Grupo Mateus S.A. (GMAT3.SA) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for waiting. Welcome to the earnings call for the second quarter of 2025 at Grupo Mateus. [Operator Instructions] We'd like to let you all know that this earnings call is being recorded and will take place -- will be provided on the company's website where you have the full material for the earnings call. You can download the presentation on the chat icon in English as well. [Operator Instructions] We want to highlight that information in this presentation and possible statements that could be made during the earnings call related to business perspectives and projections as well as operational and financial goals of Grupo Mateus represent beliefs and assumptions of the company's management as well as information that is currently available. Future statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions as they refer to future events, as they involve circumstances that could not occur. They could affect the results that impact materially those listed in future statements. Today, we have the presence of our company executives, which are Mr. Ilson Mateus, the Founder and Chair of the Board; Jesuino Martins, the CEO; Tulio Queiroz, the VP and Investor Relations Director; and Sandro Oliveira, the Vice President for Operations, Logistics and Commercial. Now I'll pass the floor to Mr. Ilson Mateus.

Great day to all that are listening to us. Thank you so much for your presence. Once again here together. I want to thank God for this opportunity to be here disclosing our results. I also want to thank our Chair, Jesuino Martin, Sandro, and our VP, Tulio as well as the over 64,000 employees at Grupo Mateus and another over 12,000 employees, adding up to 66,000 employees as well as the shareholders that support us and have been with us during this process. And well, to start off with this presentation, I would like to discuss in the first semester, we had 4 stores that we expanded to in the first quarter, 4 stores in the second quarter, we expanded to [indiscernible]. And in the third quarter, in July, we had the store in Porto Franco. It's a small store, adding on to our routes. But now first, following with our expansion project as well as the closing here on the next slide. Slide 7 -- sorry, Slide 3 (sic) [ Slide 5 ]. Okay. Our highlight here with 271 stores. And in this scenario, we've also brought the closing of 10 eletro stores, which really intend to generate more efficiency in our business, reduce our stock and improve our working capital. And so we continue to analyze the other stores searching for efficiency and these are more than 5,700 commercial reps. And we've really been exploring this channel a lot within this multi-channel approach. We also have another observation, which is we are structuring another channel here, which is the distribution of cold cuts and also reinforcing this focus here and searching for innovation, which is the goal of Grupo Mateus, finding ways to innovate and provide consistency as well to our future results. So bringing in this discussion here on expansion. We have over 16 stores under construction, and we have another 16 stores that are under expansion. We have 5 that are for services that are -- these are stores that bring in better results either be one store in Piauí in Teresina. And so we can really highlight this, which is something that really helps us with our EBITDA and our results. Now on Slide 6, we bring in within this merger with Novo, we have an important highlight. Within this expansion, you can see we have 2 stores that have already been opened. As you can see, these are stores that are very important for the route density. And we have another 3 stores under construction that should will be opened. And we have another project with Novo for a group of stores that will be opened every -- during the entire year within this expansion. And we really want to say that we are very excited with this merger, and we've already been mapping out the efficiency gains with Jesuino, Sandro, and Tulio that have really been dedicating their time to this, and we see a lot of synergies and efficiencies also in logistics, HR, prevention, trade marketing and also part of the commercial work that we start merging and we see interesting gains as well in the future. And now we'll pass the floor on to our Chair, Mr. Jesuino Martins.

