Companhia Brasileira De Distribuicao (PCAR3) Earnings Call Transcript & Summary

Good morning, everybody. If you could please take your seats, we are about to begin. Well, good morning. It is an enormous pleasure on behalf of GPA to receive all of you today in the auditorium, where we are having a live event. Today is the very special day. We're going to present to you this last year of execution of the Pão de Açúcar strategy, something that has helped us resume our growth and profitability. We're also going to speak about our vision going forward for the business. It's a very special moment for me. I have been working at GPA for 1 year and, of course, I have been able to witness all the changes and the spectacular culture. But precisely, in the Pão de Açúcar brand that is very dear to my heart. It has been a benchmark in the market of Sao Paulo, and this, of course, enables us to feel very proud and to maintain our focus on the customer. Our presentation today, you will see that everything will focus on that customer. We are centered on the customer. Here, you have our agenda. We will speak about the main strides in our agenda. We will go through all of the company areas. We will have a break at 10:15 for 20 minutes and then we will resume with more presentation, the Q&A session, and the closing that is forecast for 11:55 today. What is important this year is a change that will enable us to generate greater efficiency in questions and answers. We would like to answer all the questions and we will do this through a QR code. On your seats below the chair, there is a QR code and you can take advantage of this QR code to send your questions throughout the presentation. They will all be answered during the Q&A session. Once again, thank you very much for attending. Have a very fruitful event. Our history is part of the history of the food retail in Brazil with pioneerism, commitment going through generations and always offering the best purchase offer to thousands of customers. With a team of more than 40,000 associates, we are acknowledged for the strength of our brands. Our business model involved and includes all of our network offering services in different formats. We are loved by Sao Paulo. Pão de Açúcar is one of the most delivered brands in Brazil. Our premium supermarket format has a service that stands aside with fresh product customization and exclusive products. We innovate creating -- first of all, we have the highest loyalty in the market and a very strong connection with our consumers, both inside and outside of our stores. We are present and, Extra, one of the more iconic brands of the Brazilian retail present in more than 60 cities in Brazil. We are the best option in neighborhood for day-to-day shopping offering freshness services and highly competitive prices. We're very close. Our proximity formats are growing and they adapt to the busy lifestyle of cities and urban centers to resolve expeditiously the needs of our customers in the stores through the site and through the app. The customer can choose how and where to buy. We are the largest sellers of food in the e-commerce, and we have adapted and enhanced our operation, enhancing our relevance and share in the Brazilian market. Our exclusive brands are in accordance with the dynamism of the lifestyle of our customers and the choices that they make. We're committed in offering products that will bring together quality, practicality, and sustainability. Here at GPA, we have a passion for our customers, and we have the commitment of always acting responsibly, fostering diversity, equity of opportunities and the development of our teams, strengthening relationships with our partners and committed to good environmental practices, sustainability, and animal well-being. This will enable us to offer a better future to the environment, society and consumers. To [indiscernible] (00:14:26) and the commitment that push us forward, it give us pleasure, allow us to be happy and fulfilled. And we are very satisfied to be part of this significant history.

