Americanas S.A. (AMER3) Earnings Call Transcript & Summary

Good afternoon, and welcome to Americanas S.A. Conference Call to discuss Q2 2022 Earnings Release. Here with us today are Mr. Miguel Gutierrez, CEO of Americanas S.A.; Anna Saicali, Timotheo Barros and Marcio Cruz, CEOs of the Platforms; Fabien Picavet, Executive Director; and Fabiana Oliver, Director of Investor Relations. [Operator Instructions] We'd like to remind you that there is a slide deck to support today's presentation. It's available at riamericanas.com. Any forward-looking statements made during this conference call regarding business prospects, financial and operating projections and goals are based on beliefs and assumptions of the company's management as well as on information currently available. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events. Therefore, they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect Americanas S.A. future performance and could lead to results that will differ materially from those expressed in such forward-looking statements. The company clarifies that the accounting information underlying the comments is presented in accordance with IFRS with standards issued by the Brazilian Securities and Exchange Commission and in Brazilian reals. Now I'd like to turn it over to Americanas S.A. CEO who will start the presentation.

Thank you. Good afternoon, everyone. This quarter, we are celebrating the first anniversary of Americanas S.A. In June last year, we approved the combination of Lojas Americanas and B2W assets, forming one single company. Since then, we have promoted a true revolution from the combination of the businesses, which allows us to report today another quarter with solid results. We cannot forget the challenging economic scenario with high interest rates, growing inflation, pressure on costs and a drop in the population's income. This requires us to be even more efficient in the continuous search for balance in the main operating and financial variables. We have built a business model that is constantly changing throughout our history, adapting to different socioeconomic scenarios. The broad product offering, low average ticket with high repeat purchases and the credibility we have earned among our customers help explain the consistent results over the last 20 years. We have created a resilient business model. The long-term vision and the reading of the market movements have also resulted in a smooth implementation of our strategic vision. We are committed to growth, but without taking our eyes off the future and of the purpose of adding what is good in the world to improve people's lives. Despite the challenging environment, we closed the cycle with optimism in Brazil and even more confidence in our strategic model. This is just the beginning of a new chapter in our history. There is much more to come. Now I'll give the floor to Fabiana and Fabien who will lead the presentation.