Good morning, Tulio and Sandro and everyone that's been listening to us today. I want to, once again, as usual, share with you some highlights that we've had throughout the second quarter of '25 with some important achievements that really make us happy and we want to share with you all. So about our net revenue, we reached a level of BRL 8.8 billion that were built in the second quarter of '25. This is a level that really keeps us happy because we grow. And if you notice, we have a growth of 14.9%. This is a growth that is very robust, and we go from a base of 19.5% in the same period last year, and we keep up with this growth at a pace that is very accelerated. When we look at the data from Nielsen, this is -- we're growing a lot more than the food retail in Brazil and in Northeast. And so we've been growing at a very important pace as we've been reporting. So as you noticed, we've added another BRL 1 billion in revenue. And when you look at the bottom left side, you can see our results for the net revenue in the quarter, where we also have a historical level of BRL 17 billion still as revenue, a growth of 3.9%. That was really significant, and we add another BRL 2 billion. So when you consider this net revenue perspective, we're very happy with the resilience and robustness of our growth during these quarters we've been sharing with you. And if we take a look at this ahead, the same-store performance, and I think it's worth mentioning everything that we've been able to achieve in this second quarter of 2025, and we can achieve a 6.1% growth in the same stores. And this is a level that really makes us happy because although it is a level that is maybe a little below food inflation, we can see that we improved compared to the fourth quarter of 2024. We improved this performance in regards to the first quarter of 2025, and we reached a level of 6.1%. So it's important to also highlight here that we've been trying to explore our multi-channel approach, right? We are a multi-channel company. And the composition of these different channels help us reach this level we're sharing with you today. So it's also worth mentioning that when we look at the same indicator and we exclude the eletro operation due to the closings of eletro and this is a very specific operation, but that is transforming to 6.7% growth. So when we look at this closely, we see same-store sales growth, looking at our multi-channel approach in line with the food inflation growth as well in the last few months. So -- and when we get to the bottom part, you can also see the same-store performance in the semester. So it's a level that's very similar, 5.7% growth in the same-store sales in the semester. And here, it's worth mentioning also with all of you that are listening to us today. Of course, we've been focusing on profitability throughout these quarters, and we've been sharing with you this strategy. The market is going through a very specific moment. And we chose over the last quarters to keep up with this profitability pace and really find the best balance possible to be able to deliver the best results so that the composition at the end of the day is the best possible. And most of this growth in this quarter comes from pricing. The volume was very significant. And here, it's important to mention also that the expansion we've had, which contributes to the same-store performance. And as we mentioned on the screen here, we also shared our strategy in year 1 where we focus a lot on sales. And then year 2, we've been keeping up with this profitability pace as well. And that has really helped push the growth of the same-store sales downwards. But when you look at the same indicator in legacy states, we see levels that are very different. We have legacy states that grow in the same-store sales, right? But of course, we understand that we have to find ways to find the optimal point there for the composition of our results when we consider our company as a multi-channel company with all of these strong points together, we deliver these same-store sales levels, right? So if you take a look ahead, I wanted to share our performance in the gross margins, and this has been an indicator we've been trying to focus on Tulio, Sandro, and Mr. Ilson because you've observed our balance sheets over the last quarters. And quarter-over-quarter, we've been keeping up this gross margin that is very resilient, very consistent. And if you look at this, we've been able to reach a level of 23% once again, and we've been growing in regards to the same period last year. So in the bottom part, you can also see that the gross margins in the semester are left at the same level. So it's a semester with very robust, a semester that when you look at the same period last year, it's also growing 0.6 percentage points compared to the first semester of 2024. So that demonstrates consistency and a growing margin. And it's worth mentioning that the maturity of the new regional and in just a bit Sandro will also talk about this, and that really helps us to keep up with this level of gross margins. And we've been maturing this -- all of the operations we've been implementing in the last few years. And so the projects also on the commercial front that have really been contributing with different initiatives that really help us keep this margin level that's a historical level. So if we take the next step ahead. In the fourth column, we're really happy to also share our EBITDA with a level that's a all-time high of BRL 705 million in this quarter. We've been growing over 24% in our EBITDA and our EBITDA margin is at 8%. So it's a very robust margin. If you look at this and you have been keeping up with our balance sheet, you can see how it's been consistent over these quarters, and it grows when you compare with the same period last year, 0.6 percentage points. So at the bottom part, you can also observe our EBITDA margin and the EBITDA in the first semester '25 compared to the same period last year with the same level of resilience. So we're really happy and [indiscernible]. And I think it's worth sharing that this is where our main focus is. Since we've been keeping up this, we've been trying to keep up this balance. And I think we've been able to in a way where the gross margin maybe go sideways, but we always try to provide an EBITDA margin with consistency and resilience, and I think here, you also have the expense control, which is something Tulio will discuss a little more ahead, and it contributes to the gross margin that also helps us deliver this EBITDA quality. So I'm really happy with these results. And finally, I want to share our net income, which is also really making us happy, right? You have the net income of the second quarter of '25, where we reached BRL 349 million and we've been growing if you compare the same period last year. And in the bottom part, we reached BRL 668 million. We've been growing in regards to the first quarter of 2024. And therefore, I think this is a composition of more and less that really keeps us happy because no doubt, it's another quarter of a lot of consistency with what we've been proposing to deliver and what we've been intending to share with you all during the last few years. So finally, Mr. Ilson, Tulio, and Sandro, I want to thank all of our team for their dedication that they've been having towards our performance and results. So we know about the meetings that have been made and the intensity that all of us have had. And so I know a lot of them are watching us as well, and I want to thank them all for their dedication. So I think that's it. I'll pass the floor on to Sandro, our Commercial Marketing and Operations VP. And he's going to talk about the performance of the new regional and a bit more of our anniversary as well. We're celebrating this. And so I'll pass the floor on to him now.

