Morning, ladies and gentlemen. At this time, we'd like to welcome everyone to RD People, Health and Well-being Conference Call to discuss its 3Q 2022 results. The presentation can be found on RD's investor relations website, ri.rdsaude.com.br, where the audio for this conference will later be made available. We inform that all participants will only be able to listen to the conference during the company's presentation. After the company remarks are over, there will be a Q&A period. At that time, further instructions will be given. Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the beliefs and assumptions of RD management. Forward-looking statements are not guarantees of performance.
They involve risks, uncertainties, and assumptions because they relate to future events, and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of RD and could cause results to differ materially from those expressed in such forward-looking statements. Today with us are Mr. Eugenio de Zagottis, VP, IR and Business Development, and Flavio Correia, Director of IR, Corporate Affairs and Strategy. Now I'll turn the conference over to Mr. Eugenio de Zagottis. Sir, you may begin your presentation.
Hello, everybody. Welcome to the Raia Drogasil Conference Call. We'll talk about the results of the third quarter of 2022. I'd like to start by saying that this was a great quarter. This was a quarter that I think shows the strength of the company. It shows the robustness of how our strategy has changed our numbers and has driven our business to a very healthy level of growth and of profitability. To start with, we ended the period of 2,622 stores in operation. We opened 58 stores and closed 19 stores in the quarter.
Our revenues totaled BRL 8 billion, 22.3% increase to a very robust level of top-line growth, which is driven not only by a strong expansion, but also by superb performance at our mature stores, which was 14.6% in the quarter, significantly above both the CMED price readjustment and the last 12-month CPI. Our market share reached the record level of 15%, 70 basis points increase with gains in every single region. Our digital sales reached BRL 3.5 billion on an annualized level, an increase of 58% in the quarter, with close to 12% of retail penetration. We also reached a contribution margin of BRL 131 million, which represents 10.4% and an expansion of 40 basis points.
Finally, an EBITDA of BRL 547 million, close to 23% increase with a flat margin of 6.8%. We had a significant contribution margin gain driven by digitalization of the company, which fully financed the increase in general and administrative expenses that we have pursued in the quarter to support digitalization of the company. Finally, BRL 202 million of net income, 16% growth, and 2.5% net margin, and positive free cash flow and total cash flow generation in the quarter. In this slide, we can talk more about our expansion. We reached a total of 2,620 stores all over Brazil. We opened last 12 months, 260 stores, so this is a level already in line with the guidance of the year.
We have closed 54 stores in the last 12 months. When we talk about store closures, I think it's important to separate what is the closure of maturing stores versus mature stores. Maturing stores that get closed, they represent correction of normal expansion mistakes that happen in a large scale expansion such as ours. These nine closures means something like 3% mistake ratio over the 260 stores opened in the last 12 months. This is a normal rate of mistakes. This is what we have been doing. Obviously, if we had a mistake even below this would mean that probably we wouldn't be growing fast enough. At the kind of pace we do, this is a very low level of mistake, and it's normal, and I think it's supposed to keep happening.
When we talk about mature store closures, I mean, here the main issue is optimization of the store portfolio. The focus of the company is serving the customers, and obviously the store is a tool to do that. If we can serve the same customers with higher profitability, with less assets employed, by reducing the store base, this is something we're very happy to do. These closures, they don't represent a problem. They represent an opportunity of improving the efficiency of the company, of serving the customers, by eliminating redundant cost base, by redeploying sales to surviving stores, by redeploying assets, either working capital or fixed assets to new stores, and so becoming more effective. We're always looking for these opportunities, and this is good when it happens. It should not in any way be seen as a negative thing.
Finally, when you talk about the age structure of the portfolio, we have 72% of mature stores and close to 28% of maturing stores. In addition to the guidance of 260 stores for this year, we have also updated the guidance for the coming years, 2023, 2024, and 2025. Initially, the guidance was 240 stores, and now we have updated that guidance to 260 stores. We will maintain the pace of this year in the coming years as well. This means on a combined basis that we're doing more than 1,000 new stores, actually 1,040 new pharmacies to be opened in a period of four years, including this one. This represents a 42% increase in our store count.