Thank you, Miguel. Before I begin, I'd like to introduce myself for those of you who do not know me yet. My name is Fabiana Oliver. And over the last 15 years, I worked as an analyst on sales in several banks in New York, London and Brazil. I joined Americanas a month ago as Executive Director of Investor Relations. And today, I'm debuting on my first earnings call. I'd like to thank the company for the opportunity and trust. Okay. So let's start on Slide #4 with operating highlights of the first year of Americanas S.A. We achieved 53 million active customers, which represent 4 million new customers over the last 12 months. During this period, our customers performed 435 million transactions, an increase of 54 million compared to the same period in 2021. Another indicator I'd like to highlight is the number of items sold in the last 12 months. There were more than 1.6 billion items sold, an increase of 395 million items in 12 months. With regard to our stores, with organic growth of our brick and mortar stores plus the entrance of stores from Vem Conveniencia, Hortifruti, Uni.co, we totaled 3,591 stores, spreading more than 900 Brazilian cities. The number of sellers in our marketplace has also increased, reaching 140,000 sellers connected in the platform. Engaged sellers lead to increased assortment. And this quarter, we surpassed 147 million items available, adding over 36 million items in one year. Now moving to Slide #5. We highlight the progress in our strategy to be even more relevant in our customers' day-to-day life. The impact of our initiatives and the gains from the operating -- for the combining operations are evident when we see that in the second quarter the active customer base grew 9%, while the number of items sold and transactions increased even faster of 32% and 14% respectively, an important demonstration that our customers are increasingly engaged and keep a frequent relationship with the company. Over the last 12 months, active customers visited our stores and websites 8.2x on leverage, 6% up year-over-year. On Slide #6, we share sales growth. In this quarter, total GMV was BRL 13.9 billion, a 10.4% growth. On the last 12 months, total GMV was BRL 59.1 billion, a 21.1% growth. The GMV of the physical platform went up 26.9% this quarter, totaling BRL 3.5 billion and gross revenue regarding same-store concept achieved a robust result of 10.2%. The GMV of the digital platform was BRL 10.4 billion this quarter, a 5.7% growth, above the growth of e-commerce market, which dropped 3.1% this quarter. As for GMV partners, there was a significant growth of 18.3% this quarter, totaling BRL 6 billion with a special emphasis on the great evolution of long-term categories such as market supplements, perfume, cosmetics and apparel. Now starting on Slide 7, we share the highlights of Ame that keeps on delivering great results. Ame already monetized Americanas ecosystem. And for the first time, it achieved a positive EBITDA in the quarter, BRL 8.5 million. This is a consequence of the exponential growth of the monetization fronts that contributed to the 120% growth in gross revenue for this quarter. Over the last 12 months, Ame achieved a TPV of BRL 31 billion, a growth of 1.7x compared to the same period last year. Furthermore, the financial product and services platform closed the quarter with 35 million downloads, 12 million monthly active users, 3.6 million merchants, more than 1.9 million Ame cards issued and more than 95 functionalities. Our fintech that was established 3 years ago as a smarter way to give discount, keeps a track record of success going far beyond our borders. By boosting revenue with financial services, Ame monetizes the ecosystem as envisioned in our business plan. The main products offered by Ame are the credit marketplace for individuals, the anticipation of receivables and the credit with guarantee of future receivables for companies, Ame credit card, digital installments beside new partnerships, Pix and much more to come. Products are offered in partnership with a specialist who carry the credit risk and the funding of the operations, thus keeping Ame as a fast-growing fintech and asset-light. Another highlight of this quarter is the sponsorship of the Maracana Stadium with Ame becoming the official means of payment of the largest state in Brazil. In addition to digital payments in the stadium's internal stores, the expectations to reduce and simplify even more the purchase process at fast cashiers by using all the technology of Ame's Super App as well as offering exclusive benefits and promotions for stadium goers. The sponsorship of Maracana Stadium is a great opportunity for Ame to connect with millions of Brazilians through sports and entertainment, engaging new customers and strengthening the purpose of democratizing access to financial products and services. On Slide 10, we address the strategic role of physical stores in our ecosystem and how multi-channel has become a reality in the operation with the store becoming an important hub for trials and purchase. This quarter is a result of the evolution of our multi-channel model, O2O sales grew 25%, reaching BRL 1.4 billion. Furthermore, in the second quarter of 2022, 40% of deliveries were made within 3 hours. We can see the scope of this progress when we note that just a year ago, this percentage was 15%. On Slide 11, we highlight some benefits of combining the companies already seen in this first year of Americanas S.A. We now have a single database, allowing an integrated view of the customer and their consumption habits. There are no barriers anymore in the migration of customers between platforms, allowing us to fishing our own fish more efficiently, improving the relationship with customers and reducing the cost of acquisition. The number of downloads of Americanas and Ame apps made in our stores are a tangible example of this strategy. This year, there were more than 14.3 million downloads of Americana.com App and more than 2.6 million of Ame's app encouraged by our teams at our stores. On Slide 12, we introduced Americanas Entrega. In April, we launched the brand Americanas Entrega, which now brings together distribution centers and hubs with unified stocks and integrated network, stores acting as hubs and increasing use of artificial intelligence. Americanas Entrega is growing every quarter. As a consequence, deliveries within 24 hours reached 61.2% of the total and deliveries within 3 hours reached an incredible 40%. During this quarter, we continue to expand ship-from-store to over 900 cities and accelerated the deployment of [ DAC ] stores with the goal of stocking products from the digital platform in stores, so significantly reducing delivery time and costs. On Slide 13, we introduced a new verticals that came to add value. Hortifruti Natural da Terra is the largest retailer specializing fruits and vegetables in Brazil. Hortifruti Natural da Terra, HNT, provides distinctive service as a category of high recurrence and has an engaged customer database with an average purchase frequency of 36x a year. Our ambition is to expand the physical presence of this grocery stores starting with the Southeast where the stores and the current supply chain are concentrated to foster the development of suppliers. The acquisition of this company also strengthens the operation of Americanas Mercado, significantly improving the level of service and ensuring high quality in the delivery of fruits and vegetables. In this integration process, we have already reaped several synergies and are confident that we will be able to make the operation increasingly profitable. Vem Conveniencia operates 1,226 BR Mania stores in a franchise model inside the gas stations supplied by Vibra, which gives us an opportunity to fishing the fish more efficiently. Local has 55 stores and the plan is to launch the franchise model for proximity retail. Vem's strategy is to expand a number of stores and make each store sell more and with increased profitability. The centralized supply operation will generate more value for the franchisee and reduce the final prices for consumers. In Q2 2022, we start to supply more than 800 stores centrally by Americanas. The plan is to reach more than 1,200 stores by the end of 2022. Americanas' ecosystem enhances Vem's perspective in digital retail, allowing franchisee to become a seller, product pick-up point and to accept Ame as a means of payment. In addition to offering financial services to the franchisee/customer. Uni.co is leader in the [ fund ] design segment and owns the following brands: Imaginarium, Puket, MinD and Love Brands. And currently, with 420 franchised stores, Uni.co's strategy envisions taking express delivery to the group's brands and accelerating O2O in the franchise stores. Today, on average, 20% of purchases of Puket, Imaginarium and Love Brands made on the Americanas website are already delivered by the franchise stores closes to the clients. Together with Uni.co, we have expanded the global supply chain management operation from Shenzhen, China, where the company has already been operating for 10 years with the team of approximately 30 people. The journey to generate value new business is just beginning and we are very excited about these new front. Now I'd like to turn it over to Fabien, who will continue with the presentation.