So good morning, Mr. Ilson and everyone else watching and listening to our presentation. We're going to bring in once again this breakdown of how we've been moving towards our results in the Northeast region. So we can observe also that we've been having consistent results when we consider this versus the previous year, we have a gain of 1 percentage point in our post-IFRS EBITDA. And this is really the consistent -- this consistency is due to all of what Mr. Jesuino has just mentioned with more stability in our EBITDA and our results. And this expansion already contributes in this way along with the other regions in the company. So just to mention a quick analysis here, when you look at the numbers in the last quarter, we have this increase of 3 stores. Now we have 42 stores in this comparable basis. And we were able to keep up this data, this EBITDA number in a consistent manner. So if we look at the region overall as a whole, we have 52 stores already. These are 48 atacarejos, cash and carry stores, and plus the retail stores and the new challenges we have with Novo that will experience from now on. So that already represents 1/3 of our sales if we consider our food retail channel. So more and more important, but more consistent also in its results. So moving ahead, we bring in a bit more detailing about our market share performance with the data analyzed by Nielsen and we have an advancing of 1 percentage point in the region we operate in with -- as market share. So that demonstrates the strength and resilience of our team even in a moment of so many challenges that we're going to eventually find in all of the states where we're in. We've been able to advance and really become more and more relevant in the market for suppliers and our consumers as well. Well, moving on to the next slide. We have a breakdown of what we're experiencing in the month of August. And August is the month of our anniversary. It's a super important month for us in our annual channel -- calendar, sorry, when it comes to seasonality, it's super important for us for our revenue and for our results. And we want to talk about what we've experienced. So we have this campaign, a specific campaign for the month of August, 30 days of lots of special deals and campaigns for our consumers. All of our stores are in a party climate, let's say, or party vibe. And another point we want to bring before we open this up to all of you is that we continue to respect the regionality, right? So we have this artist, Joelma. She's -- this is, of course, due to all of our marketing work, and she's a super famous artist in the regions where we operate. So -- she is very strong in all of the different states and regions we operate in. She interacts directly with our public, and we've been trying to really accelerate sales and she brings this in her profile, and this has been super successful for us in the first half of the month of August. And so all of this is really so that we can bring visibility to our suppliers, and it's a delivery that also reaches the objectives of our partners. And on the other hand, also supports us with our strategic negotiations that are more assertive. And in some way, we can have some traction for the sale that's been made collectively, right? So we wanted to share this so that everyone can kind of keep on the same page because the month of August is part of the third quarter of the year, but it's an extremely important month for our seasonal calendar as a whole and for sure, will help us a lot with delivering what we've been planning when it comes to result consistency. So to summarize, that's basically it, Mr. Jesuino and Mr. Ilson. And now I'll pass this on to Tulio.

