ever since 2021, our sales growth has been above 17% a year.
Within that context, sales reached over BRL 1.2 billion in the quarter, and Panvel sales almost BRL 1.1 billion in the same period. One of the highlights of the quarter was to be able to maintain gross margin unchanged, annually speaking, at 31%, and that is the result of an efficient mix of products effort. Back in 2022, we benefited from a price increase above 10% in drugs, and also a basket of products and services related to flu and colds. That did not happen this quarter because this is one of the hottest summers in recent years. We have been able to reduce that pressure that was expected in our EBITDA margin, reaching BRL 57.8 million , 5% of our revenue.
Another highlight that once again shows us we have good results. We have been gaining more market share in Southern Brazil due to the performance of same-sale stores and also the expansion. We have been expanding our share in digital, almost 20% penetration rate, expanding our customer base, reaching 17.5 million people. This has been a period of harvest, of good projects we have implemented. Despite all these investments and that growth, our leverage is low, 0.9 x our EBITDA, and our balance sheet is very robust. We can overcome these hard times of high interest rates and slow down in economic scenario. We have an 11 days improvement cash cycle. This is an improvement when compared to pharma retail. We are very proud of all the commitments we made back in the follow-on in July 2020 have been delivered.
Sales growth, results, investments, and governance. That motivates us, and that's our commitment to shareholders and all the other stakeholders. Onto slide four. Let me explore how consistent we have been. This is our common practice. This is even more important this time around so that we can keep track of our growth. Gross revenue in the last decade has been a CAGR of 14.6%, almost 15% up until 2022, well above inflation rates. In recent years, we are bringing that average upwards. From 2021 to 2022, let me highlight that growth. The second quarter of 2023 compared to Q2 of 2021, our CAGR is over 17%, a very strong number. As I said, that's bringing that average upwards. That would eliminate basic variations that happened between 2020 and 2023.
We've had no loss in our history, so we're proud to say consistency, solidity, and innovation are the trademarks of Panvel. On to sales on slide five. That's for the Q2. 9.5% in sales growth when we had a strong comparison base in Q2 2022, almost 26% growth when compared to 2021. At that time, revenue was driven by a 10% price increase and a sale of an entire basket of tests and products related to flus, colds, allergies, and infections. It didn't happen this year. The average growth of 2022 and 2023 was above 17%, aligned with the CAGR I showed you in the previous slide. That growth, let me point that out, was above market average, not the result of stores expansion only, but also better sales performance per store above that of the region.
On the right, you see the IQVIA data comparing Panvel with other chains and other players in Southern Brazil. Our goal is to boost average sales per store of over BRL 610,000 in the second half of the year, and we've been growing when compared to last year and the first quarter. We have maintained that average of 60 store expansion per year. This is a very important indicator that we have been able to beat. When we look at same-store sales and mature same-store sales, that's on slide six. Bear in mind that we are comparing that to Q2 of 2022. We've increased 6% same stores and 2.2% in mature same stores. But when you look at the average growth ever since 2021, numbers speak for themselves. A 15% same store and 11.1% of mature stores remaining above inflation. Moving on.
When you look at expansion per se, we have opened 11 stores in Q2. Ever since 2022, we have maintained a very consistent pace, helping our operation and extracting better results. We remain very pleased with the ramp-up of the new stores, so we remain comfortable in our capacity to execute our expansion plan. Let me draw your attention that we have the record high in maturation stores. That's a record number. They account for almost 30% of our store base. So this is between stores that are between one and three years that would pressure short-term results, but that's a guarantee for the midterm and long term. In the quarter, we have closed one store, and we transferred to another store a new location along the lines of working towards optimizing our assets. These are necessary and healthy movements or moves for the business.