Good morning, everybody. It is a pleasure to be here today, hosting you in our Pão de Açúcar to speak about the work that we have carried out and the evolution we have had as a company, as a business and to, of course, render accounts of this stride, but also looking towards the future as something very promising for the company. I remember that all of this began in April of 2022, which is when I entered the company I had the opportunity, the privilege to become the leader of this group. Together, we set up a team, and we started plotting, which will be the future of this turnaround and I have spoken about the initial products that will -- project, excuse me, that will extend for 3 years. By working together, we created a concept of the 6 strategic pillars that would guide our turnaround in the company. We told you that we wanted to grow sale above and beyond inflation by gaining market share by resuming the Pão de Açúcar market share. We had the commitment of reconnecting to the customer and being that benchmark for service in the Brazilian market, and we chose NPS as a metric that would be the foundation of this ambition. In digital, we had the leadership of the food retail market. We wanted to expand this, but we mainly want to make this business, this sales channel a channel with a deficit into a channel that was highly attractive. We have taken the opportunity to grow with a new format of proximity format with replenishment and by extending the supermarket, but bringing it closer to the customer's home as an option to replenish products and we have strengthened this vision once again by expanding the foothold of the Minuto Pão de Açúcar supermarkets, especially in Sao Paulo. A very important framework of our pillar, of course, is profitability. As a company, we had been suffering. Because of our results, we needed to resume our results for the company, for the market, enabling us to plan the future, a more sustainable future and we have worked arduously in this. But none of that could have worked without our strong pillar of culture, working with the right pillars guaranteeing that they would all feel like owners become committed with the results. And this is what we were setting for, for each of the leaders that joined us and believed in this process. Very briefly, I would like to convey to you the main points of these pillars. In sales, we began this project with strong work in category management and this enabled us to put the right product in the right store in the gondola permanently. It is simple as this. First of all, we had to take away from the shelves, whatever was not productive. This led to an assortment reduction of 12% of products with low turnover. And this allowed us to leave on the gondolas, all of the products that were relevant for the customer. We immediately began to observe an increase in sales and a new culture, which was one of the pains that our customers shared with us. I go to your store, I buy something, I go back the following week and the product is no longer there. I am very proud to say that our stock level -- our consistent stock level in store is 95%, perhaps the best figure throughout Brazil in terms of availability on our shelves. We have also worked hard to guarantee to put the perishables back as a main player in the supermarket, the perishable products for us are strategic. They bring that perception of quality, of refreshment, of recurrent visits to our store. And I'm very satisfied and I have shared this with some of you that we can already say that the share of sales of perishables in the Pão de Açúcar network is more than 50%, very important for us. And the result of all of this work, and we have been sharing this with you can be seen in the absolute increase in sales and the growth in same-store sales above the market average. And it shows our gains because of what happened with our market share for 3 consecutive quarters. For 4 consecutive quarters, we have been gaining market share in the total market. And I draw your attention here to 2 points that are in crack. The growth of market share vis-a-vis the premium supermarket, which is where we have put a greater focus this year. And here, you can see a growth of 1.5% in Pão de Açúcar, another premium market in the food retail of Brazil and then even more important highlight for our expansion strategy in Minuto Pão de Açúcar, where you observe a growth of almost 3% in terms of market share gain in the proximity markets throughout Brazil. A second point that we focused on was reconnecting with the customer. The second quarter of 2022, we invested to hear the customer. It's important for the customer. The NPS pointed to the fact that we had 2 initial paints, the time in lines, availability of products on shelves and the service in certain service areas like the bakery and others, we invested heavily in training. We worked with multi-skill training with our store operators, point of sales to be able to reduce the time they spent in lines, and we also invested in self-checkout not only in supermarkets, but also in proximity stores. We invested in the fishery, the butcher, the bakery stores, giving our employees technical training, so they could better service our customers, and we could observe this in the better scores of NPS. But we had a broader scope, a broader focus. We wanted to enhance the premium and valuable customer base. When these clients become loyal, they are ninefold more profitable, more frequent compared to the traditional customers, so it was important to bring back that connection with the customer. And this year, we launched a new program, the Mais program, which is our loyalty program. We have three layers, more client, the Mais client, the black clients and others. We began to work with customized offers, offers that make sense for our customers in general. And the good news here that I would like to share with you is that the number of premium and valuable customers has been growing this year above and beyond 10% quarter-on-quarter as the program is better understood by the customer. They understand the benefits that they will receive, and we see these figures continuing to grow. As a result, we have grown our NPS in all of our banners. And this is only part of the detail that we focus on to make a difference in the customer perception, the quality of products 96.5%, of approval services 95%, and the environment and the store structure almost 95% approval pointing to the fact that the customer has realized the efforts that we have put into our stores. The investments that we have made to guarantee that their experience will be in hand. In the digital part, we have made great strides. You will remember that at the end of 2022, we made a very bold, but difficult decision to close down the James operation. Throughout this year, we have continued to invest in technology in our app, ensuring that the app will be the contact hub with our customers. And we have seen an increase in monthly active users going beyond 60%. We have also invested ever more in the store operation. And in midyear, we carried out the second structural transformation of our business. We closed down all of the distribution centers referring to the digital sales, and we transferred that operation fully to the stores. Now this led to a dramatic change in our operation. Firstly, because of the integration with the store. Secondly, because of the stock levels a reduction in logistic hub and it has enabled us to come ever closer to the customer. Now with this, we have not only reduced the cost of our operations, but we have already managed to enhance and increase the quality of services for the customer. We left from same-day deliveries of 40% to 75% nowadays for online purchases. We have reached 90% of perfect orders, a full order delivered at the right time. And we continue to move forward. What does this represent as a result? It means that nowadays we're absolute leaders in the digital retail food sales in the market. We have leadership in Mercado Livre, iFood, Rappi, and we have a group that is extremely well prepared. An example of the synchrony that the team works with working for the customer, putting the customer at the center. And as a result of this, we have come out of a digital operation that had a negative contribution of -- with single tool in operation today that is positive with a contribution margin that is possible, optimizing logistics, optimizing our stores and, of course, coming closer to the customer. And when we speak about expansion, I'm extremely satisfied to say to you that the assertiveness of Minuto and Pão de Açúcar has proven to be very prosperous. Since April of 2022, we have more than 130 new stores inaugurated growing their market share and the foothold of the business in Brazil, especially in the city of Sao Paulo. We have the vision of a store that is for replenishment and Fred will speak about this in greater detail. The idea is to extend Pão de Açúcar closer to the customer's home. They can go to the store in 5 minutes on foot and see all of the categories that they would normally find in a larger store. So this business that also began some years ago as a laboratory model after everything we have learned now has a critical share in our results increasing the contribution margin and is our great leverage for growth going forward. Now a point that I'm sure you're very interested in discovering in this room refers to our profitability management. This is the commitment of the company with the company itself, with the market, with our shareholders, something that we had to resolve. And we did this through a very strong control of our sales to begin with. You will recall that at the end of 2022, we restructured the office with a reduction of BRL 130 million. In partnership with [indiscernible] this year, we have begun working with zero budgeting base. And this year, this has led to a reduction of BRL 230 million. We're speaking of BRL 360 million in cost reduction for the company in 1.5 years. We have also managed to improve our shrinkage performance. In the past 15 to 18 months, we brought that down in almost 1%, but we're not there yet. We believe there is yet another 1% to achieve, and we're going to follow that through next year. So halfway through that route, we still believe there's more gain to be had. And finally, our core business, how can we improve our business negotiation strategies? How shift the business? How can we make it more profitable, bring it back to historical levels this company has always had. Our commercial team, led by Joaquim, who'll be talking to you shortly. They've been doing fantastic work, getting closer to the industry, managing categories as I put it, reducing shrinkage, as I said, bringing customers what they really want and reducing the need to have markdown for low turnover products. All this put together, has given us a structural growth of 1.3 percentage points of gross margin. You've seen that in the past quarter, after a series of quarters, we have surpassed the 25% mark of gross margin. And we still believe we can improve that even further. We're now reviewing the entire pricing strategy types of discounts offered to customers. And the ultimate goal is to optimize that discount program to the right customer at the right time, at the right store. As a result, we were very pleased to deliver a 7% EBITDA in the last quarter. We're still halfway through. We maintain the guidance we gave you late last year to deliver a complete year, 2024, an EBITDA between 8% and 9%. We not only believe in that. We are actually delivering all the KPIs we had promised all the way to the end of 2024. That's where this 3-year phase ends, and we will reach those goals. In conclusion, I would like to address our commitment as managers of the business, and we are committed to deleveraging the company. This is just as important as the entire operational revolution we've been implementing. We have to address, and we are doing so to address the capital structure. We started by selling noncore assets. We also did a sales leaseback of 13 stores. We sold the store in Barra. We sold our stake at [ Estadão. ] We have just announced a negotiation of Cnova coming to an end. This is always helping to take us a company that is 100% Brazilian in the quarter, a company that is focused on the Brazilian food market, a company that is way simpler to be understood. But there's a soul in that company as well. We do have a purpose commitments to itself, to its workers and to society overall. One of those commitments was to reach a 40% of women in leadership roles by 2025. And we've celebrated extensively earlier this year. That was back in June. We were ahead 1.5 years. We are over 40% of women in leadership roles. And there's an opportunity to keep on growing to be expanding that number. Our goal is to reach 50% of women in leadership positions because that combination will make the company be even better. We have also fulfilled the commitment to reduce the gas emissions. So we have to play our part in society. We are renewing equipment. We are investing in new stores, making sure we're delivering on that commitment to reduce pollutant gases by 50% when compared to numbers we had back in 2015. We have also been working with our employees aiming at being more active in society as a retail food company. We have access to customers that are there in our stores. We can work together in contributing to NGOs, charitable institutions. We have over 2 million kilos products given out. It's a project called [indiscernible]. Every single employee is involved in that effort. And I would like to conclude my presentation by introducing the best team in food retail in Brazil. They're second to none. We have the experience and the skill of a team that is delivering on their promise. That transformation is being led by these people, Geraldo Monteiro. He couldn't be here today. He's okay, but he's having some health issues. But he has been able to change the supermarket operation in Pão de Açúcar, has a lot of experience in retail in Brazil. Rafael Russowsky, you've known him. He has just joined us -- he joined us 4 months ago. It seems like 5 years, but he's been doing fantastic work. Frederic Garcia, heading the proximity business, that transformation, that expansion that is happening in our strategy. Erika Petri has recently joined us, what was it, 3 months ago, 4 months ago? She's been leading the people agenda or talents. We are going to heavily invest in 2024 in building talent in this company. Joaquim Sousa, our Chief Commercial Officer. He's been in charge of this entire transformation I talked about today. The role of that commercial department in the transformation of the business. Rodrigo Posso in charge of technology. He has a lot of experience in the digital retail world. [indiscernible] our Chief Supply Officer has been recently promoted. He's been doing fantastic work. He is now heading supply -- security, safety, the entire legal aspect of the business. Well, the truth of the matter is, let me tell you this, in this company, we have operators that are working relentlessly day in, day out to transform Pão de Açúcar and bring it back to the place where it has always deserved to be. There are only two people that work for this company. If you are there, out there on the field, supporting a customer, serving him or her or you're helping someone who's helping that customer we've been trying to simplify things, supporting the store to remove whatever the store does not need so that the entire team can be focused on customers on their experience at the store. And that's how I conclude my opening remarks. Once again, I would like to thank you all for being here. And once again, I state our commitment, our focus and consistency to be loyal to the 6 strategic pillars by 2024. We have a team that is fully committed to make that happen. Thank you so much. I'll turn it over now to Erika Petri, to be talking about HR and culture.

