Good morning, ladies and gentlemen. Welcome to the Panvel Group's Q1 2023 earnings conference. This conference is being recorded and will be available for replay at the company's investor relations website, where the presentation slide deck can also be downloaded. We would like to inform that during the company's presentation, all participants will be connected in listen-only mode. Following that, we will begin our question and answer session, and further instructions will be provided. Before we proceed, I would like to underscore that the Grupo Panvel's administration's forward-looking statements are based on their beliefs and assumptions as well as currently available information. These statements may involve risks and uncertainties, seeing as they refer to future events and therefore rely on circumstances that may or may not materialize.
Investors, analysts, and journalists must consider that events relative to the macroeconomic environment, the industry, and other relevant factors may lead to materially different results than those expressed in said forward-looking statements. Joining this conference today from the company are CEO, Mr. Julio Mottin Neto, and CFO and IRO, Mr. Antonio Napp. Now, let me turn over to Mr. Mottin Neto, who will begin the presentation. Please, Mr. Mottin Neto, you may proceed.
Good morning, everyone. It is a pleasure to be here again to report on this quarter's results. These are results that give us significant confidence that we are treading the right path, following strategic and financial path that is historic for the company at this point. Q1 2023 showed over 14% growth, bearing in mind that the basis for comparison from last year was high and had been substantially impacted by the COVID-19 pandemic and its Omicron variant.
We had over 19% growth back then. So over these 19.3%, we have grown over 14%. Despite this change in the mix of product, where the COVID-19 allowed for a wide margin and whose sales essentially plunged over this year. By rearranging our mix, we were able to widen our gross margin, which increased by 0.2 percentage points during Q1, which was extremely positive as well. Another substantial highlight, which seems outstanding to us, is the fact that today we are living in regular times within Panvel. Panvel has always seen high sales of non-pharmacological products. We are now seeing customers coming back to stores. Therefore, non-medications had outstanding performance this quarter with over 25%, as well as generics. Now, the story behind generics is a bit longer.
The company changed its generics approach with more competitive products in the last few years, and now we are seeing continued growth in generics in a very substantial way, with an addition of clients to Panvel's client base, especially customers coming from lower income groups. So we understand that this trend in generics is very interesting, and we see that as coming to stay. Another important point this quarter was the fact that our expenses were further diluted, which is in keeping with our theory that our strategy of expanding stores and maturing our stores with an increasing average sales tends to represent a dilution in our sales cost, as well as our logistics side, which over the past two years included substantial investments. We opened a new distribution center in the city of Curitiba.
We virtually doubled capacity in the city of Eldorado do Sul, and these DCs now have a level of maturity and cost dilution that is also very significant, and that is another positive highlight on the spending side. This trend with reduced costs, widened margins, and higher sales over a robust basis for comparison provided a very substantial EBITDA, which increased by 25.9% over this quarter, 0.4 percentage points over Q1 of last year. It is also important to underscore that we are now finding a new level of productivity, whether through average sales or higher productivity within our stores or even on the logistics side. These are trends that, from our standpoint, are expected to continue over the course of the year. These are aspects that are very much under control and with perfect execution.
The company is seeing substantial productivity level that will contribute to our growth over the course of the year, which is a very important highlight. I would also like to underline that within this scenario, we are living in Brazilian retail at large, where we are seeing huge challenges. I believe that our low financial leverage against a backdrop of high interest rates that we expect to remain high for some time, definitely represent an opportunity to continue to grow at a fast pace, also expanding our footprint, whether that is in Southern Brazil or our small footprint in the city of São Paulo, which has provided very encouraging benefits. The brand that we are building in the city of São Paulo with a longer-term project, to us, represents a competitive advantage. We do not see the same level of health ability in the balance sheets of our competitors.
Another highlight for Q1 is something that we had been talking about over the course of last year, which was a market practice, which is sales via WhatsApp. This was something that we had never worked with before, but WhatsApp has now become an official digital sales channel for the company. We even have plans to have this channel gain increased relevance. This is a very important channel for the elderly population. We know that the elderly are more challenged when it comes to digital sales or digital purchases, but we understand that those heavy users of medication tend to account for a larger share of our sales, which is why we see WhatsApp as a significant lever within our digital strategy.
