Grupo Casas Bahia S.A. (BHIA3) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Via Varejo conference call to discuss the results for the third quarter of 2020. This call is being broadcast via Internet at our website, ri.viavarejo.com.br. The slide selection will be managed by you. The replay will be available after the call is finished. We would like to say that forward-looking statements made during this conference call regarding business perspectives, projections and operating and financial goals are based on the beliefs and assumptions of Via Varejo's management as well as on information currently available. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur. With us today, Mr. Roberto Fulcherberguer, CEO of the company; and Mr. Orivaldo Padilha, CFO and IR Officer. Now I turn the floor to Roberto.

Good afternoon, everyone. I hope you're all doing well. Thank you very much for being with us in this conference call and for being interested in our company. Once again, I would like to start this call by thanking the great team of Via Varejo for everything that they have done so far in just little over a year that we are head of the company. And in fact, we have turned, transformed this company. We have a strong team, a diverse, inclusive team powered by challenges and really in love by making our customers' dreams come true. I have to thank them. I would like to thank our millions of customers, whether the long-term customers or the ones that are just coming in. I would also like to thank over 450,000 investors and shareholders that are with us in this transformation journey. We are very happy about the results that we are going to bring to you today. They concretize everything that we are talking about every quarter to any one of the commitments that we have made so far. The good news for our team, which is powered by challenges, and our customers that want to be well served in an omnichannel system, and also for our shareholders' wish to see the shares going up, is that we still have many opportunities to go forward, to move forward till here. We are just in the beginning, and you will see the results we already have. Turning to Page 2 to start the presentation itself. We have reached all-time record for Via Varejo, BRL 10 billion in total GMV, a growth of 43% vis-à-vis the same quarter of last year. And with something very important: we did not let go profitability. We believe that it is possible to have sustainable growth with profitability. We had BRL 4 billion in the online GMV, and as I said, BRL 10 billion in total GMV. On Slide #3, looking at the highlights for the third quarter, we more than doubled our online share. It was 18.5% in the third quarter of '19. This quarter, we ended at 41% of share in that category. The stores are fully reopened now and they started -- they were fully reopened by the end of the period. Almost all of them opened. We have grown 12.8% in same-store sales. So we are comparing here open stores against opened stores. So we reverted completely the lockdown period, and we have excellent growth in our brick-and-mortar stores as well. So we grow in the online. We reopened the stores. We continue growing on the online, and we grow a lot in the brick-and-mortar stores as well. On the online, we have grown 219% in the total of the third quarter; in 1P, 294%, very robust growth here; and 83% of growth in our 3P, also very strong. The total GMV for stores, for brick-and-mortar stores, was BRL 6 billion and the online GMV, BRL 4 billion. I just have a comment here. GMV here, we are considering where the product is invoiced and, here, we do not have canceled sales. It is net of canceled sales. Canceled sales is not sale, and it's not GMV. So we remove all that effect, and we show life as it is. Now turning to Page 4, this still on the main highlights for this -- the third quarter of 2020. Well, Text Me on WhatsApp is something that we have created during the pandemic. It became a worldwide case and it's still greatly successful. It had a share of 16% of the third quarter of GMV and 19% in September, if we consider September alone here. And the excellent news here is that the Text Me On WhatsApp is being used in 1P and 3P, which is that advantage that we talked about. We have our over 20,000 sales reps also working with 3P. So you can see on 1P, we had 17% of sales in the third quarter, if we isolate September alone, 20%; in 3P 12% in the quarter, and in September alone, it goes up 1 point to 13%. It's important to say here that our sales rep, basically 90% of our sales reps already have a mobile device on their hands. So they can transaction the whole cycle of the sale via mobile device. If the payment is on a credit card, they can have -- they can receive the credit card on the shop floor. The consumer does not need to go to a cashier. And so everything is done electronically. So that is improving a lot the stores' flexibility. And it's going to encourage more and more an intensive use of our sales force to sell 1P online and 3P in our stores. Now turning to Page 5. And here, we talk about marketplace. We had a GMV of BRL 849 million, a growth of over 83% on top of last year. And several highlights here: shoes, books, fashion. But we also have that liquor, home, construction, toys, beauty, all of them are growing a lot. And we see our continued improvement plan there. We improved our sellers, there are over 8,000, and we have over 5 million SKUs. There is an evolution on top of the second quarter of 2020. We had and we still have the commitment of accelerating the onboarding. We have already improved it. We are able to have a much greater volume than what we had, but we will be in the ideal plan in the first quarter. That's when we are going to go into the real-time onboarding. We are already growing and evolving, and our great tech team decided that we could have other improvements with the onboarding. So we decided to develop that part of the platform in a more assertive fashion. And we thought that was a good movement, to delay it a little bit. And so for the first quarter, we'll have a real-time onboarding. And then -- and that's why we have a delay on bringing in sellers. We are going to analyze the sellers' quality, and we are going to bring in those sellers that make sense for Via Varejo's ecosystem and for our consumers. Now turning to the next page. We acquired I9XP. This is a developer specialized in e-commerce, over 120 developers