Good morning, everyone. It's a pleasure to be here with you this morning. I am Erika Petri. I'm In Charge of Human Resources, Sustainability and Corporate Communications. I've been in HR for over -- almost 20 years, half of my career in retail companies. I've been with Pão de Açúcar for 3 months. And I've been hearing the same question. What is it like to work for GPA? Are you enjoying it? And my answer is it's an incredible company, filled with challenges and opportunities. And I am proud to be part of a team of leaders that is completely committed to improving our customers' experience on a daily basis, bringing results and most of all, being an example of the culture we have been trying to implement. And whenever we talk about that culture, of course, the culture and our decisions have to be focused on our customers with agility, learning experience with simplicity, with meritocracy and also with the commitment to bringing sustainable results to the organization. That culture has been translated into these 5 values on your screen. And it is made possible when we stated to all employees is to be the best choice for customers and pride to our employees. We are a little over 40,000 people, a diverse team. 41% are women in leadership positions, 62% are black. 48% of these black people are in leadership positions. We know we still have a long way to go. It requires a lot of work when you talk about gender and ratio equality. But we'll keep on working just like we have been doing, affirmative action for leadership positions, developing and helping women to take those leadership positions and our entry programs, affirmative programs, our internship that is exclusive to black people. And we know that in retail, people can make a difference. And culture has to be at the foundation of our strategy. That's what we have been doing. Our values will determine our decision-making process. And to that sense, we have managed or have changed our management system, assessment models, tools, compensation, that culture has to be aligned for sustainable results. And that's why sustainability is gaining ground in every department of our company. Let me point out that we do have a governance in place of the most important sustainability programs. Most of our leaders are involved. Most departments are involved even in our goals panel of our leaders, most sustainability indicators are there. And if people can make a difference in retail. More and more, we need a healthy environment, a place where people can grow and develop. It takes time, we know. In our recent customer survey, we have increased our NPS by 7 points. We're still on the road to becoming the ideal place. But our employees acknowledge that they can grow and develop. 42% state that they keep on working for GPA because there are career opportunities. So when we talk about career path, what do we do? When we say customer focus and our focus is passion for customers, back in 2023, we have trained 100% of our operations teams to standardize the service so that we can offer our customers an outstanding experience. That program was conducted to 29,000 people, both for supermarkets and also for our proximity stores. But we go beyond technical training programs. And we do have a platform that has been key to communicate our culture. That's what we call retail university. In 2023 alone, over 12,000 courses were offered. It's a platform available 24/7 to 100% of our employees. And in that university, you have both online and face-to-face programs. I would like to highlight two of these programs. They have been very important in our culture development work. One of them is to develop leaders and want to develop women. In 2023, we have trained 800 women. 98% of those have already been promoted after attending those courses. Let me point out the succession program for operations. We do have a consistent program to train new leaders that will support our business expansion. So on top of developing the team, there are two very important elements for culture: performance and meritocracy. When we talk about these two elements, we have to base ourselves in a robust program to manage people. This is what we call people's cycle. We define goals assessments, we identify talent, and prepare the succession plan. It's part of our culture and it has to do with the skills we develop in our business. These skills we assess them what we deliver results, but also the how we deliver on those results. So just as important as what you deliver is the way you deliver them to reinforce the culture we've been building in recent years. In 2023, we had a landmark that was key to develop that culture. We moved away from a panel that had over 1,000 KPIs. Now we do have 10 KPIs to all leaders and to all employees. All company's employees know what we're looking for and what's important to turn things around. So that topic has been a very important symbol to give employees transparency what we expect from them and what we have to deliver as a business. If we say one of the values is together for results today and forever, there are no two ways about it. When we talk about results, there's something we should never lose focus, which is efficiency and productivity. In the past 2 years, we've managed to reduce our corporate structure by 21%; however, we reinforced our staff in operations, bringing in these functions as the cheese specialist, a wine specialist that generates or that gives customers the value, to provide them with value. And these are ways to contribute even further to our customer experience. When we talk about adding value, I have to say or have to mention sustainable development. Let me highlight three areas where we have been focusing. One of them is the supply chain; the second, the reduction of carbon emissions in our operations; and thirdly, I'll be talking about our social activities. When we talk about the work we do with the supplier, 2023, we managed to get even closer to the supply chain. We've been focusing on social audits. We work together with our suppliers to help them grow so that they can have in their own supply chain that is sustainable and we help educate consumers even further. We reinforce communications in our stores. One example of that is the fact that [indiscernible], 65% of egg sales, these are cage-free eggs. When we talk about gas emissions, our goal, back in 2015, we want to reduce by 38% by 2025. We brought that now. We are at 40% in 2023. Of course, we're not stopping there. We have now reset that commitment. And to the social part, I would like to underscore a program that we're very proud of called [indiscernible]. We have trained young people. We have taught young people, people that can work at GPA or are ready to work in the market. Besides training these youngsters, we're offering them a more promising and better future. And when we speak about the future, at GPA, we're convinced that the culture we're building will pave the way for this better future. In 2024, we have some very key goals in terms of people and sustainability. We're going to continue to work on our talent, reinforcing this further. We would like to attract the best people ensure that people want to work with us, allow these people to develop and take on positions of leadership guaranteeing, of course, our work together and enabling us to work towards the challenges we have. Additionally, we will focus on the development of our leaders so that each leader will be a model of culture. People that can train further leaders and to continue to look at culture, of course. We would have to make strides in terms of the engagement of our team. We want to enter that zone of excellence of the NPS. We know that we have to continue to deliver -- develop our teams, have better teams, work with quality of life, better working conditions, but we are focused on having the very best people working with people who do want to be here. If we obtain this goal that had been set forth for 2025, the reduction of carbon in our operations. We have reached 40% in 2023. So for 2025, the commitment is a reduction of 50% of carbon emissions in our operation. We're building an ever more diverse and inclusive company. In 2025, we will have 50% of women in leadership positions. We're convinced that through that we are building a company that, yes, will be the best choice for our customer and will be a reason of pride for each of our associates. Thank you very much. I will now give the floor to Joaquim.

Well, thank you, Erika. Good morning. I am Joaquim Sousa. As Marcelo mentioned, I am in charge of the commercial areas of the GPA marketing and much more. 1.5 years ago, I was invited to become part of this team. And that is a highly ambitious project with plenty-fold opportunities, but I saw that it was completed here because of the 30 years I had acquired in the retail market, but also because of my belief in this very consistent and coherent projects for the future of food retail. Now when we look at the verticals, the fronts that we use in our strategic planning, we began to create a team and carry out a diagnosis of how we could become part of this entire environment, which would be the more logical factors commercially, but always guaranteeing that all initiatives would permeate the entire commercial structure. 1.5 years ago, I brought up some points that we had already diagnosed and that we were putting into place. So today, I would like to refer to the brands that are more relevant, as Marcelo said to render accounts in terms of everything we have done so far and to show you what we're speeding up as we look towards 2024. Last year, we spoke about relevant factors and the strength that we needed in our model. We began to work to create more strength through 2024 and thinking of the evolution of share of wallet of our customers, our evolution in the wallet share. And of course, we thought about expanding profitability. How to do this by adding value to GPA in a smart way and with a great deal of transparency in the front of perishables. We spoke about the customer experience, how important this category was in the digital world and all of this in line with the trend and the backdrop that we have in terms of ESG. The good news for 2023 that reinforce that we will continue this in 2024 is that the experience in the store was to recover the growth of this category, and we have made progress with training with the schools for the bakers, the other people, 2,000 hours of training. And in 2024, this will expand to 250,000 hours. We see that this is upfront that will have to continue to be one of the main access of loyalty of recurrence for the Supermarket and Proximity format in the country. Now the perishable zone is a point of victory for us, [ 50% ] of this perishable format is very important to ensure that we can surpass what we call customer recurrence with a single brand. The battle of the digital with greater product availability within the stores as part of our digital journey, the best choice, the training of people working with this in stores. All of this has enabled us to enhance our share 33% in the purchase of products in our food channels. And of course, this has aided and abetted our company guaranteeing a robust growth of 53% only in the digital category with perishable and we have seen an opportunity of being the main actors on this front, bringing in suppliers, leading events in terms of animal well-being guaranteeing quality through a single program, which is quality from the origin, all the perishable products are tracked, they're audited and verified from their point of origin until they get to the store. Organic product, which is another front the whole world is working on and where Brazil poses an opportunity. We're working to work with better costs and the development of suppliers. Organic products have grown more than 10% in the stores. And these fronts, first, the producers, the industry know that this is the best place to distribute product and customers now. This is the best place to buy. But for 2024, we are moving forward in world trends, directly, direct to go, practicality, how to change the store into a hub of food consumption, not only a purchasing hub, but to shorten the chain, bring the quality ready and offering it to the customers. Now the trends that we foresee speed the customer who wants to be ever more agile new types of households, all of this helps us to set up and work on new services at the store and not referring to something we will be doing now a day since the third quarter of this year. We have already implemented different. No Christian areas within the store. This is increasing the average ticket holding on to the consumer for more time in the stores, making the store a hub in digital. We have made strides, but we need to gain more consistency, working on new ways to supply the customer home with subscriptions, with new products for perishables. For example, this means evolving and bringing more practicality to the channel and Pão de Açúcar doubtlessly will move forward faster in this now quality and health ability. We have made great advances and they will be even greater in 2024. The next stage to guarantee this, we have more than 300 professionals technical people both security people, trainers, people that are devoted day after day to ensure that all the high standards are available at our stores. And what we saw during the 2023 assessment, what the strength we have outside of Sao Paulo and the Hinterland in regions like the Center West, Northeast, Rio de Janeiro. How we can expand all of our best practices and share our knowledge outside. All of this has represented a new driver of accelerating the growth above the average growth. We have always enabled us to surprise the customer and take competition outside of Sao Paulo to be able to conquer new region share of wallet. We have worked considerably on this. We spoke about the premium customer, how important it is to concentrate customers' expenses in our stores. And for this, we resort to all of the possible tools available. The first significant step we have taken that we showed you last year, it was still very novel when we presented this last year. The full category management, it wasn't simply an assortment or verifying the assortment, but instead focusing on all of the stages of the product seeing how this would impact our inventory management, which role this would play in each location where we have a store. The price image, the quality image. And the Pão de Açúcar banner, which was a focus at that time has showed us that the results are very worthwhile. In the fourth quarter this year, we have begun expanding this to all the other formats. These are winning figures for us. They have helped us with our culture, a reduction of almost 4% in a break in stock out better experiences in purchasing, better experiences and assortment, bringing us a reduction of 9 days in our inventory levels, cash improvement, availability improvements and better relationship with suppliers. For the supermarket banners, what is not simple. We have been able to move forward in terms of price image and enhancement in competitiveness by working intelligently showing is good prices to the customer without having to reduce the prices, showing the customers they will have a gain by purchase from that category. Another factor that has helped in this growth of share of wallet have been our exclusive brands. The TPA exclusive brands nowadays are market share leader throughout Brazil. They have the highest market share in the country in terms of exclusive products because of the focused intelligent work with careful selection. We drew some SKUs from the line, those that made no sense for the store or for customers and in 2023, we replaced this with 300 new products, products that were selected based on research intelligence with the help of the customer. Exclusive brands, thanks to this, have reached a growth of over 14% in the stores. In the regional stores when the operations make their presentation, we'll see that we have banners reaching 27% of the share. Why? Because of the knowledge, the thrust of the customer with exclusive brands, we have a figure that we follow up very closely. Customers that consume exclusive brands will return 2.5x more to the store. Why? Because that exclusive brand becomes a factor for loyalty because it's only in our store that they will find these products. This is a strategic pillar for the company, and we're going to pursue this further. Why? It's overall trend. It's a way of having the trust of the consumer because of this. Another factor that has helped us in the increase in share of wallet is to use the database we have on customers, how to reach our customers? Always with that look of an owner concerned with the entire strategy from one end to the other. We began to work in-house ever more with CRM, working on how to communicate with that customer now which has been the impact of this. Since the first quarter of this year, we have had a significant increase in the [indiscernible] of use of our own communication channel with consumers. We will be able to always reach them with the best offers, options at Pão de Açúcar. Now which is the general impact of this, a true enhancement of a return on what has been invested and a considerable reduction in the investments we had in marketing. Nowadays, after the 30 years of experience I have in the retail market, it's very difficult for another retail chain to reach the same investments that we carry out in marketing, precisely because we have brought in-house that very smart and practical use of our proprietary channels to help us speed this process more, we recently acquired. And last year, we worked with a teaser for this. We have acquired a tool called CPP. It is extremely accurate when using communication channels with our consumers. Now this tool is nowadays responsible for 18% of all of the information hits and communication hits with our customers. We acquired this tool and we, of course, created a business plan to understand the return on investment for the tool. Since the beginning this tool has proven to be much more profitable than we imagine. To give you an idea, we have a measurement, which is the return for every 1,000 eases of information we send to the consumers. And the usage rate has grown 280%. So we are moving away from business as usual of BRL 107 return we had on each piece of communication to BRL 111 just because of the accuracy and the smart way in which we are using our assets in-house. To be able to do all of this, we have tried to communicate more broadly, find a way for the brand to truly communicate with customers through different channels. And I would like to show you a video, which I think is self explanatory of how this happened in 2023 and how we plan to grow in 2024. [Presentation]

