Good morning, everyone, and welcome to Santoro's webcast. Today, we will discuss the company's earnings results for the Q2 of 2020. This is Pedro Zemmiel. Today, I'm here with Jose Salazar, our CFO and IRO and Daniel Hegenstein, our Treasury Investor Relations Director. So let's start on Slide number 2.
This was the most challenging quarter for our company. The result was not good, but thanks to the efforts of our team, we adapted quickly to this new scenario, and we succeeded in mitigating the impact of the pandemic in our businesses. Our presentation has 3 parts. 1st, we're going to give you an update on the impact of the crisis and what has been done to face it. Then, the results from the Q2 and finally, the Q and A session.
You can send your questions to this webcast platform and the questions will be answered after the presentation. Let me start on slide number 3. Over the last year, approximately 80% of our revenues came from our brick and mortar stores. And this year actually, this quarter, we started with all of our 211 stores closed. That had an impact on our results, particularly considering expenses with stores, personnel, and occupancy, which are mainly fixed.
Stores closed also had an impact in our digital channel because we were not able to benefit from omnichannel sales. Based on that, we had to react in order to optimize the mitigation of this crisis in our business. We also adapted working conditions for our employees in order to preserve the health of all of them, focused on fixed expenses, and reinforce our liquidity. And we did that substantially, by these many initiatives focused on personnel and occupation. But, unfortunately, we did not enough in order to observe this decline, almost 90% in our revenues from brick and mortar stores.
But we took new measures, anticipating receivables, new lines of credit, payment terms, and the receiving of products. Well, fortunately, our digital operation was already relevant, accounting for 20% of sales. After our first reaction to COVID-nineteen crisis, we strove in order to strengthen it By implementing initiatives such as shadow stores and drive thru, we were able to reactivate our omnichannel operations even with stores closed. And besides omni, we also increased our share in the using of the app, which accounts for more than 50%, and it's very important for customer loyalty. And with profitability above other channels, focusing on marketplace.
And that grew more than 300% in this quarter. Everything contributed for the digital revenue, more than doubled this quarter. And also, complying with with with unlimited opening hours and decreased the flow. And as months went by, we gradually opened more months, and regaining sales, recovering lost sales. So from 15 stores opened in April, with a drop by 67% in sales, to 100 and 72 stores opened in July, with a 41% drop in sales.
To date, we have 192 stores opened, with a drop of 33% in our revenues. Let's move to Slide 4. It's very important to highlight the fact that the growth in digital was not enough to offset the drop in our brick and mortar stores and also the high inventory levels led us to work with lower margins, much lower than normal. Now, I'd like to turn it to Salazar. He's going to focus on the financial results.
Thank you, Pedro. Good morning, everyone. So let's move to Slide number 5. In this quarter, as well as in the comparative period, we also had non recurrent effects, both positive and negative. All the explanations that will be given refer to the adjusted results to these nonrecurring effects and also IFRS strategy.
Our consolidated net revenue decreased 56% in the 2nd quarter and 30 percent in the Q1, with the impact of stores closing, as mentioned by Pedro. Revenues of our stores declined 89% in this quarter and 48% in this first half. The performance, considering only stores opened SSS, was 52% in the quarter and 3.6% in the first half. As Pedro mentioned, we also had an increase of our net revenues of 85% in the first quarter 50% in the first half. As for GMV, it grew 105% in the first quarter, 62% in the first half.
Our gross revenue, dollars 83,500,000 in the first quarter and $329,900,000 in the first half, a decline of $69,900,000 and $39,100,000 respectively. Gross margin was $34,900,000 in the quarter and 44.3% in the first half. High inventory levels also led the market to implement promotions, consequently becoming more fierce. We also had to adequate our prices, increasing markdown, decreasing our gross margin. Markdown also led us to regulate the age of our inventory that was old.
Our consumers also bought more bicycles and some other devices with lower margin. Now let's talk about operating expenses. There was a decrease of 20.6 percent in the quarter and 4.6% in the first half, which is explained by our strong focus on containing expenses during this pandemic, and that led to a decrease in our fixed costs of approximately 40%. It's also important to highlight the fact that our fixed costs are mainly related to our brick and mortar stores, but we also have relevant operating deleverage. As for digital channel, we have some variable expenses that increased according to its growth.
So we had the 4th increase in our revenue in this quarter, but our expenses also increased and had a negative impact on our EBITDA. So here, we have adjusted EBITDA of $84,900,000 in the quarter and minus $79,700,000 in the first half, with a margin of minus 35.5 and minus 10.7. As explained earlier, that is explained by the increased markdown that had the impact in our gross margin and operating deleverage. Now, let's move to our net income. Our net income in the quarter was negative compared to the results in the first half, 78 visavis43.3 positive in the second half of twenty nineteen.