Also, we see significant growth in our work with data on the digital side to become increasingly more important for our customers, and so that we can treat them as unique in addressing their needs. But we understand that we need to work faster. We know that time saving is an increasingly important asset for people. One of our challenges this year, and it is true that we have delivered in several cities, in several locations, in a time as short as 30 minutes. But we want to come to the point where we will be able to promise that we will be able to deliver in as short a time as 30 minutes. And we believe that that is close.
But last but not least, I think it's important to say that RDC 786, published on May 10, which regulates fast testing in drugstores, also represent a significant opportunity for increasing service sales in drugstores. I think that with that, doctors become more confident after the regulating agency, ANVISA, now sanctions fast testing in drugstores. So that rhetoric behind healthcare hubs now gains a significant lever and makes more and more sense. So we are now focusing our efforts increasingly more on making our service sector become more substantial and more representative within our balance sheet. Now I would like to turn over to our CFO, Antonio Napp, who will be giving you guys a bit more detail about our financials in Q3. After that, we will open up our cameras and begin our Q&A session.
Thank you, Julio. I will now take it over and go a little bit deeper into the details of everything that Mr. Mottin Neto said, and we will then open the conference for questions. So moving forward, this is something that we have every presentation that we make. We love to explore how Panvel's been consistent over time. Everyone who knows us knows how much we like to talk about this. Considering the consistency of Panvel over the last decade shows a compound growth rate of about 15% until 2022, and this average is going up in the last couple of years. Now, I'd like to talk about the performance since mid-2021 until now, which has been outstanding. Looking at our first quarter versus Q1 2021, our compound growth is of nearly 17%. So a very substantial figure, which is pulling our average down.
We also like to say that we have never seen a loss ever since we started, which has been a trademark of the group. Now moving on to slide five, we'd like to reinforce Panvel's outstanding sales in Q1. As Julio said, Panvel grew by 14.2% over this period, over a strong basis of comparison in 2022, where we had grown by over 19% versus 2021. And it's important to remember that back then, our revenue was driven by COVID tests and the entire basket of products relative to COVID-19, which is something that we did not see in 2023. So this increase in sales was, again, outperforming the overall market and was not a result of our expansion in stores, but also the increase in in-store sales as well as the prices of our products in the area.
So we also have a chart here comparing Panvel's performance against its main competitors in the area. So our purpose was to increase our average sales per store. And even though we had low sales compared to February, we ended March with average store sales at about BRL 648,000 per store. Again, we cannot forget that we are coming to this average sales level with accelerated expansion, with over 14 stores being opened in Q1 2023. Along the same lines, when we look at same-store growth and mature store growth here in Q1, growth was still robust at about 10% in same-store sales and 6.2% in mature sales, despite the level of inflation, according to what we've already said. And now we'll be talking a little bit about expansion. We've opened 14 stores in Q1, and we have opened overall 59 stores in the last six months.
We are seeing a more consistent pace of store openings. We have been opening 14 stores for a number of quarters now, which makes it easier for us to leverage these assets. We are very pleased with the last few crops, which makes us very comfortable with the company's ability to pursue or to execute its plan. I would also like to say that we have the largest number of sales maturing in our portfolio, which account for 30% of our bases. If on the one hand, this was clear in our short-term results, it is also an assurance of growth in the medium to long term. In this quarter, I would also like to say that we ended three quarters and transferred them from old locations to new locations, getting more returns from our sales. We understand that these are important movements that are important to our business.
Further in the presentation, we will also look at the returns from these stores, but it is important to say that these are still very much robust figures. As a consequence of what we say in terms of the success of our expansion, in slide eight, we can say that Panvel's market share continued to grow and came to 11.7% in Q1, 0.2 percentage points over Q1 2022. With all due respect to our competitors here in South Brazil, Panvel has once again showed the consistency of its expansion much higher than average with growing market share. I would also like to underscore our higher share in medication, especially generics, which has to do with well-being for the population, which is very much in line with our strategy as we continue to invest heavily in continuing to follow up with patients with chronic diseases.
Moving forward, we will talk a little bit more about the digital side on slide nine. Again, every figure makes it clear that Panvel will continue to be the benchmark in the industry. In Q1, as Julio has already said, we have come to nearly 18%. So to date, virtually 18% of Panvel's sales include our digital sales. This level is a result of the maturity of several projects that were concluded at the end of last year, especially the activation of social commerce tools, which are now contributing strongly to our online sales growth. It is interesting that it continues to grow over such a strong comparison basis, and we are clearly seeing customers coming more to our brick and mortar stores, which is to say we are seizing every opportunity to digitalize those customers. In social commerce, we rolled out a very interesting project, which is our digital assets.
