Azzas 2154 S.A. (AZZA3) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to our video conference for our first results -- for the first quarter of 2025 results. With me here, we have our CFO, Rafael Sachete; our Investor Relations Director, Bianca Faim. And thank you to all of you that are participating. It's a pleasure to have you all here to share our results. This is the main goal of our meeting: to hear your questions. This is very enriching. However, due to the volume of news that, I would say, are a bit speculative about the society issues in our group, I'd like to take this opportunity to reiterate our solid governance and especially the focus of everyone for the integration and construction of our Azzas 2154 Group. They are absolute trusted. And the best way we have to demonstrate that is through our solid results. And this first quarter is a testimonial to our ability to act with a spirit of we're stronger together. It's normal that in such big issues, there are different opinions. And we believe that the differences can build, and it was with this spirit that we had a lot of debate, and they're also going to happen during our future. But the dedication and the total focus on results and the decisions that are based on what's best for our business, they are what's most important. So the trust and support of everyone, I have all their support, especially for Roberto Jatahy, my partner. Now we're going to start our presentation. In this first quarter, we have a great evolution in our integration. FP&A today is already an area that gives us great agility in our performance, daily, weekly. Our budget is our -- is what is our compass actually, and it permeates in all brands and all decisions within the organization. And the agility that we -- the consolidation of our financial results in the first quarter going -- in Q1, going through all approvals, the Board, the fiscal board, tax board, and we here on May 8 publicizing our results shows how integrated the company is. We started capturing the synergies. An example of that was the growth in our fixed expenses of only 9%, with a growth in revenue of close to 15%. Our governance is very well structured. There is great clarity of responsibilities, the independence of each brand, however, within a budget framework and a structured process that follows the results. As I mentioned, everyone here, they work based on our budget. Our main performance KPI to pay bonus in 2025 is not EBITDA, but actually cash generation. We also started after approval here in April 14 in the Statutory Committee, the implementation of societary restructuration. Sachete is going to give more details about this step. We have great efficiency in management. From March, we completed several processes that they have a date and a time and they happened frequently. We have monthly meetings to analyze results from N3, N2, N1. We've had great positive results analyzing our opportunities. Internal benchmark in our BUs, our CapEx meeting, we have a lot of diligence reducing this a lot. We're going to talk about our CapEx, our weekly meeting for cash management and a monthly meeting to then analyze our procurement and our inventory. Our operational leverage shown in the first quarter will be a reality. We have weekly action plans when we realize that some of the results are outside of our plans, and the action plans are implemented very quickly. And in April, we had expressive cuts in our expenses with our SG&A accounts. We are talking about BRL 170 million, and we also have great reduction in our CapEx in all lines of around BRL 120 million, and we have the opportunity for more. Now about the main object of our business, the focus that we all work towards -- to continually create desired brands. Today, we have several brands. When you put sublabels together and parent brands, we have 16 large brands. But it's worth pointing 4 that are best in class: Farm, for sure, the biggest women's apparel brand in Brazil; Reserva, the biggest one for men's apparel; Arezzo, the biggest brand for shoes in Brazil; and Hering, surely the biggest democratic apparel brand in Brazil. So we get to show that we have leader brands. If you can picture visiting one shopping mall and if you exclude our brands in these shopping malls, what would be of that shopping all without Azzas 2154? It's worth pointing out the constant growth. All of our brands in our group grew in the first quarter. And consequently, we are absolute leaders in this market. We've just started our fusion. There's still a lot to happen. But for sure, our competitive edge when all systems are in place once we're operating, the clients' view with Azzas prime, with more than 3 million clients in our database, all brands in this segment to grow would have to be part of the Azzas 2154 Group. Now about our supply chain, which is totally versatile. Imagine that last March, all brands turns to the winter collection. Now considering only models and colors, a huge variety of shoes, bags, apparel from basic T-shirts to night dresses, more than 12,000 SKUs developed and delivered in our shops. All products created by our team. We have a supply chain management that is extremely flexible that manages to bring the