At the bottom, we can see the reconciliation of our net income for this quarter and the reported EBITDA. Slide number 10. All the measures implemented to preserve cash allowed us to generate despite negative EBITDA. Operating cash flow for the quarter was positive $71,700,000 and cash flow regarding CapEx was negative by 21%, resulting in cash generation of $50,700,000 With the in order to strengthen our cash position and prepare us for the ending transactions with Nike, we conducted a follow on, and we ended the quarter with a cash position of We kindly ask you to give us just one second in order to update the questions. Can you please add some color on about the performance of digital channels in July August?
How was it different from the brick and mortar stores? Thank you very much for your question, Matheus. So our digital channel has been maintaining performance and growth compared to previous months to what we saw at the end of the Q1. So we succeeded in adjusting operations, and also with our shadow stores now properly working, and we also reduced our gross margins. And thanks to our efforts with our app, and although stores are now reopening and also sales increasing week after week, the digital platform has been keeping the same pace.
We did not see any changes. There was no decline. Okay. So we have many questions. Let me read the next one.
It comes from Irma from Goldman Sachs. Two questions. First, how do you see the normalization of inventory and how you are receiving new products? And how is the dialogue with the shopping malls? Thank you, Emma, for your questions.
With regard to your first question, There is a disorganization in a flow that is usually a right hand square. So we resumed receiving products, and also we are distributing products to our stores. But what we see is that the industry is reorganizing, is readapting right now because we had to adjust our margins when brick and mortar stores closed. And probably that will imply in reducing imports, and they will probably be concentrated for the holidays. So it's just as if we skipped one order or one entry.
And that will also lead to a shocking offer. Also considering that plants were closed in Asia and in other parts of the world. So I believe that, right now, we do not see any red flags. We are receiving products, and we are succeeding in distributing it. So there was a decline in offer, but we also had a decrease in number of purchases.
2nd question, what about the dialogue with the shopping malls? Well, this dialogue is being conducted case per case. When stores were closed, the malls were our partners, and they really supported us. And also seeking for a solution for an issue that was not produced by any stakeholder. And now we are going month by month.
What we find is that we have different realities at different shopping malls, different managing organizations. But we are working as partners, not as long term partners, but also with the outlook of growth. And I think that, that allows us to certainly negotiate. But I would not mention anything like, the average or the typical. The conversation is being done case per case.
And what I see is that we have a consistent negotiation pattern. Well, we have many questions about margins. So Thiago Matera, Eric Huang, Well, Pedro has already answered part of that. But I think the question is how we are going to manage margins from now on. So as mentioned earlier, the market is right now disorganized with high inventory levels.
We really need to cut down on our margins in order to reach a reasonable level of inventory. And we believe that margin recomposition will take place in the next months, and it will be probably at the normal level at the end of the year when we have Christmas and Black Friday. And we believe that starting next year that we will have reached the balance. But obviously, this is going to take place very gradually. We believe that this recomposition will take place along the second half, so that we reach proper levels at the beginning of next year.
If you allow me, please let me add, I believe Salazar already mentioned some of the facts, but I'd like to highlight the fact that we have a more fierce market. We have high inventory levels, and the company was growing 20 we also had to work in order to avoid inventory aging. And there is also the mix issue. So regarding pieces of equipment and some other products with a lower margin, but had increased sales. So what we see is a gradual recovery with margins improving little by little.
And just as Jose mentioned, with the arrival of new collections, we expect things to reach normal levels. Yes, and in answering the question about the changes in our mix, so we had 2% was related to bicycles and equipment. And in the last quarter, we saw a change of that from 2% to almost 10%. So that certainly has an impact. And as things go back to normal levels, we do not believe that this will going to stay at a 10% level.
But we believe that it will be better than the previous 2%, but we do not know exactly where it will stand, but somewhere between 2% 10%. And I think it's important to also add about the mix of channels. So obviously, the gross margin of digital channel is lower, but now we have a higher share coming from digital. And the market is really experiencing a dramatic period right now, and we are all working. And we know that things will get back to normal.
We just don't know when, but it will go back to normal levels. Well, our next question, Luca Cidero from Saga. Saga. How do you see the renovation of stores and its schedule? And also considering the crisis and how some other stores will close, do you see a means to actually increase your presence in some other shopping malls?
Okay. So renovations, remodeling, we were already doing that. And now we have reopened some iconic stores, such as the one in Recife. And once our cash was more stable, we also took advantage of remodeling some stores. And as for reopening, I believe that, once again, we are optimistic for the midterm.
But in the short term, there are 2 factors that reach a balance. We are less certain about our revenues, about our sales, particularly when you talk about less consolidated shopping malls. And we are being highly conservative in our revenues prospects, and we know that, on the other hand, there are there is room for opening new stores. We know that some retailers from different industries are permanently closing their stores. So we see that.
And for this year, we don't have any target regarding a next number of stores. No. We want to open good stores. We are we know that there will be some exceptions, some excellent opportunities, but we may like some other opportunities for the future. We have also a new store being remodeled on Paulista Avenue, and I hope we have some news in our next meeting.
And that will be another iconic store. Question from Alex Tanaka from Alpha Key. Good morning, Pedro. Can you please give us a feedback about the follow on with Nike? Thank you, Alex.