This goes beyond digitalizing our customer, but digitalizing our purchaser via our platform. We turn our store managers into digital influencers in their community. So we have over 10,000 posts and over 30 million impressions, which increase the footprint of our stores offering product services, coupons, and also promotional sales. This level of penetration that you are seeing is directly related to the quality of the experience via our channels and delivery to our customers. We have the fastest delivery in Brazilian retail, and we are investing in technology to deliver even faster, as Julio has said. We have, for example, here a chart that shows clearly how the share of our deliveries in as much as 60% has increased versus all our deliveries. So we went from 20% in 2021 with those sales to about 50% in March 2023.
No other competitor in our industry can do this at this rate. What we plan to do is keep our competitive edge, which is why, as we speak, we are working to provide to our customers in the main markets, deliveries in as little as 30 minutes. Bear in mind that we are doing that with a level of service of 97% NPS, which is another enviable rate. We will have another 137 delivery stores, not to mention click and collect, which we have in over 500 stores. This is combined with our digitalization efforts, which had an increase in app downloads. Our customer base increased over 60% versus last year. Bearing in mind that today we have over 1 million active users per month, which is driving our MAU level to over 40% of our customer base.
To wrap up the digital aspect, another pillar that we always talk about. In our case, this growth in digital is not a driver of margins. Using all of the stores that we have and the lower COGS, we were able to improve our store productivity. Another strategic pillar that makes all the difference at Panvel is our services arm with Panvel Clinic. We continue to position ourselves as the leaders in healthcare services in South Brazil. We ended this quarter with 344 stores with Panvel Clinic, with 27 more stores than Q1 last year. Of these stores, 89 stores have the vaccination capability, and this is something we take so seriously that we reached over 44% market share in this segment in South Brazil. I guarantee we still have a lot to grow in the region.
This is no news, but the reduction in COVID-19 vaccinations reduced the number of services in that level. Regardless of that, Panvel has the largest market share in the area. So another benchmark reassuring our mission of providing healthcare to our customers. We believe that Panvel already makes a difference right now, monetizing each one of its projects and sowing good seeds that will be harvested there. Julio talked a little about this, but we had the issuing of RDC 786, which will provide another great avenue for growth. Now moving on to slide 11, coming to another important pillar, which are our private label products, Panvel products. This is another important pillar for us to widening our margins. This is the only network where the customer takes the brand home.
In Q1, the share of Panvel products came to 7% of our overall sales and 17.4% market share in hygiene and beauty. Again, establishing itself as a benchmark in the Brazilian market. In Q1, we saw that the COVID-related products, such as surgical masks, increased the number of Panvel Group products. Excluding that, we grew by almost 24%. This is a seasonal share movement for us, which we expect to be balanced over the course of the year, considering the growth in the existing products. In Q1, about 24% of Panvel sales included items launched over the last four months and continued renewal that is been driven by our churn. So with over 1,000 active SKUs, this is still a significant gross margin product, which exceed by over 60% the margin for our overall products.
It is also good to remember that over 30% are produced by our own manufacturing, and this ensures a wider margin in our entire private label operation. Later, if you would like to watch the video or look at our presentation, a few examples of products with the Panvel label, which as you can see, is growing in number of categories. Closing this virtuous circle in our digital and brick-and-mortar operations, we have to look at customer satisfaction. According to the information available on slide 13, here we have a summary of the most important aspects we monitor consistently. Our NPS ended at 80 points following the same trend we saw last year. We still have the best rate in the pharma market, and we are still the best-rated app in Google Play Store and App Store.
This is something that fills us with pride, and we are always monitoring it, looking to provide the best for the client. Looking at our gross margin, we go to slide 14. Gross margin was one of the highlights for us this quarter. In retail, it came to 30% in Q1, growing by 0.02 percentage points over Q1 of last year. I would like to underscore that we were very successful in managing our product mix. This allowed us to offset both in sales, as we have already seen, and in gross margin, a dramatic decrease in products relating to COVID-19 in Q1, especially highlighting growth in generics and non-medications whose gross margin even exceeded our expectations for the period. Looking ahead, we are still very confident with promising prospects for gross margin.
