Guararapes Confecções S.A. ($RIAA3)

Good afternoon, everyone. Thank you for joining us for our First Quarter 2026 Earnings Conference Call. As you saw in the results we released yesterday, it was another quarter of progress. And to tell you more about our strategy and everything we're doing, we have Andre Farber, our CEO; Miguel Cafruni, our CFO; and Francisco Santos, the Head of Midway Financeira. We'll begin with a presentation, and then we'll open for the Q&A session. [Operator Instructions] Before turning over to Andre, I will just make a few initial remarks. This conference is being recorded and has simultaneous interpreting. The presentation will be in Portuguese, and the English version is available on the IR website. Any statements regarding projections or outlooks reflect the management's expectations but do not guarantee future results. And lastly, the data presented here in our consolidated results excludes the shopping mall's results from the first quarter of '25 for better comparability. Now I turn the floor over to Andre.

Thank you, [ Iza ]. Good afternoon, everyone. Thank you once again for joining us today. It's a great pleasure to have you once again. We're going through a very special moment at Riachuelo. In May 26, I am now celebrating 3 years at the company, and I have called this journey on the company as a major transformation process. I joined as CEO in 2023 and many things happened since then. I'll go through some of the highlights as a reminder of the process we're going through and what we're building here at Riachuelo. So back in August '23, we started making changes to our Executive Board. We created a fashion department reporting directly to me and a marketing department also reporting directly to me. So that was a sign of our focus on fashion and on the Riachuelo brand that was the beginning of something else, a declaration of what we will build over the coming years. Also in October '23, we started ramping up production at our factory. We know that Riachuelo has a strategic edge in having an integrated supply chain and using the factory well makes a huge difference to our bottom line. We have been showing that over the years, and that's a process that started in October '23. And there was also a period of operational discipline and investment. In December '23, when we closed the books, we generated BRL 1 billion in cash that year, which helped us to deleverage the company. and we continued making changes. Moving into 2025. We relaunched our culture in mid-'25, and we relaunched the Pool brand. This is a brand in our portfolio that we value greatly. This is our brand for All Things Denim. In December '25, we relaunched the Riachuelo brand with a pop-up store in Pinheiros, a very important moment of brand evolution where we revised our logo and our color. You can see everything in green here. And these are examples that started with the appointment of the marketing department back in '23, followed by the brand relaunch in late '25 and all of these changes that you can see today and that are generating very positive results. Furthermore, during our transformation process, we stated our strong focus on fashion and on Midway. I've talked about that in the past. And as a result, at the end of last year, we sold Midway Mall. As Iza mentioned, the results you'll see today for comparability with last year exclude Midway Mall. But I also want to highlight that in our focus process, we also made some trade-offs. And one of them was the sale of Midway Mall at the end of last year. And we continue to evolve. There is still a lot to be done. And this is a process that has just started, so to speak. It's like we're on day 1. It sounds a bit cliche, but I feel that everything we have done so far is just the first seeds of everything that Riachuelo can still achieve. So in '26, we changed our ticker valuing the Riachuelo brand so much. So we also changed the company's ticker. And last week, we opened our new store format in Curitiba. We had already tested the format in Pinheiros at the end of last year during the brand revitalization. And now at the Barigui Shopping Mall in Curitiba, we launched the Pool model, and I'll talk more about that later. So we continue with great optimism, a major transformation process in which Riachuelo has evolved significantly and delivered very positive results. But now let me give you a summary of the results for the first quarter of '26. It was another robust quarter. It has now been 11 consecutive quarters of same-store sales growth, once again in double digits for apparel. So we're very proud of this number, which is the result of this focus on improving fashion and improving operations. And we did all that while improving margins. Apparel margin reached 54.9%, up 1.2 percentage points against the first quarter last year. And we also had 10 consecutive quarters of margin expansion. So 2.5 years of consistently expanding our margin. So we reached a record Retail EBITDA for the first quarter, BRL 135 million, up over 20% year-over-year with an 8.1% EBITDA margin, a very significant increase as well, and this is the best ever first quarter EBITDA in the last 9 years. So this is a lot of progress, and we're very proud. Our financial operation remains very solid and consistent as we've been saying. Riachuelo is made up of 2 core businesses, the Retail core, Fashion and the Financial core. In Q1, they delivered similar results, BRL 135 million