Well, we're getting closer to customers by using these tools and gaining more share of wallet and to bring all these things to profitability. When we started out last year, when we decided to expand profitability and how to go about that, one of the first things we noticed is that we had to bring in the industry in-house so that we could have synergies with that joint effort. So first off, we came up with an entire strategy we called AJ BPs or JVC's, joint business plans, and joint value creation. These are means of negotiating and establishing partnerships. 53% of sales in 2023 have been covered by these plans. These are 360 plans. You cover the entire industry retail customer relationships. You manage product planning, launches, campaigns, seasonalities. You take everything into account with transparency, with data. And of course, it could be no different. Suppliers covered by the strategy 16.5% sales and 12.8% growth in volume with these suppliers and as well as with other suppliers. We have identified opportunities to have better results in breakage sales businesses and as well as ways to bring these suppliers to join their efforts with ours. Opportunities amounted to BRL 100 million, 87% have been captured already. It's been contracted out. It's been signed, and there is cohesion and there is consistency therefore, still on the topic of partnerships. The work we've done to reduce stock outs, we have relaunched a program. We were pioneers back then, Top Log. Under Ruy's leadership, we brought these suppliers in-house to work the supply chain with us. Those that were more actively engaged evolved faster. Stock outs were reduced by 40%. That program as well as other efforts helped us reduce our inventory by 9 days. On top of the other strategies, closing down. DCs that has helped us improve inventories better, but partnership and collaborations played a key role to that success. We have been monitoring a KPI. We wanted to make sure that this was actually the win-win-win situation, customers, the industry and the retail. And the question was, fine, retail is doing great. Customers, we have been able to recover those volumes. We want it. What's the industry stake? In the second half of this year, we have been -- or we were awarded as the best evolution in retail. That award was granted by the Advantage Institute. They've assessed 350 suppliers. They assess the synergies between retail and industry so that has validated that third KPI. We wanted to make sure that this was not static that that was something that could continue to evolve. There's another reason behind profitability. We've been working on that since Q1 of 2023. We've been talking about retail media quite extensively. We identified an opportunity to capture and monetize our assets. Let me give you some figures so that we can have some color as to the potential of that initiative. This year, about BRL 2.6 billion will be invested in retail media. Inside Cedeo, one of the most important research institutes on the topic, estimates that in 2026, there will be BRL 46 billion in Retail Media. This is going to be the new currency to work. Media through retail. We are now beginning to operate with more data, more transparency by using our audience in physical stores, digitalizing them, using our digital channels so that we can be a huge channel for investments in the industry and bringing that away from our digital channels and using other types of media. In Q1, this year, the very first survey we conducted -- this is data that will be made available to you. The second place today that the industry ranks as the best place to invest through retail media is GPA. This is yet an important source of revenue -- new revenue for the company. Finally, Marcelo mentioned the generosity front, which is how to improve promotional efficiency, just like the category front. The second focus now is promotional efficiency, and how? Better pricing. Looking at frequency of consumers, the exposure of these products through media channels, through stores and having the right products. We can have more profitability, better return on investments and at the same time, giving consumers the best price perception of all this generosity package, we offer them. Campaigns are more successful, therefore, and the formats are differentiated therefore. Okay. In conclusion, perishables, we're going to overcome the 53% barrier. That's the first commitment we had made working on the share of wallet, ensuring a double-digit growth in volume. It's a matter of continuity of that success we're all aiming for. And finally, profitability expansion. EBITDA will be between 8% and 9% as we had promised. Folks, thank you all so very much. Back to Fred Garcia.

I have to make up for the last time. We are running a little behind. I'm Freddie Garcia. I've been in retail for 30 years, 20 working for an international competitor and 10 here GPA. Out of those 30 years in retail, 20 in Brazil. And in 10 years in GPA, 5 in Proximity specialty businesses. And now I'm taking over the pillar that is called expansion. I've been in Brazil for 20 years. I decided to remain here in Brazil because I love this country, number one. But I also wanted to be part of that turnaround journey GPA. And thank you, Marcelo, for giving me the opportunity. I am fortunate enough to represent Geraldo Montero. He couldn't be here today. Geraldo has a large experience in retail. He had worked for GPA before for 14 years as an Operations Director. And now he's back in August of last year. And he worked for the competition for some time and now he's leading the uptake for the resumption of our premium format and to strengthen our mainstream brand, which is Extra. Let me start with Pão de Açúcar. Our ambition is to take Pão de Açúcar to that position of the best premium supermarket in retail. The mission is very clear, Pão de Açúcar is based on three pillars: Fresh perishables, quality, freshness, recurrence and loyalty. Joaquim talked about that extensively. Fresh even in the store, but also fresh through other programs, just like MasterChef Cooking show. So fresh in and outside the store, while being through the health platforms and our [indiscernible], the ambassador of that health approach and health through social activities, social and environmental activities fostering that consumption with awareness and loyalty platforms, [indiscernible] the gold and black categories. These two types of customers that segment has grown 50% ever since the beginning of the program. And of course, providing the best possible service in the store. Strengths and initiatives that will take us to that differentiated service, providing customers with the best purchasing experience and that's based on several pillars. One of them to providing more services and improving service even further. 51 stores have benefited from more services throughout 2023 by improving that customer experience. 51 stores that account for 68% of [indiscernible] of GPA and that expansion resumption we have opened 4 stores this year. The fifth store will be opened just next week on the 14th in the city called [indiscernible], 5 stores this year, 5 stores last year, 10 stores in 2 years. This has never happened. It hadn't happened in 10 years. So expansion is at full speed. Okay. Onto the pillar initiatives for both services, 51 stores, improving better services by implementing [indiscernible] cheese specialists, customer specialists. People that are focused on the cashiers and the service areas packaging, specialists, especially on those 15 main stores, focus on customer service. This has been present at every store, just like Erica said, 100% of employees have been trained in our program. We have redefined that training program. Every employee, 16,000 employees, took their training in 2023. So we have improved customer service and buying experience. The NPS has improved accordingly 25% increase in this last period, starting Q4 last year up to today. Customer service has to do with a better buying experience to the flow of the purchase. We've done work to change the store layout to provide less friction in that buying experience. That was key. 82% of stores have been changed in their layout. So they can provide a better buying experience. Category management, that was just incredible. We reviewed 1,400 plans, better turnover, better availability, reducing stock-outs in 3 points. Sales are up by 4.5% on same-store sales when compared to those stores that haven't been through that refurbishment, that renovation, they'll be submitted to that renovation in early 2024. On to e-commerce now. It has become more and more important. We are at 13% of total sales in November, which is a record high. E-commerce is now poor in Pão de Açúcar's value proposition. We have 400 new employees. Our DC operation is shut down. So e-commerce is now handled at every store, 100% shipping from store. So 400 employees dedicated to e-commerce, improving our service level and at the same time, reducing costs. The migration helped us save in storage and freight costs as well. The share of perishables, a very important key, fresh within the store, but fresh in the digital channel, a 5% -- a 5-point growth starting in second half of 2022 from 30% to 35% there. This is an indication of trust on the part of our consumers. And of course, that gives us frequency and recurrence in that type of sale. Fresh and once again, I focus on perishables, a very key category to Pão de Açúcar, 49.2% stake we want to reach 53% just like Joaquim said. A bakery is also something that will make a difference. Rustic Bakery, 200 tons of rustic bakery. We have more ready-to-eat assortments, ready to go assortments. We're now implementing self-service in these stores. Our ambition, just like I was talking to [indiscernible] yesterday. We want to reach 90 stores that can support that kind of service. Sushi, we are the #1 seller of Sushi, over 1.6 million units sold by early November. And finally, investments for both fruits and vegetables that are processed. That has brought in substantial growth at every category in perishables, butchers, bakery [indiscernible].