that will dive into our developing stages. And so we will have drivers for marketplace, for logistics, and this is going to be another tech hub that we have in São Paulo. And it's -- we are in São Caetano, but this hub is in São Paulo. So we are taking a leap here. We will gain more speed in the development process for Via. Turning to Page 7. Here we have stricken a huge goal here. This is an important landmark so that everyone understands how we are looking at when we see Via Varejo. So when we talk about go beyond Via Varejo, that has to do what you see in this page. We associated ourselves to the largest innovation hub in Brazil. It's called Distrito. And by that, we intend to connect directly the greater start-up system. They already have 300 start-ups in their systems, but they map all of them throughout the country. Therefore, we are able to have an accelerated curatorship to understand which start-ups can accelerate things that will take us beyond retail. I'll give you an example. We bought ASAP Log in the beginning of the year in a little over 6 months, and I'll talk more about that. But this is already the first carrier for last-mile for Via Varejo. So we accelerated 1.5 years of development. And I think that accelerating Via's development with that type of partnership, we are also accelerating Brazil's development. We help the entrepreneurs that are putting together their start-ups, having their ideas. So why not? They could come back to us also and accelerate Via. Maybe in the future, we might have some unicorns in Via Varejo's ecosystem. Turning to Page 8 and talking about logistics. I think it's important here to give you some color. We -- logistics is being discussed in the market a lot lately. And I think it's important to bring you some figures. We talk -- we usually say that we have logistics advantages, and we should mention which advantages these are. Today, we have 27 DCs in Via Varejo, 1,150,000 square meters of DCs, very well positioned throughout the country. In addition to that, we have 500 stores catering to everyone else as mini hubs. And so we have a great extension of that as well. So we have 100,000 meters. And the last mile of our customers, we have 100,000 miles -- no, 100,000 meters in the last mile. But we have 1,065 stores with 1.4 million square meters of area -- of store area that actually work as a collection point for consumers. So if you do the math, we have 1.5 million square meters for the inventory area, for stocking area and the last mile for consumers. So we have logistics centers that are doing the logistics connections with these stores. And we have all of these stores with this huge amount of square meters in the last mile. Therefore, we have an unprecedented benefit, and that's where we are investing our tech capacity so that we can accelerate everything. The great news is that all that we have is already in our ecosystem. It's already in our SG&A, it's already discounted on our margin, everything that you see in the upper line. So I do not need to have additional costs to deliver the best logistics in the country. We are going to add the tech layers to discuss deliveries in terms of hours throughout the country. Going into the details here. We have 500 mini hubs. Every time that we deliver using a mini hub, we decrease in 50% of the cost of the last mile when we compare that to other options that we have. The ASAP Log is already connected to these 500 mini hubs and fully connected to Via Varejo. It is already the biggest last mile carrier in the company. And also it provides logistics to the open sea because it connects to what we want for our logistics. And we want to embrace both our sellers as well as other providers that are in the market. 3P sellers, they will have the same cost and delivery condition as Via Varejo. We already have 200 sellers that are being tested. And over the first quarter, we will be scaling our logistics also to cater to our 3P. The fulfillment pilot started in September of 2020. It's running very well. We have an industry on that -- going on, on that pilot, and we are doing well. And over next year, we will have news for you. In terms of deliveries, the Click & Collect reached 34% of the deliveries. Now in September, with all the stores already reopened, a little bit of what I said before. From 40% to 50% of all deliveries volume that happens in Via Varejo already is going through the stores, whether the store is being used as a mini hub of the last mile or the store is a point for the Click & Collect. We just opened our 27th distribution center in Pará with 24,000 square meters. We are expanding to Para now in a few days. By the end of the year, we will have 11 stores there, and we already have a DC of 24,000 meters, because we think it's going to be small very soon, and we have the possibility to expand it already. Turning to the next page. For the first time, we are here disclosing the figures for banQi. banQi is not even priced in the models for Via Varejo. We concluded this acquisition in May. We inserted it in our systems. We changed the format and the colors of the branches so that they could really match Casas Bahia's colors and formats. And here, we talk about its figures so that you all understand the potential of this business. banQi has already 1 million of accounts that have already been opened. And out of these 1 million, 600,000 accounts were opened in the last 3 months. So even when we -- even having the stores closed, we were able to open 6,000 accounts. It already has BRL 1.2 billion of credit operation, already part of our payment books. Out of that, BRL 685 million came in the last 3 months. It started with 34% of contracts that were paperless, and now we are going over 53%. So when the consumers go to the store and open this credit operation, they're already having the installments and payments straight in banQi. 