best product made in Asia, also have the crème de la crème from national production for leather objects, generating a lot of diversity for our clients and consequently, expanding our sales capacity. About our distribution, we are in the premium fashion. We are best in class in the 4 main channels that we operate and also including our global footprint. We dominate on e-commerce. Just in the first quarter, it was 150 million unique accesses to our website. Of course, the same taxpayer member can access different sites, but unique access, we had 150 million of them. Something that we haven't even started touching on, but we have in the past 12 months, 3.5 million clients purchasing online. And then you can figure the power that this has for our future. The Azzas prime program is just in its beginning, and it's going to be a great growth leverage for our future. And our capillarity -- our distribution, more than 600 of our own stores that have a great synergy in where we operate, 1,500 franchises. Yesterday, I saw the reports of the largest franchisers in Brazil. We are the leaders in the fashion segment, competing with other segments that are easier to franchise, such as food and services. And our multi-brand channel, which actually makes our product reached more than 22,000 points of sales. So we dominate, and congratulations to the whole sales team for operating these 4 channels so efficiently. So the essence of our group, our restlessness, the will to be wanting to innovate. In 2025, we have a bigger diligence to operational efficiency. We have lots of projects in our parking lot, but it's worth pointing out some of them that will be implemented throughout 2025, and the biggest emphasis is for Farm, et cetera. The brilliant concept developed by Marcello and the whole Farm team with support from Alberto will go live in August 7. So when we have our call for Q2 2025, we're going to introduce -- the store will be opened in Barra Shopping. And then the flagship store in Garcia D'Ávila, it's a concept that is Farm, everything but clothes. There are going to be some apparel, obviously but hundreds of SKUs within this Farm spirit and lifestyle. This project has been tested in multi-brand in wholesale very successfully. So this go-live is the main disruption project for something that is new in the Azzas Group. And to end, our agility to adapt. The results of this first quarter demonstrate when we saw with the expenses that we should cut, that we needed synergy, we make the decisions. The company historically uses prices as leverages for growth. And to end up this broader presentation and my key messages, I'd like to list the 5 main priorities for our year. Continued focus and energy is something that is our must-have, is the creation of desired brands and give independence and space for the creative team and for the brands to have all the necessary resources so that all of our brands in all fashion segments we work be the best ones and are loyal to their clients. Continuous growth, which is not a necessity. So we are sure that in order to continue existing and having capacity for investment, growth is the foundation. We want to focus on operational leverage and consequently have better efficiency in our capital allocation. We're open to use our assets the best way possible to monetize and bring return for our investors and use the assets to escalate future growth and actually be able to use our capital the best way possible to support our future growth. All of this backed up by solid governance, which is what our results grew. Now going to our results. We reached, in the first quarter, a gross revenue of BRL 3.5 billion, a growth of 16.1% compared to the first quarter of '24. Our EBITDA post-IFRS, BRL 427 million, growth of 23.3%; and pre-IFRS including the expenses, BRL 359 million, growth of 28%. Our gross margin varies greatly depending on the channel mix. Here, we have 54.8%. EBITDA margin with great leverage of 120 basis points post-IFRS and 150 bps pre-IFRS, which is 15.9%, I'm sure that with time, we are going to reach continuous leverage. Our expenses, 39.3%. I mentioned that we have a large percentage of our own stores, which increased these expenses but multi-brands, and our net profit still in not the efficient margin, but the tax margin, it's on the way for great changes. That's why we present here excluding the Law 14.789. It would have been BRL 181.6 million, a growth of 20% compared to the first quarter of '24. Now let's focus on our 4 main business areas, starting with shoes and accessories. The growth we present, it's satisfactory. It's below our potential. Although we already have 38% of market share, market share that has never seen in any developed market in the world. We know we have internal opportunities, be it in the performance of stores or improvement in distributing multi-brands and also, very importantly, in the analyze of average price, especially for our parent brand Arezzo. This brand in the past years got a protagonism in fashion, brought premium clients to its base. Sales, for example, in Iguatemi Shopping Mall presents a huge results, 30% sales. And -- but remember, we're in a country -- it's a large country, and we need to penetrate