The experience within the stores also depends on the exclusive brands. Exclusive brands that are a source to set ourself the side, increase loyalty and be more innovative. We have been through a rebranding packaging that is more in accordance with the looks of GPA and of course, a share of 23% of sales at Pão de Açúcar, the credit card doubtlessly offers additional discounts for the Qualitá products, and this helps us to enhance the price perception increasing competitiveness. I would like to show you a short video that speaks about perception, we want to convey our best initiatives. But in the final account, what is important is what the customer has perceived based on what we implement day after day. [Presentation]

Very well. These are testimonies of customer. In the first testimony, the improvement of layout and improvement of corridors, better visibility and the second customer speaking about how we spoiled them, something exclusive we have with our [indiscernible] customers. In this case, an extremely satisfied customer who is a black customer and who took part in a show. We also have other exclusive experiences in 2023, participating in the Formula 1 awards, a visit to the vineyards in Argentina, normally, we close the vineyards to outside business. And well, these are unique, exclusive experiences, and this is the type of experience we would like to offer in our stores day after day. Very well. Let's speak about the Extra market, our mainstream banner, with the mission of being the best neighbor in the neighborhood and the pillars of the extra market, there are 3, when it comes to the work front. First, savings, a format that appears very much the savings. The competitiveness of the market allows us to have ever more customized offers our own brand as the great protagonism of this format with a share of 27% of sales. And it's a protagonism not only in price image, but also in product quality, perishable as well, with a complete focus on quality and finally, relationship through the very best customer service and agility. In 2023 for the extra markets, this became a focus to enhance the in-store experience. And it began that journey for the strengthening of the brand. And we're going to see all of the fronts that are connected to these two main initiatives. First of all, the strengthening of the brand. We worked with the conversion of the 28 stores [indiscernible]. And we wanted to have a single value proposition. This has brought about efficiency gain, more unified offers, more unified commercial dynamics, a reduction of breakage in 14%, an enhancement in the assortment of perishables [indiscernible] had perishable for a direct delivery. Now we are following this, but we have gained efficiency in terms of assortment and the BGC that has gained in terms of assortment by bringing in all of the exclusive brands that the extra market already had all services in 2023, we had the implementation of this. We trained 100% of our employees that we have in GPA. This, of course, also specs over to the extra markets. We trained more than 11,000 people besides that technical training for butchers, for bakers and others. And readjusting the number of employees per service having employees to enhance the service and the experience, all of this, of course, linked to productivity. And with this, throughout 2023, the extra markets grew significantly in terms of NPS, the growth was 35.9 points in NPS, the result of this new positioning and a focus on services in general. I'm going to describe some initiatives that work for both formats Pão de Açúcar and the Extra market by obtaining a synergy processes and investments in technology. Now, the first point that is important is self check out 100% of the stores are equipped with self-checkout or they will be in 2024, and 75% of the extra stores in 2024. This is extremely important for efficiency and productivity in general. Now this investment has allowed us to have an 8% reduction in terms of the lines in front of the cash and it has a 20% penetration in our ticket, a reduction of expenses, both Mercado, Extra and Pão de Açúcar. We have stores that are similar in terms of structure, and we have created structures. And within these structures, by using the OPZ methodology, we make sure that all of the stores can attain this level of expenditure. This was done in the two banners throughout 2023, allowing us to reduce our operating expenses. Now internalization and polyvalency, a very important point, especially on Pão de Açúcar. The work here was to bring in how all of the services linked to the [indiscernible], which used to be outsourced. We have brought all of these people in. We have trained them. And we now observe an enhancement in the quality of what we deliver and of course, better engagement of all the employees working in that area. Additionally, by bringing everybody in, we had an improvement of 30 bps in the store expenses. When it comes to breakage, we had enormous work that was ongoing. We implemented a mark down tool that is part of all of the formats Pão de Açúcar, Proximity, Extra, Mercado and others. We have reduced the figures of breakage by 0.4 significant result. For 2024 for the extra markets, this will be a year of implementation. They will benefit from the work done in category management upon their [indiscernible] and we are going to focus on category management on the digital part and, of course, continue our focus on the perishables for Pão de Açúcar 2024 will be a year to consolidate all of the initiatives that were put in place in 2023. We're convinced that we are on the right -- that we will obtain our vision, of course, of being the best premium supermarket in the Brazilian retail market, a short story, if you allow me. The conviction -- well, this conviction arises and it's not us. It comes from others. It's customers that tell us that every day. I don't know if you know the neighborhood of [indiscernible], we have a store in what is called [indiscernible] back to back with a competitor that is in the same premium format. This store, well, this other store has better parking than we do, but our story is simply sell twofold. Why? Because of the acceptance of our customers that is much broader. We're convinced therefore that we are on the right path. We're going towards that ambition of being the best premium supermarket in Brazil. Thank you very much for your attention. We're now going to have a 20-minute pause, perhaps 15 minutes for coffee break. Thank you very much for your attention. [Break]