There's a lot of growth that is being expected to the coming years, not only this year. This growth will be done while preserving the same geographic and demographic segmentation that we have pursued so far. I believe we also maintain the same kind of assertiveness in this expansion, maintaining this kind of mistake ratio around 3%, which is a very low mistake ratio. Another highlight of the expansion is the diversification of the growth. We are now in a total of 525 cities in Brazil. We have entered in the last 12 months 72 new cities where we were not before present, so this is very significant.
If you look in the mid chart here, the breakdown of the expansion, we have done only 18% of the new store additions in the São Paulo state, which is the largest state in Brazil and the native market of both Raia and Drogasil. You can see that we have done, for example, in the southern and northeastern regions, more store openings than we have done in São Paulo. This is a testament to the fact that Raia Drogasil today is a truly national player with a capacity to grow the same returns and the same quality all over Brazil. Doesn't matter where we open the stores, we're always delivering the same returns, and we are also expanding the company with the same quality that we have done until now.
Finally, when you talk about store formats, 13% of the new stores are premium stores. The rest are all hybrid or popular stores, which highlights the opportunity that we still see to grow more in B and C class, where we still have a lower penetration to this day. Finally, when you look at the overall portfolio, not only the last 12 months additions, something like a third of the stores are premium, 2/3 are hybrid or popular stores. This is our national footprint. As I said, we grow all over Brazil with the same returns, with the same effectiveness, with the same quality. More than that, when we analyze our mature store sales, today we have an average mature store sales of BRL 1.05 million per mature store per month.
When we compare this number across different states and regions, this is a very constant number. All our regions, they perform very strongly and they perform around this level. This is a unique performance. No other competitor dreams about selling more than BRL 1 million per mature store like we do in Brazil. Even if you look as an average for the full store operation, not only mature, but including new stores and maturing stores as well, we have BRL 960,000 in sales per store per month, which is a unique level. I would like to highlight here our growing presence in some of these markets.
For example, when you look at the southern region, we already have 323 stores with more than 100 stores in Rio Grande do Sul, which has been a focus of our recent expansion. We have 380 stores in the northeast of Brazil. We are getting close to the mark of 100 stores in the north. We are now at 97. Not to mention more than 1,100 stores in the state of São Paulo, which is our native market, which is our core market. Finally, we reached a record market share of 15% on a national basis with very meaningful national growth, but also with growth in every single region of Brazil. National market share increased by 70 bps. In São Paulo, we got to a staggering 27% of market share.
This is an amazing number, especially if we consider that we are opening a small number of stores in the state, but still we have grown 120 basis points year-on-year. Southeast, we have grown from 9.9% to 10.8%, 90 basis points. In the Midwest, we have also grown, here we have grown actually 100 basis points. In the south, 40 basis points. In the northeast, 40 basis points. In the north, 130 basis points. Very healthy growth all around Brazil and record market share on a national level. I believe in every region in the short to medium term, we should reach double-digit market shares. When you talk about the consolidated revenue growth, we reached BRL 8 billion in quarterly revenues.
Not only this represents tremendous growth, 22.3%, which is a number that we ourselves didn't expect, very similar to the last quarter growth when we still had some COVID effect happening. I think also a very important message here is the absolute revenue addition. We are increasing our revenues from BRL 6.5 billion to BRL 8 billion in 12 months. BRL 1.5 billion in additional quarterly revenues in only one year. This is an unbelievable growth. This shows the power of the scale that we have. Meaning the size of the company is today, we're talking BRL 32 billion annualized revenues. When we are able to grow at this kind of level, north of 20% the absolute scale addition that we had is unbelievable.
The difference to our competitors only gets expanded. We are the leading player in Brazil by a wide margin, more than twice the size of the number two player in the industry. We have the highest productivity per store in terms of the revenues per store, revenues for mature stores, EBITDA per store. Our EBITDA per store is more than twice of what our competitors do. We have the fastest growth, so this is only adding to our differential. Finally, when you talk about product mix, we have done superbly across every single category. Obviously, the highlight has been in prescription with 24.9% growth in generics and 22.5% growth in branded. When we look at OTC and HPC, obviously, because the mix cannot go beyond 100, if something's gaining, something has to go down on the mix.
Even the part that is going down on the mix, it's growing around 20% with 19.6% in OTC, which is facing a very tough comp base because COVID was meaningful in the third quarter last year. Hygiene personal care also growing more than 20%. We're performing really well across every single category as the number shows. Finally, talking about our comps. We have seen same store sales growth close to 17%, and we have seen an amazing 14.6% growth at our mature stores. This is way above the CMED readjustment of 11.9% and way above the accumulated inflation over the last 12 months. Digital has been a very important driver of this performance.