not only in Iguatemi Mall or Leblon or VillageMalls. We need better distribution. And for that, for the 2025 summer collection, we have a price reduction of around 7%, bring lines of projects that will help Arezzo to grow again, high single digits, which is our great expectation. The bags segment, very important role. We started the process of purchasing from China, taking advantage of this moment from China manufacturers being in a downcycle due to the lack of exports to the U.S., and we're going to leverage that to increase our import of bags, a category that we're going to grow a lot within this business unit. And it's worth mentioning that one of the reasons for our low growth in the first quarter was -- it was not due to incompetence. It was deliberate because we did reduce the sales in our franchise to increase the sellout, sell-in coefficient, which results in very low debt. So a very high degree of liquidity that we have in our franchise. So we had a negative growth of 1%. In franchise sales, it was deliberate, allowing franchises to have a better turn in their inventory. This figure is reaching the ideal -- what's ideal. And with this launch, everyone is invited. It's an event called Pulsar, next Tuesday in the Bienal building. It will be a great success. More than 1,500 store clients, multi-brands and franchises, so I'm sure that our goal to reach 10% is going to happen quarter after quarter. And it's worth saying that even the growth below what we expect, it is a very highly -- a great business unit that is serving as a base and benchmark for the migration we want to carry out with time in the apparel sector. Positive highlights to our women's apparel BU. Congratulations to everyone, especially the Farm brands that had a growth of 56% by multi-brand. This growth is going to be sustained in the second quarter, but in the consolidated for the first semester, the Farm brand will have a growth that will be above 20%, which is in line with our budget. So don't worry here. It's great to deliver it a bit earlier. This gives more time for the store to sell at full price, but nothing that is going to change the growth in Farm. We have solid growth to get from this brand. And the consolidated for the winter season in our business, it's worth looking at not the Gregorian calendar from January to March or April to June. We look at the season as a whole. So the first semester in the beginning is the exit of -- and the sale for summer and then pre-winter in February and then goes on to March, April, May, June. And then there's a winter collection. It's just a matter of seasonality, but in the semester, Farm will have a growth above 20%. And Farm global, where we had a flat growth in dollars, this is a seasonal [indiscernible]. We're going to grow more than 22% in the second quarter, in line with the budget for the global operation. With all the challenges we are going to mention here that are being addressed with increasing imports from China and flexibility to bring the brands to other countries, so Farm global will also grow 2 digits above 20%. The Animale brand, we had double-digit growth. Congratulations to the team. It's a pride for our group. Talking about Hering, which has a very great ramp-up, achieved 17% in the fourth quarter and now something around 19%, growing strongly, excluding the discontinued brands. And most importantly, the growth where we want, which is B2B. So as of today, we have own megastores. We want to migrate in next month to the franchise operation. Hering is an operation to have a bigger focus in cash generation. And for that, the B2B channels are much more -- are generating more cash, less inventory. This is a focus. We've opened 3 stores with this new concept. I invite all of you to get to know it because it changes the brand experience. We do have -- it's a brand. It's not a department store. It is a brand with its identity, with heritage. The Mother's Day campaign shows that it is a huge success. The growth in May in Hering are very high. And we opened the Bourbon Shopping mall store. We had an increase in the area of 50%, but the growth in sales is about 70%. So Hering is still on a great -- continues on a great path. And the growth will be established in the mid-double digits, a bit below what was presented in this quarter because we've understood that we've reached a satisfactory growth for the Hering brand. And to end, my congratulations to the new leadership in AR&Co that has its main focus profitability. Here, we show this through the acceleration of the growth in e-commerce that achieved 9.6%, in line with the strategy that was deliberate, was to reduce cost and reduce some sales so that we can have profitability in this important channel and this brand. Great focus on B2B, growth of 10% in multi-brands. In the summer, we started the showroom. This growth is going to be 15%. And it's important to have Reserva as the brand that shows that it's possible to franchise apparel, and this is one of the strengths of our company. So these are my highlights about our company and the more operational and strategic detail of the BU. Now I give the floor CFO, Rafael Sachete so he can continue our presentation. Thank you for your attention.