All right. I think we can get back to the presentations. Okay. Let's get back. This time, I'm going to wear my own hat as the person in charge of proximity and specialty business units. Let me focus on proximity first. So here are our competitive advantages when compared to the proximity market in Brazil. Okay. The value proposition and it's consistent with our customers' expectations, consistent with the social demographic change we witnessed in the country with smaller and smaller families and also consistent with the real estate development in urban centers such as Sao Paulo. In the past 12 months, over 72,000 homes or households have been sold over $4 billion in revenue. But the interesting fact is that out of these 72,000 apartments, over 70% of those is smaller than 45 square meters. People that do not have room to store the things, they buy. They don't have hunting space. They have to address all these issues within walking distance. That's why our proximity proposal is so advantageous. Better assortment, pressure options, perishables being a source for loyalty. It's faster so that we can have that self-checkout. And in the end, a better service. Assortment is another advantage for that proximity format, 45 -- between 4,500 and 6,000 PLUs, some stores can reach 7,500 in the fresh Pão de Açúcar. This additional 1,500 are 100% perishables. Perishables as a differential as a driver for Loyalty. 46% of these baskets contain perishable products. Exclusive brands, just like any of the other formats out of those 6,000 PLUs 1,100 are exclusive [indiscernible], Qualitá [indiscernible]. They account for 20% of sales and fresher products, healthier products, organic products, FLV and bakeries, FLV is in 19% of purchases. Bakeries, 21%. If you were to take the top 10 in Proximity, top 10 sellers. The best seller is the bun. The bread, the perfect bread, every day. They rank first close to a beer can. I'm not going to mention any brands. And then bananas, top 5 sellers or best sellers in perishables. So that helps us stand out and come up with a good value proposition. On to the next pillar, pillar #4, expansion. We've opened 100 stores, 83 [indiscernible], 14 mini, and 3 fresh in the past 2 years alone. And that makes us proud because the open -- or the stores we opened in 2022, the 44 we did became mature after 6 to 7 months. Out of those 44, 30 were opened between November and December. So they're now celebrating their first anniversary. Speed through self-checkout, 67% of stores in [indiscernible] have that self-checkout facility. We have better NPS, reducing waiting lines, more fluidity, but more efficiency and productivity and, in the end, better service. better customer service, just like I said, for Pão de Açúcar and Extra, we trained and recycled all our employees. The 3,900 of Proximity stores went through the training program. The program is called Agile, unlike that program of supermarkets. Carrying nice and focused on targets, all employees went through that training program in 2023. And we are very proud of women in leadership positions. That's a strategic objective to have more women in Proximity stores, and that's the reality. Out of the 3,900 employees, 60% are women. 56% of store leaders, store managers and department heads are women. So that makes us very proud in Proximity. And Erica mentioned it, our succession program. Our expansion puts us with the challenge of developing new leaders for these new stores. In 2023, we promoted 332 people to take over managing positions either as a manager, a store manager or a section head. The advantages of this format. Let me talk about expansion again. It is aligned with what we have budgeted. . We are moving ahead in the 2024 pipeline. And I would like to give you 2 important takeaway messages. Number one, the proximity business has an EBITDA above what we announced for Q3 GPA. So we are contributing to the company's profitability. Once again, that justifies our our strategy to expand the number of stores in this category. In 2022, we had an additional 120 bps when compared to the numbers of the company. It's assertive, profitable and contributing participation. In order to do so, -- we do have a market intelligence out there. We've learned a lot from the stores we've already opened. We have 40 separate assessment criteria density, verticalization, income, households, number of households, competition, we come out with a store out of these indicators, and we have that sales potential. We have a committee that meets every Tuesday with Rafael, Marcelo Pimentel, we validate and approve all these activities. Again, a very successful project, and we keep on updating it and improving it with new data. Let me just say that we're about to sign a partnership with a consulting company. They work with P&D or research and development, rather R&D. So their -- this partnership aims at improving our feasibility process so that we can be more and more successful in choosing points of sale. Let me talk about the connection to the needs in each district or in each neighborhood. We have 3 brands and our expansion focus is in the minute format store. Out of the 4 stores, I'd like to explain why we chose that format. The [indiscernible] stores out to 300 square meters -- 350 square meters. And the value proposition of Pão de Açúcar that starts out with 900 square meters. Between -- in that gap, there are no proposals. And there are new areas where we could start and where our competition is already present. So the first store was opened in 2021. We tested assortment services. We opened a second store in early 2022 at [indiscernible] somewhat larger store, a different setup. It's been very, very successful, very, very profitable. So that led us to open yet two other stores. One of them in July and the other in September. Both stores are now reaching sales levels that we had estimated for that 12-month period. So again, a huge success [indiscernible] Fresh will be one of the priority formats for the expansion effort in 2024. Again, 3 brands to be opened in different areas to supply the needs of different districts, and we have been successful in that effort. Let me now address the strategy as to how we choose neighborhoods, [indiscernible] we have 14 stores. We are about to open 3 new stores next year by [indiscernible]. We already have 21 stores. we have 10 new scheduled for next year. One store is to be opened next week at [indiscernible] And Vila Mariana, we have 20 stores. And we're going to have 5 more next year. So we want to occupy these districts. We'll have 40% -- 50% market share, not only with Proximity, but with supplementary offerings within the brands, Pão de Açúcar, Extra, they are also present in these neighborhoods. All right. Everything we've done in 2023 in terms of service, supply chain, Ruy and his team helped us reduce stockouts. It's below 4% now. Just a year ago, we're at 8%. So it's a major improvement. NPS improvements in terms of product availability is outstanding. So that helped us bring NPS up by 17%, even since Marcelo took office in Q2 of last year. And [indiscernible] format benefits from all the other tools implemented to Pão de Açúcar, which are identifying customers, which is very key to customized offerings. 61% of our customers have been identified. And digital. Again, a major tool to promote additional sales in early last year. We started out at below 2% in Proximity. Today, it is above 3%. So a major improvement. Of course, we have the 3P [indiscernible], et cetera. But as far as 1P is concerned, as a store, I think we can -- we stand out by being quick so that flash rather than Express that would be delivering up to 2 hours, flash deliveries between 45 and 60 minutes, 10 items, maximum. So this is the major lever to boost proximity sales. That will be our focus in 1P next year. But let me just say that in digital, the fresh format is up to -- it's north of 20% with a share of perishables. They're very similar to that of Pão de Açúcar. So our ambition in digital, we are above 3%. Our goal in 2024 by using that flash delivery, our goal is to reach to 5% to 6% participation there. In summary, as far as proximity goes. So this is a winning format, and we are convinced the best proximity format in Brazilian retail is ours. It's a successful expansion model, successful in terms of assortment, In terms of customer service, and we do believe we are heading the right direction. Let me give you an example in that sense. I don't know whether you've been to [indiscernible] of course, you have been there. We have a store in [indiscernible] Street and there are two other competitors there. One competitor left that street because the value proposition did meet the demands of that neighborhood. And we believe that [indiscernible] format would be perfect for that location. So we got a point of sale from a competitor that shut down. So it's next door with another competitor with the different value proposition. So our store sells twice as much. And again, it's up to the customers, it's not us. Our store sells twice as much. So our value position actually provides a complete basket of products, way different from the other formats that are more convenience focused. So we're heading in the right direction. So 2024 is looking bright. I'll turn over to [indiscernible], who will be talking about digital. Quality and innovation head at GPA. I'm representing [indiscernible] that encompasses customer service analytics and digital sales and operation. Of all, we should take a look at technology and e-commerce. Well, this is something that goes through all business units, all banners. And this is one of our great achievements. It's part of all of our business models, and we have designed our digital transformation model based on 5 pillars. First of all, that search to grow our channels with profitability, an enormous challenge in the digital world. We have gone from the negative to positive results mentioned by Marcelo, and we are a leader, of course. We are a leader in the food market. Working alongside Pillar 3 that also refers to excellence in all of our channels. We work with strategic partnerships. We're working with iFood, [indiscernible] able to enter other regions. We're not alone in this very important journey. When we look at our store we consider digital, not only as digital stores, it goes throughout the company, the brick-and-mortar store, the digital part and it enables us to work with better pricing, customer intelligence -- and we should never forget innovation, which is part of the Pão de Açúcar DNA that focuses on being practical on the pillars that we have to bring in better results. We spoke a great deal about profitability of our digital sales. But I would like to draw your attention to our growth levers by bringing in chains, we were able to enhance the ultra convenience delivery. It was 15% of the digital results. And we cancel lunchtime if the customers needed something urgently or during barbecues that couldn't be covered with the next day delivery. We use this as a growth lever along with the levers we have of the 3 platforms, and the partnership that we have with Mercado Libre, where we do not have brick-and-mortar stores, but we work through this distribution. All of this increases sales without forgetting profitability. Now first, we have the fresh and perishable a differential to bring in greater recurrence. They set us aside, offer better profitability. We also closed down our distribution channels. We have reduced the delivery overlap. All of our stores can now work with hiccups, but several of our stores are delivering based on different modalities, based on analytics, on data science. And this, of course, brings us optimization and better service levels. We have done away with James with the customers, but we still have that rapid delivery, allowing for a cost reduction and better services, better technology costs and better innovation and, of course, better final cost for the customers. Now with the CDP, we have the Adobe platform, and we have begun to apply intelligence to analytics and segmentation. And this has helped us increase revenue per impact. Now to speak about the experience, which is also another lever, there's a great deal in the Pão de Açúcar ecosystem that is positive for the customer. We have James, we have Stix, we have Livelo, which is another club. We have the point from the invoice, the cashback. We used to have the James up for rapid deliveries. But this was very fragmented and did not offer that value perception, instead of adding more things to harmonize that experience in a single app, with the customer at the center based on 4 pillars, what the strategy we resorted to that is used in the store to activate discounts. It is also used for digital purchases. We have a part that is focused on loyalty, taking advantage of that ecosystem that we have. So checkout after sales, I can have 50 perfect journeys, but 1 journey that does not go well, and we have to resolve the problem, and this is when we see that through relationship, we can increase recurrent and loyalty, simply because of the trust that exists. And we shouldn't forget the youth within the stores or customers that visit our stores physically. We have a higher number of clients using the app, not necessarily for their purchases. Now the last 2 topics that you see there began in 2023 and will be our focus for '24 to conclude the app. When we look at the results, in 2022, we had an increase in invoices. The customers assessing us like they do for Amazon, for iFood and others in terms of experience. We increased the number of monthly users, aggressively increased the downloads per month, we're bringing in ever more people to the app. And apps went from 62% of digital sales, we have now reached 80% done through the app, which is a connection hub with the customer. What did we do this when we speak about a purchasing experience? Of course, we have the loyalty. We have the discounts, but we have simplified the purchasing journey and changed the way we do things. Instead of working with projects, we work with an incremental project, facing ourselves on the customer feedback. We invested in 2023, 50% of the investments and the apps that we have had the prior year with better results. So we're breaking down delivery, carrying out tests, point-to-point deliveries and also investing heavily to be able to invest in other areas as well. To speak about loyalty, we're beginning with the gaming for the MICE customers, the black customers. What do we have to do to change their level? We have these points in the card, cashback, discounts and much more. And we see that there is a better value, greater value in that relationship with Pão de Açúcar, something that become accrued through time. And the perception of course, it leads to greater loyalty and is now based on a single experience. So the checkout that we began, we used to be focused on the phone. There were long waiting periods. We have now inaugurated this process through the app. And this year, this will become fully automated. Besides offering the customer a better experience, greater speed and working with better services, we have the word that is so important. Confidence. You can work this way with Pão de Açúcar. If anything happens, we will resolve it, and the journey will continue to be positive. In terms of in-store experience, we have activated all of the discounts. We have discounts for the black customer, the MICE customer, discounts through the card, gear promotion, Livelo points at the cashier. We have codes, explanations on how this works at the checkout and full explanations to guide the customer. We're now beginning to carry out tests with product information, always with the customer and the app within the store. When you do go to the store, we spoke about the self-checkout, which enhances productivity. And we focused on waiting lines and payment, which was a pain mentioned by the customers. What is more important is productivity and customer satisfaction. We ensure that our staff in the store can work with face-to-face services, offering consultancy, instead of resolving these problems that caused attrition or friction. Some customers already prefer this. We began with the mobile cash. It seems to be a pin machine, but it is a full cash. It has the scanner. It can work with Livelo and MICE customer, especially at peak moments. We work with the mobile checkout. We work with our operators resolving problems in waiting lines and acting at the special moment. Our [indiscernible] bakery service, you don't want to ask anybody to offer you service. You make an order, the order go straight to the kitchen. In a few moments, you will receive the product, a much more fluid process, and you can go through the checkout and the orders at the restaurants as we do have restaurants in several of our stores. You get your food, you go to pay, you end up in a waiting line. This is excellent food. It would be a waste to have your food become cold. So we're taking advantage of the experience of those who do this well, and we have incorporated it. To speak about innovation, we're speaking about AI and to make sense for us, to buy food is different from purchasing a television or a smartphone. You can go into Google and find your product without any problem. But we're speaking of 130, 140 items here, for barbecues, pairing with the right wine. So if you don't know about products and quantities, you have to go into YouTube and other channels. What we're launching at present and we have a prototype that is ready for the launch in December. We're using AI to say, "I want to have a barbecue for 6 people." I receive a suggested list of what I need, the coal, the bread, the meat. For people who do not eat meat, there is a revision. The price can be recalculated. All of these products are added to the cart. We're testing this in total in the store. This will begin in December. In the first quarter, it will be part of the app. Now in terms of wine experts, our consumers love sommeliers, but they're not always available, but we can recommend the type of wine, the amount of wine that will vary from one consumer to the other. They recommend pairing, amount, price ranges and we're going to begin that test and watch the consumers' reaction in brick-and-mortar stores and through the app. We can connect this with WhatsApp, with other channels, with our relationship with customers, annexes to retail media, obtain recommendations from partnerships and work with successful partnerships. Therefore, the takeaway here is that digital is not only e-commerce, it is part of brick-and-mortar stores, digital stores and the core of the company. Secondly, we're going to see leadership without leaving aside our desire for profitability. We're going to use business models that will bring profitability. And we're going to pursue information to resolve consumers' problems and scale this up. Thank you very much.