and BRL 133 million with Midway growing around 6% in another very consistent quarter. As a result, the consolidated group EBITDA was BRL 268 million, up 14% and a consolidated EBITDA margin of 11.5%, also an improvement compared to last year. We have achieved profitability in the first quarter for the first time since 2020. We had not posted a profit in the first quarter since then. So this is another major improvement showing all these solid results. Now next slide, I want to highlight our Retail EBITDA evolution. We went all the way back to 2017 when the result was 0, and we have been evolving consistently. We had the shutdown and the lockdown during COVID. But then from 2023 onward, we went to -- from BRL 39 million to BRL 135 million, an improvement from 3.1% to 8.1%. And in absolute numbers, we increased from BRL 39 million to BRL 135 million, an improvement of 3.5 percentage points in absolute terms. So a very significant improvement in our Retail EBITDA. Now let's move from EBITDA to net income. Here, you can see the last 4 years on an LTM basis. So we came from a loss in '24 and this number is -- actually a loss was in '23, and we practically doubled our LTM over the last 12 months, reaching BRL 494 million with this combination I mentioned today, the core Fashion business growing with margins and Midway, which is a part of our business with very solid results as well. So I'd like to show you now the consistency of our strategy, and I will break down our strategy into the pillars for you once again. Our strategy has 5 pillars. The first is experience. This pillar focuses on in-store experience progress. So you've seen the launch of the new store, product evolution and e-commerce experience. So we've been investing heavily in this first pillar, products, launches, stores and e-commerce. And the second pillar builds upon this. And we see many growth opportunities in what we call our footprint. We know that Riachuelo started in the Northeast of Brazil, and it has a more modest presence in the South and Southeast regions. So we see opportunities to open stores and to renovate stores using this new model that comes from the experience pillar. So this will allow us to extract more value and generate revenue growth through our store base, whether through new openings or renovations. And the third pillar of our business is the fashion efficiency pillar. We have an integrated supply chain and many processes that make fashion work, planning, pricing, overall business management, all of that. And we've been investing heavily in various initiatives under fashion efficiency in order to make the factory more efficient and better connected to retail, pricing strategies, planning strategies. There's a lot, and all of this falls under the fashion efficiency pillar. Our fourth pillar is Midway Financeira. As I've been telling you, Midway is very important to us. So we have a series of initiatives to continue supporting Midway's growth and efficiency. So this is the company's fourth pillar. And the fifth pillar looks at our business as a whole. Our capital structure an efficient business with good return on assets and good return on investment. And everything we do is done with great investment discipline, always focusing on returns. We have been discussing these pillars for some time now, and we presented our pillars to you at our Investors Day in December last year, and we continue in a disciplined and consistent manner to work on the same pillars in the company's day-to-day operations. So moving on to the next slide. Here, you can see some of these evolutions, especially when it comes to the experience pillar. We evolved our store. As I told you earlier, we opened a store in Pinheiros in December last year, just a short time ago, 3.5 months ago, and that store has been a success. It also drew from the new pillars of the Riachuelo brand evolution. And last week, we opened a second store in this format. This is the store you can see in the picture at Barigui Shopping Mall. And I want to give you a bit more detail so you can get to know the store. The store is located in Curitiba and some of you haven't had a chance to go there. So let me show you a video about it. I'm here today live from Curitiba checking out the new Riachuelo store, which is also our new concept store that we intend to take across Brazil. More than a space transformation, this is a major strategy evolution. The store values experience, product, the senses and the feelings. There is great attention to detail, and there is a lot of history of what we have done at Riachuelo, but also stores of those who are doing it today, those that are making it happen. It feels me with pride to see the evolution of the story. It all began last year in Sao Paulo with a pop-up store in Pinheiros, a much smaller store, just 250 square meters. Now it's taking shape in a much larger size, 1,000 square meters in the city of Curitiba. And this is just the beginning, the beginning of a story. This is a store we intend to take to many other places in Brazil. But for those of you who are in Curitiba, come and see it. I hope you like the new Riachuelo store. So this is just the beginning. This is our new store. It has now gone to Curitiba, and it will go to many other cities in Brazil, as I said in the video. And the store is our main stage. It's where everything happens. I tell our team that the store is the temple. That's where the magic happens. But