Good morning, Sandro and everyone else for your presence, Ilson, Jesuino, and we're going to talk about our results now. Jesuino has already given us a pretty good overview. But just to get into more details about the specific points. So I think this first block on Page 14, we talk about the gross profit. And I think here, we've been talking to you guys for a few semesters, and I think the focus is really on consistency and a strategy that basically ever since the last quarter last year, we've been focusing on profitability. So throughout the second quarter, we've been very transparent. And at some moments, we had some sensitivity tests and analysis to be able to understand what would be the impact on same-store sales, and we understood the best path would be to keep the profitability path. And we weren't able to keep the same-store sales at the strength we needed to keep delivering the margin. So we understood the best path would be to continue to focus on this profitability agenda. Having said this, it was another quarter, as Jesuino mentioned, that was very consistent, balancing our gross margin and same-store sales growth. And so with that, we have a gross profit in the semester of almost BRL 4 billion. And a growth of 18% in the quarter and 17.2% in the semester. So now on the next slide, #15, we are bringing the overview of the operational expenses. And here, you can also see we've been trying to keep consistency. We know the company has been opening a lot of stores and working on different initiatives. And sometimes this is never actually very simple, right, especially in inflation moments and where other segments are maybe not in the same direction, right, in short periods of time. But we've been able to keep the consistency that's very important in this expense line. And here, we've also been working on ever since last year, some significant work with essential expenses for PIS/COFINS. And next year, we'll have the beginning of a tax reform, and it's really important to work on the PIS/COFINS credit until the end of this year. So it's an agenda we have been working towards, and we continue, of course, respecting this. And as we've been working on this initiative for very little -- very recently, we understand what are the risks and those that are really not worth it when you consider the jurisprudence. But another point is also something we've been working on more and more internally so that we can work with a higher level of depth. And in the last few years, we were able to transform our budgets with a [indiscernible] into the different segments in the group. The expense rituals have been working and also have been taking place, and we've been thinking about productivity, right? So always thinking and understanding how our business has its peculiarities. And we believe this is an important step to contribute and continue to contribute even with the EBITDA margin consistency agenda, as Jesuino mentioned. So anyways, having said this, it's a quarter where we have about BRL 2.5 billion of operational expenses and all of this is, of course, already considering the growth expenses of all of the new store operations and all of the processes for growth in our wholesale that we've been also disclosing to you. Moving on to Slide 16. We have the numbers of the EBITDA. Jesuino has already shared the main analysis points and points related to this consistency. An important point is just to remind you all that something that's contributed quarter-over-quarter with this consistency agenda is all of the work we've been doing for the past 2 years and the partnership with our suppliers, all of the different initiatives we've been working on in this sense. And it's, of course, something that's been growing at levels that's a little bit higher because it's been maturing every year, we have to find more opportunities and we get to know more about this and this -- and the interactions with Novo has also been contributing a lot to this. With this, we really help with the maintenance of profitability and consistency looking ahead. So then we have growth of 26% year-over-year and an EBITDA margin of 8% in the quarter, almost 8% in the semester of 7.9%. So this is a fundamental point about our profitability agenda and consistency agenda. So moving on to the next slide, #17. We have the net income numbers, BRL 349 million in the quarter and BRL 678 (sic) [ 668 ] million in the second semester. And so it's another quarter where we've been able to really have the income tax at levels that were very interesting, and this is something we've been dedicating a lot of time to as we redesigned the tax planning, and this is something that's going to continue to be alive, right? In 2026, we already start the same -- we already have the application of some different changes in the tax reform in Brazil. And this is something we must look at in the short-term, but also in the long-term when we consider strategies for this first turnaround block. And then about the net income, we also have another point, which is about the lease expenses. And I think here, it's also maybe worth getting a bit more details. And here, I'm not going to talk about lease expenses. But here, we should also consider the interest. And I think here, there's another point that's really interesting with the new store openings. And this block of new stores really added on to the lease expenses with about a bit more than BRL 16 million in this quarter, a growth of 54% year-over-year. And when we consider the calculations of the square meters, it's higher because in this space, -- and so that's all part of this strategy in this issue, right? So then you have about BRL 3 million additional expenses in regards to the anniversary here, it's a normal annual adjustment. And here, you have the new measurements of some leases related to related parties where we performed an adjustment in this quarter, and that adds to an increase of BRL 10 million. And then you have products also, as we mentioned here on the 24th of July. Also the depreciation of the leasings as well when we consider this block specifically within the financial expense and depreciation line. So moving on to Slide #18. We have the cash conversion cycle slide. And I want to call your attention to this slide specifically because when you look at the public numbers, we're seeing a cycle of 72 days. It's 2 days better than what it was last year and also 2 days better than the first quarter of this year. And so I think here, there are some interesting points we should consider. The first point is about the receivables that went from 35 days last year to 34 days. And we had an anticipation