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

Hello. Good morning, everyone. Welcome to our earnings call, as we speak about the results of our First Quarter in 2023. I'm Renato Franklin. I joined the company on the 2nd of May and beginning of this week. Obviously, as you all know, the entire C level of the company and our IR team are here today, and they will be the ones delivering the results, and they will be clarifying any possible questions, then still going deeper. And I'll be available as well to answer possible questions you may have on my decision to be here and what we're looking at up ahead. I'll pass the floor to Gabriel to the Q&A session. Once again, thank you so much for your participation. Gabriel?

Our first question is from Vitor Pini.

My first question goes to Padilha. We noticed a variation in the cash position of BRL 1.8 million in the suppliers. And I would like you to explain a little more about the nature of this adjustment and what we should expect up ahead of BRL 1.4 billion in the balance sheet. What the dynamic will be with the cash effect on this line?

And this is a short-term line, already considered this reduction in about [ BRL 1.5 billion ] at the end of the year. But what happened in the first quarter is seasonal, it's natural. It's connected to working capital and funding [indiscernible]. So, this reduction because the seasonality of the first quarter has a natural effect. The second effect is basically the conditions with the lower supply in this line -- in the Brazilian credit line. A lot of banks stopped working with this credit facility, which impacted us as well. We still carry an important significant value. These lines are pretty much kept in our plan for the next quarters. So that's an important line for funding suppliers. So we're keeping this link. [indiscernible]

Okay. I would like to call [ Daniel Aker ] for her next question.

First, I wanted to go deeper in working capital. And connecting with this point with lower offer and supply, we know this is a moment with anticipation of receivables. I wanted to know the strategy you guys are using to mitigate or offset this level of facility available. And also, there's an increase in the stock levels. And I don't know if this some other movement you guys are trying to work on with an expectation for stronger demand. I wanted to know what your strategy is behind the stock, besides -- at this moment. And then, I'd like to also take advantage of this opportunity to ask you about a more strategic perspective, which is, I know it's not that much time ever since you joined, but I would like to understand what your first impressions are about the company. This movement, this change you had, if you define some gaps, strategic changes now in the company at this point in time?

Well, I'm going to start off, [ Danny ], thanks for that. The FarPay and credit card discounts are very similar, both paths are feasible, and the reduction of this discount for FarPay [indiscernible] we decided to use more discounts from credit cards in this quarter. So, the stocks are a little bit greater and we're already getting used to the -- preparing for the seasonality in Mother's Day. As you mentioned, very little time, 5 days only. And what I could say is, in all of our due diligence process and our decision making, what I reinforced on the video yesterday was that we consider Via to be a very unique differential with a very competitive operation, strong brand, a huge portfolio of customers and a capacity to adjust the operation that's really quick, considering the market scenario. And this has allowed this team to deliver these results. And the conversations I've had with the team so far, when you add up this amount of hours, it's quite intense. So, we've been surprised positively, right? And there's a lot in [ Via ], a lot being built. So, it's important to mention also that this company went through a very strong transition where we had a team taking over with a big challenge to put it back on track. They made intense investments so that the company could have the portfolio of solutions and avenues for growth and deliveries to our customers. So, the company has an infrastructure that's ready, right? We do have 2 fine-tuning to be done. There are important deliveries that need to take place, projects upgradation, sales and cost efficiency reductions that are underway, and they will be delivered. And this increases our competitive advantages that we have. When we look at the earnings in our first quarter, we can see that most of the stock price we have and the productivity in our stores, the deliveries that the stores are providing, this demonstrates the differentials. When you look at [ steep out ] being reduced, the NPL indexes, the coverage for aging, and you can see that the know-how with the credit confession is very unique. And what I'm most noticed that made me more excited was the people, right? It's a really good environment, people are working in a very united and engaged way with a clear direction. My agenda, we're not going to see any big drastic changes, but I'm here to contribute with -- so that we can bring more discipline. People already have this focus, right? Now when it comes to capital allocation, so all of these avenues for growth have major potential for growth, [ literally ] 1P, 3P fulfillment solutions, everything can grow and the allocation of capital understanding, which returns with respect to how much capital we expect to allocate every quarter and every period, and then really taking care of the business investment returns. So this, of course, will help us to understand with greater clarity how this will impact our numbers up ahead, but I'm super excited. I am very -- positive surprises, very excited with how the company has been conducted. And of course, you have these adjustments, and we can bring in even more [indiscernible] evolution up ahead. So, the [ rising ] up ahead is very positive, because we've already finished that phase where we needed to invest a lot of cash with most of the machinery or tools that the team has at this point in time.