I think what we're seeing here is a company with a twin engine motorization working for us. We have on one hand, the expansion, which keeps driving growth with new stores and store maturation, but then we have this other engine, which is digital. Why digital is such an important engine? Because customers who become digital customers, who start using the app, we are able to engage these customers in a much better way. We are able to improve the experience they have and as a result, the loyalty and the spending goes up. Digitalized customers spend 20%-25% more than what they spent before.
The mature store growth that we are sustaining, this is already going on for at least two years, is a direct consequence of this digitalization process. We reached BRL 3.5 billion in digital sales. If our digital were a separate chain, we would be already fighting for the number four position in the industry. Not there yet, but close to that and we'll probably be there in a couple quarters. This is a tremendous number. 11.8% penetration on retail sales and 58% of growth over a strong comp base that we had last year. I think one of the highlights of this digitalization process is the channel mix that we have built, which is truly unique.
88% of digital sales happen at channels that are not only modern but also proprietary. The exceptions here are super apps, which is of course a modern channel but not a proprietary channel. It's a third-party channel that we are affiliated to. We sell, we give the customer the option, but we much prefer to sell within our proprietary channels. Super apps account for 10% of digital sales. Finally, call center, which is a Jurassic channel. We shouldn't even be counting this as digital, although we do. This is 2% of total sales. The point here is when you compare to our competitors, they all have call center accounting for 20, 25 or even 30% of their digital sales. In our case, this is only 2%.
All the rest is through digital sales with a highlight for our apps. Apps account for 55% of digital sales. Their penetration is growing as the experience improves, as our squads increase their throughput and we keep making our app better every day. I think we have a good app today. We still don't have a state-of-the-art app, which we wanna have in a couple years, but it's a much better app than we had one or two years ago, and the numbers shows it. Now just as the digital NPS is also increasing and also showing that effect.
Finally, when we talk about digital traffic, not only we're doing much better than all our competitors, we do it alone, we are more than the sum of players two to six in the industry with much higher growth than these guys together have. We are also a meaningful player in the overall landscape of Brazilian retailing, going beyond our vertical of retailing. Not only among pharmacies, but among retailers overall. We are the eighth player in Brazil in digital access. I believe in a couple quarters, we'll become probably the sixth in digital access. Well, talking about gross margin, we got a gross margin of 27.9% in the quarter. This is a good gross margin.
This is slightly better than the gross margin we had at the same quarter last year, 10 basis points improvement. Of course, this is lower than the second quarter gross margin, which is a peak margin. This sequential reduction is absolutely normal. There's nothing wrong with this gross margin. We had a peak in the second quarter because of the inflationary gains of, you know, inventories as a function of the CMED price increase. Finally, we also had a three-day improvement in cash cycle. Our cash cycle will, I think, get sequentially better for the fourth quarter, but we're still carrying somewhat higher level of inventories because of the supply chain uncertainties to assure a superb product availability to our customers and to sustain very good comfort.
We have the balance sheet, which is very differentiated as well. When we have the opportunity of using this balance sheet to support the customer and to support our top line growth, this is a good thing to do as we're doing now. Selling expenses have been diluted by 30 basis points. This is a direct consequence of the operating leverage. Since mature stores grow ahead of inflation, we're able to dilute sales expenses, and this is driving a contribution margin increase of 40 basis points. This number is a very strong number. And if we compare, for example, last 12 months our contribution margin, this is a record margin for the company. To be very specific, we're talking about a 10.7% last 12 months contribution margin.
There is only an outlier that was slightly higher than that, which was 2016, when the contribution margin was 10.9%, because we had, I think, 12% price increase with normal inflation. At that point in time, we had this outlier, but if it's only 20 basis points higher. If you forget 2016, this is the highest number in the history of the company, which shows that the digitalization is driving tremendous productivity at our stores, so we can get to this record level of store productivity. Obviously, the cost of the digital transformation is an increase in G&A, which has gone up 50 basis points versus last year.
The beauty here, as we can look, as you can see through our EBITDA, which has been flat, is that the productivity gains at the store as a result of digitalization has fully paid for the additional expenses required to pursue this digitalization. Our digitalization strategy is being self-funded by the productivity, by the enhanced productivity at our stores, and this is very good. We have seen on a sequential basis a stabilization already of this figure around 3.4%, 3.5%, 3.6%. I believe in the short term, in the next two quarters, probably this will remain stable, but our goal for next year is to try to dilute G&A. Let's see how it plays out, but that's at least the ambition we have set for next year.