Thanks, Alexandre. Hi, everyone. Welcome to our call. We're going to talk about our financial results, showing the next slide. We ended our first quarter of 2025 with BRL 3.3 billion in revenue, in comparison with last year, a growth of 14.5%. But excluding the discontinued brands movement that we started in the fourth quarter of '24, the growth was of 16.1%, with important highlights to the women's apparel BU and democratic apparel that had performance of 27.1% and 19.4% respectively. Gross margin and gross profit are relevant items for our business. We reinforced in all of our calls that the margins of the segment are high, and the care and the risk embedded in the collections are high and the management ability also with creativity and sales management. We have achieved to maintain the margin side. Our expansion of 30 basis points is mainly supported by the mix of channels and industrial portion for the growth of our revenue, our industrial production that reduced -- that generated reduction on operational costs. Our SG&A, excluding depreciations and amortizations, it's worth pointing out the growth of 11.3% below the lines of our revenue, with an important aspect in our fixed expenses that grew 9%. And our commercial expenses grew a lot, pretty much in line with our revenue growth. This is a level of construction. We've been improving quarter-over-quarter in our expenses and will be an evolution to leverage our expenses of reducing the percentage of expenses as a whole over our revenue. With that, we end with an EBITDA with a growth of 28.2%. When we look at the pre-IFRS number with a margin expansion of 150 basis points against rhw same period last year, focusing mainly by the growth in revenue, leverage of gross margin and dilution of our expenses as well as the projects for expense reductions that we implemented. It's worth highlighting that great part of these projects and the construction that we are carrying out for value generation, for business company as is structuring, all these operational expenses as registered in recurring expenses for the company. They are not treated as one-off expenses. And as you saw in our report, the volume of expenses with integration having dropped substantially and our future projection is that this figure will be reduced even further substantially for the next quarters. So our EBITDA reconciliation that started from an accounting EBITDA of BRL 438 million. We bring the first 3 lines, the long-term incentive, which is accounting, there's no cash effect. Recurrently, this figure has been kept in the same level of BRL 9 million. Item 2, we have a reversion of a decision that had been made in the fourth quarter of provisioning the closing of a store abroad. This was reviewed, and this figure came back to the company EBITDA but registered here as nonrecurrent. Finally, item 3. We have M&A expenses that are being registered here. They are balances with some line -- or the lawyers and consultancies that was paid in the first quarter of 2025. Going to item 6, an important item in our quarter. It's worth pointing out that the decision for 2017 from the Supreme Court where it was stated that the companies could get credit from PIS and COFINS taxes on the portion of the revenue that is included in ICMS tax. At that time, one of our business units, the shoes unit, decided to be more conservative of not taking that credit over the portion would be the default ICMS and went to the court in favor of the company against the Federal Revenue Brazil to get that credit. This decision has been going on until now. But last January, the Federal Revenue published an ordinance that say they're not going to litigate companies about that matter. They're going to let companies use this credit. And therefore, this revenue is being recognized in the first quarter of '25 in total. And it generates cash in the next 2, 3 months and in a recurrent fashion with a quarterly positive impact for the shoes operation. Going to the right side of the slide, we bring the reconciled net profit, which is not -- which is unchanged. The 2 we are going to bring are in the left, which is the sum of our EBITDA adjustments and the right, the surplus value of Hering that is going to appear in our quarterly registers to the end 2027. As to the net revenue or net profit, we have to address our new setup, our bylaw arrangements. We are studying a relevant project of a bylaw redesign for our operations, which will match the use and empowerment of the procurement of the [ airline ] company, Cidade Maravilhosa, which is controlled by Soma Group. With that, we will be able to suspend the effects of the law, improving our net profit company and mitigating any possible risks as to credit approach due to the fiscal damages that should be offset, thanks to the discussion of such a thesis. Now cash flow generation and cash flow position for the first quarter of 2025. We closed our cash with BRL 1.8 billion (sic) [ BRL 1.1034 billion ] and a net debt of BRL 2.72 billion (sic) [ BRL 2.0711 billion], 1.27 fold higher the company's EBITDA of the company of the 12 months. Let me highlight that in the first and second quarter, the company has reached some level of cash consumption due to the marketing -- working capital, which is a bit higher, and working capital might be reduced by the second half. This is a continuous point for improvement. I wrap up here my financial presentation, and this is the end of my presentation. Thank you so much to everyone.

