Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to RD People Health and Well-being Conference Call to discuss its 1Q 'twenty one results. The presentation can be found on RD's Investor Relations website, ir.rd.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's remarks are over, there will be a Q and A period.
Before proceeding, let me mention that forward looking statements are being made under the Safe Harbor of Securities Litigation Reform Act of 1996. Forward looking statements are based on beliefs and assumptions of RD Management and on information currently available to the company. 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 Desagoches, Investor Relations and Corporate Planning Vice President and Mr. Fernando Spinelli, Investor Relations and Business Development Director. Now I'll turn the conference over to Mr. Eugenio Desagoches.
Sir, you may begin your conference.
Hello, everybody. Welcome all to the Hayato Gazzio 1Q 2020 conference call. And I'd like to say to start by saying that we're very happy with this quarter. This was not an easy quarter in terms of the comp base that we faced. Let's not forget that last year in the Q1, this is exactly when the pandemic started.
So we had a huge surge in demand in the Q1 last year as people were getting ready to social isolation. And indeed, in April, we saw a huge social isolation taking place all over Brazil. So if you look back 1Q 'twenty, our top line grew 25%. So the comp base we had to face this year was very high. This is true in terms of sales, but this is also true in terms of expenses, expense dilution results, etcetera.
So in the end of the day, despite this huge comp base, I think we got a great Q1, which shows tremendous momentum, and I think it's a very good start for a year that started to become a promising one. We ended the period with 2,319 units in operation. We opened 40 stores. We closed 20 in the quarter. Our market share grew 30 bps on a national basis.
We reached revenues consolidated revenues of $6,000,000,000 14.9 percent growth and again, 14.9 percent top line growth over a comp base in which we had grown 25% over 2019. And exactly because the 2020 numbers are now becoming a roller coaster, huge Q1, very low April, May June. We also start to look a lot on 2 year stack figures. And so if you compare our top line growth versus the 1Q 2019, we did a 43.9% growth, which is an acceleration versus previous quarters. We reached a contribution margin of 9.7%, 10 bps margin expansion and an adjusted EBITDA of EUR 416,000,000, 7% consolidated margin with 12.6% of growth.
Finally, the net income reached EUR 178,000,000, 3% of net margin and a 10 bps expansion versus last year. And finally, we posted negative EUR 132,000,000 free cash flow with our EUR 126,000,000 cash consumption over the 4th quarter. This is related to seasonality. The 4th quarter is always a good quarter in terms of cash flow. And in the Q1, we stopped buying inventories in order to leverage the inflationary gain on inventories.
So on a 12 month comparison, we had positive cash flow generation. But when you compare the Q1, which is March 1st December, the seasonality generates such pressure. Talking about our expansion here. So we opened 40 stores in the quarter and we closed 20. This rate of closures is abnormal and this reflects the fact that last year because of the pandemic, we minimized the store closures and we closed less stores than it would have been normal.
What happened is that the pandemic shifted demand from one store to the other. Shopping malls were initially closed, then shopping malls had restriction periods to open. The downtown stores lost volume because of smart working. Neighborhood stores gained. So it was very difficult last year to read our sales per store in order to take long term decisions related to store closures.
So we only closed extreme stores in extreme situations. But by the end of the year, as the sales normalized, we recover the visibility and then we could reassess store closures. And so we closed in this Q1. A lot of stores that should have been closed last year under normal terms. But now we get back to normal closure of stores.
We'll get back to historic pace. If you look here in the quarter, 32% of the stores are still undergoing maturation, and we are also reiterating the guidance of 2 40 new stores, both for this year and for next year. Here, we have some color on the expansion. And I think the main point here is the number of new cities we have we are occupying. We have here a 4 year time series, and it's obvious how the pace of new CD entries are accelerating.
So we entered in 54 stores during the year. This is way more than we have done in previous years. This points to the fact that our expansion today is more marginal and less cannibalizing than it has ever been. Obviously, in the past, when we opened a lot of A Class stores in densely populated areas where we had a lot of stores already, the cannibalization was much higher than it is today when many of the stores are taking place in new markets. And even the stores that we open in existing markets, they are more they'll be more concentrated in peripheric regions, more outside of the greatest store concentrations that we have.
If we look at the stock composition, it also it's diversifying as a result of that. So in the last 12 months ended in the quarter, premium pharmacies accounted like A class stores accounted for only 12% of our expansion, while hybrid stores have been above 60%. They serve the diversified consumer basis. And then finally, C Class Pharmacists, they accounted for 29% of the expansion. So our expansion is popularizing more and more.
And obviously, our aggregate base of stores still has 34% of premium stores, more than the popular, but the trend, as I pointed, is completely opposite from that. And we'll see more and more growth here and maybe here, and we'll see a slight compression here as we get national and as we get more diversified geographically and economically. This is the Brazilian map with our occupation per state and there are a couple of interesting messages here. The first message is that we now have both banners with more than 1,000 stores. Haya opened the store number 1,000 during the quarter.
So Haya now has more than 1,000 stores and obviously, Door Azul has 1300 stores. If you look in terms of revenues, we own both the number 1 and the number 2 player in the country. Opposite, there are other chains that have more stores than Hyah alone has. I mean, the drug a higher bread, not the Hyah drug a deal company. But on a revenue basis, Dragahai is the number 1 banner in Brazil and Dragahai is the number 2 banner in Brazil.