Well, we are now awaiting for CADE's position. There is nothing new. We are now awaiting for CADE's And as soon as we have something new, we will certainly share with the entire market. Thank you for your question. Now we have 2 questions from Itau, one for Elena, one from Thiago.
Well, let me start with Elena's question. The pandemic led the consumers to digital, and also the marketplace also benefited from the platform. So did you see any changes regarding costs of what consumers bought? And also, there was any change regarding platform's performance? Have you been discussing that about marketplace?
Well, it's reasonable to think that the scenario favors marketplace and also specialized products? Well, that was also Marcos' question. Okay. So we have also a long term strategy, and there is something in this question regarding a short term and tactical action. When we think about long term strategy, well, the marketplace is very different, and we have, for example, a platform player, such as a store in which you sell about everything and trying to become like a convenience platform delivering and also transactional, so selling about everything, anything people want or need.
And in Brazil, we have highly qualified players in this segment. And there is another one is playing as an ecosystem, aggregating a certain niche, which means that for consumers, that will mean more than the transaction itself. So this is also available in other parts of the world, and this is the path I see Brazil following. So we are trying to build a closer relationship and also in trying to better understand our consumer. So I'd say that, these are different scenarios.
Obviously, there are advantages and disadvantages in both of them. And when you think about categories, obviously, there is a benefit for platforms, And also, we'll have consumers coming back to a more open platform. But what we wanted to offset is by increasing our contact points with sports consumers. So we have SANTARO, and I think that this is very clear when we also embrace Nike and also in trying to enhance our relationship with consumers, increasing number of contacts, and also to take this relationship to another level. So I think that these are 2 very different things, but there is certainly room for us.
With regard to the current scenario, 2 things. First, we really worked hard in order to increase sales through the app. In the short term, this growth has a high CAC, but the hypothesis is that the CLV is higher. And we consider the consumer just as if he was they were buying just once. But what we want is to have the consumer coming back, and the track of the app tends to be lower.
And the second or third purchase, because you can also send some links to consumers. But we are very confident about our platform and our strategy. With regard to our partnerships, well, 2 things. We have the premium brands, which is the brands and how consumers see the brands for sports brand. We know that building a brand is something key, and that's why the way they relate to these specialized players is different from more general players, so I would not put them in the same box.
You cannot buy, for example, a blender and running shoes because the brand believes that they need really to enhance their brand, and we understand that. And we also have our own label and some other brands that can enhance their presence. But I'd say the GMV is still low in B2W when you consider what we have. So the growth that we see, when you think about Brazilian reals, we are considering our own platform. Well, I hope I have answered your question.
We have 2 more questions. And I think, well, we let me just add to the question about the online environment and also our main competitors. And also Felipe Pertegaon from MARR. He asked, can we provide more information about the app? So we saw a relevant increase in its use.
So how do you see that from consumer standpoint and CAC? And also about the marketplace and how that can actually change digital sales channels. Well, first of all, I'd like just to say that for a long time, we had a theory that few apps would be present in consumers' mobiles, and that some would be used less often and that an app such as ours would not really have its place. But we invested in our website and desktop and mobile also, and less in the app. In the past, that was how we worked in the past.
But our app actually has a very good performance. What we see is that now more consumers have mobile phones, and people do keep many apps, as we once thought. So once came from the app, so 30 points compared to last year, 3,600,000 So, 3 37% increase and 1,600,000 downloads, 43% more. So what we see is that this channel is important. And we also know that this consumer will come back.
With regard to competition, online competition, first of all, obviously, this crisis had a higher impact on brick and mortar stores compared to online sales. So the more concentrated digital, the better. And we also have some competitors that present a higher presence, and, obviously, they benefited more during this crisis. But I'd say that we have approximately a potential of 90% to enter this market. So I'd say that this will really be a leap.
So thank you for your questions, Marcelo and Felipe. Well, we are going to close this Q and A session. Our Investor Relations teams will be available to answer further questions. Thank you all for participating in our earnings webcast. Sports as part of Brazil.
We were always convinced about that, but the pandemic made it even clearer. Even considering this first half of the year in the pandemic, people kept exercising. They have changed their habits, the sports practice, but the willingness to exercise continued. And thanks to our omni channel, we continue meeting this demand. We are very proud of our team that despite this delicate time in their lives, worked hard in order to make us more efficient.
We are very proud of the support Santoro and the team gave 2 transformer projects, our initiatives to NGOs that changed the world through this port. Financial results of this quarter was not good, and it could not be considering the closing of physical stores. But despite this challenging scenario, we were able to limit our losses, generating cash in our operation and in the company and doubling revenues in our digital channel, which was already relevant. We know that there will be more short term challenges, but we are very excited about the future. We will recover regain little by little the revenues from our stores, and let's work hard in order to continue building sports ecosystem in Brazil.
Thank you very much for your participation and interest in SBF Group. Have a great day, and see you next time.