Our next question is from Eric from Santander.

Thanks for taking our question. On our side, the first one when we look at this credit [indiscernible]. We see that in the NCL, we have relatively good numbers with the improvement in [ rental ]. So we just want to understand what could be like a trigger that's a little better with more acceleration in credit card. And you noticed any marginal improvement where you can identify some indicator on how [ put ] the credit card and pay more. And then, when look at the business in the competitive environment, especially when you see 1P in digital, we see this is still [indiscernible] market especially when you consider these projects that require credit for consumption. But considering this competitive environment with such a relevant player, it's weaker. How have you looked at this from an overall perspective with 1P and the opportunities to have an important turnaround. When we think about the first quarter and the price drop, any kind of shift in the second quarter?

I'm going to start talking about the credit indicators. So, remember in the last call, I had mentioned that the first quarter of 2023 would have a reduction in our -- over 90 indicators in our provision, which was complete. This is due to an issue with change in strategies in our credit policies that we [ took place ] in the third quarter of 2022. So, when we started this, we notice that the market was deteriorating, and it had 2 important adjustments. And up ahead, we would harvest in the third quarter, especially in September and more ahead. We have been performing very well, so we are comfortable up ahead. We know that the market and the situation representing consumers are quite delicate. So, we need to be careful about this. And we've been having some occasional credit openings. So, in this scenario [ or phase ], we can't joke around. We're really comfortable, because so far things have been performing well, and we believe that the indicators are going to be stable. Not sure who is the second question was for, but -- hey, Eric, thanks for the question -- about 1P. Considering the economic situation, nothing changed that much, but basically we opened up sales in the same phase as the first quarter. We were having a big bet on Mother's Day. So we prepared very well, received more merchandise and extended the terms, and April, May started really well. So even with e-commerce being really rough, we're still gaining share. We gained share in the first quarter and we're gaining share in April, which was really good, but the market is still very tough, especially for higher ticket products.

Our next question is from [ Nicholas ] from JPMorgan.

I wanted to know about your initiatives from an expense perspective. What have you already done? And what do you think are the main initiatives you can work on throughout the rest of the year to help with your operational leverage?

Ever since last year, we have been working on some efficiency programs and we have been working on this for the past 6 quarters with the operations of stores, productivity, that's been pretty high. There's big pressures though on inflation. So, sales have been -- having probably low what they should be, which pressures the costs a lot. And we have been working on an in-depth plan to review this structure and this goes through all of the areas in the company. So we actually disclosed this. We already did part of this in the first quarter, and then the different work initiatives, which I consider beyond the administrative costs that also go through marketing, logistics, operation and closing the stores and DCs that are not efficient. So we're really quick on these plans. And the trend is that on the growth of these expenses compared to last year took place due to [ make ] themselves at the stores and NCL related to the revenue that's really just like that. So, the rest of the expenses are quiet flat. So we should go deeper in these initiatives with deployment of these initiatives during the year. And you should see this throughout the next quarters, but it's going to focus on the whole company really.

Our next question is from [ Joao ] from Bradesco.

Thanks for taking my question. I have 2 questions actually. 1 is about the dynamics for the revenue from services. So what would be your diagnosis? Would you have -- are there any levers that you have been working on that should be considered? The second question is, what your perspectives are for the capital improvements? If we can expect any kind of changes or improvements that are more structural in regards to this part of the business.

Abel will talk about the revenue for services.