We continue to evolve our project in incrementing generic sales as well as convenience, hygiene and beauty, and white label Panvel products. When we look at our SG&A on slide 15, we can see, especially in sales expenses, precisely the investments and changes we have made in the last few quarters. This is something we have been talking about for some time, and following the trend that we began to see in Q4, sales costs accounted for 21.6% of our sales, a 0.5 percentage point decrease versus Q4 2022. Both staff, material, and inventory expenses decreased as well as logistics expenses, and we believe we will continue to capture these gains over the course of the year. In SG&A, it is important to underscore our consistency. We continue to maintain our financial discipline, which is already characteristic of ours.
We stayed at 2.2% of sales, which is exactly the same as we had last year, still with the best SG&A level of the industry. It is important to highlight that this level of expenses and the search for better productivity is still in the DNA of our company. When we look at, for example, the number of staff per store, we are still one of the most productive brands in the market, and our productivity continued to grow this quarter, always focused on providing the best possible service against a backdrop of a strong customer traffic in our stores. We have already talked about stores and expenses and margin. With that, we come to our EBITDA. Our adjusted EBITDA ended the quarter at BRL 50 million, or 4.5% of revenue, growing by nearly 26% over last year.
I would like to say that we are very pleased to be witnessing a real margin expansion at the beginning of the year. What allowed this wider margin has to do with what we have already said, diluted gross margin and sales expenses. These items will continue over the course of the year and reinforce our positive prospects for our year result. When we look at retail EBITDA on slide 17, our consistent execution becomes all the more clear. With this, we come to another important highlight for us for the quarter. I always like to say this because it shows the results generated by our stores, and it ended Q1 growing by nearly 20% versus Q1 2022, + 0.5 percentage points versus the same quarter of last year.
I would also like to say that we are expanding our number of stores in the last quarter, and this shows the success of our mature stores and the excellent ramp-up in our new stores. The increase in this item, which is what some people call Four-Wall EBITDA , is yet another factor that explains our optimism for our 2023 performance. In keeping with everything we have already said, we come to the net revenue on slide 18. Adjusted net result came to about BRL 23 million , about 12% of our gross margin. No surprises here, guys. The small decrease in our net revenue has to do with two effects that we already expected.
On the one hand, the negative impact of higher financial expenses during the period, and on the other, a basis for comparison in Q1 2022 that had over BRL 6 million as a positive effect in income. With those two effects, it was only natural that our net income decreased by a little bit. Still, the group is still one of the most important performances in the market, which highlights our very efficient operations. I would like to take the opportunity to thank our staff that worked really hard to maintain a good level of service throughout this time. On slide 19, we can see a consistent cash performance. Our data continued to perform well, and we had a level of purchases that was better respecting the gap between interest rate and our results.
We maintain the same cycle compared to last year and see that there is still room compared to last year. Another thing that was highlighted in the beginning that was said is our capital structure, which is still very good. We continue to preserve one of the lowest leverage in the market, and the increase in this leverage versus the beginning of last year is within expected, seeing as we should remember that first quarter of the year seasonally always consumes more cash. This was because of an increase in medications and the month of February, where we traditionally have lower sales. With the low level of debt, we feel very confident in the continuity of our expansion and our investments, regardless of the scenario of high interest rates that we are living right now, which is likely to continue for a while.
This still has a low impact on our results, thanks to the strength that we have already pointed out. We had already mentioned this at the end of 2022, but I would like to underline it again. For 2023, we set the goal of coming to the end of the year with a leverage level below 4 x our EBITDA. Naturally, I would just like to stress that this decrease will not be seen in the first half of the year because of all the seasonal effects we have mentioned. But starting in Q3, we expect to see the decrease in our leverage very clear. There is a clear path to that, and we will see improvements both in our cycle and in the group's operational performance over the course of 2023.
With that, we end the numeric side, and we go into the part where we talk about our strategic building blocks to tell you how our strategy is going and what is in our minds about each one of these pillars, which are the lens through which we look at our operations. We always like to talk about the strategic expansion of our brick-and-mortar stores. It is no news that brick-and-mortar stores are and will continue to be, for a while, the gravitational core of our business. Being successful in our geographic footprint is key for all our other pillars to succeed as well. Our expansion plan is still moving ahead within plan, focusing on Southern Brazil, hybrid stores, and also within the state.