of about BRL 199 million because of the transaction with Novo, right? So when we created this, we brought in this mechanism for the anticipation of receivables, and that was incorporated also to Novo to be able to stabilize the company's cash position and then also, of course, entering into the working capital strategy as well. So here, you have an important point on receivables. And so in practical terms, if we consider these 199 days, and I think it's really important. When we consider this, we can consider this suppliers had an increase. And here, you can see that throughout the questions, the recurring number of suppliers was 50 days. Why did it go up? Because there was also an increase. And so when you consider the recurrence level was 50 days basically. Then also when it went to 47 in this second quarter, now we also see there was an additional movement, right? So in the first quarter, we had this supplier time frame or deadline, but then we increased the stock level. What we did is we really controlled stock purchases a lot. And also now in the anniversary month, which is the most critical stock management process in the company. So the stock levels went down, but there was also a mathematical effect of this. So because of this, we were able to see this effect of suppliers kind of pushing this downwards. So at that moment, we bought more and we ended up inflating this, but now we bought less, and we also reduced the short term for suppliers. And so we keep up this by saying that the recurring levels of suppliers would be 50 days. So because of the anticipation of receivables, the recurring values will be 36. And then with suppliers, we understand it would be -- recurring would be 50. And when we look at the stock, we understand the 85 days are recurring because of all of the work we've been doing not only in the second quarter, but also throughout the third quarter, which, in my opinion, and Jesuino mentioned, it's also the most critical, right, considering all of the anniversary ramp-up. So that would basically end up at the 85 days. So when we perform this adjustment, then we understand that it would add up to 71 days of cash conversion cycle. And what this is, is basically 76 days -- sorry, 36 days, which will be the receivables discounting the effects of the receivables anticipation, 50 days also and 85 days with a level that we consider to be recurring in the stock, adding up to 71 days. So from then on, efforts continue to be quite accentuated. And Mr. Ilson in his speech also talked about this from a strategic perspective. For the first time, the company really took a step into rethinking the eletro operation and really levered by this working capital agenda. And of course, there's an initiative here to be worked on in this segment. Besides the stock elements we've already mentioned, we've been really working towards this in the commercial area, also has a lot stronger impact in the short-term compensation coming from this indicator specifically. Well, moving on now to Slide 19. Here, we have the numbers. And so -- if you look at the indirect cash flow, I think we noticed that there is a working capital consumption. It's very important to explain. So what was this? Well, in the first quarter, we bought a lot of stock and we gained supplier terms, right? So in practical terms, it was 54 days from suppliers we registered in the first quarter. I remember I mentioned it would be close to 50, but these 4 days add up to the second quarter. So how much of these represent BRL 280 million. So we understand that from a working capital perspective, there was pressure among quarters of BRL 280 million that were paid in the second quarter due to this movement that was taking place. So the second quarter, as I mentioned, had pressure in the working capital because of the payment and the increase of supplier stock and also because of the payment terms we were able to achieve. So there was a displacement in the payment in the second quarter. And then in the next block, you can see the CapEx results and also the BRL 130 million of the Novo transaction. So that's why you have this cash consumption of BRL 473 million in the quarter. Then moving on to the next slide. I wanted to merge all of these different rationales. On the top part of the slide, what we see is clearly the number of the net debt at the bar, how this behaved throughout the quarter of 2024. And we can see that in '24, the number -- the period of the most cash consumption was in the third quarter due to the increase in stock and the anniversary. So we start buying normally in June, July. And so that's where you have an important payment in the third quarter. So most of the cash consumption last year was in the third quarter. And what we see at this moment this year, we clearly shifted the pressure of cash consumption to the second quarter because of all of this context I mentioned. So we mentioned that there was a clear cash generation in the company that was very different than the situation in July last year, where we had important cash consumption. So since we're in the middle of the month of August, we have pretty good visibility on how the cash situation is. And so why is this a lot more well, because you have an important weight on the stock management as well as for the variable compensation process. And so in our understanding, the peak of leverage that we understood in the third quarter with an increase of cash consumption of BRL 700 million. The peak this year was in the second quarter. And in the third and fourth quarters, we should generate cash because one thing that you don't give up on is that really the cash expansion needs to be done with our own cash generation. We're not going to focus on increasing our debt, right? Yes, for sure, today, this morning, we were having breakfast and looking at the cash flow, right? And so it's an important process, right? But I'm very satisfied here that, as you mentioned, the last update, there is an important curve there, and that should be quite relevant. So now we can move on to the next slide. So just a breakdown on the CapEx. We had about BRL 244 million in CapEx in the quarter. Of course, the biggest number is concentrated in new stores and then another relevant level also with the land and generally speaking, I think we've been keeping up with a pretty good pace when it comes to the cash scenario throughout the year '25, considering the expansion pace Mr. Ilson has mentioned throughout his speech, his introduction speech. And so I think these would be the initial comments. And now the team will be available to get into the questions. Thank you so much.