Thank you, Fabiana. I'll continue the presentation from Slide 15. In the quarter, the consolidated net revenue grew 7% from BRL 6.3 billion to BRL 6.7 billion. In the same period, EBITDA grew 29%, reaching BRL 843 million. The reduction of physical retail, the positive result of the fintech Ame, the integration of the acquired companies and the gains obtained from the business combination contributed to the expansion of the EBITDA margin, which reached 12.6% of the net revenue in the quarter, a growth of 2.2 percentage points. Revenue growth with profitability is part of our DNA and shows the financial discipline and confidence search for efficiency, which have always been part of our culture and which are even more important in the current economy. On Slide 16, we present the debt maturity schedule. In 2020, we began a process of re-adjusting our capital structure. The follow-on allowed us to advance in the strategic M&A moves, invest in organic growth and reduce gross debt. Also in 2020, our debut in the American debt market with the issuance of bonds allowed us to lengthen the debt profile, starting a process of exchanging short-term debt for long-term debt. We ended the second quarter with an average debt maturity of over 6 months and one-time EBITDA leverage in addition to a healthy cash to short-term debt ratio of almost 7-fold. With the same objective of lengthening the debt profile, after the end of the quarter, we carried out the 17th issuance of debentures. The operation was very successful with a total value of BRL 2 billion, a maturity of 11 years and will have a cost of CDI plus 2.75% a year. The funds will be used to reinforce the company's cash and replace issues that will mature in 2022 and 2023. On Slide 18, we talk about our ESG strategy. In line with SDG 13 action against global climate change, we continue to work towards achieving the goal of becoming a carbon neutral company by 2025 and of having 100% renewable energy in our operations by 2030. In line with the strategy of encouraging conscious consumption and good practices in the value chain, we added 2 more certifications to the Americanas + Clima platform, which aims to help customers identify products that help fight climate change. Now with the Procel seals and [ Polem ], we have more than 2,000 certified products. Picking up on social agenda, following our commitment to SDG 10 reduced inequalities, we developed the Plus Codes Project in partnership with Google, G10, Favelas and Favela Brasil Xpress. The project allows the mapping of addresses in low-income communities, making it possible for these addresses to be found on digital platforms for transportation, services and deliveries. Today, more than 1,500 addresses have been mapped and 6,000 people have benefited from the project. As a result of these and other actions, we have been recognized in the wholesale, retail and e-commerce categories of Exame's Guide Best ESG 2022. This achievement reflects the sum of our efforts and our commitment and transparency to the company's sustainable management, contributing to the generation of a positive impact for customers, society and the planet. We are also featured in the Best of Sao Paulo - Brands & Services award by Folha de Sao Paulo Newspaper, ranking first in the department store category and in the CIEE Best Internship Programs Award, ranking first in Commerce. Americanas was also in the top 5 of major brand awards, such as the Most Influential Brands in Brazil by Ipsos and the Most Valuable Brands in Brazil ranking published by IstoE Dinheiro. On Slide 19, we highlight our participation in important events in the quarter. In May, we participated APAS Show 2022, the largest food and beverage show in the Americas. Americanas Mercado was present with an exclusive space and presented its digitalization solutions for the industry to thousands of potential sellers and customers. In July, we actively participated in the eCommerce Brasil 2022 Forum. Americanas was present with 3 outstanding booths, Americanas Marketplace, Ads and Ame, offering new business opportunities, solutions to improve the customer experience, advertising solutions for retail in addition to Ame's financial products and services. On Slide 20, we present the strategic vision of Americanas S.A. Americanas is an ecosystem that combines digital, physical, fulfillment, fintech, ads platform and its innovation engine, IF, operating through a strategic model that focuses on offering increasingly customized and more convenient consumer journeys to all customer profiles. Our model seeks growth with profitability. With our unique assets and competitive advantages, we will be able to accelerate our dreams of organic growth, driven by the development and evolution of our platforms. The central element is the core where our commerce brands are located. On the second tier are our organic and inorganic growth initiatives. On the future tier led by IF, we have several disruptive initiatives that encourage the use of new technologies across all platforms and drive new business development. With that, we finish our presentation. And now we will move on to the Q&A session.