Finally, when you talk about net income, we did BRL 202 million in adjusted net income. This is only 20 bps lower than last year, and it's lower because of a much higher interest rate. It's important to mention here that both the Adjusted EBITDA and the adjusted net income, they are not taking into account the non-recurring or non-operating gains of BRL 36 million that we booked in the quarter. The reported results, the accounting results, they're better than the adjusted ones. We are taking out of the adjusted figures these effects that relate to previous periods and therefore we deem them as non-recurring.
In terms of cash flow, we have positive free cash flow of BRL 104 million, positive total cash flow of BRL 27 million in the quarter, and we have a financial leverage of only 10 basis points lower than the previous quarters. That's 10 basis points lower than the previous quarters. 0.9x net debt to EBITDA, so very healthy levels of leverage. Finally here, our share price, it has done reasonably well in the quarter. It increased 18.4%, and this was above the Ibovespa. Obviously, if you look last 12 months, then we have seen negative alpha of 11.5%. We've also seen very healthy liquidity, BRL 145 million average daily liquidity for our shares. Obviously, when we look at long-term total shareholder returns, they have been around 20%.
Here to summarize what we have seen in the quarter, I think this is a picture of very robust financial results, which have been driven by a very strong sales performance. We can break the sales performance into a very healthy expansion. 260 stores opened in the last 12 months. Tremendous marginal returns. We are seeing real internal rate of returns consistently above 20%, despite the fact that we are entering a myriad of small cities, countryside cities, new states, low-income markets, but still our expansion keeps delivering. We have opened 260 stores last 12 months. We have set a guidance for the coming years to maintain this pace of 260 stores a year, where before the guidance was 240 stores.
In addition to this expansion, we have the effect of digitalization, which is driving mature store performance is significantly above the annual price adjustment and significantly above the last 12 months CPI. Combining these effects are driving 22.5% top line growth, 15% market share, which is a record level, significant expansion on national basis with gains in every single regions. We are closing as many stores as we can, and this is an amazing thing because we are able to retain the customers, we are able to transfer a significant portion of the sales of the closed stores, and at the same time, get rid of our redundant cost base.
At the same time, redeploy working capital, physical assets like gondolas, like the IT infrastructure of the store that we can use for new stores that we're opening. This is a driver of productivity for us. This is not a bad news, this is a good news. Closing a maturing store is a bad news because it represents a mistake. Closing mature stores, and we're talking stores of an average of 14 years in operation, it's a good thing as long as we are increasing the EBITDA and we are redeploying assets as we are doing. This is a good thing. And the result here is really almost record contribution margin of 10.4%. It loses only to what we saw in 2016.
The G&A has increased to support digitalization, but the store productivity is fully paying for this G&A increase, leading to a stable EBITDA in the short term, with a possible EBITDA expansion coming forward. Because if we sustain operating leverage gains at the stores, and if we start diluting G&A, it's obviously that the EBITDA at some point has to increase, and this is what we believe. I'll now pass to Flavio to share some of the developments in our strategy and to talk about the upcoming investor day that we will have Thursday here in São Paulo. Flavio.
Thank you, Eugenio. Just pinpointing the highlights of our strategy captures during this quarter. On our new pharmacy front, we just reached annualized digital sales of BRL 3.5 billion with 88% through modern proprietary channels, and only 10% for super apps and 2% for call centers. This is premium performance compared to our competitors here in Brazil. This 88% participation of modern proprietary channels are focused on our app, okay. 9.8% of our customers are already omni-channel customers, so this is important for our strategy. We are not focusing on digitalizing sales, but on digitalizing customers on our base. Those customers already represent 16.5% of sales in the company.
Our digital customers and their digitalization is improving results on average 20%-30% incremental sales for those customers compared to the control group. Considering same cluster without digitalization. Our omni-heavy users' frequency is 3.5x higher than an average customer on our base. We just launched a new rapid delivery format in São Paulo, expanding shipping from store base and strengthening deliveries up to one hour. This is a new model we just launched on top of the already existing delivery channels we have. 92% of digital orders are served through our stores, so this is an important strategy for us.
