Good morning. This is the Centauros Conference Call, where we will discuss the company's earnings results of the Q4 of 2019. At this time, all participants are connected on listen only mode. Afterwards, we will have a Q and A session. When further instructions will be provided Please note that this conference call will be recorded.
This presentation followed by slides will be simultaneously broadcast and available for download on website, ri. Sentado.com. Br and will be available for download in the portal. Before proceeding, it is important to clarify that forward looking statements during this conference call regarding the company's business outlook must be treated as forecast that depend upon the country's economic conditions, the retail sector regulation and performance and other variables. Therefore, these projections are subject to change.
Here with us, we have Mr. Pedro Zemo, Centauro's CEO Jose Salazar, CFO and IRO and Daniel Jekensteiner, Treasury and Investor Relations Director, who will discuss Syncauro's performance in the quarter of Q4 of 2019. Subsequently, there will be a Q and A session. Now I give the floor to Mr. Pedro Zeno.
Please, you may proceed. Good morning to everyone. We are very pleased with our year of 2019, our 1st year as a publicly held company. We have made progress in our omni channel, in our digital platform and in the expansion and retrofit of our G5 stores and we have delivered good results, which have been accelerating. We can now go to Slide 2 and we will talk about our results and achievements.
But before that, we will discuss how the crisis, which is unfortunately taking place in 20 20, it is strongly impacting our society, it's affecting us and how we are acting in the face of it. Our first priority is the health of our team. We have been striving to take care of everyone and to support our Brazilian society in flattening the contamination curve. As for the health of our business, on our supply side, our suppliers and we have enough inventory to absorb any eventual supply shocks. In addition, historically, exchange rate variations are passed on to the market and do not affect our margins.
On the demand side, we are watching the situation unfold. We will certainly observe a shock in the demand of brick and mortar stores, but we have a robust and consolidated digital platform, which is gaining more and more relevance and guarantees us an important advantage at this time. In case of more prolonged shock, we are capitalized, thanks to our cash generation and our IPO. Our cash position at the end of the year, including available receivables for prepayment were almost 700,000,000 with almost no debt in our balance sheet. In addition, we have a balance of BRL577 1,000,000 in PISCOFINS credits on ICMS, which were recognized in 2019 and which are already approved and being used to deduct taxes.
It is also worth remembering that a refurbishment and opening projects are short term, about 2 months each. In a pessimistic scenario, we have the flexibility to postpone these projects if necessary. In our 39 years of history, we have gone through countless crisis, and the current team is the same team that faced the crisis of 2015, a situation in which we overcame a strong economic crisis even though being extremely leveraged. We are constantly monitoring the national scenario and are prepared to, as in all crisis, we have through get out of this stronger even more because we entered it stronger than we entered the previous one. Our digital platform sales We have been increasingly able to connect to the real needs of our customers and We have been increasingly able to connect to the real needs of our customers.
Our NPS reached 82.6% in the consolidated result, almost 85% in physical stores and 72% in the digital platform. In the last quarter, we accelerated the expansion of our G5 stores, opening 14 new stores. On Slide 3, we can see that we reached a total of 210 stores, of which 43 were already G5. This expansion helped us to grow revenue. We grew almost 17% in the last quarter and reached a same store sales consolidated result excluding the 2018 World Cup effect of 11.2% in the year, 7.4% in brick and mortar stores and 30.4% growth in the digital platform GMV.
This growth generated operational leverage and our EBITDA margin reached 14.2% in the 4th quarter and 12.2% in the year. With that, I give the floor to Zalazar that will go into more details about our financial performance. Pedro, thank you for your introduction. We had some relevant nonrecurring effects, both positive and negative. In our release, we presented a chart explaining all these effects.
All the explanations I'm going to do in the next slides are referred to the results excluding these nonrecurring effects as well as the IFRS 16 effect. Now Slide 4, we will discuss in detail our net revenue in the Q4 of 2019. As Pietro just mentioned, we posted 16.7 percent growth in our quarterly net revenues. Comparing to 2019 with 2018, the growth was 11.9%, driven by both channels, brick and mortar stores and digital platform. The brick and mortar stores, which grew 15.7% in the quarter, were boosted by the addition of 14 new stores and by the refurbishment of 2 stores for the G5 model and the Mega Loja sales, our endless aisles, which has been growing consistently.
In the digital platform, there was a 21.8% increase in the net revenue in the quarter, which was driven by the continuous growth of omni channel. Marketplace was also a highlight of the quarter, growing 120% in the quarter. Now Slide 5 to discuss our gross profit and gross margin. There was an increase of 15.8 percent in gross profit, which was BRL410,400,000 in the Q4 of 2019 against BRL 354,400,000 recorded in the same period last year. In the year, there was a growth of 12.8 percent compared to 2018, reaching BRL 1,258,600,000.