[Operator Instructions] Our first question comes from Luiz Guanais with BTG Pactual.

I'd like to ask you how you see gains in synergy that is still to be captured with the combination of B2W and Americanas. So I believe, Miguel, that you have been addressing that, but what can you expect from now on? And my second question, what do you expect regarding profitability of Ame after we have reached the breakeven point now in Q2?

This gain in synergies we have with our new company, they are still -- well, there's still a lot to be done, particularly in terms of getting to know our customers better, in which phase are we? We are in a phase where we are intensively developing system in order to have one single view of our customers. And then we are already extracting data as we showed previously in many different situations. So we have consolidated data already on our customers. And with that, we are now making a big effort to turn the datas into information. And finally, this information will be turned into actions. It is easy to understand that the whole dynamic requires a very intensive technology support, and this is exactly what we are doing right now. So there is no longer for us a digital customer that are a physical customer. Now we are able to see one single customer looking at the journeys customers have with us, trying to understand this journey as a whole. Of course, this might sound a little bit abstract, but actually, we are really confident and optimistic regarding this way because if we stop and think about it throughout this whole period, what happened in the first quarter compared to the second quarter, we had a first quarter with growth of 21.7% growth in MV and this quarter 10.4%. In the first quarter, physical grew 27.7%, here 26.9%. So the resilience of our model, as you can see, is really shown right now. We can see that. And this is already the result of us being able to make this reading a consolidated reading of all our customers. So this has a growing dynamic. We have been talking to the best people in the world, the best companies in the world to get to know better what they have been doing. And we can see that there is a whole world to be developed, an extraordinary world, and that will make us better understand our over 53 million customers' journey. So going to these broad numbers, our GMV grew 10.4% this quarter. Beyond -- well, actually not reaching what we wanted to. But if we look into our numbers, our physical was compatible with the growth we had in the first quarter. So someone just looking at figures might say, well, nothing happened, whereas our digital, which in the first quarter grew 20.1%, grew in this quarter only 7%. Now when we really look into digital, the first quarter, we grew over 24%. And in this quarter, we dropped 7.6%, meaning 3P is already coming very strong. And all this is the result of this analysis coming from the combination. And there are other things we have been talking about whether it's tax vision and there is vision of different synergies, which is also underway. I know this is a very broad subject. I think I better stop here because this is really exciting. Regarding Ame, I'll ask Anna to further elaborate. That's it.