We still have a number of points that we have already prospected for 2023, and we plan to continue to expand at the same rate as in the last few years. In slide 21, we share the new numbers of what we are talking about. In 2023, standard and popular models will be important to capture B, C, and part of the D income groups. So we expect to have, this year, 10 new cities with Panvel stores until the end of 2023. Moving forward now on slide 22, we take the opportunity to once again give you an overview of the success of our expansion and the operation of our existing brick-and-mortar stores. This is information that come directly from IQVIA. The first time that we saw this was in Q1 2022. We talked about this before, the increase in Panvel's market share in Southern Brazil.
Here we have sort of the details about how we are setting ourselves apart from the competition. This is data from Q1 2023, and according to IQVIA, is divided in four aspects. The first group in darker blue is the impact of our new stores and our growth rates. In gray, we have the impact from the higher average price of the products that we sell the most. The third group is volume. So the higher number of volumes, more clients, and more frequency of sales. The last, the number of new stores. Whether we compare activism, new sales, it is clear, first of all, that we are moving with quality expansion, whose level of growth is very much in line with the average for Southern Brazil. It is also very clear that we are gaining share considering the quality of our existing stores.
We were very efficient in 2023 and expanding our customer base at a much higher rate than the average for 2023. Look at the chart, especially when talking about volume, whereas our competition saw a decrease in the second half of 2022, we continue to see a frequency of customers virtually unaltered. Also, we are more efficient than average in the choice of our stores because the impact of that choice was very small on our average sales, less than half of what we saw for the competition. If you are with us every quarter, you know that we are giving more and more details to the market about the performance of our expansion, looking at average sales, Four-Wall EBITDA , and retail EBITDA. Here on slide 23, we once again update that information and share that for you.
Looking at the figures on this slide, we can say very comfortably that we are very accurate in our expansion strategy. When we look at the performance of our crops, the figures speak for themselves here on the chart. First of all, the EBITDA for retail every year. This shows what we have been saying every quarter, that our overall margin will improve over time as the new stores drive the margins up month after month. When we look at our ROIC, it is the same conclusion. Taking as a starting point the company's performance in 2019, we set the targets that guide our work in terms of ROIC, whose calculation is very much the same.
We see that every crop of stores starting in 2019 exceeded the targets that we set, and increasingly so, starting with over 10% returns in the first year to as high as 60% in the last reading. Since 2020, we have opened over 75 stores. That is no small feat. At a pace that was never before seen within Panvel, and the average ROIC was still over 40% throughout. Lastly, talking about the performance of our brick-and-mortar expansion. On the right-hand side of the screen, we can see the results for each state where we operate. We can say again, very confidently, that we are delivering in every region of the country, and we are closing the gap in the states of Paraná and Santa Catarina when compared to the state of Rio Grande do Sul.
Actually, in this chart, we have the maturity of our stores per state, which helps us see especially how much we can still improve our margins as curves begin more similar to what we have in the state of Rio Grande do Sul. Now wrapping up this overview of expansion and our opportunities. When we look at the market share for each of these states where we are expanding with figures close to 6%, there is still a lot of opportunity. We still have a lot of room to grow and a low risk of cannibalization. This is also true for the countryside of Rio Grande do Sul, where we still have opportunities. Panvel is poised to explore every state, and after careful work developed throughout the years, our brand has become well-known and respected not only in our home state but in every state we operate.
We are now moving on. With that, we are automatically talking about customers. Another strength for Panvel, which has been growing an ever more solid base. Over the last quarters, we made a point of breaking down these figures to explain our customer base because they also help to explain why we are still growing and why we are still optimists. Our Panvel clients still grow, and we are leveraging the robustness of our relationship strategy, exceeding 16 million individuals recognized and separated within a unified customer base. This is a competitive advantage for us. With all of that, we are now poised to follow the entire customer journey of our entire base, especially for those who are severe disease patients. It is important to say that our customer base grew over 28% in Q1 versus last year. Here we have other important figures.
We are still very successful in looking at our active customer base, which grew over 30% versus last year. In addition to that, this expansion in the active customer base was also accompanied by a sales frequency, which is another healthy figure for our business. Growing the number of clients and growing their frequency, we are creating more loyal customers. According to our metrics, these loyal customers go to our stores more than 3x more than all clients. These are customers buying once every two days. Exactly. Our overall customer base, we have active customers with one purchase every six months and loyal customers who buy once every 15 days. This funnel is really improving for us, which is great all around. Another important thing is this trend is a factor that really makes us more confident in our ability to deliver better results.