When we look at our footprint, I'd like to point to the fact that we had only 3 states where we didn't operate, and actually, we still don't operate, but we already have contracts signed for these markets. So we are entering in Amapa and Acre in the next quarter, and we also have contracts to enter Guaraima, which we should enter by year end. So by the end of this year, we will have operations established in all states in the country. Some highlights here. We already have in the Northeast more than 300 stores.
We have 303. We are the leaders already both in Salvador and in SIFI. We are becoming the leaders also in the state of Bahia in Pernambuco, either we already are or we'll become in the next months because of the inertial growth from maturation that we already have contracted for those markets. And this is a really successful operation, but in terms of sales, in terms of expansion pace, in terms of profitability as well. When you look at the North, the North has been another highlight.
This is our most recent market. We entered both Amazonas, especially the city of Manaus and Hollandia recently. These are the 2 most recent states. But in the whole northern region, we already have 60 stores. And I would like also to stress the southern region in which we have already closed to 250 stores.
We recently opened our DC in Puerto Alegre, and this issue will be instrumental to allow us to further expand here in the state. You see that Rio Grande do Sul is a state in terms of potential, slightly larger than Parana, and we have less than half the stores we have in Parana. We have Santa Catarina is a much smaller market. We have more stores than we have in region. But our operation in Rio Grande do Sul is an amazing one.
It's very profitable. We're very happy with it. And now we're accelerating growth here, driven by this new DC that opens up the countryside for us, which before was too far away from the Curitiba distribution center for us to fulfill. In terms of market share, I think we have a slight increase here on a natural basis and in most markets and a slight decrease in Sao Paulo. This has to do with the way that IQVIA does these calculations.
The numbers that IQVIA used to calculate market share, they come from actual demand numbers informed by the larger chains. So chains like us, we inform IQVIA how much we sold month by month, store by store. But in the case of smaller players, they don't have direct access to that. So what they do is they get selling data from the wholesalers. So wholesalers like Profarma, Santa Cruz and others, they will tell IQVIA how much in merchandise they shift to each independent pharmacy or small chain over the month.
So this is a calculation that mixes up sell out data, demand data with selling data. The Q1 of the year is a moment in which every retailer in Brazil is getting ready for the price increase in order to get inflationary gain on inventories. So what happened in this moment is that the selling increases, and so there is a distortion in this calculation. But we I but IQVIA informs also the share only on a sellout basis. Obviously, this is a part of the market, not the full market.
But in the part of the market that gives sellout information, we recorded a 1.7 percentage point national gain with a 60 bps gain in Sao Paulo. So we I believe this is much closer to the reality than this number here. Now talking about our top line growth. We reached in the quarter close to $6,000,000,000 in consolidated revenues. So if you look at our retail business, it grew 14.4%.
On a 2 year basis, it has grown 43.4 percent, while Forbio grew 22.6% with a 2 year stack growth of 55%. If you look at the mix, OTC has been the fastest growth category exactly because of the pandemic. I mean, all categories related to the pandemic are here. I'm talking about COVID test. I'm talking about hand sanitizers, masks, etcetera, etcetera, etcetera.
Then we had moderate growth here in generics and HPC, and we have lower growth here in branded. But the most important figure, I think, of the quarter is in this chart, which is our comp. Let's not forget that we're comping versus our Q1 last year in which we had grown top line 25% and mature stores 11.5%. So this comp base of the 1Q is a completely abnormal comp base because people were stockpiling products at our stores before locking down. And by the time they locked down, we saw in the Q2 minus 7 mature, 6.3 total.
So this is now a roller coaster and this is why we start looking at 2 year stack figures for us to understand where we are. So when you look there, it's clear that the comps are accelerating. So we came from 36% to the Q3, 40% and now close to 44%. We are also publishing the April data exactly because of the 2nd wave of the pandemic for you to get a better grasp that this is different from last year in which people were really locking up at home and not buying much. Now demand has been normal.
So we look at 41.6% 2 years back growth, but with a negative calendar effect of 1.2%. So if we look on a calendar adjusted basis, this is very similar to the Q1, so we're maintaining this great momentum. And in the case of the mature stores, 14.1%, if you add up 1.2% in calendar effect, we are at 15.3%, even slightly better than in the Q1. So the structural growth momentum for the company has been great. And looking at the mature store growth on a 1 year basis, 4.6% plus the calendar effect, this is 5.8%.
So this is strictly in line with inflation despite the fact that it's coming on top of an 11.5% abnormal comp. I read tonight many last night many of the sell side notes about the result that a lot of most analysts were talking about good as expected. And I have to tell you that for us, this is everything but expected. We never expected to have inflation adjusted comps in line with inflation over this huge comp base. This was never our expectation, and we have done way better than our budget to be very candid here.
So in my view, this highlights how strong in our view at least this quarter was. I think another great news here is the digital penetration. So in the Q2 last year, when people really locked up at home, we saw a peak of 7.6%. As customer traffic started normalizing, this had ceded somewhat, but still we were by year end much better than we had started. But we're happy to see that in the Q1, we started growing the digital penetration.
We got to a new record, which is 7.7 And the best news here is that the March figures and the April figures are even higher than this. So it's been really within the quarter, we have seen this growth. So there's a great trend in increased utilization for the rest of the year. So this is for me, this is very important. Well, as I mentioned before, we don't see digital as an end in itself, as a business in itself.
Digital is only a means to increase customer engagement, frequency, spending and lifetime value. And we have measured that the people who have adopted digitalization, they spend 20% more than they spent before. So as people get digitalized, the total spending grows and this sustain the comp growth. The only reason why we have a comp growth like this is exactly because digitalization is driving an increase in customer spending. So we believe we'll be able to sustain real mature store sales growth for the foreseeable future exactly because of digitalization.