On to the results of these stores. Let me anticipate that numbers have been very good, just like we've had in previous quarters. As a direct consequence of good sales performance and also expansion performance on slide eight, Panvel's market share is on a growing trend, reaching 11.7% in Q2, a 0.1 percentage point when compared to Q2 of 2022. With all due respect with the competition, they compete with us in the Southern Brazil. Panvel has been consistent in execution, well above its average. Yet another quarter of market share. If I'm not mistaken, it's the 12th quarter in a row. Drugs and generics, that's an expensive market share that is related to our mission to promote health and wellbeing to the population. Aligned with our strategy, we have been able to invest in keeping track of our chronic patients or customers.
Let me now address the digital business on slide nine. Panvel has become a benchmark for pharma market. Sales penetration reached its record high of 19.4%. In other words, almost 20% of our sales go through our digital channels. That's the result of several products or projects of the company that were implemented last year. Social commerce tools that helped us promote digital sales.
Let me draw your attention to our own channel. We do not depend on third parties.
Yes, thank you. This is very relevant, Julio. Thank you for pointing that out. This is what we have been doing. This is our own team's effort with our own delivery capacity. I'll be talking about other types of deliveries. We have good news to announce to all of you. That sales level has to do with the quality and the experience we provide, and especially in the last mile.
We have the fastest delivery in the pharmaceutical industry in Brazil. We have been investing in technology to deliver even faster. I always like to show you this slide, but let me point that out once again, because that shows the growth of deliveries in under 60 minutes, 30% in 2020, 45% in June this year. We're not considering pick-up and delivery, or click and collect, rather. This is only delivered to the household of customers. No one can do that, and that's why we're working on it as we speak. The Turbo Delivery, under 30 minute deliveries. I'll be talking about that in detail in a minute. So the service level is at 97%. We have 150 delivery stores, nine mini DCs to support our own delivery effort. I'm not including click and collect.
It's available in 100% of our stores and accounts for an important portion of all our sales in digital channels. It's a very healthy segment too. This is yet another highlight. In alignment with all the digitalization efforts, we have an increase in app downloads, 60% increase when compared to Q2 2022. We have 1.5 million active users every month, over 43% of our customer base. Very few retail stores have such a high number of active users. This is yet again another indicator of our quality in the digital channel. In conclusion, in this chapter, I'll be talking about other new initiatives. Let me point out that all this growth, in our case, it won't hurt the margin. It happens through our stores. It improves our productivity by using all existing stores, bringing costs down.
You can speed digital sales with profitability, improving our average sales, which is one of our main goals. Moving on. Another very important pillar. These are Panvel brand products. We are on slide 10. Panvel, I always like to say that statement, Panvel is the only chain in which you can bring the brand into your home. Panvel brand represents 6.9% of total Panvel sales and 17.7% share of total hygiene and beauty. Once again, it's a benchmark for the retail pharma in Brazil. We were impacted by sales in COVID. We're back on the growing trend. We have more shares in total sales of Panvel, and there's more growth down the road, because when you remove that from the base, we still have some masks. Panvel products grew by over 28%, and we're going to grow that even further. And we'll have many new products.
Just to give you an idea, 24% of the products were made of products launched in the last 12 months. We're always renewing our portfolio. There's something else I would like to share with you. We have a unique position in Southern Brazil. Panvel products account for over 44% of the entire market, private label pharma market. These are IQVIA data. And being a leader is only growing. That leadership is only growing. We were market share leaders in our private label, and we are extending that lead. So this is, once again, a very important strategic pillar to maintain healthier and healthier gross margins and good quality related to Panvel brand. About 30%, about a third of Panvel products are manufactured by our own industry. That verticalized strategy ensures quality and better margins in the entire private label operation. On to slide 11.
These are just a couple of pictures of our private label brands. Over 1,000 SKUs. Come take a look at our website, our stores, and of course, buy a couple of things from our stores. Okay, ending that virtuous cycle of our digital effort, we always talk about customer satisfaction. These are the top KPIs that we monitor. NPS is almost stable, 79 points. We have the best pharma retail in Reclame Aqui, 8.7 points. And we are the best ranked app. And we are always keeping track of our customer's point of view. Let me now talk about gross margins, talking about more figures. On slide 13, you can see that evolution. Gross margin was one of the highlights in the quarter. Retail was 31% in Q2, a 0.1% when compared year-on-year.