Talking about optimism, we would also like to talk a little bit more about Panvel Clinic, which includes our whole range of clinical services, especially vaccination and drugstore testing. We take this very seriously, and to us, drugstores are the ideal place for primary care and preventative care. There is a lot of great things to come in this journey, and the most recent news was yesterday, the publication of RDC 786, which regulates rapid tests in drugstores. With that, we will improve our works with TLRs, seeing as we have over 50 units which are prepared to perform these tests, especially after the second half of the year. August 1st, if I am not mistaken. This increase in services has a ground all laid up for it, and there is a lot to still do in this sense.
We are confident that drugstores can be a core part of this system because of its consistency, something that other links in the healthcare chain do not have. This also makes sense in the sense that these personas, which we call clinic personas, they have a ticket and frequency that are much higher than average customers of Panvel, as I share with you within this slide. Now, guys, we are moving closer to the end of our presentation, and I would like to wrap up sharing with you a summary of our updated outlook for 2023. We have talked about this at the end of the year. We are now one quarter later, so we take this opportunity to update our overview, but I have to say in advance that this is still very good and still very much in line with what we said before.
When we look, first of all, to our sales data, we will continue to expand our sales, as we said, and we continue to expect to see a two-digit growth in our same-store sales over the course of the year. In order to achieve that, we will continue to focus on the level of service in our stores, continuing to digitalize and expanding our customer base. This includes continued investments in data analytics, CRM, and the experience via our digital channels. We also expect to see more growth and an expansion in our marketplace platform. Looking at categories 2023, we will still see a lot of growth in generics and as well as beauty and hygiene across all products. Non-medications, which has been a hallmark for Panvel, will be great in terms of the expansion and gross margins.
Gross margin, our strategy, both in product mix and in prices, is focused on keeping healthy margins for 2023 at levels close to what we saw in the previous year. We have already delivered that in Q1, and as I said, the increase in generics and non-medications will help to offset the lower sales of medications this year. The non-in-person sales will also be important in that sense. When we look at expenses, we will definitely continue to reap the benefits of our operational leverage with gains in store sales. Here we go back to what I mentioned in terms of retail. This is something that is very clear to us. We should have mature sales becoming more efficient. We will continue to see new stores accelerating their maturity.
If we keep the expansion rate, the number of stores open in 2023 will lead to a lower overall result in the year as a whole. But after two years, we will begin to reap these benefits. Looking at all of this, we understand that we will expand our margins in 2023, looking at all of these elements. This concludes our overview very well. We are still confident in our execution ability. Again, I would like to thank everyone for joining us, and we are now open for questions.
We will now begin the Q&A session for investors and analysts. If you have a question, please click raise hand. If your question has been answered, you can remove your name from the queue by clicking lower hand. Please wait as we poll for questions. Our first question comes from Mr. Gustavo Senday with XP Investimentos. Gustavo, you can now open your microphone.
Good morning, everyone. Thank you for taking my questions, and congratulations on your results. I have two questions. The first one about your working capital use. There was this pressure of two days year-over-year. I would like to understand what opportunities you see moving forward, perhaps more days for suppliers, but I would like to understand what would be the regular level moving forward. My second question is about the hygiene and beauty mix. You have seen outstanding growth that has been really calling our attention, and I would like to understand what opportunities you see moving forward in terms of penetration for the mix, what this category could represent in your mix of products moving forward.
Thank you, Gustavo. Let us start talking about working capital. In Q1, as I said before, this is seasonally a time of burning cash. Because we had purchases that were a bit lower, this gap of lower cash with high interest rates in Q1, we couldn't capture all possible gains in supplier margins. But looking ahead over the course of the year, we should see that starting in Q2, but most clearly as of Q3. Our target is still improving in at least three days the average deadline for suppliers, and we should see gains of at least two to three days in the average deadline for customers. With that, we expect to end 2023 with an average gain of four to five days in our cash cycle, comparing December 2023 with December 2022. That's the path we're on, especially when it comes to our cash burn in Q1.
We burned less than we expected, and this is a sign that shows that we have every opportunity to deliver a significantly lower leverage at the end of 2023 when compared to 2022. Now, about the health and hygiene and beauty mix, essentially, every product within that category showed robust growth over the course of Q1. This is a behavior we had begun to see in Q4, but it's become a lot more significant now. We're talking about child products, makeup. We are still moving forward in food and convenience, and we are constantly seeking for more opportunities to expand our mix in our stores so that we can improve the productivity per square meter in every store.