Thank you, Sachete. Let's go back to the first questions. This is the question. [Operator Instructions] So the first question is from BTG. Could we please comment about the expenses level for the next quarters? I understand that many costs are associated of Group Soma and they are concluded. And how about this new level? Have you already framed that?

Thank you so much, Luiz, for your questions. All strategic questions involving auditors, lawyers and consultancy -- consultant firms, they have been concluded. This is no longer a reality. However, we still have continuous expenses for value generation, new projects and unification. This is a continuous project of unification. We may say that's the level of expenses that we had the last year. They will not be replicated to this year. And next year and from now on, the first quarter is fully aligned to be maintained for the next quarters of '25. And the bylaw unification and the whole structure and unifications that we are performing, they will leverage SG&A levels of our net profits for the next quarters for this year and the coming one.

The second question is also from BTG, and it has to do with working capital. Could you elaborate what are the initiatives for a better cash recovery, especially in the garment and apparel sector?

Thank you, Luiz. There are several initiatives, and we may divide them within 2 pillars: one, the first, short run and the second, long run. As to short run, we have to look after our inventory and receivables and payments to be still on the run operational efficiency for expenses reductions. But the main aspect will be a better and more efficiency, inventory management, which has been carefully looked upon by everyone top down, top bottom and bottom up, all the sectors and all levels of managers, they are looking after inventories level. This is a priority project to 2025. And what we see ahead is that we are going to have a much more positive inventory by the second half. The quarter 2 will not be any worse than that, actually it will be much better, and we foresee a very sustainable inventory management. Thank you, Luiz, for your question. I would like to implement some aspects as they have to do with the main drivers of our business. I will try to be a little bit romantic. We have to leverage our apparel sector in Brazil, we want to be the leaders. This is a dream for a middle to long run. But as next week, we are going to start some first steps, steps which we started taking last year, but now we are much more effective in the next 18 months. Wait and you will see huge changes in the apparels business. As to this sector, we have 2 main raw materials, which will totally show the dependence, the resources and also the level of complexity of this supply chain, not just as to fabrics, but also the manufacturing aspect. Firstly, the knit, the woven Brazil in the region of Vale do Itajai that is a [indiscernible], which is self-sufficient. They go from the transformation from cotton into woven and several other types of knits, laundries and manufacturing plants. They are pioneer in the Vale do Itajai region for over 100 years. So the level of consumption of reserves on a larger scale where 70% of SKUs of those brands, they are also produced with cotton, with woven. So we have to transform the digits through the night as [ Campo Bom is to shoes ]. In our headquarters, you know that below the same floor, we have a creative style area for Anacapri. And at the opposite, we have for other brands. In the shopping centers, you see stores with products totally different, and no one believes that they are created below the same floor -- the same roof, I mean. All the sourcing is controlled. We have an in-place movement to migrate the whole intelligence and the full knit know-how to Blumenau. Forget about the SKU, Hering's brand, our knit unit in Blumenau city will be a hub for the production and resources of the whole knits, which is produced for our several brands. In addition, within the same universe of knit clothing at Hering's brand, we have invested on a number of strategies where we have reached the conclusion that today, the manufacturing plant for Hering is self-efficient for circular knit and for ink, for tint, but not as efficient for tint, I should say. In routing machines, they are not very efficient. So we have to improve, and we have to shrink down Hering's manufacturing capacity, changing to another type of woven thread, which is very efficient, efficient and which will be very useful for manufacturing other brands. We are working with more experts, which will improve efficiency. It starts on the second half and it will end by 2026. The Peruvian cotton exports that will be concentrated in the Hering manufacturing management, understanding costs and inventory and working capital of this technology of a product like that. Then we have 2 other sources -- 2 other partners, I mean, the imported one and the national one. In June, we are going to travel to Asia, where we aim to unify all the important structures of our group, where we want to balance the payment rules. In some ways, we use traders with some time for payments. So there is much to be improved on working capital. So that will be very representative in our sector. And last but not least, important, we have the flat fabric. We have a finished product to source which is quite clear in our jeans productions. And in the flat fabric, more for Farm products, they are a long run because they are more expensive fabrics. They require longer tinting and sewing process. So I believe that cotton has a very important role to play in our business, reducing inventories, gain more activities. By 2026, we are going to change Hering's release for 8 collections yearly with some capsules collections in the meantime. Today, we closed our working capital on 27.2%. Such level on shoes goes around 19%, and we wanted to reach the average of Azzas for 23%, 24% within the 12-month period. So working capital will be worked and improved.