Ame is our financial business at Americanas. And its goal is to monetize the entire ecosystem. It was really born with a silver spoon, because when you look at our competitors, all fintechs, none of them was established within such rich ecosystem, so many business opportunities. But there is also a purpose. A very clear purpose to monetize Americanas business. That's why it's very relevant. It's aligned to our plan despite everything that had the impact on us such as the pandemic. But this is -- actually, we anticipated the plan, and this is the first quarter in which we achieved positive EBITDA. But we really need to wait for bear its fruits, the monetization we expect much more. And we are working hard in order to achieve that.

Our next question comes from Ruben Couto with Santander.

I actually have 2 questions as a follow-up regarding Luiz's question about Ame. What can you expect regarding representativeness or how much will Ame contribute to the company in 2, 3 years? Just to give us an idea about the scope. And my second question is about EBITDA margin and also the positive EBITDA, but it seems that cash generation did not keep up with that level. So what can we expect in order to have this cash generation online as well?

So I'll start and then somebody will jump in. About Ame, you're right, this is our goal. It is still our new brand company. But when you compare it to other mature operations out in the market and when you consider their contribution of 20%, 30% of EBITDA, I don't see why Ame cannot achieve that level.

Well, regarding generation, I think it's really important to -- well, we have already talked about our quarterly growth. We have already talked about how the physical continue to grow very significantly when compared to the other quarter. We all know this has been a tough quarter, not only for retail, and I'll now talk about the main lines. I think it's really important to bear in mind -- or to have a joint exercise starting with EBITDA. In EBITDA, we grew over 2 percentage points in this quarter compared to the previous year, the EBITDA margin. Then in this vision we have here, which is like an internal vision, we had a financial result, which interest rates are higher. We know that costs have been growing or going up significantly, but we have been watching that closely. So it is sort of what we were thinking we would have. And then our CapEx. Our CapEx, basically are the major initiatives. They are associated in the mid and long-term view, and the first one is the combination of our company. Actually, we are saying that the whole technology, we are reviewing it and re-adjusting it trying to understand a single customer journey. Well, in the past, we used to have a physical customer and a digital customer. Now we have one single customer, and this enables us to have a lot of data. And our ultimate goal is to turn data into information so that then information can be turned into actions. And this is only possible with intensive use of technology, which we -- and then we maintained our investments, considering this long-term vision. And then we have another front, which is in terms of opening new stores. Our proposal is to be increasingly operating in new cities. This has an outstanding impact on the lives of people working and living in the cities. And on the other hand, we can have a very significant number of new customers, both physical and digital customers. And finally, we have the relationship between inventory and suppliers, as you all know, in our business and the retail business, this relationship of this ratio is very significant. This is what we call a funding financing we have in a retail company. Historically, we've always had and we still have financing, which is very significant in our inventory, supplier, meaning our inventory has to be smaller because we have to pay our suppliers. So how can we improve that? Well, the basis of that is that we have to sell more than we've paid. And this means that if we got a lot from our suppliers and we're not able to sell, we will have a value amount for the supplier and another amount that goes into our inventory. So this will not lead to working capital. Actually, we have to be able to sell increasingly more and be increasingly more efficient in this chain as a whole. So we have to strive for efficiency, not only in our company, we have to try to have efficiency also in the supply chain as a whole. And that also takes into account our commercial partners. So actually, we have always tried to sell before we pay. We may have measures, which in our view, are short-term measures. For example, you can negotiate a new payment term with your suppliers. That would be to pay in April and you negotiated with the supplier and you will pay in May. But anyway, you have to sell before May so that you can have better conditions in terms of financing. But historically, our company has seasonality. Historically, we've always been significantly financed or funded by our suppliers. Well, we still are, but in this period where we had a slowdown, notably in our growth strategy, because if you recall, in the first quarter, we grew 24% in digital 1P even with a serious issue we had at that time. And in this quarter, we are decreasing by 7%. So actually, we have to try to find a new point of balance in this relationship because suppliers in the mid and long-term relationship will not want just, okay, I won't get the money. That will not happen. So they will just no longer want to be our customers or suppliers. And we have a private today that suppliers really want to have which is to advance receivables. Well, actually, this is the line where we have a greater variation regarding our records, but it is still positive in our view, in this financing view. Meanwhile, we are right now improving our inventory and selling even more and improving the whole chain. A proof of that is that our EBITDA margin has increased and we have had a significant reduction in our inventory when compared to the past quarter. And all that means that we are adjusting our inventory to this new reality. That's why we have this variation in our working capital as a whole, which will naturally being adjusted over time, which is by selling more, buying the right stuff so that we don't have that idle inventory and to sell before you have to pay. And this is what we class have to, okay, get more from the supplier. Well, if I get 1 billion from a supplier and you don't sell, you have that sitting in the inventory and we will not get anything. So actually, we are very much focused on really having a greater turnover of our inventory with the partnership we have with our suppliers always trying to be the best choice to our suppliers in the mid and long-term, always bearing in mind that our business is very significant in the digital market. But in the brick and mortar, we have over 3,000 stores all over Brazil. And we think this is really a strength in the period we are going through right now. This is what I had to say. Do you have any questions, Ruben?