When you think about talk about digitalization, it's important to mention that we have increased a lot the infrastructure to support this service. So we have shipped from stores from only 72 stores by the beginning of last year. We have increased this number and added more and more stores through the year. And now we have a new jump to 3 54 stores with more dry shift from store. This comes on top of the fact that 100% of the stores do Click and Collect and 100% of stores, they do neighborhood deliveries, which is customers who live in the immediate neighborhood.
They send WhatsApp to the store. They order through WhatsApp directly from the store, and we deliver with the existing store personnel in the immediate neighborhood. So neighborhood delivery plus Click and Collect, which are very low cost services for us, they represent more than 50% of our digital demand. Ship from store is less than 50%. So the economics is very good also because of that.
And finally, we reached a total of nearly 10,000,000 cumulative app downloads in the quarter, and this is a number that has to keep growing. Let's not forget also here that we have 2 new businesses that we are developing, the marketplace and the health platform. These businesses are fully digital businesses and they depend on the digitalization that we're able to do through the new pharmacy to feed them. So it's exactly these 10,000,000 customers who have downloads today and then in the future, I hope there will be 12, 15, 20 or more who will buy from the marketplace and who will use our health platform. So this is why digitalization is so important.
Talking about gross margins, we had a slight pressure here, 20 bps over last year, 30 bps on a sequential basis. When you look at an annual basis here, 10 bps is due to the adjusted the net present value adjusted, which is really a non cash effect related to interest rates and 10 bps relates to promotional intensity to drive customer digitalization. We have been very aggressive with coupons in the stores, especially smart coupons because they drive the digital onboarding of the customer. So net from other gains, they accounted for a 10 bps gross margin pressure. And in terms of the cash cycle, we had a flat cash cycle versus last year.
But obviously, the Q1 level of the working capital is always higher than the Q4. So it's a big increase over the Q4 because we have stockpiled inventories to get ready for the forward buying. But we are in a similar level, both in cash cycle and in inventories versus where we were last year. Selling expenses were a great highlight here despite the fact that the mature store growth was below inflation and only on a calendar adjusted basis was in line with inflation. So the normal thing to see would have been a slight pressure, but we have we're getting more efficient and we got a 40 bps dilution in selling expenses.
When we met this gain in selling expenses from the gross margin pressure, we still get to a contribution margin increase of 10 bps. This is a very important figure because this is where we understand the quality of the operation, how we are doing structurally. And I mean this because as we are investing in digitalization, marketplace, health platform, we have a lot of G and A that the company is absorbing in order to deliver those businesses. So depending on when we look, it's possible that we see pressure because of the G and A. But I think this should be temporary pressures because this investment is being done with the goal of growing and creating value.
So longer term, they will be compensated, but in the short term, they could be, depending on the quarter, a source of pressure. So the fact despite what happens on the G and A, this is where we see the underlying strength and profitability of the operation because we factored out the G and A out of this metric. But still, G and A increased by 30 bps, 20 bps here of this G and A base are directly related to the digital execution, but there are more effects from digital like corporate overhead, management team, etcetera, that are not factored into this number. So this is what explains the increase in G and A. Let's not forget that we once had a G and A of 2.3.
We now have 2.8 and this is a choice. So we are adding developers, we are adding people in analytics, designers and a lot of management structure in order for us to deliver this new strategy. So this is part of the process. But happily, the core business has been so strong that we have been able to offset this general increase with the contribution margin growth we have recently seen. Finally, our EBITDA was 7%, in line with the Q1 2020 when we 10 bps lower despite the fact that we had a huge tailwind here from the pandemic and also from the calendar because we had in 2020 a leap year.
So having a similar margin from last year, I think it's an amazing accomplishment because for us, this was a quarter that looked from the outset a very challenging one, but we're very happy to deliver very strong results here. We saw our accounting EBITDA was EUR 350,000,000 sorry, here, EUR 432,000,000, but we had nonrecurring gains, mostly tax gains from other periods. So the adjusted EBITDA is below this EUR 416,000,000. Obviously, if you look at an account EBITDA, it's a huge increase. But these tax credits, they relate to previous periods.
We are not factoring them in this calculation. So we always look at our normalized figure, and I think this is the right thing to do. Finally, we had EUR 178,000,000 in net income, 10 bps higher than last year despite the huge conveys that we have seen. Finally, in terms of cash flow, we had pressure both on free and total cash flow because we are comparing March with December, which are very different cash cycle points because of seasonality. If we were comparing March with March, this would have been a positive cash flow generation.
So this is only related to seasonality, but still net debt to EBITDA stays at 0.6%, which is somewhat lower than we had seen last year. Our stock our share price was pretty much constant, only 0.1% increase year to date. The index was slightly down, so there's a positive half of 2.3 percent and an average trading volume of BRL 155,000,000. And obviously, the compounded total shareholder return seems the higher end to the 0.2 years, they are always very high. And the good thing is that quarter over quarter, year after year, we maintain this kind of figures.
So making here a summary of what we talked. I mean, This is a great Q1 for the company. We are very happy about it. We had huge comps because of the pre pandemic demand surge, because of the leap year last year, but still on a calendar adjusted basis, mature stores were in line with inflation. But we have more and more to look at the 2 year stack figures because the 1 year become a roller coaster.