Thank you Alexandre. Now we have a question from XP about shoes, BU units. Could you please update us about the shoes adjustment process? What do you have in mind as recovery timing? And what type of adjustments are being done from a product and communication perspective?

Thank you, Danni, for your questions. I have some bias to talk about Schutz, Schutz brand. Schutz is celebrating 30 years of life. It's a long life and Schutz demands a new trajectory, which is based on first, we are having a more usable product, the level of capacity of Schutz to be innovative to release products in the front run, but we wanted to produce products with a higher level of use with a difference of customer's profile, and that's already taken place. We have some results, which show 17% increase just in May. The Mother's Day campaign works on this new image of a young woman, Giovanna, the actress with her 2 children, who is a person, who is a fashionist but with a more accessible, more affordable way to grab Schutz products. And as you have mentioned, we are redefining Schutz images, which will have a target price of BRL 590. This is the sweet spot for Schutz. We have also [indiscernible], which became a huge success and is totally sold out for a price of BRL 490. We are also emphasizing the bags of Schutz, which amounts 26% of our sales, and we know that, that may reach 33% of our sales. By next Monday, we are going to have a new leader working with Schutz that's an expert on bags sector. I even heard that you were invited to join us, and it will be a pleasure to welcome you to see all the stages of Schutz' productions and promotions. And all of you are fully invited. I'm very positive and assertive Schutz as a brand has a high level of sales, but that's not a brand amounting 25% growth. The Schutz growth was much lower in the first quarter, and we hope to reach 10% growth as Schutz' market share is well positioned in a premium segment.

Now we have a question from Vinicius, UBS. U.S. tariffs. How can the U.S. tariff scenario affect the business with the U.S.? And what global Farm expects in terms of revenue -- annual revenue?

I will start by answering from the Farm side and then some other insights as how may turn us into the main leader on shoes. Farm globally has a great distribution and a relevant percentage of Chinese productions that was born at several Asian countries. So in the short run, what do we have in mind? We have managed a negotiation and a reduction of our CVM. There is no silver bullet, a number of tasks that we'll generate a way to offset the impact, where we are able to increase the shops' sales prices. And Farm products, they accept a slightly price increase. And the time will be on the diversification of Farm sources plants where the main countries will be Turkey, Morocco, Portugal despite a higher price, but of great quality of production and manufacturing. We are also studying the possibility of using the know-how of imported textiles, but then with the Brazilian manufacturing process. So our company is an agile company, is very fierce and intelligent, and we see this as a way for improvement. Of course, that has a time frame that will have some sort of impact. But for Azzas 2154, that impact can be easily managed in terms of economic short-run impacts, but our company is fully prepared for those initiatives. On the other hand, most of you know that for decades, Brazil, especially our manufacturing zone was the largest shoes manufacturer and supplier to the United States for many, many years, then to China by the end of the '90s. But on behalf of João Fernando Hartz, they are the main exporters of Brazil. They were the main exporters of shoes back in the 60s, and we have to rescue our contacts to the main brands. We are today the place to go for American brands who would like to use Brazil as they are main sourcing. We are within a process of negotiations, where we'll be able to use not only our industrial capacity, but mainly our pro development capacity with thousand plants, which we have around us to migrate the production from China to Brazil and then perform and leverage more business with the United States. It's worthwhile saying that gross margin, which is being reduced, however, is 100% aligned to our results because they do not imply in any additional expenses, which helps us to strengthen our efforts with our suppliers. And not only Schutz and Arezzo's brands growth in the U.S., Macy's, which is our main customer there, they are selling tremendously, and they want to take our products many other stores. There was no readjustment of our products. So Arezzo represents a great business to other markets. So we have to benefit from this moment of changes of those new tariffs between the U.S. and China and Japan, that represents an opportunity to the Brazilian market.