No, it's very clear.

Our next question comes from Robert Ford with Bank of America.

What was the impact of Easter in the quarter? And what about the trends for July and August? And how do you see the rest of the year with regard -- also related to the World Cup? And Anna, what about your partners? How are they doing at Ame regarding loans and default?

Robert, this is Anna. Can you please repeat your question regarding Ame because we were not able to hear you?

Of course, I apologize. What about your credit partners? How are they doing at Ame regarding delinquencies? I don't see risks. I understand that. But what about your partners?

They have their business. And all partners are currently in a situation which they can keep on being our partners and serving our customers. The context is challenging and we are now doing all the necessary adjustments, but our operation has no risk. And as for our current partners, we are working together, although that may be more challenging for them right now.

But how much are they lending?

Unfortunately, we cannot disclose that number, Robert.

What about the impact of Easter in this quarter? And also what you expect for the next quarter?

Now this is Marcio. Let me talk about sales. Talking about Easter, there was -- well, Easter was on April 17. So it's in this quarter. It was a very good Easter. I'd say it was the best quarter. It was a record. So it just strengthens what Miguel mentioned before regarding the increase in physical stores and our reach in the entire country and also our presence physically and in the digital world. Now as for the future, starting in July, for July, we expect a consistent increase in physical stores. And we have a lower ticket, but this is still a strength in our physical stores with a very large assortment. So we see this consistent increase. Now as for digital, this is being now led by the long-tail 3P with an average ticket that's also lower, which is now important, that's what consumers are looking for in the categories, just as mentioned, perfume, cosmetics, apparel, grocery stores, automotive. So we are doing good. And especially this is being led by 3P. As for digital, when you go to 1P, we still see a mild demand, low demand and that certainly has the impact of the purchasing power of our customers. But we believe that that will normalize in the next month. And we are also very excited about the end of the year because we know that we will have the introduction of 5G, which is something new and also it usually boost our sales. But there are also very important events such as Children's Day, the World Cup, Black Friday and Christmas. So we are confident about the future.

Our next question comes from Danniela Eiger with XP Investment.

I have 2 questions. First, it's about 1P. I believe that, while we were a little bit taken aback, but I think that that can also be explained by the market. But my question is to understand what you see for this line for the future, particularly with the launch of 5G? I think that this is something that probably affected your numbers. And my second question is about Ame's loyalty program. Can you please give us more flavor about that? And how do you see that? And also, if you can also talk more about your business plan regarding that? And my third question is about cash generation. Oftentimes, the market asks us why you are different from your competitors? Perhaps you have -- you are unique with regard to inventory levels or to your partners or perhaps your seasonality is different from your other marketplace peers?