100% of our stores are already click-and-collect centers, and 92% of our delivered purchases are delivered through our stores. This improves a lot of our capillarity and also reduces a lot costs for delivery and time to delivery, okay? Our squads are improving productivity more and more, so this is an upgrade for our NPS purchase on the digital channels. On marketplace, we are strengthening our marketplace capabilities with the depuration of sellers and SKU base to improve service quality on this quarter. Marketplace NPS is improving 16 points on this quarter on top of 24 points on the other quarter. This is an improvement of 14 points on the past six months on experience for our customers.
We have been reducing the average delivery time on marketplace as well, dropping from five days on average to 3.9 days on average on this quarter. Finally, on our health platform. We are now running 40 free programs for health promotion in the Vitat app. We just launched the first paid program focused on weight loss on this quarter, and we count now around 40 million customer monthly average users on our Vitat platform. This would be for the highlights on strategy. Finally moving here for our RD Day on next Thursday. We will be running this show after two years of COVID, of pandemic. We are now relaunching this event on a presential basis.
This event will happen during the whole morning from 9:00 A.M. to 12:00 P.M. on this Thursday. We'll be talking about strategy of the company overview, talking about the new pharmacies, operations and omni on marketplace. We'll talk about health platform, digital transformation, and people and culture. It will be an extensive overview on our strategy and on our performance during this past period and looking a little bit forward too. There is here a QR code. Please feel free to scan the QR code to guarantee your participation on the presential event that we'll be running. Thank you.
Just to finalize, I mean, this is an event that will be broadcasted online, and all these times are local Brazil time. You make the equivalent to your time zone. We can now go to Q&A.
Thank you, Flavio. Thank you, Eugenio. We'll now proceed to the Q&A session. The first question is from Robert Ford from Bank of America. Please, Bob, go ahead.
Hey. Thank you very much, Eugenio, Flavio. Thanks, and congratulations for the quarter. Can you talk a little bit about the new store guidance raise? You know, how should we think about the population and income thresholds you need to justify a new location? And what is the market holding capacity for RD stores today in Brazil? And then, you know, when it comes to those planned locations, how are they distributed across new and existing markets? And as you develop new revenue streams and categories, how should we think about your ability to expand into increasingly smaller addressable markets and further increase capillarity? And then, you know, there were some reports in the quarter of industry-wide stock-outs. How much of your sales growth would you attribute to your bettering stock positions?
How do you think about the stickiness of that client as you took market share in the quarter, at least when it comes to those better service levels? The last question was just on Vitat and that weight loss dimension that you're starting to develop. You know, is that being done in conjunction with suppliers of therapies and supplements, or is that being done entirely independently at RD Brazil? Thank you.
Hi, Bob. Well, first of all, thanks for your questions. I mean, the way we pursue our expansion, I mean, we are very bottom-up oriented, so it's very data-driven. We have a team that understands for every market what's the size of the market, not in population as well, but in the end, what matters is not population, is the size of the market. A market, if you think about two cities, same population, one is more affluent than the other. One has an average age which is higher than the other because of higher prevalence of seniors, for example. They will have different markets. We understand really well those figures. We know what the market share in each city is.
Our team looks the cities locally and even through the map we can know where we have white spaces or not. We're always looking ahead in terms of our expansion process, and we set what the targets are. We know that these cities are cities where we want to enter, so our team is already scouting for location. These cities we have entered recently, but maybe now it's time for a second store. Obviously, when you talk about the larger markets, we're continuously looking for opportunities. We know where the gaps are. We know the market shares we have by neighborhood. There are markets in which we have already a very high share, very good occupation.
We are okay for the time being, but maybe in two-three years, with more people getting older, the market growing, that share will get lower because the market grew and we did the net capacity. It's maybe time to open new stores. This is a completely bottom-up process. In the end of the day, the guidance that we give you guys is a result of what we look bottom-up in the business and what we think the opportunities are. At some point, if we think, okay, it's getting tougher, the returns are falling down, or we are not seeing as many new locations, maybe at some point we have to adjust that downwards or the opposite.
I mean, if you keep seeing more opportunities, if you enter new cities, if we push the envelope in terms of size, and we still see the result, we still see the returns, we feel confident there is more. We feel that we have a large pipeline of opportunities, maybe we'll be more confident and we can push our new store guidance up. This is how the process works. It's really bottom up. It's really data-driven. We are looking at the recent results. We are learning from mistakes. We are doing experiments and learning from them as well. If there's a mistake, we correct. If there's something we did and it looks exciting, we try to replicate in other areas. It's very experimental, but always very structured and very data-driven. This is how it works.