60% of those that chose to print the payment book are already choosing that new system. And what is good is that in addition to turning digital this credit possibility, we also have the sustainability impact here. That is great. We are talking about without having to print the credit contract and without having to print the payment book, we are saving 30 tons of paper over 1 year. So there is a fantastic journey here in terms of digitization that's on the part of the customer and also, it relates to sustainability. Out of these 1 million customers, 430,000 of them are active with at least 1 transaction. The cost of acquisition for banQi is very low. It's lower than BRL 15. It's easy and it's affordable. It's cheap for us to bring in customers to banQi. And remember that we had 600,000 customers in the last 3 months, and we still had some of the stores closed. And in this last quarter, things are happen in -- happening in an expedited fashion. We already have BRL 120 million of TPV. And out of that, BRL 81 million happened in the last 3 months. We are very happy about that. We're very excited about these figures, and we do believe that we can have banQi as the digital wallet of the C-Class in Brazil. We have several initiatives. We have several services there, and a lot of things are in the future -- in the pipeline for the future. Now talking about Casas Bahia on the next page. For the 15th time, Casas Bahia was awarded Top of Mind in Brazil. It had 37% on that score. And here, we have an important piece of news. When we got in right after that, we were also awarded the Top of Mind. But the competition was very close to us. And what happened this year is that we got an all-time record of Top of Mind, 37%. So we are now 8 points ahead of the second position in the market. We are working hard. We transformed Casas Bahia brand. Baianinho is now our model, and it's embracing sustainability as well, as well as the Casas Bahia causes. And in terms of brand, we are moving forward in an accelerated fashion. I'm going to talk about Black Friday 2020. We launched the campaign and we anticipated the campaign. We were the first ones to launch it. And our idea is try to dilute Black Friday so that we can have more control in terms of crowding of too many people in the stores. We are doing that. We launched our campaign, well, yes, they can. And we have the best news here. On November 1, our -- the video of our campaign was the video in the YouTube that had the highest number of hits of visualizations in the planet. And in the volume of visualizations, we already have had 57 million views. So in fact, the Black Friday for -- and Casas Bahia are really matching and going together on our consumers' mind. Google has just disclosed the survey they ran. Casas Bahia is in the top 3 in the -- of the brands that are most associated to Black Friday. In the same survey last year, we were very far from being in that position. And the excellent news is that Casas Bahia is the brand that people look for more when they think about Black Friday. So we already are leading the surveys when -- and the searches when people think about Black Friday. So we are very well prepared for this Black Friday. Padilha will talk more about that, but we already have BRL 7 billion in inventory. That's what we have today to move forward to our Black Friday. Now turning to our next slide and talking about the stores and how we see the store's footprint. When we had the lockdown and we reopened and we had the authorization to reopen the stores, we decided not to reopen some stores. Around 10 to 12 of them, we did not open. So we had 4 or 5 stores sometimes on the same street on the same region or area. And we chose not to open 1 or 2 on that same street. And then we ran an initial test with it Text Me on WhatsApp, with our CRM more and more active, we tested to see if we had the ability to move customers from the closed stores to the other stores that were open. And the news is again excellent. We are able to move most of customers to the other open stores. So we are making a decision of optimizing our portfolio where we have too much overlapping in terms of stores. This is not a simple decision because we would be closing profitable stores today. But we understood that we can close those stores and have the neighboring store with the gain of productivities. We are moving towards that. And we have around 100 stores that are going through our evaluation. We have that possibility of optimization. So we can have our stores portfolio being much more productive. In terms of expansion, we are accelerated. We had a plan of 80 stores this year. Because of the pandemic, we had to stop. We resumed the plan after the pandemic decelerated. We are going to open 30 stores now in the fourth quarter. And out of those, on the 19th, now we have 6 stores in Pará now; in December, 5 more. And we'll be going to the north of the country then. And we are sure that these are going to be huge hugely successful. But now we are just being very careful on how to do the opening, following all health care protocols so that we do not have too many people. That's going to be hard because the expectation in the region is very high to have Casas Bahia there. On the next page, we have our platform, how we see our business. We are a platform that is an omnichannel platform. We know that we are the company that is best prepared to bring the omnichannel to Brazilians when and where they want. In our ecosystem we have Bartira, which is crucial right now. It's the -- furniture selling is very high. We started the third shift in the plant. It's working at its full capacity. So we have 27 DCs and 500 mini hubs, ASAP Log integrated to us, 1,065 stores as the stores that relate themselves to customers, also stores that are a hub for Click & Collect. And also they have a logistic hub, the Text Me on WhatsApp in the app and in the desktop, and brick-and-mortar stores, both for 1P and 3P. banQi now is also in our ecosystem in a very accelerated fashion. We believe that just as marketplace, it will also bring recurrence to Via Varejo. And marketplace will be able to take advantage of all the hits. And so banQi will have a daily frequency to consumers when they become -- also when it becomes the digital wallet for consumers. We have now Distrito's participation in our system and also all the other tech hubs with I9XP. All of that is around our core and our obsession in making our customers' dreams come true. We have a team that is fully focused on this transformation, on this evolution. And the results that we bring to you today prove everything that we are talking to you so far. And we still have great opportunities, and they are many. And we haven't even touched them. We were preparing Via Varejo so that we could accelerate that evolution, analyzing, looking at multichannels and many other businesses in retail. I will turn the floor to Padilha, and he's going to go into the details on our results. Thank you very much so far.