Danniela, this is Marcio. Let me start. So you asked about 1P. So just as I mentioned a little bit before with regard to 1P in the second quarter and digital, 1P digital, because in physical, we had a very strong growth. But as for 1P digital, we did suffer the impact with these categories that represent higher tickets, for example, telephone, mobile. So we did have a poor performance. But now with these events that will take place now in the second half of the year, Black Friday, the World Cup, 5G, Christmas, we are really excited. We are very optimistic that this will improve. And 5G will certainly also boost this category. We expect to see many customers switching to new phones. We know that there are some that are already capable of running on 5G, but we expect customers to buy new devices. And about loyalty, we had a soft launch this first half of the year, but we will now strengthen that in the third and fourth quarter. Ame was established already with this loyalty tool in order to enhance the engagement of our customers. This program was designed to be very democratic, very accessible to anybody. It allows also for an experience that is related to like playing a game, so customers can easily understand that. And this launch will permit the entire ecosystem. So it will bring many benefits to our customers, engaging them in different segments. It's a program in which we have missions to be accomplished. And once you carry of that mission, then you unlock many benefits. This is our loyalty program. So it's a loyalty program from Americanas that will be present in the entire ecosystem. It will be available to all brands and even to brand that we acquired. So Hortifruti and to anybody interested. So we will launch that in the third and fourth quarter.

Danniela, this is Miguel. I'm an expert now on this issue of cash generation. Let's look at this inventory and supplier math. What is the dream of every retailer to sell whatever they have just how before they have to pay to the suppliers. So by definition, if you look at our history record, we have here a history in which this line for us has always been a big asset historically, which is in a range that is really relevant. If you compare -- because you've asked regarding our peers, our line has always been really different when compared to some of our peers. But we should consider that our business is slightly different. When you talk about peers, we haven't really to pay attention to that and consider that. So what happened? And something else that is slightly different compared to the market as a whole is that we have major events. So actually, when you have a major event, for example, when you look at the fourth quarter with Black Friday and Christmas, our sales increased significantly, meaning that we will later have a major payments to make. And as part of this equation of trying to sell before you have to pay suppliers. But by definition, how can we improve this math? You can do that by having a greater inventory turnover, which is basically about being efficient or you get longer payment terms with your suppliers because you are going to pay more next month. Then you adjust that later and/or you try to -- well, basically, these are the 2 main measures actually, because you have to be more efficient. And as I said, we had a very significant growth in the physical stores this quarter compared to the first quarter. And we had a slowdown in 1P, which was very significant because we grew a lot in 1P, 24% in the first quarter and we had a 7% drop in the second quarter. And thus, those purchases we made from our suppliers, we wanted to re-adjust our inventory, which is exactly what is being done in this quarter together with a natural seasonality. So in the end, historically and this calculation, we have a big inventory and our commercial partners help us with sales. And today, we are trying to become more efficient in this inventory turnover. And we are able to do that with the participation of all our partners so much so that our receivable -- advanced receivable program, which is a success has been maintained and it's been really good to our suppliers as a whole because in our mid and long-term vision, our supply chain is becoming more and more efficient in order to be able to meet the needs of our suppliers and their journey. So -- but that -- well, but if you get more from the supplier, you got 1 billion more from supplier. You've got 1 billion worth and you have 1 billion worth in the inventory and net funding not if you got 1 billion from the supplier and you sold 1 billion, but hasn't paid yet, that improve your financing, okay, Danniela? This is a very passionate, exciting topic, isn't it?

Our next question comes from Joao Soares with Citibank.

My question is to Marcio. How do you see this competitive environment, especially when you focus on 3P? We know that there are many organizations prospecting sellers, which means that there are many people interested in increasing their base of sellers. We know that Americanas has a unique assortment. But how are you going to navigate such competitive environment and keep on growing on 3P? And also, how do you expect to keep profitability in this line of business?