In terms of stock-outs, I mean, obviously, given the balance sheet that we have, the fact that we can invest and have very good inventory levels, given the fact that we're the number one buyer in Brazil of pharmaceuticals, obviously, I think we're always better insulated from any challenges than anyone else. It's capital, it's management, it's scale. These all help us tremendously. Having said that, I believe that the supply chain problem it exists, but that the effect on overall sales or on the market is not as high as people think it is because the demand adapts. If a certain brand of antibiotic is not available or even a certain molecule is not available, I mean, the physician will know that. The physician will change the prescription to another product that is comparable.
Obviously, if you look at our stockouts, percentage of items that we ran out, the numbers have been in the recent quarters higher than in the past. A big portion of the demand has adjusted and the prescription has been adapted. I believe in the end the effect is not that big. To some extent, obviously, we do better than the other people, and I believe there is stickiness in that. Because why people come to us? They come to us because of the overall quality of what we do. Part of the quality is high inventory availability as it is price competitiveness, as it is having the best location, as it is having the best service, as it is having the best store experience, as it is having the best digital experience. It's the combination on all of that that causes the stickiness.
The next question is from Joseph Giordano from JP Morgan.
Okay, guys. Good morning, everyone. Thanks for taking my question. I have some questions on the digital. We continue to see increasing contribution from digital. Here, like, I'll split my question in two pieces. The first one, how are you guys seeing the competition in this channel and what's the relevance of the marketplace in this strategy? In the release, you guys mentioned consistently that the digitalized customers, right? That's like an important statement. Not digitalizing sales, but customers. The digital customers, they produce much more for the company. My question here goes like, when we think about the health services, right? All this like content platform, service platform you guys are developing, how did it change the consumption profile of this customer as well? Thank you very much.
Okay, Joseph. I'll start with the second part, then I'll go to the first part of your questions. I mean, obviously, digital is a tremendous tool for us to increase engagement, to improve customer experience, and as a result, to enhance the loyalty and the spending of the customer. This for us has been a huge focus and we look at our top line growth, and I think it shows the success of this strategy. It's the same customer buying more frequently from us and spending more from us. At the end of the day, when you talk about our strategy, which has the three pillars that we're referring to, new pharmacy, marketplace, health platform, the main point is not look at separate profit pools or separate pockets of profitability, it's the aggregate effect.
The fact that we have a marketplace means that the customer frequency will increase, the customer will use more digital platform. The same for the health services. Therefore, not only we gain on the marketplace, not only we gain at the health platform, but we will sell more pharmaceuticals, more NP Beauty and Health products as a result. All these strategies reinforce themselves. We have to think of customer lifetime value. This is what is driving the performance. I think as the marketplace starts becoming more relevant, as the platform starts emerging, this will be further enhancers of this behavior that is already moving the company forward and already changing the economics. These are more tools that we have. These are more resources that we have to drive this engagement, this loyalty, and this spending.
It's still early to know. We obviously have early data of marketplace customers. They spend more, the same with people who use the health platform but it's very initial. We have to see these businesses getting more volume and then having a better understand of what the aggregate effect on the lifetime value these new businesses are bringing. This is what matters. In terms of digital competition, I mean, I think we have to separate this digital competition in two parts. One is within our segment. When you talk about pharmaceuticals, it's only pharmacies, us versus the traditional competitors. Obviously, when you talk about HPC, for example, then we have an extended competition from platforms like Magalu, Mercado Livre, and et cetera.
When you think about pharmacy competition, I think, I mean, in the end, we have to remember that this is a scale business. The dry powder that we have to invest in technology, I mean, what we invest every year in technology is 40% more than the EBITDA of the number three player in the industry. It's 3 x the number of the fourth and fifth player and sixth player in the industry. I mean, it's a completely different magnitude of investment. Obviously, as we invest, we get to a digital solution that is better than everybody else. I mean, the fact that all our competitors still rely on call center as a channel. I mean, this is a jurassic channel. This is a channel from the past. This is not digital.