Good morning, everybody. Thank you so much for having joined us today. Around March, I began to hold some conversations with Marcelo about joining the company after spending 11 years living in France, to become the GPA CFO. From a personnel viewpoint, this was a rather complex decision. My family used to living abroad, and it truly was not a simple decision to make. Marcelo and I converse. Marcelo shared with me what he was doing, what he was implementing in terms of the company, and he spoke about his vision for the future of the company. These conversations, of course, made my decision easier, simpler. With the rest of the team, Marcelo has already put in place operating initiatives. He began transforming GPA very positively. But we knew that the company still faced an enormous challenge regarding its capital structure. For those who are not aware of this, I was in the part of the Board of the GPA. I was aware of the challenges it faced, but was also very aware of the potential the company had. And at that point, I sat down to make a decision. And I knew that once the capital structure problem of the company had been resolved, the resumption would be much faster and the future would be brilliant. I have worked in the financial market for more than 20 years. I went through credit, M&A, the capital market, along with the experience I had with the retail market. And because of this, I was in a privileged situation and could contribute very constructively to this new plan and vision that Marcelo had set forth. As you can see, I decided to take on this challenge. Operating and financial highlights for the company. And they show very clearly the strides that we have made and the resumption that the company has undergone in the last quarter. We begin with gross sales. I think the graph itself is explanatory. We have had a significant advance in sales. This began in the third quarter of 2022. Quickening the space beginning in the fourth quarter of '22. As of that date, our year-on-year sales were quite strong, with levels greater than 10%. In some cases, with increases of more than 10%. In the third quarter of '23, the sales represented a 10% increase. When we think about gross sales for the last 12 months, we can see the advance in a period of 12 months, our growth was 3.1% quarter-on-quarter, as an average since the fourth quarter of '22 until the third quarter of this year, representing an annual growth of 13%, which is, of course, very expressive. Same-store sales, very strong sales once again and a more accentuated resumption beginning in the fourth quarter of '22. [Foreign Language]

The question is about store productivity. After the initiatives that will be implemented now, especially in terms of revision, breakage and assortment, how has this impacted the competitive environment in the markets where you are?

I will begin very quickly and then give the floor to Joaquim. Now we have a very serious program for productivity. Most of our assortment in the gondola wouldn't withstand 1 day of sales. It didn't mean that we didn't have the product. The product was not on the shelves. And when we began with category management, we saw that we had an excess of SKU that did not have the right turnover. We would have SKUs with more than 100, 200 days. We also had an excess of supply that didn't position us very high in the market. At the beginning, one of the categories that drew our attention was that of olive oil or oil in general. We had 130 SKUs, while the market as a whole worked with 70. Well, we couldn't continue to be a leader by carrying all of this inventory. Now it is important for the customer because on the shelves, we put products that are truly relevant for them, and this helps us in terms of productivity and we reduced the products that are called [indiscernible] line, products that fell after 1 day of being on the shelf. We then replenish the shelf and that product will withstand 1 day of sales. Now while we reduced inventory, we have to make a readjustment in all of our supply chains and work with greater forecastability with the suppliers. We are in a process of transition, moving away from the previous selling model to a new sellout model, which is what is important to offer to the consumer what they truly purchase. And based on that to negotiate with the industry. Joaquim or others, perhaps you would like to add to this answer very quickly?

As I mentioned in the Pão de Açúcar presentation, this category management was based on programs, an increase in availability of the product. And this has brought about a gain of 8% on the Pão de Açúcar banner. And a gain of productivity that helps us to also improve our customer service. And during the year 2024, of course, this will also be captured in the extra markets where we will roll out this category management. We will also do this in the proximity stores, Minuto. What we have to do is work with all of this in the regional stores, which is very important. There's another issue which is the competitive environment. We analyzed all of the markets that we're in to detect opportunities in the region outside of Sao Paulo in the Hinterland, outside of the capital, places like Rio de Janeiro the Center, West and North. We're working to reinforce those markets with commercial focus that will bring all of these stores into a new vision to guarantee greater competitiveness. This has helped us increase sales. It has helped us to increase the speed vis-a-vis what was happening in Sao Paulo. Even though Sao Paulo was growing over and beyond inflation, but the regional markets have aided and embedded us in the local competitive market. Nowadays, for example, we're seeking the very best that we have in fruit, in the market of Sao Paulo through imports, and we're distributing these products in these regional or local markets. And this enables us to reach very remote region from Sao Paulo.

In your presentation, Joaquim, you spoke about several indicators, KPIs. We have 2 questions here. Which are the gains that we still need to capture in these KPIs that have improved considerably? And secondly, benefit plus margin, or are we going to consider this as being a growth in sales? Well, I'm anxious to hear your answer here.

While we had some evident gains in the Pão de Açúcar banner, but also the proximity stores and others, we are going to have additional gains in these banners. When we work with that full category management, this is not something static. It is something organic and quarter-on-quarter. It goes through new processes where we detect new opportunities to enhance productivity further. Regarding profitability, yes, that possibility exists because we're speaking of significant movements of inventory categories and 700 different points of sales. So it's something constant and recurrent. So we will have an increase in sales while we have better visibility of the product. And a good category management will also show the consumer a pyramid of assortment that formerly could not be seen. So we have gains in sales and increases in profitability going forward.

My name is Rui Cunha, and I can speak more broadly about breakage or stock out. We're all very good in terms of calculations. When we speak about 5.8% of breakage, this is an average. We have several outliers, regions where it is more difficult to maintain stores, where this is more difficult to maintain. And some categories that are more difficult than others. In Sao Paulo, for example, 3 weeks ago, the demand for ice cream simply exploded. And, of course, our breakage level did too. Our customer in premium formats like Pão de Açúcar and Minuto has much higher expectations compared to the average retail customer, and they don't want to go to the store and not find the product they want. Now we have had these problems, but they are more marginal than they were last year. All of the projects carried out in Pão de Açúcar spread into other formats, which are the results we expect in sales and profitability, once we implement these projects in the extra markets. We have strategically chosen this first year to focus on Pão de Açúcar. It's our premium banner. During the presentation, you have seen that this holds true for Pão de Açúcar supermarket and Minuto stores, the proximity stores. It has been important because it is our main brand. And throughout the year, this is the brand that has gotten lost and we needed to redeem, not only the brand but the customers. We have had a great deal of learning. And presently, we have more know-how in terms of technical and systemic knowledge to replicate the same exercise for the mainstream banners. And this is what we will do in 2024. During our meetings, you asked about the relevance of the extra markets and the relevance of that sales channel to a CB bracket consumer. It's very important for us. It's where the GPA brand doesn't fit in and where the Extra brand is extremely valuable. It is connected with that customer that we have access to. We have brand power, and we can regain it once again. What will happen in 2024 is that the contribution margin of the Extra brand, because of category management optimization, the clustering of stores, and the focus on perishables, will practically double the contribution margin in 2024. The challenges that we had with the brand was making it profitable. The question is how to operate a mainstream brand properly, ensuring that it will be profitable and offer contribution. And we have been able to do that in 2023. The profitability of the Extra banner, although below GPA, is historically higher than it used to be. Growth will continue in 2024 through these strategies. To speak about market share. We showed you the strength of the loyalty program that we have and the growth that we have achieved.