By reaching that result when compared to Q2 of last year that benefited for a 10% price increase, this is only proof that we have been very successful in managing our product mix because we offset both in sales and margin that decrease of services and all those items related to colds and flus. This is yet again proof. It is proof of Panvel's strength. This has always been present in the company in hygiene and beauty. There are no other companies or company in the industry that can work hygiene and beauty and private label. As we go back to a normal situation after the pandemic, because we were operating under a completely different scenario, more drugs with more share and people wearing masks left and right. We are now playing the game we are very familiar with. That is very important.
Non-drugs and private label products, generic product that were very important at the time. That is once again, it is proof that we have a very promising outlook for second half. Yes, that is how we can make a difference. That is where we stand out. But good work provided in beauty products will help us in the overall performance. Okay, now on to expenses after gross margin. Retail sales, you can see the results of the projects implemented in previous quarters. Following that downward trend that we have been monitoring in the two previous quarters, retail sales was 2%, reducing 0.3%. Both sale, stores expenses, payroll, inventory, and logistics expenses were down as well. We are going to keep on capturing those gains throughout the second half due to the productivity gains, as I mentioned, and a positive effect of inflation rates that are going to be smaller than expected.
G&A, we have been able to keep on our financial discipline. We had 2.5% due to a lower operational leverage. Throughout the second half, we are going to go back to historical levels, and we have been posting the best indicator in G&A expenses throughout the retail pharma industry. All this control of expenses is part and parcel of the Panvel Group. When we look at employees per store, we are the most productive in this segment. We have been focusing on service quality in that scenario, bringing in more and people into our stores. After talking about sales, margin, and expenses, on to the results. Adjusted EBITDA was almost BRL 58 million. 5% of gross revenue, a 3% growth when compared to last year. Very good execution of gross margin and sales expenses.
We mitigated the expected margin pressure that was expected for this quarter given the strong comparison basis of Q2 of last year. Let me point out that the EBITDA for this half of the year was the same level of that last year, despite that very strong comparison basis. All these elements of our operation, margin, sales, and expenses, they will be present throughout the second half. That is why we remain optimistic to expand EBITDA margin throughout the second half of 2023. Retail EBITDA on slide 16. We have been consistent in our execution, and that is made clear here. Another highlight for the quarter. That metric of retail EBITDA shows results for stores alone. And Q2 is at the same level last year. 0.1% margin caused by gross revenue. You have mature stores in here, new stores. You have the entire maturation ramp-up that we did not slow down.
Still, when you look at the first half of this year, when compared to the last year, we are on a growing trend. Once again, we are expanding new stores in the last 12 months and reaching that result when compared to a very strong comparison basis. That is a clear indication of the success of the work we have been doing in our store management. This is again, a key indicator that will show us a good road for growth in the second half. Along the lines of everything we have said so far, we are onto slide 17. We are delivering almost BRL 27 million, almost 2.3% of gross revenue. This small pressure on the net profit just like EBITDA that exceeded our expectations.
We are one of the most profitable companies in the industry with net profit that shows our operational excellence and also good cash management as well in terms of using capital wisely. The company managed to properly manage our cash in the quarter. We did not resort to purchasing across the board that would not be as beneficial. It would not make sense. Interest rates at 13% would not make any sense and that can be seen in our cash cycle. That is yet another highlight. We reduced our cash cycle by 11 days when compared to last year. Inventory levels have been balanced. We have improved negotiations in terms with suppliers and we are now reviewing payment terms of sales that we started to review earlier this year. There is room for more improvement.
Of course, cash cycle may vary from quarter to quarter, but this is something we envision and we have communicated that to the market time and time again, which is focus on cash management. That good management of workflow helped us to have a positive free cash flow of BRL 12 million, which is very rare. This is very good. Another highlight is that this capital structure remains very solid. We have one of the lowest leverage ratios, 0.9 x our EBITDA. That leverage will grow a little bit in first half. It is according to our expectations because seasonally speaking, first half would consume more cash. That has been a reality in the marketplace for a long time. We stand out in the pharma industry because we can keep on investing because we have a lot to do.