So it's high now, but then it will be very low in the second quarter. But we are sequentially accelerating, reaching 44%. Digital penetration is an all time high of 7.7% and growing. As I mentioned, March April are higher than this figure. So the transformation of the business, we talked a lot about the digital.
But then when you think about the health care, which is the other element of the new pharmacy, we have performed year to date since May last year nearly 2,000,000 COVID tests. And in the Q1 alone, due to the peak of the pandemic, the 2nd peak, 1,000,000 COVID test. I mean, this is huge figures. I mean, you cannot compare these figures to the public listed lab companies like DASA, FLURY, etcetera. I'm not saying they're higher, but they are very meaningful and we are in the same conversation at least when we talk about COVID tests.
And obviously, very, very healthy margin in line with last year, slightly higher on the net margin, slightly lower on the EBITDA margin. So very good performance overall across every metric. And when you look for the year, this is also very positive outlook as well. We have sustained similar comps on a 2 year basis for April, 42% here. If you consider 1.3% negative calendar, we are talking nearly 43%.
Obviously, on a year basis because of the roller coaster is now very high, but this is artificial. Additional penetration increasing, as I mentioned. And we had a very healthy price cap increase, which I think sets a good perspective for the year, even considering that we have an increasing inflation. But this price increase will allow us to absorb that, and I think we are expecting overall a very good year across every metric because of how of this strong start and also because of the price cap increase. Here, I would like to provide a highlight about the marketplace.
It's too early for us to start issuing GMV figures. We will come to that point sooner rather than later, but we still consider our marketplace in a pre operational stage. We started a pilot in November only in the Drugahaya website. In January, we launched the marketplace in the Drugahaya app. So it shows how recent this is.
We currently by end of the quarter featured 84 sellers, 18,000 3 PSKUs. So it's increasing versus the 4Q when we had 12 sellers and 1,200 SKUs. The sellers that we are adding, they not only expand our offering to new health and beauty verticals, but they also expand the mix in existing verticals like beauty, for example. And one of the best news here is that 39% of the marketplace orders had a 1P order coming together. So this is this was the synergy between the marketplace and the new pharmacy, just like there will be a synergy between new pharmacy marketplace and the health platform.
The view here the focus here is increasing the customer lifetime value. We have 40,000,000 customers. We want to they have higher frequency, probably with the highest frequency channel in Brazil. So we believe that obviously, new pharmacy marketplace and the platform will have their own P and Ls, but the beauty is the synergy between them because we digitalize the customers with the new pharmacy and then the customer experiences the marketplace, then the customer experiences the platform. The customer starts using the platform on a regular basis to take care of their health.
It's very they also, as a consequence, use more frequently buy from the marketplace and buy from the new pharmacy. The marketplace customers, by the time they understand that we have a one stop shopping offering in healthcare, they come more frequently and they also buy more 1P. So the billing is way beyond 1 plus 1. It's 1 this is we're multiplying these different businesses. So this times this times this, I think we change the customer lifetime value in a very meaningful way if we're successful.
This is what we're looking at. And the construction of the platform will continue through 2021. 2021 is still a soft opening year. So but we're currently negotiating with over 150 sellers. We have more than 1,000 sellers in the prospection.
We have strong focus on onboarding them in a correct way, activating them well within the platform, taking good care of them. They become customers of the company. The company starts having the individual, the customer, but the seller is a client as well, and we have to treat them like that. So taking care of the customer experience and the seller experience is very important. And right now, the full logistics is done by the seller.
But over time, we have to absorb more and more of the logistics, start integrating with our disease, but in the end of the day, having the pharmacy as a logistical hub. We have 2,300 pharmacies all over Brazil. We serve 90% of the A Class within Amayo. So we can get a seller who's based in Sao Paulo and get their products in the countryside of Amazonas in a couple of days and let the customer do a click and collect in the store with a 0 or very low delivery cost. So by using the store as a hub, we improve service to the customer, we improve the popularity and the service and the perpetuity of the seller and this is what we do that no one else is able to do.
When you think about the large platforms, they have done an amazing job, but they don't have the capillarity that we have to do a quick and cheap logistics like we can. Our customers don't expect one day to day for day deliveries. They expect 1 hour, 2 hour, 4 hours with the 1P. And even with the 3P, it won't be 1 hour, 4 hour because the inventory was will not be sitting there, but then it will be one day today, something that it's very difficult to the large platforms to do. And it's important to mention that Drugazil is still not integrated into the platform because we are switching the version of Magento for Drugazil.
So we believe that in the Q3, Drugazil will have a marketplace as well, which right now only higher. So it shows how insipid this is, but how promising this is as well. And finally, just before Q and A, we have recently unveiled to the market a lot of changes to our government that I think improve and strengthen the governance. It starts so we have a new strategy that we that's a much more complicated strategy. We're shifting from a regular expansion driven retail strategy to an omni channel strategy, a strategy that relies on our platform, relies on an ecosystem.
And the first good news here that we recently unveiled is that the majority shareholders have signed a new shareholder agreement for 10 years, which will enter into effect in November this year. So until November, the current agreement stays into effect normally. And in November, the new shareholder agreement starts. It will last for 10 years. This is involving the 3 long term shareholders of the company, the Galvan, Piris and Pifonsi families.
And these three families together, they own 30% of hydro Brazil. So we have a long term commitment from these shareholders who have been with the company for a very long time. It's always important to mention that this group of families include both the founding family of Drugazil, which is the Piris family, who founded Drugazil 85 years ago and the Pippozi family who founded Haiyo and Hunt 15 years ago. And these families, along with the Galvan family who has been in Drugazil since 70s, will be around for at least another 10 years to provide stability for the company to deliver this new strategy. As a function of this revamping of the governance, we have expanded our Board from 9 to 11 members, and we have increased the number of independent members from 3 to 5.