Good afternoon, everyone. Let's talk about the highlights and the financial results in the third quarter. Let's turn to Page 14 of our presentation. Total GMV stores online on 1P and 3P. Here we have the breakdown of the revenue per channel, and also the total when compared to last year, BRL 10.046 billion was the total GMV for the third quarter of 2020, BRL 3.41 billion more, 43.4% growth. The online GMV, BRL 4.121 billion vis-à-vis BRL 1.293 billion last year, BRL 2.8 billion more, 219% growth. Now breaking down the online GMV: 1P GMV, BRL 3.272 billion, BRL 2.442 billion higher, 294% growth; GMV 3P, BRL 849 million, a growth of BRL 386 million, 83.4 percentage growth; stores, almost BRL 6 billion in revenue, BRL 214 million more, 3.7% growth. In terms of on and off shares, we have grown from 18.5% to 41% in the total online of the company, a growth of 22% -- or that was the growth of share. The 1P, 20.7% from 11.9% to 32.6%; and 3P, going from 6.6% to 8.4%, a growth of 180; and the stores closing with approximately 82% from -- going from 82% to almost 59%, a drop of 22 percentage points. The results here on Page 15, accounting. The company totaled BRL 10 billion; the gross revenue, BRL 9.2 billion; gross net revenue -- or gross profit, BRL 2.7 billion or 35%; SG&A, BRL 1.630 billion, 20.6% (sic) [ 20.9% ]; an EBITDA of 15.3%, almost BRL 1.2 billion financial income, much lower than last year; with BRL 107 million; and net income of BRL 590 million, 7.6%. Here, we had a significant growth in all the lines with a strong reduction in expenses. And we also bring to you what we call operating results. On the next page, we will have here the adjustments, the nonrecurring one, revenues and expenses that are not recurring in the same quarter of last year and this year. In this quarter, as you all know, as we have disclosed, we also had tax credits that were very relevant specifically for PIS and COFINS, ICMS as well on the base of PIS and COFINS. There was an evolution in terms of the understandings about this subject. And therefore, we were allowed to recognize, to post this credit in this quarter. There was a total impact of BRL 490 million in the net income. Net of this effect, we come to an operating result of BRL 100 million of net income, and last year a loss of BRL 208 million. So here, you have more details. It's also available in our release. In our release, you have more details about this calculation. I think now, I think we can move to Page 17. In this page here, we have the core performance of the company, operational without the recurring effects in the 2 past quarters. So as presented, through GMV, BRL 3.41 million (sic) [ BRL 3.041 billion ]; gross revenue, almost 27 -- BRL 2.7 billion; net revenue, over BRL 2.1 billion; gross profit operational, BRL 2.309 billion; recurring 29.6% with a slight decrease in percentage terms. So basically, here, we have 3 basic components in our gross profit. We have mercantile gains from the sale of products, from the sale of services and also the financial revenue from our payment book. And this is -- there is a difference here. Due to the accounting system we used, we recognize revenue based on the volume of the portfolio because this persists during the duration of the contracts. There was a loss of portfolio during the pandemic period because the company didn't originate payment books during the pandemic months. But in June, in July and August, there was an increase. So I think by the end of November, we will be able to resume to normal levels. But in that quarter, the effect was negative, but it should be recovered by the end of the fourth quarter. Therefore, I would say that our recurring margin is slightly above 30%, already considering this rebound. Another highlight is a strong dilution of expenses mainly attributed to this important volume. So our gross revenue rose by 40%. Expenses grew 13.4%. And despite the fact that we spent BRL 206 million more over the net revenue, there was a 4.7% reduction, which quite comfortable and also sustainable in our line of business, especially considering this new scenario including online sales above 40%. As a result, adjusted EBITDA was BRL 627 million, meaning 8% when compared to 5.4% in the same quarter of last year. That represents a gain over BRL 300 million and also gains of 2.7 percentage points. In terms of financial income, here, in terms of -- in nominal terms, there was a reduction of BRL 50 million. This was very much attributed to the follow-on that occurred at the end of the second quarter. We already present a very interesting compound result in terms of reduction, in terms of the net revenue that is 3% or 2 percentage points, which points to a very positive effect in our result. Therefore, now we arrive at BRL 100 million in net income, totally sustainable; operational, 1.30% when compared to BRL 208 million in losses incurred last year. That means an improvement of BRL 309 million, growing almost 5 percentage points. Next page, I would also like to give you more details, that drop in percentage of gross profit. But again, we see an important growth of BRL 503 million in the half period. SG&A grew 4.7 percentage points, meaning BRL 360 million in efficiency gains in that quarter. And this generates BRL 233 million of improvement, or 2.7 percentage points of EBITDA gains. And