It has everything to do with this higher interest rates so we can grow whilst maintaining low impact on our cash. We said that last year along the lines with the entire macroeconomic scenario. For 2023, we have goals to reach year's end with leverage below 0.4 x our EBITDA, even better than what we had in December of last year. The road ahead is very clear. We have to have those improvements that you have already seen in cash cycle. It has to do with the financial performance of the company as well, was robust in the first half and we have a very promising view for the second half. In conclusion, we also like to thank all our employees, all the stakeholders. We do not do this alone.
Almost 10,000 employees helping us day in, day out, providing health and good well-being, delivering quality and value to customers and of course to shareholders as well. Once again, thank you. I would like to thank all the teams in offices and stores and our DCs. Onto the presentation in which we share our strategic pillars. Those familiar with our company have seen this slide many times. That is how we see our business and we are going to pick some of these topics to share what we are thinking about them. Number one is expansion of physical store. We are onto slide 20. Of course, physical store has been and will always be our focus in our business. That is the number one pillar. Be it for the convenience, the support of last mile delivery, experimentation. Being successful in your geographic expansion is key for all the other pillars.
Our expansion plan is aligned with our planning efforts focused in southern Brazil, popular and standard models and in the countryside as well. On slide 20, we see confirmation of strategy 2021, standard and popular is clear. Supporting classes A, B, an important segment of C class. Expanding away from capitals is clear. Over 70% of new stores distributed in small towns and metropolitan regions. At least 10 new cities to receive Panvel stores in the year 2023 alone. That is a very nice expansion in our region. Every quarter we are detailing our expansion performance, average sales, EBITDA for all and even ROIC. On slide 21, we update that information and would like to share them with you based on Q2 data. We may say, once again, we are heading the right direction. Numbers speak for themselves. The first retail EBITDA, yearly evolution of results.
That is an indication of improving our global margin throughout time as new vintages or new stores will mature. I have talked about it and I would like to say that this is going to be very helpful in the future. ROIC the same thing. When you start out, think about the company's performance up until 2019. We define our targets for the expansion. A very similar calculation. Each one of the seasons of these stores starting 2020 exceeded those targets. Over 10% return in the first year and over 60% return when the stores become mature. We opened 175 stores up until or since 2020, a significant number at an unprecedented pace for Panvel. Average return was above 40% for the entire network. This is key. Usually you grow faster impacting results, but that is not the case.
There may have been a couple of mistakes along the way, but the average is very good. In conclusion, for this physical expansion, when you look at the slide on the right, these are the results for each one of the states where we operate. Once again, we can comfortably say that results have been excellent in all regions. Closing the gap between [Rio Grande do Sul] or closing the gap between the other states and Rio Grande do Sul. When you look at Paraná and Santa Catarina's performance, you do not have as many stores that are mature. We are improving. That is why we show that maturity chart so that you can understand the stage in which each state is. It is important to see that these margins are going to evolve as the maturity evolves as well. In conclusion about the expansion, onto another very important pillar.
These are some of new projects. They are at different stages. They are all currently underway, but we have been improving dramatically. Digital sales is almost 20% of total sales. This is just an outstanding landmark. We still have a long way to go. This is the result of hard work and focusing on what is more important to reduce friction with customers. We challenge ourselves to go even further. That is why I would like to share some other important project that will contribute along those lines. Number one, let me talk about Digital Manager project. It is actually making a lot of noise in our e-commerce effort. This is the digitalization effort of our employees. There is avenue for growth, digitalizing customers, but we have to digitalize our employees as well. This is what we mean when we say store digitalization.