[Operator Instructions] Our first question is from Danni Eiger from XP.

I have two. The first is a point that I thought was really interesting. For the first time you guys are talking about this dynamic of capital allocation, looking at the store footprint you all have. Tulio even mentioned this when it comes to the opening. So when you consider these closings, are you going to have some possible conversions? And if you plan to reuse this for other formats you consider to be more profitable or if you also have other stores that are mapped out, not only in eletro but also in other formats. So just what you consider as potential value creation in one of these metrics here to be able to look into what we should expect as gains in the future? Then my second point is about the Novo Atacarejo. I know you still haven't brought too much information besides the closing, but if you could give us some info on what you've been seeing as possible or main gains that we should expect in the short term? And if you would have some visibility in the next quarter on the numbers. Anything you could share about how this integration is taking place would be great.

Well, I can start off with this about the store closing. It's important to get your question here, Danni, because we keep up analyzing eletro. We know that it's a category that's kind of moving downwards, and we've been monitoring this slowly to really unleash this capital and business that doesn't generate value. We're going to be assessing at all times. And what's most important, we are a company that's always looking at innovation and technology, and we've been developing other business channels. And of course, we're going to be taking advantage of this space in one of these channels to be able to bring in business that's a lot more profitable and scale up a lot quicker. So we've been keeping an eye open on this.

Well, now Danni, this is a great day to you as well. About Novo. On the next quarter, we're already going to be reporting with Novo already consolidated. Then Tulio can talk about this a little bit more. We've been working on some internal discussions and then Tulio will give you some more detail. We've already been mapping out different opportunities, and that's a super important point. And we're going to be focused on finding ways to have efficiency with the new company. There's some work taking place in this sense. And I think that will lead to great fruits, right? So that was mapped out, and this work is going to start off now. We still don't have any fruits reaped. But of course, we want to share these efficiencies in the next quarters. And so just as another initiative we've mapped out also is loss controls, and we have a huge initiative there working on this topic with the food retail losses. That's been really an important point for us in the last 3 years. The commercial area also mapped out, and we've seen a big opportunity for efficiencies and synergies. Sandro has been leading this as well, and that's another very robust point we've been mapping out. And in the same way, the marketing and trading, we've already been mapping out a way to find synergies and efficiencies. We have been working on this initiative. HR has been unified as well. And so generally speaking, all of these different initiatives for efficiency and synergies, we've been working on. And it's a very intense initiative with many different meetings going on in the last few days and months. And maybe you can give Danni a bit more clarity also about these results.

And I just wanted to reinforce this point on the share gains and the importance we have in the regions. Yes, no doubt.