inside the store, we have our products. And within our experience pillar, we have been doing a lot of work and investing heavily in product evolution. We started the year at full speed with innovations and products. So let me show you another video with the highlights of what we've been doing here to support this great experience and product improvement. Riachuelo continues to evolve in fashion, focusing on what matters most, the strength of the brand and the product. We started '26 with a historic swimwear collaboration with Triya. In April, we marked our presence at Rio de Janeiro's return to the official Brazilian fashion calendar as a sponsor of the Rio Fashion Week. The first Pool show, a collab with [indiscernible] took over the runway, and we were also alongside the biggest names in Brazilian fashion. This is the look we created with Riachuelo. And the news don't stop. For Mother's Day, we launched the collab with Silvia Braz, which has broken record in the first hours of sales. It has her signature. And this week, we present the partnership with Lenny Niemeyer on pieces that plan sophistication and original design. The Ultra Line was not left out. Our tech-enhanced basics got new updates with the Ultra comp collection. This is brand and product evolution and Riachuelo is increasingly connected with fashion. So as you can see, we have been making many moves on the product front. Collab launches with various designers and personalities such as Silvia Braz, Niemeyer, which we launched yesterday, and we are also investing in Ultra and working with the best fashion designers in Brazil. We're very proud of this, and we want to continue raising the bar for our products so that the Riachuelo experience gets better and better and so that we can continue to sustain that same apparel same-store sales growth we have seen for 11 consecutive quarters. But everything we do has a lot of impact. And I want to come back to this topic in a very brief way. I want to show you that everything Riachuelo does has a huge positive impact on Brazil's fashion supply chain. And Riachuelo fashion is very impactful. We ended last year with 33,000 employees. And our team is very diverse. Our C-level is 42% women. And we believe that for every job we create, we create another 5 to 6 indirect jobs. That amounts to around 190,000 jobs. And we have a very special project in the back lines of Rio Grande do Norte called Pro-Sertao. We have 94 workshops there. And alone, they generate around 3,000 jobs. In the cities and towns where we operate there, we are the largest source of income. So this is in textile fashion in the state of Rio Grande do Norte and across Brazil because we are the largest fashion employer in Brazil. And our factory has been using 100% of renewable electrical power. This is a major business evolution for us as well. And we have supported different projects across 7 Brazilian states. We generate jobs in Brazil and impact with positive results, but we also believe in this positive cycle that Riachuelo generates for the entire fashion supply chain in Brazil. And as a recognition of that, B3 has acknowledged us for our advances in the area. We just moved up 24 positions in the B3 ranking. We are now in the top 30. So we're very proud of this market recognition of Riachuelo's and all the potential that we believe Brazil is doing things the right way, which is what Riachuelo has always done and will continue to do. Now let me keep going. I would like to wrap up by talking about our ambition, our ambition in numbers. Our measure of success, and I have already mentioned this at our Investor Day, but I would like to reaffirm this to you. We want to continue delivering positive apparel same-store sales quarter after quarter, and we'll continue working on that with a strong focus on fashion and experience. And we also believe in a significant revenue growth potential, whether through renovations or new store openings. So we'll keep track of that. And we've been working on our supply chain so that we can continue expanding apparel gross margin. We always get the question, how much more room is there to grow? As you can see, the journey is long. We've been working on this for 3 years. We started planting the seed in August '23, which led to the results we see now with the stores and the same applies to everything we do. Things take time to mature, but we already see margins improving significantly. And within our strategy and our numbers, we continue working to improve apparel margins. And Midway is also very significant to us. Our numerical ambition is that Midway accounts for 30% of our EBITDA and net income results. So Midway is very important. We'll keep track of that. And we also see an opportunity at the company to grow through improvements in our capital structure, capturing efficiencies and growing net income faster than EBITDA. So while we'll continue growing EBITDA, we see potential for even greater growth for net income. And last but not least, we'll continue evolving our capital structure. There are opportunities here so that the company's return can keep improving. So translating that into numbers, these are the numbers of our ambition. These are the metrics we track. With that, I finish my presentation, and I will return for the Q&A session. Now I turn the floor over to Miguel, who will go into a bit more detail into our numbers and talk about our first quarter performance. Thank you very much.