The way we see it, there are a lot of opportunities in communicating with employees through WhatsApp. WhatsApp saved retail through the pandemic. There are several limitations due to WhatsApp policies. These limitations have been lifted gradually. Of course, for the pharma channel, given the characteristics of that customer, heavy users are senior citizens, and that is the challenge to digitalize those senior citizens. WhatsApp will be the way, and we can benefit a lot from it. We are only at the beginning of that effort. We have 350 stores, 32 million impressions. We are including Facebook, Instagram as well alongside WhatsApp. That number is growing and there is no turning back. Good for us. Panvel is leading that trend. Number two, relationship, and we have to talk about deliveries. It is one of our competitive advantages, and we are taking yet another important step.
Officially now in August, we are starting in Porto Alegre, a new delivery modality, Turbo under 30-minute delivery. That is very clear. Customers demand faster and faster deliveries or urgent deliveries. Once again, we want to stand out from the competition and make that available to our customers. All the other types are also available. At the end of the day, it is customers that will decide. We want to provide what customers want. So we are taking the lead and we want to stand out and will help us grow even further. This is our number one asset, our stores, and they are close to customers. So we are arranging our inventory differently for Turbo. They will prioritize those stores that are closer to customers. So that puts up a barrier, so to speak, for any new entrants, because you never know where the next competitor will come.
Amazon, Mercado Livre/eBay, they have a hard time replicating that proximity we have with our customers. Being capital is our competitive advantage, and we have to use that asset more and more. iFood would deliver faster than we did. How come? How can iFood deliver Panvel products faster using our own source? So we have to change that state of affairs. Last but not least, we are resorting to Panvel Ads. It is a retail media. The first stage started in early 2023, and we have new campaigns coming along the way to promote sales of specific products, showing conversion rates and rotation rates well above those traditional marketing campaigns. There is still a lot of work to do, new revenue to come from that effort. Just like everything else we do, we have been very careful to provide suppliers the best platform.
This is yet another growth avenue starting this year. Our number one concern here is that, well, digital media is based on data and return. There is no point in spreading displays in 300- 400 stores and not bring any return to our suppliers. Because they make all the calculations of their return on investment. So we want to start that project, but providing return on investment, because that is their number one complaint about retail media. They are unaware of the return on investment. So we want this to be a sustainable strategy, and we want to collect part of it that goes to Facebook, Instagram, and Google. To do that, we have to provide clarity in the type of return they would get. Moving on. All right. Following along this growth vision, let me now talk about Panvel Clinic that would encompass all our clinical services.
Vaccines, tests, everything that was approved. We take services into serious consideration because they can be very helpful. We had 343 with Panvel Clinic, a 15 stores growth. 90 of these rooms are or can provide vaccines. Almost 38% market share in Southern Brazil. In services, we are 21%, it is a lot when compared to 11.7%, and there is still a lot to do. In recent days was shown in several stories in the media that reinforces our commitment to taking good care of our customers' health. There is an ANVISA resolution that regulates how you perform clinical exams at drugstores. All these measures are way more accessible to the population and will help us controlling treatment with convenience. This is a very interesting revenue source, but we have to be careful with it. You cannot change habits overnight.
I believe that when health authorities will approve these quick tests, will give assurance to doctors to refer these tests, but the adoption rate for that change to happen will take some time. But it is important to be there, to be operating in this world, because that is the role of the drugstore, to be a prevention agent. We do not want customers to live longer only. We want them to live longer and better with more quality of life. So that is our commitment, because that has to do with our purpose directly. Even the dengue vaccine, a very serious health problem. That is the first year in which we have a good vaccine with fewer side effects. It can be easily applied. But drugstores overall in the country would take center stage in providing that dengue shot, especially in the summer. We have to change those habits.
Not only Panvel, but the entire pharma industry has the mission to educate consumers to go to the drugstore for that kind of service. We talked about retail media, and data is key here too, as well as in retail media. We have been investing heavily in this area to keep track of data and use data for the benefit of consumers' health. Drugstores can play a key role in providing those services, because they are convenient, and they are capillary. There are no other link in the health chain can provide. Let me share something that is very new to us, too. Panvel will be publishing its first sustainability report about 2022. This is going to be proof of everything we have been doing. This rendering of accounts to society, the way we see it, will motivate our stakeholders even further to be more engaged in that journey.