The doubt here refers to the market share movement. If we can already identify how many of the customers that we lost in the past, we have been able to recover and which are the opportunities going forward?

No, I don't believe that we have concluded this work. In the graph shown by Rafael, he showed -- we haven't fully recovered that potential that the stores have, Pão de Açúcar and Extra markets. Now through the expansion and through a unique model, Proximity has guaranteed the market share, but Extra markets and Pão de Açúcar have not. This is very positive for us. Now that challenge of a continuous market share will make us seek out older increases. We have an enormous potential. Of course, the competition is always extremely active, but the work that we are doing, the consistency that we are delivering through category management, through our loyalty plan and all of the drivers that we have used to bring in those customers into the ecosystem. And when I say ecosystem, we have seen that we have customers that are multichannel customers, and this has undergone significant growth. The solution that we bring through the brick-and-mortar stores, the supermarket stores and Proximity stores have been complementary offering solutions to the customer that did not exist previously. So the customer will increase the share of wallet within the company, where all of the solutions can be ground. The purchase digitally is important. The replenishment purchase in Proximity stores is very important. The more complex purchases at supermarket stores are also important. We have growth of 70% to 80% of share of wallet of customers within this ecosystem, and this will enable us to recover volumes.

Now when we're speaking about market share gains, a question that was partially answered and refers to the customer journey in-store, which are the customers where we could find greater opportunity? And the question refers specifically to the grocery part. A customer that doesn't concentrate all the grocery purchases with us -- with GPA.

A very clear perception in that question. In the evaluation we carried out, we verified this potential, the movement of consumers between points of sale. And we go back to the situation we had before the pandemic. Well before the pandemic, on average, the consumer would visit 8 points of sales to complete the purchase of the basket. Now with the growth of cash and carry, this was a driver for the growth of the grocery section. Now in my presentation, I said that the category management has to focus on the consumer's basket, not to have greater assortment or better inventory. We have to look at the entire chain. When we began to work looking at the grocery basket, we saw where our greatest opportunities lay. Well, consumers tend to look for more economical channels. We work on this with greater intelligence and this was where we were able to change the situation. The JVPs allowed us to enhance the relevance of this. When we speak about market share per category, the greatest increases in market share in the last quarters are those categories where consumers would look this for in supermarkets that were closer to the categories such as cleaning products, cosmetics. Now consumer has that ease of buying all of these products within our stores.

I'm going to move forward in a topic connected to profitability. The first point here refers to the guidance for 2024. And to begin speaking about which margin we believe we will have in 2024 based on what was presented today.

I don't know whether I understood that.

I think you would like to better understand how we're going to get to the guidance. Is that right?

Starting from the -- what will happen?

He wants another guidance. Okay. We're going to double our goal. I've just showed you a couple of things, and out of those initiatives and the alternatives we have available for next year, and that includes promotional efficiency -- keep working on a breakage to continue working on the zero-based budget. We believe we can go beyond. When compared about the guidance of our margin -- but that would be the guidance of our guidance. We don't want to keep the company between 8% and 9%, which is our guidance. We want to optimize the operation as much as we can. Today, we are at a suboptimal level as far as margins are concerned. The impact of the pandemic was positive when you take into account inflation rates. Now there was deflation in food, that put a lot of pressure on margins. So going back to a more business as usual price levels that may bring positive impacts down the road to our own margins into retail margins overall. So there are many tools available out there. We're now introducing many promising projects for next year, but then there's deflation, something we cannot control. If there is an inflection point, if prices pick up again, we believe it's controlled, that again will give positive impact beyond those 8%, 9% that we committed. That's all I can say. I don't want to get into trouble that I would take as far as profitability is concerned.

I'm going to ask you a question. I'm sure it was going to be asked, especially when we analyze recent changes. What about the rumors about a company becoming a corporation or Casino leaving Latin America? Has it been confirmed? Or is this just a speculation?

I'll try to be as objective as possible. What happened yesterday, speculation. There's nothing of the sort that I can confirm. There was a short movement yesterday that impacted share prices, but there's no relation whatsoever with any decision. Let me be very clear, which is public information. In June, Casino conducting its own restructuring processing, they purchased a group in France, they announced they are no longer interested in assets in Latin America, and they went even further. They left Assai. They are leaving [indiscernible], and we have been monitoring the move, and they will stay with Pão de Açúcar. Now we are repurchasing Cnova. The European asset will remain there in Europe, the Brazilian asset remains. When, how, this is a question that should be addressed to them. We have no say in the matter. But we remain focused on the Brazilian business. It will become 100% Brazilian company. We are 2/3 along the way, the turnaround process, just like Rafael said, we have been focusing on restructuring our capital. So this business can become profitable once again. That's all I had to say about that change. Anything else is speculation.

Let me summarize a couple of questions about capital structure and leverage. I think I'll be able to cover 100% of the questions that were submitted to us. What is your take on the net debt in late 2023, in '24? What's your take on the conclusion of sales of assets, [indiscernible], Cnova and maybe other assets that you may be considering for sale.

I have to limit to our guidance. That's EBITDA margin for 2024. Again, between 8% and 9% post IFRS 16. As to the EBITDA increase, if we were to assume we're going to reach the guidance, that's our commitment today. With the natural revenue growth, we will have a substantial increase in our EBITDA financial mass. That will help us deleverage the company. As to selling assets, just like I said during my presentation, we've already delivered BRL 620 million of cashing, selling the store Barra, selling another pending asset. We have recently announced selling our stake in Cnova, an additional BRL 10 million of the last payment, part of that transaction has been finalized. And the main instrument of our deleverage plan is underway, which is selling our 3.3% stake in [indiscernible]. I can't give you further -- any further detail. This is a process that is being conducted by a third party. It's a buyer that comes up with an offer. The information we have is that the process is following its due course. Maybe a little delay here and there, but there are no indications that this transaction won't be concluded. When we talk about leverage, about late last year, next year's end, I cannot mention that. I cannot give any guidance. If everything works out according to plan, mathematically, automatically, you can have that ballpark figure of the numbers in late '23 and some projections for 2024. Maybe you could have an idea of that estimate of leverage. On top of what we have announced already, there are 2 other major assets that are for sale. One of them is this building, where we are, the company's headquarters and the surrounding area, this is land we own. These are our own buildings. I cannot give you any date, but it's a process that is currently underway. It started out a couple of months ago. It hasn't been stopped, but it was delayed, due to some permit issues with the local government, real estate issues that you are all familiar with. These are complex matters at times. But these issues have all been addressed. There are no hurdles along the way. We're looking for a buyer. There are proposals being submitted and that conclusion may be concluded in the following months. And as to the last piece of asset that we could sell, that is gas stations, 66 in total, BRL 1.5 billion, that's total sales a year. EBITDA is about BRL 30 million a year. And we're selling those gas stations. It's an operational asset. It's not a core business. The company used that strategy to bring in flow to hypermarkets through gas stations and vice versa. We no longer have hypermarkets. We can benefit a lot more by cashing in, to reduce our leverage and boost our investment capacity in our own core business. The main driver there is to expand our proximity stores. That is what I can tell you about that.

I think we've covered all answers that concludes the Q&A. I just would like to make a brief comment. You have a QR code on your badges. If you could please assess this conference. So if you could take a minute to answer that survey, we'd really appreciate it.

Well, once again, I would like to thank you all so very much. It's a privilege to have you for quite so long, a whole morning. Thank you for giving us the chance to give you our results and for being able to share our optimism. Thank you. Our commitment to the future is to remain loyal to our strategic pillars. I was just talking to some of you just out there. What really stands out in that transition phase, we're no longer making those swing motions to move away from our main goal. Our main focus is to serve customers, grow, boost sales, reconnect with customers, make our digital business become more and more relevant to keep on growing organically by opening stores in Brazil, and going back to being a profitable company that gives results. Everything based on a very strong and solid culture, in which people understand their roles and commitments, and they are truly engaged with the company's commitment. And that's how we conclude this event, that's our full commitment of the entire team. We are here representing over 40,000 employees, people that are committed to delivering on that turnaround results, and we're already dreaming about the meeting in 2024. We'll be celebrating this huge achievement of this major turnaround journey. Pão de Açúcar will become, once again, the premium supermarket in Brazil. Thank you all very much.