So this new board has already been voted on our general assembly that happened 1 or 2 weeks ago. And on top of the 6 board members who are appointed by the shareholder agreement, We have 5 independents, and we have very complementary capabilities being added to the Board, exactly in line with this new strategy. So Marco Bonhomio, he was already in our Board. He's now the Vice Chairman of the company. Marco comes from Itau.
He's a Board member of Itau. He was an ex General Director of Itau, and he was the guy who led Itau Ibercus GISTO transformation. So this is he's actually in his 2nd term in our Board. These are the Board members, all new Board members. So Sylvia Leao, she was already working with us on the People Committee.
She has an extensive experience in retailing, so it's a very valuable addition here. And then we have 3 Board members who bring completely new competencies that are required in this new stage of the company. Denise Santos, she is the CEO of the BP hospital, Benefcesa Pimpudgesa Hospital, so very knowledgeable of health care and someone who can help us along our strategy here. Then we have Cesar Goun. Cesar Goun is the Founder and CEO of CINT.
This is a company who assists incumbents in doing digital transformation. So he understands every nut and bolt of the digital transformation we're trying to do. So it's a very valuable addition to help us on this very, very difficult path. And finally, Philippe Pavio, Co Founder and Board member of da Fichi, who is very knowledgeable about platforms, who also brings a new perspective to the Board. So we have a much stronger Board with much more diversified know how and a governance who adds to the company and help us deliver this very ambitious strategy that we have ahead of us.
There are other SG improvements like the 5 statutory commodities, strategy, finance, people, health and sustainability. We have a permanent fiscal council and something that's very important. We are unveiling on May 18, 11 am Brazilian time with simultaneous translation the new sustainability commitments of the company for 2,030. So we have very detailed goals for our sustainability aspiration, and we will unveil these on this date and on this time with simultaneous translation. We will have the members of the Board, we will have members of the management talking about our sustainability view and about the specific comments.
So I'd like to invite everybody to attend because this is a very important date for us. And for the first time, we as a company have a sustainability agenda, who is very aligned to the business agenda. And I think we can talk more about this in this event. So these were our prepared remarks. I'd like to open now for Q and A.
Thank you.
Thank you. Mr. Joseph Giordano from JPMorgan would like to make a question. You may proceed.
Okay. I was on mute, sorry. So hi, Eugenio. Good morning. Thanks for taking my question.
Congrats on the results. A couple of questions here. So the first one is on the expansion plan. So now like the company will be present in all states of the country. So I'd like to understand like how should we think going forward about the strategic acquisition?
So basically like maybe a bolt on deal in one of the new states or even existing states that would make sense for you. So if you guys evaluate that. And the second one, as you on the expansion, how should we think about the dual brand strategy on the expansion plans for the company? So we have like a 2 brand strategy basically Sao Paulo. In Minas Gerais is a 2 brand strategy, but with very limited overlap.
So if you could think about like, okay, we are over we have like a very high density on Pro Brazil, eventually like we introduced higher and vice versa. So if it is something that makes sense for you guys in the short term. And the second question goes into the digital strategy. So we see a very relevant focus and you guys are investing much more than peers on this front. So here like I would like to think how are you seeing the evolution of the platform in terms of like engagement with the client?
So we saw the introduction of several content platforms taking place in your app. So I'd like to understand how is this evolving and how like it's increasing like your monthly active users in those platforms? And the second aspect is how do you think like about the role of the consolidators we have in the market? So we have Ifood, we have HAPI, now we have CornerShot among others. So how do you see those guys playing out?
And how do you think like the industry will shape out to actually embrace those guys, right? Because at the end of the day, like they are there was that whole decline not true. So how to like conquer this market and avoid this potential competition? Thank you.
Okay, Joe. Thank you for the question. First of all, happy birthday. I know today is our birthday, so I wish you all the best as we're approaching our 40 year of existence. So you made several questions here.
So let me start with the expansion M and A part. So as you mentioned, we are growing we'll be by year end in every state in Brazil. In the end of the day, obviously, these new states that we're adding, they're very small states. So they are not very material in terms of the total expansion, but I think it's a nice symbolism that will be everywhere. And obviously, in the end of the day, we'll be able to have, I don't know, 10 stores, 5 stores depending on the market.
So the aggregate sum is a good sum. Our strategy is an organic strategy. Obviously, I mean, there are a lot of M and A opportunities. We look at them. We analyze them.
But in the end of the day, I'm very skeptical about direct store M and A. In the end of the day, it's very difficult for us to find assets that have a reasonable stock quality, that have a reasonable price. And every day, it becomes tougher because we become bigger in those markets. The overlap is bigger. The fragility of those the performance of those stores is even worse as we enter.
So I think the chance that we will do any moves, I think, is very unlikely. If you look, I mean, we have been successful in every market where we entered. And these more recent markets and more further away markets where we have more vulnerable competitors versus the ones we face, for example, in the South, In the Southeast, these are our best markets. If you look, the sales performance, the profitability performance state by state, our best performance is the Northeast, North and Midwest where we have these more fragile competitors. So we don't make it doesn't make any sense to buy anyone.