Our platform, Todos Bem , is strong. I think you should take some time to get to know these initiatives in our report. It will be made available in the very near future, and we will get back to you to talk about it in further detail. All right. Coming towards the end of our presentation and wrapping it up. Let me summarize everything we have shown and also our take for 2023, the second half of the year. It concluded the first half delivering very good results, surpassing our expectations. The implementation of all the projects and our track record in our strategic pillars help us maintain our confidence level. The highlights. We believe we are going to maintain the expansion pace, and we have a good outlook to have growth in same-store sales in the second half. We will keep on focusing on service level and digitalizing our customer base.
Of course, we will keep on investing data, CRM, and the entire digital channel experience. Of course, being successful in our expansion. Of course, we are going to learn more from the marketplace and other digital initiatives. On to categories. 2023, we will be improving generics, hygiene, and beauty. Just like Julio said, this is non-drug related. This is going to be very important to us this year, not only for sales, but also to maintain a very healthy gross margin. Now, speaking of gross margin, our product and price mix follow that goal to maintain that healthy gross margin. We delivered that in the first half, and we were very successful, especially because the comparison basis was very strong. Just like I said, the growth in generics and non-drug related products will remain very important pillars.
Panvel brand products are going to be a very important growth driver, especially when you compare to that comparison basis. These growth numbers will be very relevant. On to expenses. We will have good results coming for more productivity, as well as a positive outlook with lower inflation rates than expected in the second half. In summary, you can see the evolution of that indicator, which is in retail. Three things when you look at this indicator alone. This is the pure result of stores. Mature stores, and our expectation will be even more efficient. New stores will keep on maturing successfully and maintaining that expansion pace of 2023. The impact of new stores in 2023, short term results will be smaller.
On the other hand, also talking about sales expenses, after two years of intense logistics investments, now in 2023, we are going to take a deep dive in efficiency gains in our cities. Well, with all these elements in our hands, we truly believe we are going to follow that expansion trend of our EBITDA margin. We have very good performance of mature stores. New stores will be maturing according to plan. We will have better logistics results, and we have a benefit in inflation rates in the second half. Another reminder, we keep on focusing on our cash flow, and we want to reduce our leverage. Our cash position is better than expected, and by year's end, just like I said, we expect to close that leverage at 0.4 x our EBITDA.
When you look at our track record, our results, our execution capacity, everything makes Panvel as a unique asset in the pharma industry. It is a great investment opportunity for both new and old investors. All right. In conclusion, I would like to thank you for attending our earnings calls. Now we can move on to the Q&A session.
We will now begin the Q&A session for investors and analysts. If you want to ask a question, please click Raise Hand. If your question is answered, you can remove yourself from the queue by clicking Lower Hand. Kelvin Dechen from Itaú BBA asks the first question.
Good morning. Congratulations on the results, and thank you for taking my question. I have two questions. Number one, about market share. You are expanding in Southern Brazil. You had another positive quarter. Can you give us some color as to dynamics? Could you elaborate on that situation in the state of Rio Grande do Sul? Can you talk about the outlook for the future? My second question is about same-store sales. Can you elaborate on the prospects for the next quarters?
Thank you, Kelvin. Let me talk about market share first. Our expansion and operations strategy is analyzed taking into account the entire region. There may be variations in one state. This happened in Rio Grande do Sul, where we have been leaders for quite some time in that state. You have been keeping track of our numbers. We have been growing market share in Rio Grande do Sul, but that variation is only natural. In our expansion strategy, there is a lot of room to grow in both Santa Catarina and Paraná, and in the countryside of the state of Rio Grande do Sul. We respect our competition.
It has to do with both chains and independent stores. That dynamics hasn't changed. Of course, we have to adapt our strategy. There are times in which we choose to defend our territory, capital cities, and there will be other times in which we are going to bet on new territories. That is only part of the market. We are the only player that breaks down information by state. Other players show data by region. However, our strategy is focused in the southern region of Brazil, not in Rio Grande do Sul.