As for this competitive scenario, this has been happening for a while and we believe that this is going to continue. We are increasing our base of sellers as well as our assortment, which is very important to our customers. We will maintain this growth strategy. But I'd say that there are many things that contribute for making our platform appealing to sellers. Well, sellers want to be where they can sell. This is what they're looking for. And I think that there are some stresses, for example, if you remember, you have an O2O and we can use that. And today, we have a very broad assortment over the country and with very appealing offers to customers. And when we offer that to digital, we can also drive traffic to these long-tail categories and sellers and the categories benefit from that. This is just one of many strategies. So this is how we work in order to make the platform much more appealing to our partners, sellers.

Well, economics, we and the market as a whole, we have been making any adjustment because of the macro scenario, inflation rates and inflation rates. We have been making many adjustments throughout this year in reseller conditions in order to balance out our business, and you have been following that. We have made some changes already in the platform this year. And if needed, we will do more. But in the economics view, I think that competitive scenario as a whole -- well, other customers are also making their adjustments. We all make adjustments.

Our next question is by Joseph Giordano with JPMorgan.

Well, I actually have 2 questions. The first one is regarding potential partnerships within the Americanas as say group with very interesting initiatives, as [ express ] delivery. I'd like to know if there are any chances of you working together, generating value for the group as a whole? And the second question has to do with the brick and mortar world, we talk a lot about the digital one, but I think there's a lot still in the brick and mortar world. So how do you see opportunities in new stores? And how many stores we could possibly open this year and next year?

Joseph, this is Miguel. It is important -- partnerships where there is companies, we are fully independent actually. We are listed companies. The partnerships are looked at as in relation with any other partners. So if we have something that can potentially generate value for both businesses, we have to look at that, but considering the map of opportunities we have as a whole. So there is not something that unite us somehow. It's something that is actually more natural been built. I mean, anything that goes that direction, we will let them know as we would in relation to any other company.

Joseph, this is Timotheo. Talking a little bit about the physical brick and mortar platform. When we look at our growth algorithm for the physical, for the brick and mortar, we look at same-store sales, which brings a number of opportunities and opening of new stores. Talking about store sales, we talked about the refining of assortment and we're thinking really the role of stores when we look at our stores 3 years ago, there were just points of sale. Today, these are totally different stores. They really improve the digital sales. They are closer to customers. And this allows us to have much quicker and cheaper sales through the digital channel. So you have a point of launch. So there's a number of opportunities. When we talk about new -- potential to open new stores, well, today, we are in a more restricted view, so to say. Looking at Americanas alone, we are in over 900 cities and we are growing. And when we look at this progress, increasingly, we are going to smaller cities. And you might say, well, but how is that possible? Well, this is possible because of our scale and our scale speaks with our whole logistics platform. And as you very well know, the logistics platform, when we open new distribution centers, and we have over 20 distribution centers scattered throughout Brazil, they are the basis for us to expand. So in some cities where it wasn't economically feasible to open a new store some time ago considering the size of the city's GDP or the size of the population, as we have more scale and logistics, that becomes possible. So by running our algorithm here, I would say that we have a potential between 2,000 or 3,000 new additional cities looking for the next years. Well, that's today, but with growth and with new technologies and new dynamics, this potential can be even higher. I'm talking only about Americanas. I'm not talking about Hortifruti and others, because there the universe is much broader. Joseph, I said 2,000 or 3,000 cities, but I was talking about 2,000 or 3,000 additional stores, just make that clear.

We now close the Q&A session. I would like to give the floor to Mr. Gutierrez for the final remarks.

Thank you for participating in this conference call. In the second quarter 2022, we advanced an important strategic front in our business and in the construction of one single Americanas for customers, investors, suppliers, sellers, merchants, franchisees, partners and society as a whole. We are aware of the challenges the economic scenario presents, but we are prepared and vigilant to go through this period with the resilience that we have shown over the years. We remain optimistic about the future we are building in line with our purpose of adding what the world has to offer a better life to people. Thank you all very much, and good afternoon.

Thank you. The Americanas S.A. earnings meeting is hereby closed. Have you all a great afternoon. Thank you very much for using Chorus Call.