Our gross margin decreased 0.4 percentage points in the quarter and grew by 0.4 percentage point in the yearly comparison, reaching 48.2% and 49.4%, respectively. The increase in markdown and a onetime write off obsolete customization material for soccer shirts in the amount of DKK 4,500,000 explained the reduction of the gross margin in the quarter in the year. The margin increase is explained by the increase in the apparel market share and the withdrawal of ICMS tax from PISCOFINS calculation basis. Now Slide 6, we have operating expenses. We can see an increase of 10.7% in the quarter, 10.8% in the year.
In the quarter, the increase is explained by around BRL 9,000,000 in expenses with stores opened for the quarter or in the preoperational phase by the write off of EUR 7,000,000 in fixed assets resulting from renovations by the RFID projects. In the year, we explained the increase mainly due to the cost with new stores and RFID. Here we have our EBITDA on Slide 7. The EBITDA in the 4th quarter was EUR 121,000,000, 30 0.2 percent higher than last year and the EBITDA margin is 14.2%, 1.5 percentage points higher than the Q4 of 2018. In the year, the EBITDA was BRL 310,800,000, 19.2% higher than 2018 with an EBITDA margin of 12.2% and an improvement of 0.8 percentage points.
In the quarter and in the year, we observed an operating leverage due to the company's growth. Now when we go to Slide 8, We will talk about the financial results. The financial result was minus BRL1.3 million against minus BRL 23,900,000 during the Q4 of 2018 and minus BRL 52,400,000 in 2019 against BRL 91.1 in 2018. The improvement is explained by the deleveraging of the company after its IPO. Now when we continue on Slide 9, we have our net income.
Net income is BRL 63,700,000 in the quarter, a drop of 48.2% compared to the BRL 122,900,000 in the Q4 of 2018. In the year, we observed an increase of 1.4 percent from BRL148.7 million to BRL 150.8 million. The comparison was impacted by a significant recognition of deferred income tax from previous years in the Q4 of 2018. Now Slide 10. We will discuss our cash flow.
Our operating cash flow came better than 2018, but was impacted by tax installments of BRL 30,000,000, the natural increase in the company's working capital and by the increase of inventory from new stores. Our cash flow from investment activities these were impacted by the expansion plan of G5 stores. The cash flow from 9 Nancy reflects the impact of the net proceeds from the IPO and as planned reflects its allocation to amortize the bank debt. Moreover, with more availability of cash, there was naturally a decrease in the balance of factoring of receivables. Now we go to Slide 11.
We will you can see the first chart here to see the adjusted net debt. And here, we see our financing. Our adjusted net debt decreased 81.8% as illustrated on the second chart of the slide and it decreased BRL751,300,000 in 20.18 to BRL 136,400,000 in 20.90. The reduction reflects the positive effect of the IPO proceeds, which allowed a deleveraging and interruption of factoring of receivables. While a tax debt, the company has been meeting the amortization schedule of its tax installment.
It is important to highlight here that in addition to cash balance, we ended the year with almost BRL 600,000,000 in receivables available for prepayment. Slide 12. We observed an increase of CapEx, both when we compare the quarter and when we see the result year on year and this and due to the increased pace of store openings and refurbishments to G5 models, we opened 18 new stores and retrofit 9 to the G5 model in the year 2019. Well, that concludes our presentation. Now we can start our Q and A.
Ladies and gentlemen, now we will start our Q and A session. Our first question from Lena Villares, Itau BBA. Good morning. My first question is regarding your Nike deal. I would like to know how you see the process in your antitrust agencies and what actions are you taking?
And my second question regarding your ID, during the third question, we saw that the rollout was completed. Improving in terms of technology rollout? Are you seeing more efficiency? And it would be interesting to have your take on this. Working the dilution of SG and A from your EBITDA margin.
If you could tell us, could you break out all of these results? Because sometimes it's difficult to understand where these results come from. Elena, this is Pedro speaking. Thank you very much for your questions. I'm going to answer your first and second question here.
And then Salazar will answer the 3rd question. Here we have antitrust and Nike 3 franchise. And the third would be about our results. Your first question, the process is ongoing. There was a 3rd party that was interested.
And with this, the antitrust agency follows the procedures and poses questions to the 3rd party. So we're in this stage. We're in the stage of answers, and this is a normal flow of approval. Our market is extremely fragmented. And our group, of course, knows that different business units will coexist in a separate fashion.