If you look at us, our channel breakdown is much healthier. We have more than I think 55%, 56% of our sales coming from our app. This shows that our app is getting more robust, that the NPS of the digital operation is improving. I think this is a race that we have resources that the others can't match. I think our digital operation is more meaningful today, is growing more today, it has better quality today. If you look at two, three, four, five years down the road, I think it will be of a completely different magnitude. I think we are completely decoupling from everybody else. This is true on an aggregate basis, but this is even more true in digital because of the investment capacity, because of the management capacity that the company has.
Obviously, for some categories like beauty, this is more open-ended market. In skincare, for example, we compete with Mercado Livre, we compete with Magalu, we compete with Americanas, we compete with other guys. At the same time that we see more competition from existing categories, more people trying to grab a bite of what we do, digital gives us the opportunity to grab a bite of what other people are doing and we couldn't do before. This is the case of the marketplace with fragrances, with makeup, with hair care. I mean, we have already a big hair care category in our stores, in our 1P digital. We don't have professional hair care, for example, brands like Kérastase, like Redken, and many other. Even normal non-professional brands, we can have a much bigger selection through the marketplace.
The technology obviously makes us vulnerable to new competitors, but makes us compete in completely different arenas that we couldn't touch in the past. I think the balance here is positive. In terms of the competition in our 1P categories, I mean, we are investing in prices, we're investing in better speeds, so we are defending our market share. We can see that beauty, HPC has grown 20% in the quarter. This shows how the way we have been able to defend our market. I think one of the main issues here, the better paradoxes that we have here is that if you look around Brazil and even maybe around the world, it's not easy to grow a digital operation while maintaining and even growing the productivity like we're doing.
Digital came in two years from nowhere all the way to 12% of our sales. Digital as a channel has lower margin than the stores because of delivery costs and things like that. But you know, it has also driven higher customer spending and higher store productivity. Our margin, our contribution margin is growing. Our total margin is stable, despite the digital growth that we have seen. Generally, when we see digitalization, we see digitalization driving margins down, not flat or up as we are seeing for our business.
Eugenio, maybe to add on your point here for a digital customer, let's just remember that, our customer acquisition engine are the stores and not the digital. We are fishing digital customers out of the physical customers of the company. New stores are bringing new customers to the company, and once they are in, then we digitalize the customers. This helps us to have a totally different shape on our P&L, considering that we are not looking on the open market to find new customers, but on our own data, information on customers, on transactions to digitalize those customers. Digitalizing the customer is not totally related to digital sales.
We have this participation in digital sales of 12%, but we can say that most of our customers or a big part of our customers are digitalized customers, but still buying in the store. If you visit the store, it will be easy for you to find customers that are opening their apps inside the stores and looking for their loyalty points, looking for special promotions or personalized offerings. This digital activity is improving relationship and engagement with the customers and sometimes translating to digital purchases, but also physical purchasing in our stores.
Yeah. This is the beauty of omni-channel. It means that the store is the customer acquisition machine, is the digital onboarding machine, and is the fulfillment machine. We don't spend money with Google, Facebook, et cetera, so the acquisition cost is low because the store is doing that. The fulfillment cost is much lower because the store is there. 58% of digital sales are click and collect. The capillarity is so good that the customer prefer to come to us and pick the product at the store. Obviously, this is a transaction with zero delivery expense, zero marginal cost. It drives a very healthy economics, and it allows us to grow digital without pressuring our overall margins, which is really unique.
Our next and final question is from Irma Sgarz from Goldman Sachs.
Yes. Hi, thank you for taking my follow-up question. I just wanted to understand, and I know, totally appreciate it's early days to comment on this right now. When you think about 2023, under new administration and so with the new government coming in. What are the puts and takes that you are looking at in terms of potential opportunities, in terms of additional demand that could be created? I know Farmácia Popular is a very small share of your sales, but even more generalized programs that could potentially come back to the horizon. On the other hand, if there's any risks that you see.
Irma, thanks for the questions. I mean, I think we are very lucky to be in a business that performs well, regardless of what happens on the political spectrum or even in the economic spectrum. Our business is not driven by the effects, it's not driven by the GDP, it's not driven by public investment, it's not driven by public policies. Our business is driven by something very simple: the aging of the Brazilian population. This is something secular. This is something that keeps happening regardless of who gets elected or not elected. For me, it's business as usual. Doesn't matter who the president is, the sector works with the Brazilian state and not with government A or government B.