I'd just like to underline here that we are still focused on healthcare and wellbeing, so we're still looking at improving our mix, and I can assure there are still many opportunities that build on that. And this has been very positive. It will really help us over the course of the year, and Panvel has always had higher market share in this category that outperforms the category.
I think we're seeing a pause button being pressed in H&B during COVID. This was a time when products couldn't be tested in store, makeup especially. And makeup has always been a product that's important for Panvel. Its share in hygiene and beauty has always exceeded 60%, so this was an entire quarter where we saw the figures going back to normal. Once again, we turned on the innovation mode.
We are running a complete overhaul in terms of novelties across the categories we operate on, and I believe that makeup is a very important one. We saw that drugstores, in a way, have abandoned that category, but we insisted on it, especially because it's always been significant in terms of Panvel products. And we are all, of course, respecting the positioning limits. We do not want to miss or lose our positioning in wellbeing and healthcare. We understand there's a very significant opportunity within this category. So we're very optimistic in terms of the rebound in HB and the rebound in customer traffic because we've always been able to navigate this scenario really well.
That was perfect, guys. Thank you.
Our next question comes from Mrs. Clara Lustosa with Itaú BBA. Clara, you can now open your microphone.
Good morning, everyone. Thank you for taking our questions, and congratulations on your results. We have two questions. A little bit about the competitive environment first. We see that you have seen gains in share and sustained your position in all of the states you operate. Could you give an overview of what you have in terms of what the competition is living? We are seeing adjustments. Do you see other players in a more fragile operation? If you could give us some color, especially when you compare the Rio Grande do Sul with other states.
My second question, this is something that you guys have mentioned over the course of the presentation, but I like to hear a little bit more about the productivity outlook. You mentioned the expansion in margins. We know that the average ticket being lower than last year's pressures your profitability in a way. You have explored initiatives on retail, which is ultimately more weighty for the group. If you could also give us a sense of what that looks like for your distribution arm as well, and the impacts that that could have on that division and what the entire result, the overall result would look like.
Thank you, Clara. Well, let's start with the competitive environment. We do not expect any huge changes. We do not see any huge changes, especially considering the major networks, both locally and nationally. We see that most of them continue to follow their growth rate, as do Panvel, which is also offering a value proposition that customers are seeing as more complete, which is shown by the market share that we have achieved in the area in which we plan to continue to see, not only in Rio Grande do Sul, but in Santa Catarina and Paraná as well. You mentioned the fragility of a few players, and we understand that with the level of interest rates, many smaller players are leveraged with problems in scale. We understand that market opportunities are coming up. They are already coming up.
We see many retailers in our industry, and once again, these are smaller players which are struggling in rolling over their debt and settling their debt, which opens up possibilities for groups such as Panvel, which is why we are still very optimistic in that sense. We believe that over the course of 2023, some players will either fall by the wayside or lose momentum, which we do not expect to be our case given all the steam that we still have. Looking at other elements, naturally, when we look at the entire year, of course, we are now moving into Q2 that is facing up to a very strong basis for comparison. But starting in the second half of the year, according to our plans, we should continue to follow this trend of widening our margins and gaining productivity when compared to last year.
Again, I would like to stress that we were very pleased with our Q1 results because we were able to see our EBITDA rate take off even by a higher rate than we had expected previously. Respecting the seasonal period of Q2, starting in the second half, we should continue to see this trend of expansion. You talked about the expansion, and you mentioned distribution, actually, and this was one that performed well in Q1, with sales growing by over 18%. What we are seeing, and this is an interesting factor, is our distributor has good sales volume, preserving very healthy distribution margins, which is an interesting indicator for us that the level of service at our inventory levels at our distribution centers are above the levels of the market at large. We know that because we are monitoring the demand of our clients in wholesale.
When we talk about wholesale, it is digital wholesale, so their fixed costs are very low.
Which is still a strategic sector for us. Of course, over the course of the years, Panvel tends to outgrow the competition, but we like to take every opportunity to sell more, lower our costs, and have higher gains, which is exactly what we saw again in Q1.