That variation in market share in Rio Grande do Sul is only natural. Oftentimes, you open stores in areas you have a very large share. It is difficult to grow, and you may open a store in which there are opportunities to gain market share still in the state of Rio Grande do Sul. Some share variations are only natural. Santa Catarina and Paraná, it is on a growing trend. You won't see many variations in both Paraná and Santa Catarina. Growth was going to be consistent there. It is only natural. It is according to plan. There are no surprises.
Let me address the second part of your question, mature stores. That is important to point that out, because when you look at the data from mature stores in Q2, they grew below inflation rates. That is a fact. But it is only due to a seasonal cause. When you compare 2021, 2022, and now 2023, mature stores have been growing very strongly. The average is at 11.5%. I think I have to point out something that has to do with 2022 more specifically.
Panvel had better results than the average in the pharma industry, especially in selling services and the entire basket of products due to the quality of our inventory or our operation quality. The basket of products related to colds and flus, 30% of growth on a monthly basis. It is no surprise, therefore. It was only natural that in this quarter, you would see we are the only company that had antibiotics, right?
Yes, that is true.
Looking ahead, that is an outlier. When we are talking about Q2 of 2024, we will be talking about a different scenario. The opposite, actually. If it is a very good year, we will not be talking about it. Anyway, it is a matter of comparison basis. We are now looking at the second half of the year now. That difference in basis for comparison, that will change. We still have June, but between August and September, that comparison basis is a lot less aggressive. You will see more growth in Panvel sales now in Q3. Again, this has to do with comparison bases. It has nothing to do with variations in our initial plan.
Danniela Eiger from XP asks the following question.
Good morning. I have two questions that are related in terms of profitability. Looking at gross margin, you are talking about maintaining gross margins. Looking at the dynamics of product mix and the strength in your private label , it would make sense to expect an expansion there. Do you expect that improvement in that sense, maybe to invest more in the digital channels? I would like to better understand that gross margin composition. My second question is about EBITDA margin. You talked about operational expenses dilution, especially sales expenses, right? I would like to understand what the magnitude of that would be for this year and maybe for the future.
Yes, that will come in our favor. Thank you for your question, Danni. Let me talk about gross margin, because you hit the nail on the head, I believe. When we talk about maintaining gross margins, it may be considered a conservative point of view. For both drugs, hygiene, and beauty, that would indicate more gross margin.
Everything we have done, the generics. We have had good results in generics.
Yes, excellent results.
I cannot promise any improvement. All we can do is promise maintenance of that level, keeping that level. Convenience products have become, or has become an important category. Oftentimes, people would not include maybe a chocolate bar or something else, but this has been made available at the checkout so that consumers are not mixed up by the different types of offers. But the margins are good for those products and even our private label . When people are going back to the normal behaviors, makeup, facial treatment, these products have been recovering. All indicators make us believe that we may have better margins in the future, but we cannot promise that at this point in time.
We may invest that resource in sales. This is something that we can decide. For the time being, we might as well be conservative in that sense. As to the EBITDA margin, we have talked about gross margin, but sales expenses are important. What is going to contribute to our EBITDA margins now in second half? We'll keep on having more productivity from stores and logistics. This is very clear, especially in the numbers we see for the third quarter. Just like Julio said, inflation will be beneficial. When we compare inflation for the second half of 2023 with inflation rates of second half of last year, we can have some benefits there too, along the lines with our expectations, which is to grow EBITDA margin. We should see that happen in Q3. We managed to maintain EBITDA margins. That's not what we expected. We had a very strong basis.
The price increase was 10% last year, 5% this year.
We had very favorable mix last year with good margins. We're heading in the right direction the way we see it.
Thank you. That was very clear. Thank you. Congratulations on the results.
Gabriela Ferrante from Safra asks the next question.
Good morning. I have two questions. Do you believe that the working capital level is ideal, or is there room for improvement? You're reducing the performance gap between stores from different states. What's your take between the gap of performance between stores in the countryside and in metropolitan regions?