So before the approval, we cannot do anything because we need the approval of the regulating agency in order to proceed with our business. So this is the first part of your question, but we're following a natural and normal process here. When it comes to approve a business together with the antitrust agency. Now regarding your second point, the FIP, there's a characteristic in the company. We're very quick when we do things, and we organize things.
We see we started organize our process with labels, with everything. This we focused on execution, and we have organized everything that is necessary. And now during the first semester, since February, we started experimenting a lower of the safety margin. And of course, because we have more efficiency in the store and because of our inventory as well, because we have good inventory in the source for our customers that purchase through the Internet. So this shows how our omni channel is working.
And you can see how our safety margins, you can see that they have more elasticity. So I believe that this is the time line of the RFID. I'm going to give the floor to Salazar so that he can answer your third question. Elena, I do understand that what we saw in the result was that there was a dilution of fixed expenses by and large because of the growth of the company. So there were no recurring impacts on our results in these expenses.
We understand that everything was due to the growth of the company. Everything is, of course, connected to the drop in expenses. Thanks to you. Our next question from Irma Isgaris from Goldman Sachs. Good morning and thank you for taking my question.
And thank you for your comments on the impact of the coronavirus. I would like to add something, and I apologize if you mentioned this in the beginning of the call. There was a bottleneck in the beginning of the call. But I believe that this is a brand new situation to us for us without precedent. But what could you say with regarding the closing of shopping starting in Sao Paulo, but I believe that this will be expanded to other cities in Brazil.
How are your conversations with the shopping mall operators in order to potentially negotiate the price of the lease currently, I believe that you have according to your programs in the past, I believe that you have a very strong relationship with the shopping malls. And I would like to know what these negotiations are like in this initial moment. And the other question also would be regarding your fulfillment channel, delivery channel. Is there a bottleneck of supply chain here Because sometimes you have products coming from China, I believe that the situation there is already normalizing itself. But it's just to be sure that you will have no backlogs there.
I believe that the situation in Brazil is still evolving. Perhaps there is something to say about this region. And what about your margins? It is excellent to clarify in the release that you had a conversation with your suppliers with the recommended retail prices protect the margin, if you could tell us what would happen in a scenario where the exchange rate is totally unfavorable. If you're I would like to know if your suppliers will help you to resolve the problem or if there will be a markup.
And I believe that we're in the middle of the eye of the hurricane right now. Thank you, Irma, for your question. This is Pedro, and I believe that your question can be divided in 3 parts. The last one would be the impact on the margin. The second one would be the supply shock and first would be our relationship with the shopping malls.
Okay. Let me start. The situation accelerated very quickly. And on our side, we have made up a committee because we have to see what is happening, right? And what with our society and our business, so since last year, we have a structure to manage this crisis with a crisis committee and we have established subcommittees and we've created some priorities.
1 would be our personnel. We are responsible for our personnel here. We're responsible for our team. Number 2 would be, how could we help? Through home office to level the curve, to lower the curve considering the road that all of us have to guarantee that Brazil weathers this the best way possible.
And the third would be business protection. How do we protect it and to pull out of this crisis stronger? What we're doing now, we are updating our models on a daily basis because things are evolving very rapidly and preparing a number of actions so that we can react to whatever happens in the market and so that we can protect and minimize our cash flow and to protect our margin. That is our mission, and it is the mission of everyone currently, readapting the company to a current reality that is different from what we have ever imagined. And I believe that all the stakeholders here are going to have to participate so that we can weather this moment and then continue with life as usual because we know that crisis always have beginning, middle and end.
I can't comment on each one of them, but we are talking to all of our stakeholders so that we can work and so that we can guarantee that we will weather this the best way possible. The second question regarding a supply shock, This is we're living this one day at a time. China, specifically speaking, does not represent the greatest portion of what we import, specifically because there's an anti dumping law and for sure is very relevant. So most of the our manufacturers and our suppliers generally choose other countries to supply Brazil and not China because of this anti dumping law. And I believe that these countries were less impacted.
Now the shock of supply not only for an industry but all industries will have an indirect effect. We still don't know what these effects will be like. We don't receive products from China, but perhaps we can receive products from other countries and we don't know what will be the situation of these countries. And this may affect the supply, not from the direct point of view. See, no, private label.
Let's say, direct import and private label. Well, it's 7% of imports, 7%, 8%. And all of these products as these are private label of low technology can be replaced by Brazilian products. And I believe we haven't been very impacted in the Q1. I believe the impact will be seen in the Q2.