And as we get bigger and bigger, the overlap increases and the sales performance of those stores that we could buy goes down, and they become less and less attractive. So I think that it's I wouldn't say it's impossible. After all, we bought an off rate not that long ago, but I think it's unlikely. Then you mentioned the dual brand strategy. And we have a meaningful overlap in Sao Paulo.
This is the only place. In Minas Gerais, we have higher in the capital, Della Horizonte, only in the capital and Drogazio, only in the countryside. Then we have Drogazio North, Northeast and Midwest and we have high end Rio Janeiro and the South. So Sao Paulo is the only real overlap that we have. But we also have to take into account that Sao Paulo is the native market of both, Andre and Brazil.
Andre and Brazil are iconic brands in Sao Paulo. So we'll maintain 2 brands in Sao Paulo. We inherited those brands. We had some pilots in some markets trying to build an overlap. We tried this in Boyana.
We tried this in Brasilia for a while. But we feel that with the exception of Sao Paulo, where we have the luxury of owning 2 such strong brands, the best model in the other markets having one brand and investing to make their brand stronger. So in Guayana, we closed a high operation. We migrated stores through Brazil, same in Brasilia, same in subcities in the countryside where for example, Pirasicaba, we had high in Brazil, it became only higher. In presidential prudential countryside of Sao Paulo, higher became Durgesio.
So whatever it makes sense to consolidate on a single brand, we did, but we'll carry on Sao Paulo, the 2 brand strategy. And having 2 brands is amazing as long as those 2 brands are very strong. Building a second brand from 0 is very, very difficult, and we will no longer try to do that. Then okay, so this was the dual brand. Then you asked me about the digital.
I mean and so I think right now what we have in terms of the digital is the new pharmacy gaining a lot of steam. So when you think about 7% to 8% digital penetration, this is very significant. Not long ago, this penetration was dismal and it's growing. So it grew initially during the pandemic, then it's seeded. Now it's starting to grow again.
And this is very important because when we think about the marketplace and the health platform, I mean, these are 100% digital solutions. So we will have as many customers as we can onboard digitally through the new pharmacy. So this is why this is such a high priority for us. I think we are evolving well. I think the new pharmacy already changes the engagement of this customer, the frequency of buying, the loyalty just because we have a much higher convenience through omnichannel than we had before.
And I believe the process will pacify as the market base becomes relevant and as we launch the health platform. We will launch the MVP of the health platform still this year, but I think it will take time for market based and health platform to start making a difference. Right now, the focus is building the new pharmacy and digitalizing the sorry, digitalizing the customers in the new pharmacy, building the onboarding and building these new businesses so that by the time we have more and more digital customers, this business can feed from these customers and then this whole synergy that I mentioned can tick off. Finally, in terms of U. S.
With the whole of companies like HAPI that do the last mile delivery, I mean, I think they have a role in the market. I think they do a tremendous job in terms of getting fast service at a very with a very good customer experience. And I mean, we are our strategy is open. It's an open ended. We work with HAPIC, for example.
They are a good partner. But in the end of the day, we want to have as much as possible the direct relationship with the customer. In our case of the digital sales, 90% are directly executed from the customer by the company. 10% come from HAPI and these other guys. So yes, they have a role, but we are not dependent on that.
And in the case of pharmaceuticals, their mission is very difficult. Obviously, if you need a shampoo, if you need a deodorant and even OTC medicine, they are very convenient and they can deliver it very fast for you. But when you think about prescription, you need a more specialized execution. You need digital prescriptions to be processed. You need that you accept that we have a lot of partnerships with manufacturers with special programs.
We have partnership with payers, health insurers, companies. So it's a very specialized fulfillment. There are a lot of categories, there are a lot of molecules like controlled medicines that we cannot do through a platform like this. We can only do directly. So in my view, the specialization of the channel makes it very difficult for these generalistic channels to be competitive on the prescription side.
On the OTC and the OTC, I think they can do a good job. And our mission in terms of our fulfillment is to be as good as them, as fast as them. The fact that we have 2,300 stores, that we have 90% of the A Class in Brazil within a mile of our stores allows us to be as quick as they are. Right now, I think they have a better experience than we have in terms of the app. I think our app has evolved tremendously, but I have to be frank to say that we our app today is not a state of the art app yet.
Happi is, Magaluis, Mercadilivis and other guy, new bank is. And our aim is to get there in 2 years. So we are investing resources. We have a large number of squads working on. We are converting our systems to microservices.
We have data scientists within the company. So we are in the journal, but this player started the journal much before us. But in my view, by the day we have an experience in the app that's comparable to this guy that our ship from store that today is mostly 4 hours become mostly 1 hour, then I think we can have the most compelling neighborhood operation all over Brazil.
Our next question comes from Mr. Gabriel Simonis from Itau.
Hi, I'm sorry, guys. I was on mute here. Eugenio, thanks for taking my question. It's actually about your store formats. So in the past few quarters, you have entered an important endeavor to reach lower income customers, right, as we see in the profile of your recent store openings.
And you've been very successful doing so. I would like to know if this change in opening profile is mostly related to your expansion into new regions and if we should see a profile change going forward in any sense? And also, if you could pinpoint the main differences between the higher and lower income formats, that would be very interesting as well. Thank you.
Okay, Gabriel, thanks for the questions. I mean and you're correct. I mean, we are diversifying a lot our growth. Our growth is more and more not only geographically diversified, but also in terms of income profile. So obviously, when you grow this much in the Northeast, North and these are not as affluent areas as Sao Paulo.