And so just to add on, Danni, first of all, thanks for the questions. But as mentioned in the next quarter, we'll already bring in the numbers for this new operation. So of course, we're looking into the best formats for this, but how we can consolidate our numbers and the balance sheet. And so from the third quarter, not only the balance sheet data will be available, but we'll also be planning some communication with the market in a very robust manner to be able to share this information from a financial operational perspective and all of the main segments in the business to really help you understand this better.

Our next question is from João Soares at Citibank.

Two points that I want to share. We've been seeing the sector data, and we see the Northeast as a point -- has a bit of a relative weakness when you look at other regions like the Southeast specifically. So I want to hear from you guys. I know we always talk about this, but I think it's really important considering this deflation scenario of certain categories of food. And we should understand how you look into this dynamic, if it should be beneficial to improve purchase power of consumers and this growth organically is very important to understand. And Tulio, then it was really clear your explanation on the cash cycle and the adjustments required. But just to understand if we should already see this normalization, the expectation for the third and fourth quarters would be to generate cash, right? So we've started having some different negotiations with suppliers to match the treasury dynamics. And so it's important to understand the seasonality of the business, right? So just to understand how we can imagine the cash generation dynamic in these quarters, considering the history due to these effects that changed the scenario.

Well, let's say, the differences that in some points maybe stand out in regards to the Northeast and the rest of Brazil. I think it's worth highlighting to you if we're going to -- some of the points about how in the last quarters, we've been mentioning how the Northeast went through this readjustment in the ICMS rates that were very significant. So no doubt, there is an important point that weighed in on the performance of the Northeast in the last quarter. So as if this was not sufficient, the food inflation has been a growing factor as well. Of course, as you mentioned, it's a little more controlled, but still on a high end. And when we look at Nielsen data, we see that the food inflation in the Northeast is above the food retail inflation in the entire country and even higher than the food inflation. So we've been trying to control our internal inflation overall with a big effort to not pass along everything and really the commercial area has been dedicating time to this so that in this quarter, we were able to keep a more controlled level of internal inflation. But I think one point here is really important because it contributes to same-store sales as well due to this pass along not being everything we should have passed along the same-store sales has maybe a negative contribution for consumers, it's a big effort. We understand that needs to be made as it is important. Then we noticed consumers, especially in the Northeast being a little more rational, keeping their eyes open when they buy, being more selective when they perform their purchase list and consumers with a more restricted budget, searching for ways to maybe buy in bulk to save. And in the Northeast, however, we've seen a big movement searching for cheaper brands, more affordable brands. And I could even mention that we have examples. If you look at a cookie with filling, which is a very consumed product in Brazil, and we bought some cookies that were unknown in the Northeast, but now they're already a leader in the network. And so this built cookie brand is just growing. Milk is one of the cheapest brands we had to include in here also took on leadership in our overall chain. So if you look at like soap, powdered soap, you see the cheaper brands growing a lot, liquid soaps as well in the beginning of this year, we also bought cheaper soap looking at the market scenario, and these guys have already taken on leadership in the network. So there is this movement also in the sense, right? But even with this entire macro scenario, what we've been doing is we've been trying to do what we can do in the most strategic possible manner. Our anniversary starts now and in the Northeast all over, we've been going on the prime time with products and special sales and offers. And that's really an important milestone, right, to have a 3-minute TV film on prime time, right? So despite all of this in the scenario, we've been gaining market share, as Sandro just mentioned. And I want to say that the third quarter also starts with July that's very similar to what we've just reported. And August is, of course, a very special month for us as well. And it's a month where we try to be as intense as possible. And when you look at this scenario, well, up ahead, do you think this is going to get better? Well, it's difficult, right? And it's been even more difficult to foresee this macro scenario. But what I wanted to say with all of this is whatever we can do or what's up to us, we've been able to work on, right? And no doubt with this deflation market, the volume tends to grow. But we're very optimistic and the second semester historically is better, and we're working to keep the same pace. I hope to have answered.