Thank you, Alexandre. Next question is from João Soares, Citibank. As to Farm, he says, "Amazing, Farm's performance. Congrats for the results. Alexandre, how can we split the organic growth of the brand with the development?"

I couldn't hear the question, I'm sorry. That's totally based on organic growth. We didn't have much new Farm stores opened, multi-brand stores, they want to increase the number of stores. The brand has an average price and is aiming to increase its national capillarity. The brand is going through such a positive phase that large shopping centers, they are ordering, a need to open new stores with a high CapEx. Farm represents a new forefront for the company, for the group. Our results are consolidated and Farm has a huge capacity to grow. Last August, I was introduced to the whole base of a project, which is being developed for more than 1 year with a store concept which is totally different. We want to attract a much younger group of customers. We want to emphasize the Farm spirits with an entry price [ BRL 39, BRL 59 ] with 100 SKUs, moleskins, cups, bottles, notebooks, as to electric bikes, skates, surfing boards, technical helmets, I mean, a totally different line of apparel, including beach wears for very young clients. The stand-alone shop will be opening in Garcia d'Avila, Rio de Janeiro with a number of creative capacities for Farm. Quick spoiler, the whole store floor has an analogy to our former distinguished Burle Marx, and they have a version of Copacabana's tiles, floor, all black and white. We are also going to open another store at Barra Shopping mall and another one at Rio Design Barra, which is another very relevant mall. We believe that will be a case of success. We are preparing a guidance of Farm, and our dreams are becoming a reality. I cannot give any spoiler, Marcelo does not allow me to do so, but we have a possibility to have all these new shops.

We have a question from João, Citi, and it has to do with the shoes. What is your perspective for shoes BU? What is the relationship to franchisees? Do we have to adjust the franchise model?

Well, the franchise model, as we always say, we started back in 1993 with Arezzo&Co. That is a process which is going through constant changes. As to shopping centers' distribution, more recently, omnichannels, which changed totally the way as franchisees, they perform their online sales to sales that are done in the brick-and-mortar store. This is a process which is under constant evolution. Franchise in Arezzo, this is the name of the project. And by June we are going to migrate that project, the 2 Herings. The franchises for Azzas 2154 will have a much more unified insight now. We have several franchisees, but we wanted to unify all the franchise excellence and training programs as well as captivation programs for the new franchisees to our network. We want to understand if the existing franchisees, they would like to open new operations. So all the process will be -- Thiago will be the leader of this project, which will be very important for Arezzo&Co. Our deadline is to reduce selling to increase the price of our franchisees. This reduction is close to 0. Our franchisees after the summer season, they have low inventories and they are willing to perform large sales in the second half. But we have a very important base, and this is a continuous evolving process with a very dedicated team, several controls, a huge proximity to our network of franchisees. I'm sure that they are willing to keep on growing. And they may rest assure that Azzas 2154 offers the best options for our franchisee network. There is no other group which offers a fashion network as we do. Anacapri, we know it works on a more different model, which has more to do with subscriptions and selling the large Hering groups with different strategies. We are here now migrating, franchise to a more Azzas perspective. The main difference is trading the same way, different people. And our franchise system will be based on the profile of each one of the franchisees. And I'm sure that thanks to Arezzo's efforts in terms of franchise, we are going to be very optimistic.

Now we have a question from BBA related to expenses. Which sort of expenses levers do you see to be still captured by this year?

Thank you for your questions. There are several lines of expenses being captured. This is an evolving process. This has been a very strategic change in the month of April, evolving our corporative areas and some other business supporting areas. By May, we are going to see some positive results but even though the whole revenue growth will be sustained by a budget block of new purchase, which will hold our fixed assets. In addition, all processes that we have released last year and by the next year -- last year, I mean, and projects to release new products, new business channels, which now after 1 year are generating added value. In addition, we have a really well-structured plan, thanks to a consultant company that supported us last year. And we plan to unify BU areas, freight controls, expenses on marketing investments, all of them being captured from now by 2025. So the program is a continuous one with an implementation that will be carried out in phases.