So think about our operation in Pernambuco or Bahia. We have 70 plus stores there, especially Bahia. If you think about Bahia, maybe we have, what, 15, maybe 20 A Class stores there. The market I mean, the A market is very limited there. So we have after we did those initial stores, immediately, we had to start going down in terms of income profile.
So we started opening hybrid stores and now we're opening a lot of popular stores. So yes, I mean, this large number of popular stores are related to these new markets. They are related to a lot of small cities that we have entered, but they are also related to large cities like in Sao Paulo. If you look our footprint in the areas of Sao Paulo, it's an amazing footprint. We have a tremendous coverage.
And if we open a store in Jardins, Zitain, Moem, etcetera, cannibalization is huge and the capacity of the store to add marginal demand to justify the cost of capital is not that easy anymore. So this is why the number of stores in state of Sao Paulo is reducing quarter by quarter and the number of stores in the seat of Sao Paulo even more so. If I am not mistaken, I think we have opened last 12 months like 12 stores in the seat of Sao Paulo, 10, 12 stores. It's a very small number. And even the city of Sao Paulo, these 10 top stores, most of them are in more periphery areas that complement our existing footprint.
So our growth has never been more accretive than before. In the past, we were doing a lot of store in existing areas that had great sales, but a lot of cannibalization. Still, they made sense on a net basis. But right now, cannibalization is very low from this program, and we are still driving tremendous revenues per store in the group. So if you look today, the internal rate of returns on the expansion is the highest we have seen in recent years.
We always target a 20% real internal rate of return. We are in mid to high 20s right now exactly because there is limited cannibalization and we always look at these returns matter of cannibalization. A store that sells 800,000 heads a month, it doesn't matter. It matters not much. It adds to the buy.
If it sells 800, but it cannibalizes 300, only 500 is new and the returns calculation is based on the 500. But as starting a new market that is selling 600, 700, the 0 cannibalization, 600, 700 in marginal, and this is why the internal rate of return is also growing. So finally, you asked me about the differences in formats. I mean, in the end, we're talking about the same business. So these are like the differences in execution, things related to store look and feel, to promotion density, to generic mix, to the materials and fixtures we use in the store.
So the upscale stores, they are way more sophisticated. They have a more upscale mix. They have a nicer and cleaner store book and feel. The popular stores, they are way more promotional, way more signage, way more generics in the mix, simpler fixtures. So but in the end of the day, it's the same business.
In the end of the day, it's the same economics.
Our next question comes from Mr. Gustavo Sendai from
Ciespe Investments. I have two questions here on the service front. First, if you guys plan to expand the service portfolio you offer in stores the short term and near term? And if you do, what kind of verticals are you looking for? And the second, is there a sales conversion metric or average spend for clients that go to your stores to take COVID tests or use some kind of other service, for example, what can we expect on this front?
Is the average spending in line with the company's average, higher? That would be great.
Okay. Well, thanks for the question, Gustavo. Obviously, when you think about the new pharmacy, there are 2 direct elements. 1 is the digital, the other is the health element. So we have a lot of new things that we are developing for our health hubs.
So we have an existing service infrastructure in the stores with vaccinations. We added COVID tests, but we will start piloting health hubs that I think have a much more comprehensive service than that, that are digitally integrated with the app. So you can schedule anything to the app. You can get the exams that you do either the COVID test, point of care, whatever that is, you can get the results and store this that on the app. So there's a huge digital and health care integration that we are planning to take place on those health hubs.
And still this year, I think we'll have some of these health hubs up and ready. Obviously, we have figures related to the health hub usage, but we're still not making them public, especially because the full health hub that we're launching is not up there yet. What we have today is an extension from the past. The full health hub, I think, it will be much more compelling in my view. And at that point so we assume that we already measured the economics.
But right now, we don't share the economics. Maybe in the future, as the health gap becomes more important and prevalent, we may decide to share those numbers.
The next question comes from Ms. Irma Skars from Goldman Sachs. You may proceed.
Yes. Just a quick follow-up on customer acquisition costs. I think you've said in the past that your stores are actually relatively cost efficient way of acquiring customers, given that you ultimately have you acquire your customers through the stores and then they transit to become omnichannel customers. I was just curious to what extent you're already seeing now that you're sort of strengthening and I know you're in the beginning of what's going to be a multiple year journey, but to the extent that you're strengthening yourselves as a vertical sort of go to place for health and sort of the broader vertical ecosystem, to what extent do you see already customers sort of going directly to your platform and not even having been customers of your store? And does it even I don't know, you're very well penetrated across the country and already have an impressive market share, but there's obviously still some 80% of the market out there.
So I was curious if it's to some extent, if there's even already examples of where it is becoming more relevant that you're getting customers that are coming directly online to you digitally and that can maybe even inform part of your store build out? Or is that just sort of not necessarily that relevant?
Okay, Manav, that's a really good question. And I think the store is a huge efficient customer acquisition machine. Let's not forget that. We have a business that is 93% physical. We open a store, the customers come and they come to the store to buy like they have bought for the last 100 years in our stores on a physical basis.
Then they learn in the store that we have our app. The gist on boarding happens in the app. Then they start using these new channels, omni channel, click and collect, ship from store, etcetera, etcetera, etcetera. So what this means is that the cost of the store, the investment of the store is already fully absorbed by the regular business. But all of a sudden, we have 2 new business for us to further monetize this customer.
But I think the dynamic is not really, okay, us going to Google or Facebook and acquiring a customer and then the customer from digital going to the store. I think the other way is way more effective. We think people come to us because of the store, then they get digitalized and then they start buying through the app, then they find out we have a myriad of sellers there, so they become users of the marketplace. Then they learn that we have a gist of a health platform that can help them have better living, prevention, health promotion, disease prevention, etcetera. So for me, this is how it works.