therefore, we arrive at BRL 100 million in net profit. And considering the level of growth in net sales in the quarter, this represents an efficiency of BRL 465 million. Next page, here, we thought it would be interesting to show you the impact on gross profit. Breaking it down, last year our gross profit was 31.4%. There are 4 more relevant effects that should be pointed out. The first one is the loss of gross profit due to the changes in the mix from online and off-line. Online grew, so there was a 0.60% or 0.6% loss. And here, the other effect that I mentioned in our payment book. The financial margin due to the reduction in the portfolio during the pandemic months had a negative effect on our profit of BRL 243 million, 3.10%. But on the other hand, we had commercial gains last year in our suppliers' account or drawdown risk where we would draw vis-à-vis financial risks. A great part of that was eliminated in the end of the second quarter. And along the third quarter, there's still a small portion to be realized, but there was a positive effect in terms of exchanging the mechanism of BRL 41 million, which is 0.5%. And what remains now is a more -- a commercial gain with margins, better sales prices through pricing methodologies, which resulted in a return of over BRL 100 million. Therefore, with that, we want to show that our gross profit level is very sustainable. And our competitive advantages still remain in place. We are the largest seller of furniture in Brazil, with a gross margin much higher when compared to other categories. Our payment book and CDC is unbeatable. We have new contracts on a monthly basis, which is much higher when compared to our peers and higher to the final months of last year, November and December, which used to be peak season for sales on installment. Therefore, we've been very competitive and very efficient during the pandemic period and even afterwards because we are operating in a more modern way, paperless and digital fully integrated to banQi. Now next page, Page 20. Here, we show that when it comes to efficiency or financial efficiency, the company posted a significant improvement. This is a very dynamic chart because it shows that last year, looking at the left side of this -- to the left side of the slide. In the first half of the year, we consumed BRL 416 million. In this quarter alone, we grew BRL 464 million. So quarter-on-quarter, Q2 versus Q3 shows a cash efficiency of BRL 830 million (sic) [ BRL 880 million ] once you compare both periods. However, as the company is very net after the follow-on, we put in motion several actions in our treasury department. And one of them involved creating a supplier's portal. We allocate capital through the portal, and suppliers can anticipate the payments from Via Varejo at an interest rate. I mean this revenue is exposed to this financial revenue. But this portfolio is extremely net because it is posted against Via Varejo itself. So we post this as cash. Therefore, this last bar that shows a cash of BRL 8.481 billion is precisely the difference between BRL 605 million in that portfolio of discounting receivables in the Suppliers Portal. Considering that effect, our cash position, well, second quarter versus third quarter, is much better against a consumption of BRL 416 million. When you look at that, we see an efficiency of almost BRL 1.5 billion in terms of cash generation. Now next slide, we are constantly trying to look more visibility to our own CDC business. Here, we have 2 reconciliations in our release. We also have an explanatory note. In the top of the slide, you have the accounting view. And in that accounting view, we indicate Item 6, Page 28; Item 13, Page 38. So you will see receivables BRL 3.64 billion. And a PCLD or the former [ ALL ], you see the amount there as well. So down below, we have management view. We have a CDCI, which is an intermediated CDC. It was BRL 3.626 billion. But this is a position that on the liability side has BRL 104 million of interest to be posted in the following months. And on the asset side, we have BRL 974 million to be calculated as revenue in the following months. This may lead you to believe that the receivables portfolio is lower than that of payable. But it's just the accounting effect between the 2 different revenues. Now down below, you'll have the management view. In the third quarter, we have -- I mean, if I add up all the payment books and more than 4 million active customers that are active in our portfolio, we would have BRL 3.065 billion of receivables in the short run and BRL 474 million of receivables in the long run. Therefore, the total is BRL 3.539 million (sic) [ BRL 3.539 billion ] still to be collected from payment books maturing up to 180 days. After 180 days, it's turned into an accounting loss. So it is totally written off, but it remains active in our collection process. Therefore this quarter, we ended the quarter with BRL 1.650 billion in our receivables, in addition to the BRL 3.539 million (sic) [ BRL 3.539 billion ]. So altogether, we have to collect from our customers, BRL 5.189 billion and BRL 3.529 billion that will be transferred to our partnering banks. So we are consolidating the accounting view, the operating view or the managerial view. This breakdown is very -- is what makes the company so profitable. Thank you.