Thank you for your questions, Gabriela. Let me talk about working capital, something that is very important to us. The numbers were very positive in Q2. Our outlook remains promising in terms of negotiations with suppliers. We're going to extend payment terms. This is here to stay and will be very beneficial to us as far as receivables are concerned. Just like we did in early 2023, adapting the number of terms of installments. This can be seen in our receivables days. Our wholesale department has been very conservative in granting credit and limiting payment terms as well. Yet another positive factor.
Inventory is more seasonal in nature, and the Q3 inventory level days may go up a little bit, even to prepare for Q4. That's the impact of Q3. It's only natural that you prepare inventory levels for more sales in Q4. But the pillars, the fundamentals have remained solid. We're going to maintain this cash flow level even better. There may be some variations in Q3, but the road towards year's end has been very clear. As to the gap between countryside stores and stores in the capital cities. When you look at average sales per store, there may be some gaps. Stores in capital cities will have better average sales. Depending on the city in the countryside, you may have larger cities in the countryside that have very similar performances.
When you look at margin, EBITDA for all our construction margins, the numbers are very similar in that case. We don't see major variations amongst states. There are variations when compared state to state. Between countryside and capital cities, that's little. Between states, you have major differences, just like we showed you on the chart. Due to the maturity of the store. There are some new cities we are not as competitive. That happens in the state of Paraná, for example. But when you compare stores in capital cities and in smaller towns in the countryside, numbers remain similar. Thank you.
Vinicius Esteves from Genial asks the next question.
Good morning. Can you hear me?
Yes, we can hear you.
Thanks. Congratulations on the results. Let me just follow up on [Kelvin's] question about. The question is about competition. São João announced they're opening stores in the countryside of the state of São Paulo. When you look at the competition, would you like to open more stores in Paraná or maybe expand and open more than 60 stores? Can you talk about the competition, [Ahmed] expanding their store chains?
Well, answering your first question, we want to maintain our strategic discipline. Rio Grande do Sul, Santa Catarina, and Paraná. That's where we stand out. If you look at track records in the pharmaceutical industry, all chains that didn't do that, sooner or later had to pay a price. We believe that this is a competitive advantage for us. We're going to expand in the city of São Paulo. We believe that our store there is special despite the consolidation or the number of competitors we have there. We've had outstanding results in the city of São Paulo. Of our average sales is almost twice as much of the company's average sales. We feel like opening new stores. That's going back to the first question, how important of being disciplined in our strategy.
Vinicius, we respect all our competitors. They have different strategies. You mentioned two of them. They have very different strategies than our own, especially in terms of delivering value to customers. When you look at market numbers, customer or competitors' data, our discipline remains an important competitive advantage. We may even reconsider the number of stores, but the discipline of focusing on Southern Brazil, that should remain the same. We're not giving you any guidance today, but it's been three years now. We may expand our base to a certain extent. In our region where we operate, we're not venturing elsewhere.
This concludes the Q&A session. We'll turn the floor over to Mr. Julio Mottin Neto for his closing remarks.
Well, once again, thank you for attending. Thank you for the good questions. We are a very transparent company, not only with our employees, but everyone that comes to work here point out how transparent we are. That can become a frailty because a couple of things may end up in the competition. But we believe that transparency provides high level of engagement, and the same rationale applies to investors. A company that is transparent, that deals with the market and analysts very well. We are always willing to discuss and listen to whatever you have to say. Of course, we want you to be even more engaged in that project.
A project that provides a lot of innovation, but above all, with an important balance and a lot of respect for our shareholders' capital. I think the company can balance innovation and being conservative. We can balance that very well with a sustainable vision for our business. Okay, once again, and I'll see you in the next quarter.
Thank you so very much. We've had many questions, and our IR team will be answering those questions. We remain available to answer any questions you may have. Have a good day.
This concludes Grupo Panvel 's earnings call. Thank you for attending and have a great day.