Obviously, we do some Google, Facebook, etcetera. But in the end of the day, it's through the stores that the customers will come. And this is the differentiating factor of everything we do. Most digital businesses, they have a nightmare acquiring customers. They may have a great product, excellent solution, experience, even the margin outside of the customer acquisition cost, it's pretty good.
But by the time they put the customer acquisition cost, it becomes a nightmare. And we have an example at home. We bought Techfit, which is becoming like the chassis for our health platform. I mean, amazing start up, amazing digital solutions, amazing understanding of the customer experience. But the problem is getting customers for them was a nightmare.
And we already have 40,000,000 customers of whom we react we interact. And so with these existing customers, we onboard we do the digital onboarding and then we will transfer them not only to buy from the new pharmacy, but also from the marketplace, but also by the to consume the health platform. So this is the winning combination. Everything that we are doing here relies on the store. The store is the customer acquisition machine.
The store is the fulfillment machine. 85% of the transactions, the digital address happened through the store. The store will be the hub for 3P deliveries in the marketplace. Imagine the value of you buying something in the marketplace and collecting in 1, 2 days in the store without a shipping cost or using this existing infrastructure to deliver a home at a lower shipping cost and faster time than what you're used to. This is something that the large platforms can do.
Customer acquisition for them is not that much an issue because they have a huge spectrum of categories. So obviously, they spend money Google, Facebook, etcetera, but they dilute over our large scope of business. But this kind of fast fulfillment, only with the kind of popularity that we have, it's possible to do. But comparing to any pure play vertical platform, in the past, we had like e pharmacies, like Net Pharmacy, even Onofre and couple others. I mean, this has been a huge failure because the customer acquisition was a main barrier for them.
And then the fulfillment cost was very high because they didn't have the kind of popularity they have. So the store is absolutely central to the business model we're developing. And finally, you asked me about market share. So we have a market share of, I think, 14%. Just with store maturation and a couple more years of expansion, we are sure to get to 20%.
But I think there is way more opportunity, not only because I don't think the expansion ends in 2 or 3 years, I think it goes on with Fuze team. I think it's clear how our we have reinvented expansion, how we have learned how to access popular markets, enter smaller cities. So I think there's still a tremendous opportunity for the expansion. And I think the combination between digital expansion will drive faster share gain than we were getting before.
There appears to be no further questions. Now I will turn the conference over back to the company for the final remarks.
Okay. So thank you all for attending our conference call. And just to sum up some of the things we mentioned, I mean, this was a huge challenging quarter for us because of the abnormal comp base of last year in which we grew 25% top line, not only because of the surge in demand before the social reservation, but also because of the leap year. But still, when we look at our mature store sales on an inflation adjusted basis, it was absolutely in line with inflation despite this huge home base. For us, there was nothing like as expected in this performance.
I think it was a huge surprise for the company. We are way above budget. But the good thing is that this sets an amazing momentum for the year. The comps have been very good. The digital is accelerating.
The price increase will allow us to do very, very well with inflation, with the G and A increases we're doing to support the new strategic program. So I think the business is really structurally, I don't either it's on a very strong pace and this is poised to be a very good year as a result of that. I think the most important thing is not the year, it's not the quarter, is the long term business that we're building, is the combination of the new pharmacy with the marketplace, with the health platform. We are only in the beginning. I think we start to see the early effects of the new pharmacy.
What supports these kind of amazing comps is digitalization, no doubts about it. So this is already we're already harvesting what we planted on this regard, but I think we are only planting when you think about the marketplace, when you think about the health platform. This is still year 0 of the marketplace. I don't know how next year will be. Maybe next year starts to make a difference.
This is only the almost pre operational, but I have no doubts that the market will be very meaningful for our future. So there's a tremendous optionality there. There's a tremendous optionality from the health platform. But obviously, they have they will have their own pockets of profitability. But rather than look at the vertical profitability of separate businesses, the beauty lies in putting all this together.
In the end, this is all about increasing the customer lifetime value. We have 40,000,000 customer with the highest shopping frequency in Brazilian retailing. And by adding the digital, these frequencies further and the spend is further increasing. By adding more and more products in the marketplace, it will spend more and more. People start buying in the marketplace without even knowing they are in the marketplace.
They don't have to know we are in the marketplace. They just come to us because we are a high frequency channel. Then they find out we have this amazing offering and then they find out they are 3P and then they find out we are in the end marketplace. So this is a cycle that happens, but the marketplace frequency will sum up to the pharmacy as well. Just like the platform frequency will sum up to the marketplace and for the pharma.
So in the end of the day, despite of what we can achieve on a vertical basis on each of these three businesses, the combination is hugely synergistical. And in my view, this is a game changer for the company. This is not an easy strategy to execute. This is not a cheap strategy to execute. We have the financial commitment to do what it takes.
We are enhancing our team. We are enhancing our digital area. We are enhancing our government to support all this effort, but we are very optimistic with what we can achieve. So the previous 10 years of the original shareholder agreement have been amazing in a more traditional retailing site. We still will build upon this traditional retailing site, but now we are adding a lot of platform elements to them that I think could be transformational in the future.
So thank you all for attending the call, for your support to shareholders, and our IR team are available whenever you need us. Thank you very much.
The ERD People, Health and Well-being conference call is now finished. Thank you very much and have a very nice day. You may disconnect now.