Again, for me, the beauty about the election is to show them the maturity of the country in terms of looking in terms of our institutions. We know how difficult it has been in Latin America, but Brazil is a completely different situation. I mean, we have seen a right-wing government now being changed by a more center-left government. We have seen the opposite happen in the past, and life goes on, and the institutions are there. The changing power happens peacefully. We have seen Lula as a president before, has been responsible in terms of fiscal policy, just like the previous government overall has done a lot of things in terms of the economy. I think that transition in power is healthy for every country.
The main point is it shows the strength of Brazil, the institutions in Brazil and how different we are from many of the Latin American countries that have been suffering from political dynamics that I think we have been very, very insulated from.
Great. Thanks very much. Maybe can I just confirm, Farmácia Popular, am I correct to think that it's a very small percentage of your sales?
Yeah. Farmácia Popular is a very small part of our sales, but I don't think Farmácia Popular would have been different if A or B got elected. For me, everything will be business as usual. I know that there was discussions about what was in the budget, but in the end of the day, I doubt that any government would cut on Farmácia Popular.
Great. Thank you very much, Eugenio.
Thank you, Irma.
The Q&A session is over. We now return the conference call to RD's executives for their final remarks. Gentlemen, you may proceed.
Okay. First of all, I'd like to thank you all for attending this event. Just to summarize some of the points discussed here, I think this quarter shows, I mean, the strength of the company in terms of the resilience of the business, in terms of how well we are performing on the top line. This is a consequence of a very healthy expansion that keeps on going, that keeps on delivering returns. Doesn't matter if the store is popular or if the store is upscale. Doesn't matter if it's north, south, east or west. We're growing all across Brazil with the same returns, with the same store economics, and what was previously a single-engine vehicle, now it's a twin-engine vehicle.
We have the expansion that keeps driving the business forward, but we also have the digital change in customer behavior, increasing loyalty, increasing engagement, driving mature stores to grow sustainably ahead of inflation. For me, it's absolutely unexpected that a business of our size would be growing north of 20% in these days. The expansion, as good as it is on a percentage basis, it's less and less than before. If you look number of open stores as a percent of the total store base, this is going down, but the top line is not going down. The top line is being maintained because now we have the digital engine filling in for where the traditional engines start losing steam. This drives tremendous growth for a very high company.
It's a BRL 32 billion company in annualized sales growing north of 20%. Obviously, this is very big numbers. This is transformational in terms of the scale that it adds in how it decouples us from our competitors and how it drives store productivity. I just mentioned that the store contribution margin we have today, if you forget the outlier of 2006, that was only marginally better than this. This is a record figure for the company. We are doing a very deep transformation, a digital transformation, but that has also affected everything we do. When you talk about people, when you talk about the IT stack, when you talk about culture, when you talk about operations, management, team, governance, everything has changed as a result of this digital transformation.
This obviously has had a cost, but it's amazing to see that the productivity we have generated as a result of digitalization is more than fully paying or is at least fully paying for the cost of digital transformation. I would like to end by reinforcing Flávio's invitation for the RD Day, which will happen on Thursday here in São Paulo. I know that many of you won't be able to travel, so we'll have the event streaming online. The idea of this event is exactly to show this transformation below the water level. I mean, this is like the proverbial tip of the iceberg. You guys see what's above the water level, and this is the 12% digital penetration, the mature store growth, the results of the transformation.
It's difficult for you guys to see from outside the company how deeply this company has changed in the last two, three or five years. This is the focus of the Investor Day. We will highlight how we're different today in how we relate to our customers, in our platforms, in our people, culture, operations, in every single aspect of the business. Because in the end of the day, this is what differentiates us from everybody else. What you see, what you report is just the consequence. The difference is below the waterline, and we want to unveil for you guys where where the difference really is. Thank you all for attending this call. More than anything, thank you all for your support as long-term shareholders. We are very privileged company to have a long-term shareholder base.
I always say that I think the company chooses the shareholder, not the other way around. It's the communication that we do, it's the long-term focus that we have and people who align with us, we have always been a high multiple company, are the people who are only looking longer term. We obviously, no stock is free from noise, but we see way less noise in our stock because of short-term factors than we see, I think, in any other stock in Brazil. We are really privileged to have this long-term shareholder base, and we thank you for your support. Thank you very much.
Thank you. RD's conference call is now over. We thank you all for participating and wish everyone a good day.