I'd like to complement that a golden rule is that we have some headquarters being unified at important Brazilian cities. We also have another very important area, which so far has not been well explored, which is our economy, our savings, I mean, in real estate and now this fellow with all the experience that he has in shopping centers and malls, I'm sure that will be a very effective way to improve our business to the companies. Opening for allowance programs, we will count on the help of a senior fellow who is not still present in our G&A in terms of savings. We see huge opportunity to improve in our transportation mode and freights and logistics. So we are bringing to our team senior experts that will be very helpful to continue capturing new possibilities and to explore more synergy in our Azzas Group.

Thanks, Alexandre. Thanks, Sachete. The next question is by Goldman Sachs about Hering multi-brands. It says, "It's great to see the better growth in the multi-brand Hering channel. Could you speak a bit more about the changes in the go-to-market and the management of this channel? And how should we think about the sales potential and the profitability going forward?"

Great. Thank you, Irma, for your question. Hering multi-brand was a result of a project that we presented. We use the best practices from the areas of brand that has a vision of generating capillary savings using several data that show subclusters for each micro region in Brazil. We've demonstrated a capacity to internalize some of the sales offices, generating better efficiency and penetration in Hering, especially in the Northeast. The summer selling that started in April 17 presents growth -- strong growth in multi-brands. We have a distribution of 9,000 points of sale. We believe we have space to continue growing and gaining market share with the segment of this premium. So we're bringing Hering to a premium market. We want to change a bit the profile of the type of multi-brand that we use Hering and growth Hering as well in more boutiques. Also for basic apparel, different from them, just T-shirts and for this type of client.

Thanks, Alexandre. The next question from Joseph from JPMorgan, it is a long question. I'll separate it in two. The first one in the cost of discontinuing the noncore brands. How should we think about the phasing for the discontinuation of the noncore brands throughout the year? In this context, are there still other opportunities to optimize the portfolio?

Joe, thank you for your question. I'll start with the second part. This is a continuous process for portfolio valuation. There are many brands and fashion is cyclical. Brands have their momentum. The projects that we'll launch will have their faces and their successes and failures. And this portfolio review process is necessary for a group such as this, and the benchmark is the large international groups that commonly that buy and sell on assets and operations. It's not a process that are cyclical and will surely be a continuous evaluation within the Azzas Group. So about the decision in the last quarter in '24, initiated implementation in the last quarter of '24. We have been executing this carefully. They involve operations in brick-and-mortar store people, inventory and most of this process is completed. We have some items under production, some sold for multi-brands. This is being finalized. I'd say that the level of revenue and impact in the business, it dropped from 60%, 70% of what should be originally for the comparison base, less than 20% -- 15%, 20% in the second half, and we should not have any movement. That is the full conclusion up to June of all the discontinued brands.

Thanks, Sachete. We still have some questions, but we're 5 minutes over our time. I and the team will be here available to answer the other questions that you have. Thank you. And I give the floor to Alexandre for his final remarks.

So to wrap up, I have 2 messages. First of all, my deepest thanks to everyone that is building this dream together with us. We're building something with a collective spirit, made up by people that are passionate for what they do, are moved by challenge, are working hard. My heartfelt thanks for your guidance and dedication, and I take the advantage to invite you for Mother's Day. They didn't allow me otherwise. I wanted to have a discount coupon for Mother's Day for Arezzo Rio Sul Shopping and Iguatemi stores. If they release it, I'd like everyone to buy an Arezzo, Schutz, Hering, all of our brand, women's brands for this Mother's Day next Sunday. We want the 10th of May on Saturday be a record day in the history of the Azzas 2154 brand. I count on children, husbands to go to our stores to make the best purchases that will be a good present for your mothers and wives in this Mother's Day. And I -- we expect you in [indiscernible] on May 23. Let's go forward. Thank you, everyone. [Statements in English on this transcript were spoken by an interpreter present on the live call.]