Well, João, just moving on to your second question about the cash flow and the seasonality, as we've been working on intense initiatives for working capital, it's natural that we would have some specific impacts on the curve design and even something in the next year because the idea would be to continue to work on this topic intensely. And so that's where we -- until we understand, we've been really able to capture all of the opportunities in our hand. So just to make it very clear here, in this quarter, if we consider the redesigning from the first quarter to the second quarter, and so of course, that capital curve has been a little more concentrated this year in the second quarter. And the third and fourth quarters, as I mentioned, are quarters that this year will generate cash. The third quarter last year had a major cash consumption. But now why is it going to generate cash in the third quarter? Well, first, because you had stability, but also because we had major stock work, right? So we began with a more adjusted stock, and it was a lot more contained. We were a lot more careful with the anniversary purchases as well. we had opportunities also in this block. And for sure, it will generate cash. But then, of course, seasonally from a historical perspective, I think the anniversary point is always the point of caution, right? And from the first to the second, there's, of course, some stability, right, because that's where you really see gains. And so we've been able to build this curve throughout this year. I think that's going to provide a lot of clarity. And next year, we'll be reporting all of these elements and the intensities we've been able to bring in in-house, right? But then we'll bring transparency, of course, about this quarter-over-quarter.

That's great. So just to confirm those 7 days, we had considered as improvements in the year, in the full year. Would that still make sense?

Yes, yes, it does, exactly. And so we started the year with 77 days, and everyone's target is to be able to end with 70, right? So everyone here has been working for this purpose.

Our next question is from Rodrigo Gastim, Itaú.

Now we already have 45 days in the quarter. And so we already have some data from Nielsen. So is this related to what you're seeing? And also this year, should you have 2 anniversary months or just 1 month? That's the first point. And the second point is now as you have about 2 quarters or most of the year already launched, what's the level of comfort you have about this improvement of about 10% in working capital? And also I want to know how much of this improvement comes from this adjustment as well throughout the second quarter. These are the two points.

Well, Gastim, about the third quarter, July started off very similarly with what we've reported to you. So July was super resilient. And August, of course, we need to handle it in a different manner because we've been dedicating a lot of energy to this. But it's kind of the scenario I can share with you. So we're super optimistic, and I think we're going to be working on this a lot so that historically, it can be better. And we haven't seen so many changes in regards to this slowdown. We haven't noticed this contribute so much. But I think that until the end of September, a lot of things can happen, right? So that's kind of what I could share. And then about the anniversary, I think Sandro could talk more about this.

Yes, I can reinforce this. Gastim, this year, we chose to have 1 month of anniversary only with a lot of intensity and focused on this moment where and really providing the best productivity 1 month in September will rush to end the quarter without the anniversary [indiscernible], right?

And so on the second point about the working capital, what would be the level of comfort we have for this improvement? And so -- well, I think in every quarter, we've improved our level of comfort. So if we adjust these elements, it about 71 days. And when we look up ahead, if you consider the third quarter, the fourth quarter normally already generates cash and the combination of these two elements going from this scenario that I've shared with you makes us even more comfortable and confident. And then we all know we understand the amount of things we've been working on and the stock issue, all of the interactions with Novo as well. But of course, the more or less we've been seeing this working capital line. And so -- we have these different elements that contribute to this. And so when you consider the level of comfort, it's a lot greater, right? So that's where we kind of get our guidance from.

So then Tulio also just to add on, I wanted to mention to Gastim and to everyone watching us that we're super conscious of how much value we unleash in this pillar and how it's so important for us and how Tulio has really been bringing this point into the company. Sandro and myself have been dedicating our time to this, and we're being very conscious of the value in this pillar, and we're going to work on this from now on until we find the optimal point for this, which is probably kind of what we're looking at.

So just to connect both questions, good anniversary performance also helps with the stock. Then, of course, that also helps with the stock. If you look at this from a short term in the third quarter, we have -- we become more excited. And now I'm talking about short term, right, very short term, then we also consider the variable indicators.

And so when we see where we're headed ever since we've started, it's really incredible to see our results, and we're very happy about our journey in this pillar, and we're going to try to find the most optimal scenario for this.

Our next question is from Ruben Couto, Santander.