Thank you, Padilha. Now we will jump to the Q&A session. The first one comes from Crédit Suisse from Victor and Pedro. First of all, they would like to understand our view about growth in 2021 and whether consumption migration may impact sales for next year.

Okay. Thank you. Thank you very much for your questions. Next year is -- I mean, we're very optimistic in terms of what is yet to come next year. So we are getting prepared for an excellent 2021. We don't believe that what happened now during the pandemic was just in anticipation of consumption because, in fact, if we take -- if we look at the total sales from different categories, more or less, we would be selling the same thing this year or maybe a little bit more in some other categories. But not so much so that would steal consumption from next year. We don't believe in that. We are very optimistic with this fourth quarter. And we are again very optimistic looking forward. We gained 8 points of market share in the third quarters when you look at Gfk numbers. And we continue to gain share once you open all the categories. We will continue to grow share. We will grow the company in the market. And in addition to that, we will add our share gain, which has been consistent quarter-on-quarter.

Next question from Bank of America, Bob Ford. The question is whether we could comment on the scarcity of product in the market. And what is our relationship with [ Martins ] in terms of our partnership with marketplace?

Thank you, Bob. In fact, there is a supply problem in the market at the moment. And as you know, we have an annual relationship with the industry. So our inventory has BRL 7 billion, and we are ready to face the next fourth quarter, and we continue to receive merchandise. We are selling well, and by the same token, we are still receiving merchandise to replenish our inventory. So maybe there is a lack of one or another product, but we are very well prepared to face the fourth quarter and the end of the year, the holiday season. We talked to [ Martins ] about 2 months ago, and he is amongst our top 30 sellers. 60% of his assortment is already included in our ecosystem, and we were expediting that move to have 100%, and we are close to reaching top 10 very soon.

Next question comes from Andrew from Morgan Stanley. What about Via Varejo's view in terms of M&A pretty much similar to what happened with Distrito. How do we look at your strategy in regards to M&A?

Well, Andrew, I can't tell you much because I can't signal to the competition. But we are certainly looking at all the opportunities in the market. We are also looking at the company beyond retail. Our stake at Distrito was not obvious. I mean it wasn't obvious in a regular landscape. But we look at that as something that can boost our ecosystem in several areas. Now we are looking at all the opportunities in the market. And if we understand that there is something that can boost our ecosystem, or if that can add some attributes to our ecosystem, that's something that we will look more carefully.