When it comes to competitiveness, we are still seeing the same trend as we have always seen. Major regional networks, which are very important here in the south, we have one in Santa Catarina and also another important one in the state of Paraná, but neither of them have the offering of in-store experience that can successfully exceed the barrier from their state because these are very similar offerings. They open it here or in Santa Catarina, and the customer will say, "Well, this is not very different to what I have been used to for years." So we see a huge challenge in terms of crossing borders for these regional players.
Raia Drogasil is one that is not the case. This is a very good success case. But we usually say that if every new drugstore would impact our stores, we would not be opening as many stores as we are opening. So we are not scared of opening anywhere. Sometimes we open new stores in front of a Raia Drogasil store, and we are still very successful there. So that is what I had to say about this.
That was perfect, folks. Thank you.
Our next question comes from Ms. Gabriela Ferrante with Safra Bank. Gabriela, you may open your microphone.
Good morning, guys. We have two questions. Your digital sales have grown, and I wonder what level do you plan to get in digital sales this year. Is there still room for growth? If you could talk a little bit more about RDC 786, do you still have the pipeline that will be offered? You mentioned you have 80 stores that are already in the pipeline to offer those tests, right? Thank you.
Thank you for your questions, Gabriela. Let us start talking about the digital arm. We are already at a very high level. We have come to nearly 18%. Yes, there is room for further growth. We do not have a specific target for our growth on the digital side. We have to remember that this is part of our sales, and it has to be healthy. I mean, every client will choose their channel.
Yes, our strategy has always included presenting the digital offering as a way to solve problems, to give customers, especially customers looking to save time, a better and better experience. Every project within the company are treading that path. Obviously, if we wanted to increase our share in digital, we would be doing what most of our competitors is doing, which is offering a completely different price strategy to convert customers in-store. This is interesting, and it shows short-term figures, which are interesting in terms of digital operation share. But when you have large digital operations, that is difficult to preserve because you will not be able to preserve the company's profitability, because that additional discount that you give over the counter begins to chip away at that. We understand that these are short-term and not long-term strategies.
Our plan is to continue, as I said, we will now promise to deliver in as short as 30 minutes, improve the experience, especially on the data side and the user experience within our apps. We brought into the company a new professional that we still cannot announce, but you will soon hear a CIO that will take place of that. This is an area that has always been core for our operations, so much so that we were the only company before the pandemic that had a 10% share of in the digital side. After the pandemic, everyone was rushing to increase their share, but I do not know if they are adopting the best strategy. That is the important thing. It is difficult to give you a guidance.
I think that WhatsApp, because we have the potential of having that as a formal platform that works and that may offer the entire catalog and close sales via that channel. I think there will be a lot of work. That is it. We will continue to do our homework.
Exactly. It is possible to expand our share there, but we do not have guidance in that sense.
Remembering that profitability on the digital side is very close to our in-store rates. Growing on the digital side is healthy for us. I do not know how healthy it is for the other players.
Exactly. Ms. Gabriela Ferrante, you also mentioned RDC 786. Of course, this was published yesterday, so it is still being analyzed, but it is a list of about 50 tests that is within that ruling, and it is important because it adds legal certainty to something other players were doing in a partial way, but with challenges in terms of rollout and et cetera. This ruling gives legal certainty and confidence for drugstores to quickly move forward on a path that major networks, and I can say on behalf of Panvel, have believed for a long time, which is why we have been investing in new clinic rooms. We have today just over 50 stores with the ability to perform those tests.
There are still a few issues that we need to address with local agencies. There may be issues there, but this gives us a very positive outlook in terms of the potential for our drugstores, which now, for physicians and for insurance companies, are relevant for the testing period. This is something that we had been discussing for a long time with Abrafarma. It has moved forward, but has more to progress still. You may hear news along the way. From our side, rest assured, there has been a lot of investments made. We have professionals who are prepared. We have rooms that are prepared. As soon as we finish our analysis, even because of the disproportionate market share that we have when compared to our competitors, rest assured that we will stand out in that area as well.
Thank you.
With that, our question and answer session is now concluded. I will now turn over to Mr. Julio Mottin Neto for the company's final remarks.
I would like to thank everyone for joining and say that we are still optimistic about the scenario for this year. Despite all the macroeconomic challenges we have been facing, April has been a very interesting month as well, and we will meet again soon to talk about the earnings for Q2.
Exactly. Thank you everyone for viewing. If you have any additional question, our IRO department is available, and have a great day.
The Panvel Group earnings conference is now concluded. We would like to thank everyone for joining and wish you a great day.