And imported products, if we see one of our great suppliers, I don't want to mention it, the name less than 3% of the units come from China, but they come from other countries. This is a name that we are not going to have an impact. I believe that we are going to need a rearrangement, but I believe that this won't impact us directly. And this being said, there was also an impact in the demand. But in reality, is that we do have inventory and our suppliers have inventory to supply orders.
And moreover, of course, sales are suffering because the shopping malls are closing. The demand has dropped. And so our supplies and our inventories are more than what we need in order to face the situation and to meet the demand. We're going to have to see what is going to happen until the shopping malls open again and we go back to life as usual. So this would be my answer regarding the impact on the supply chain.
Now your third question. I have a suboptimal structure here in my office. It was shopping malls, right? It was the impact on your demand and the margin, yes, on your margin. Yes.
Thank you. Now regarding the margin, it's the following. We are going through a moment where this is an extreme situation from the exchange point of view, everything. So I believe that when we think in the long term, not in the short term, when we think in the long term, I believe that we have to see what the new balance is. And perhaps it's not exactly what we're living right now.
What I can say is that the company has a history of 39 years. And there have been other shocks in Brazil that are different, not like this one. And by and large, in this industry, there is a markup agreement. So we still don't know what the prices are going to be like. The price our purchase prices, if there will be a markup depending on the level of imports, this may happen.
But the margin agreement is a markup agreement. So this is how things have always worked. I can't say anything about the future, but what I can say, yes, is that in 39 years, we've never had a different situation. Now, I believe shop and suppliers, well, for us, this is a totally different crisis, and this is a crisis that impacts everyone. This is not a crisis that impacts A or B.
We are going to have to hold hands, no, but this is not the right no, no, not literally, right? But we are going to have created good terms so that we could so that we can overcome this crisis because I believe that one day things will come back to normal. Thank you. If I could ask you, I saw from the filings of the 3rd quarter you didn't have a hedge. There's an open moment from the moment of the order when you receive the merchandise.
Are you going to hedge this in the future to try to balance this potential exposure? Or it's not even worthwhile thinking about this in the current moment. Irma, in reality, we are not exposed because we have prices in reals. Our suppliers import and we buy in reals. We put the mark up and we sell it to the consumer in reals.
So our exposure would be when it comes to indirect imports of private label. And depending on the dollar, we can also replace it for domestic production. So this is the hedge. We're talking about simple products with available technology. So the decision is to buy, imported or domestic products depending on the price.
Of course, always bearing in mind that this product has to present quality, and there are domestic plants that are good. So Centauro is not directly exposed to the dollar. I would just like to add something to what Pedro says. The direct exposure of Centaolo visavis the dollar based on the purchase of 2019 was BRL100 1,000,000. This is what we buy directly.
We import directly. So within this scenario, we do not consider this a very relevant exposure. Perfect. Thank you very much. Ladies and gentlemen, Our next question from Irma Skaar from Goldman Sachs.
I have another question. Could you talk about your e commerce, performance in the beginning of the year and the current situation of the e commerce? I believe that it is still normal, but perhaps this brings a certain opportunity because it will receive part of the sales that you cannot see in brick and mortar stores. Could you make a comment on this about your e commerce? Thank you, Irma, for your question.
There are 2 things. There is the one thing, the accessibility of the product and e commerce resulted this. But to be very transparent, we don't have a prospect of offsetting this offsetting the lack of sales in brick and mortar stores. It's because people currently are more concerned with other things precisely. So we believe that the performance of our e commerce will overtake the performance of brick and mortar stores because the stores are closing, right?
But we're going to be very transparent. We don't believe that e commerce will offset the closing of brick and mortar stores and their sales because this is a different moment. So this is our perspective. It is good to have a channel. We maintain the flow.
And there is a possibility of of maintaining a good relationship with our consumers and to serve them. And this is also an area of revenue. And this perhaps is valid for other industries, but we don't believe that this will represent an offset. But the performance will be better in the e commerce. There's no doubt about this.
So thank you very much and very good luck. Thank you, Irma. So we are currently bringing to an end our Q and A session. I give the floor back to our speakers for their final remarks. Thank you.
I thank the entire team for the efforts carried out during the Q4 the year 2019. I would like to reiterate what I said in the beginning. Throughout our 39 years of history, we've undergone a number of crisis and the current team is the same team 2015 where we had a crisis. This will be a difficult moment, but I'm absolutely sure that we will end this crisis stronger. Our RI and the Centauro team is at your disposal to answer any questions you should have.
Thank you very much for your participation, and have a very good day. The Centauro conference call has come to an end. We would like to thank all of you for your participation and have an