Next question from Itaú, Thiago Macruz. What are the competitive advantages of Via Varejo, if you want to lead the marketplace world? And if you feel like you want to be on equal footing amongst your peers?

Thank you, Thiago. That's an excellent question. When I refer to our logistics, because, I mean, it's easy to say that we have the largest logistics in the country. But once you put everything into figures and numbers, the advantage of almost 1.5 million square meters we have, when you talk about the last mile, you know that we do have the capacity to store everything. But when it comes to the last mile to consumer -- because it's not enough just to inaugurate distribution centers or large distribution centers because it's very difficult to operate logistics in Brazil. Therefore -- I mean, it's important to have a distribution center, but it's important also to be close to our customers. This is also relevant. And we do have that capacity and the size. Therefore, I would say that this is a major differential. We are close to finalizing all of the other digital tiers to our logistics system. And once that is finalized and we also open that to 3P, I think that -- I mean, a lot of people talk about same-day delivery, I mean here, at Faria Lima or in Rio in Leblon. But when we talk about the last mile or same-day delivery, we would do that all over Brazil. And we are not very far from reaching that goal. And the good news is that we already have all the assets in-house. I don't have to acquire any additional asset. We already have it in-house. All we have to do is move forward with our digital ecosystem. Our IT system is working around the clock to make everything possible. So very soon, we will be able to offer same-day delivery but -- like an actual promise for the entire country, with great part of our assortment. Another benefit is that -- I mean, we had a cultural barrier in the past because it was difficult for our sellers to be online. But because of the pandemic, we eliminated that barrier very quickly. Therefore, today, our sellers are digital. They're already selling 3P items, and they began selling it now. And they already have 2-digit gains when it comes to 3P. So once they master that tool and they start adding that to their everyday work, be it in terms of new sales or additional sales or online sales through WhatsApp, which is another important differential, certainly our credit arm will be strengthened even further. And we will also start providing funding to marketplace items. No one else can offer that. We have almost 12 million customers. We pre-approved credit at Via Varejo. We are -- our CRM is extremely up to speed in terms of our relationship with these customers. And now with banQi, we are expediting this relationship further. So we have even a better way to relate to our customers. And everything will be available to our marketplace customers and through the sellers, because they will be able to have a digital account at banQi and get funding through banQi. So this is just the beginning of a journey. And I'm certain that all of the results we posted so far now contributes to solidifying Via Varejo's experience. But we are just at the beginning of this journey of what we can do with this ecosystem. When we arrived people were saying, "Oh, these guys are lagging so much behind." But we are here to prove that this digital transformation occurred very quickly. We did everything in less than 1.5 years. And we are also showing that the assets the company has are very strong. Because if I operate right and I focus on the operational side, the execution side, and I focus on technology as well, Thiago, I'm certain that we will be disputing this marketplace market on equal footing very, very soon. And also very soon, we will surpass the competition. We will be better than them.

Next question from Eleven, from Daniela Bretthauer. Two questions. I think the first question has to do with marketplace. But I mean, how big can you be in terms of 3P? And in terms of store rationalization, would there be any difference between the banners? And what is the difference between digital and nondigital?

I mean I think the question about marketplace has been answered. We are not going to limit the size. Because if you look at what's available in the market today, Via Varejo doesn't have any impediment. There is no impediment. Nothing prevents us from selling more. Because once I look at all my competitive advantages, now I'm good to go. And once again, this is already a given at Via Varejo. Our investment here is on IT. All of the assets are already in-house. The second question, Gabriel, what was it again?

The second question, Roberto, is about store rationalization. And how do you see the balance between brick-and-mortar and online? And whether there is any specific barrier looking forward?

Well, I think there's balance between physical and online. We are not going to grow one in detriment of the other. We see that as a single system. So the seller in the store, making online sale, so the sale can be online or physical. So we already see this as a single business, combining both. I mean, physical sales for Brazilian customers is still very important. They like to go to the store. But we want to be part of that journey, whenever and however he wants it. So we will not going to impose any barrier. We will try to boost both and give that choice to the customer. In terms of store footprint, as I was saying, we had about 100 stores already mapped. I don't want to give you any details because the competition is really looking at these stores as well. Therefore, we try to be very careful. So we want these stores to go in the direction we want. And once we say that maybe -- I mean, there are -- we are engaging excellent negotiations with the owners, and rental prices are falling to half. Therefore, I would say that this is around 100 stores, but no specific banner. We are looking at the occupation footprint for that particular region.

Thank you, Roberto. Next question from Guilherme Assis from Safra. Can you explain what were the recent improvements about marketplace, onboarding and product delivery? Whether there has been any delays or whether things are moving at the right speed?

The order track is okay. We often look at our numbers, and we talk to all of the services that look at the numbers related to our consumers. So I'll tell you now, look at Reclame Aqui to see what is happening. For quite some time, we are not at the top of that list of complaints because the number of complaints is coming down substantially. And we are increasing in terms of solving the problems of our customers. And as I said before, what we were lacking was just the order tracking in the company, but we already solved that part. And the journey of new sellers has been moving quite well. We are adding 100 sellers every month. We were including between 800 to 1,000 sellers every month, but this is by far not what we want because we were finalizing the onboarding journey. And then the IT guys came and said, okay, if we wait 2 or 3 more months, we will be able to deliver this entire package, including many other benefits when it comes to this relationship with sellers. And this will help us boost sales further. We decided that, that made sense. So execution is occurring in a very disciplined way because we don't want to go back and then restart again so, therefore, everything is very sound. Therefore, we decided that it would make sense to delay it a bit. So in the first quarter next year, we will have real-time onboarder -- onboarding with any number of sellers we want to put on board. All we have to do is look at the sellers that are part of the other marketplaces. And I don't see why they shouldn't be with us, considering our relevance. And I just gave you an example of what happened to our brands, Casas Bahia. I mean the results from Casas Bahia is just awesome, astonish. It's not even Black Friday. We're just beginning the Black Friday communication. So I don't see why all of the other sellers wouldn't like to join us. In addition, we are going to offer a lot of facilities, our client or our customer ecosystem. And everything we have will be at the disposal of our sellers.

Our next question comes from Citibank from Tobias. He would just like to know the turnaround in brick-and-mortar stores and what has been done.

Thank you, Tobias. We are moving fast in terms of physical stores. These 30 stores are coming with a new format. There are some important changes in terms of store positioning. We are also preparing. I mean the stores are already operating under this new concept. We are remodeling the current footprint. We changed all of the facades of the stores. They already contemplate a new communication for Casas Bahia. We are now refurbishing the stores and preparing them for this new store the way we envision. So it's a store that resonates with customers, and we are offering Click & Collect or the mini delivery hub. So I would say now that we are refurbishing the physical stores to prepare them for this new model.

Next question. I think that's for you, Padilha from Santander team, Ruben Couto. He mentioned that in the third quarter, we had a temporary effect on our SG&A.

Finally, a question for me.

And he wants to know if we had any effect, since this was in the second quarter, renegotiation of rents and legal expenses of provisional measures. Or if we already had the full impact in the third quarter, if this is recurring or not? Or -- and if we are going to have dilution in the future?

Thank you for the Santander team for this question. Finally, a question for me. People said that I'm very serious here because of Roberto is taking all the questions. So thank you. Well, this level that we have of recurring expenses in this quarter, it can be supported by the -- we have room for that. Whenever -- when we increase growth revenue, I don't need to add anyone else here in our headquarters and any other areas. So it has to do with the revenue of 1P, 3P and in the stores. In the beginning of the quarter, yes, we did have some stores that were closed. We started July with stores that were closed and that progressed. By the mid of August, probably then all the stores were open. This was a residual effect then. It is not relevant. So really, it's not a recurring level of expenses. It's obvious that the fourth quarter is a quarter where we expect to have higher revenue. So greater dilution. Our expenses breakdown is a little bit different from our competitors. We have the credit operations, and we have expenses then, also ADA. And if we remove that ADA effect, we will already have the best SG&A of the market when we compare ourselves to the 3 or 4 largest players. So there was an efficiency gain in SG&A dilution and reduction. And I'm sure this will happen again in the fourth quarter.

Thank you, Padilha. Now I will turn to the question of Joseph, JPMorgan. Three questions. I think this is still for you, Padilha. How can we think about the profitability in the next quarters considering the improving results? And what is the strategy to retain customers? So considering that some companies are working with cash backs, if we are going to move along those lines or not? And how to think banQi for corporate clients?