Thank you, Andre. Good afternoon, everyone. It's a pleasure to be here once again. Thank you, Andre, Iza and Fran. Starting with our Retail performance. I want to talk about apparel same-store sales first. As Andre mentioned, that is 11 consecutive quarters, another quarter of double-digit growth, 10.1% growth in apparel same-store sales, an important and robust increase, reinforcing our consistency and our value proposition. Now looking at the recent first quarters, we see that for the third consecutive year, we have delivered over 10% growth. So '24 against '23, we grew by 10.5%. The following year, we grew by 12.8% and now 10.1%. If you stack the growth over the last 3 years, that's nearly 40% cumulative apparel same-store sales growth. This shows our focus on fashion and our very consistent operations. Now apparel gross margin, also very relevant historical trend, 10 consecutive quarters of apparel gross margin expansion. We have reinforced the importance of the factory and the work of our integrated supply chain. Our factory processes are very important and consistent. In the first quarter of '26, we had almost 55% in apparel gross margin, up 1.2 percentage points year-over-year. On the next slide, we also show you a breakdown of these first quarters. We can see that we have over 5 percentage points of apparel gross margin expansion. Compared to the beginning of this transformation back in '23, like Andre said, in '24, we delivered 2 percentage points of apparel gross margin expansion in Q1 '24 versus Q1 '23. Then in '25, another 2 percentage points of margin expansion and now again, 1.2 percentage points, reaching 55% margin. That makes us very proud, very consistent top line and gross margins. Now let's look into Retail EBITDA. I'd like to provide a lot of clarity and transparency on how we've been achieving the sequential gross margin expansion. This 1.2 percentage point expansion year-over-year comes from a significant capture of internal levers, better use of the factory and increasingly well-oiled supply chain process that further integrates our operating model, and we continue to benefit from our focus on core fashion apparel categories and from lower markdown levels and improvements in our pricing process. This results in a record Retail EBITDA for the first quarter. At the beginning of our transformation journey, in Q1 '23, we were at around BRL 40 million and 3.1% Retail EBITDA margin, and we have ramped up significantly, delivering almost 5 percentage points of Retail EBITDA margin expansion. Quarter-over-quarter, there's also significant growth and expansion of over 1 percentage point, and we have now reached BRL 135 million in Retail segment's operating income. Now Financial Services. We're also very proud of the track record and quality of our financial arm. Net revenue from our Financial Services grew 7% in Q1 '26 against Q1 '25, reaching BRL 660 million, an important EBITDA growth as well, BRL 133 million in Q1 '26, up almost 6% year-over-year when we achieved BRL 126 million back in '25. This is driven by portfolio expansion. Our portfolio grew by 13% in the quarter. We've been talking a lot about responsible, disciplined growth in our 2 main businesses within the financial arm. The credit card portfolio grew 11% (sic) [ 12.9% ], reaching just over BRL 5 million in the quarter. And there has also been growth in personal loans, reaching almost BRL 1 billion in Q1 '26, up 23% year-over-year. We continue with good and healthy delinquency indicators. We are now showing you the breakdown of short-term delinquencies, you know the gray lines and the long-term loans in credit cards or the orange line. So you see we are at healthy levels. There is some seasonality in the first quarter, but we see controlled levels, both in short-term credit card delinquencies, which went from 7.6% in '25 to 7.1% now in Q1 '26, very well controlled. And in loans, we went from 20.9% in Q1 '25 with good short-term control coming in at less than 10%, 9.8% versus 12.1% last year. And the next indicator is also very important and critical for credit quality. We've been telling you about the performance of loans in recent quarters, the gray line here and the cards, the light orange line, and we see that both are very well controlled. For cards, it has remained at 4.1% in recent quarters and much more efficient than what we did in Q1 2025, which was at 5.5%, a good and well-recognized level. And these curves have some natural seasonality, but we go from 5.7%, 6.2% to 7.2% in March '26. Last year, we had 8% FDP (sic) [ FPD ], and this is within our guardrails, but that has fallen to 7.2% with these lines also trending lower. This shows that we've been very disciplined in our origination and the performance of the new vintages reinforce this behavior. Now let's move to our consolidated results, EBITDA, net income and cash generation. These numbers are comparable without the effect of the shopping mall sale last year. So we reached in Q1 '26, BRL 268 million, 11% EBITDA margin, up almost 1 percentage point in EBITDA margin year-over-year. And when we do a breakdown here, we go from a margin that was below 10%, actually 9.7% in '24 to 11.5% in '26. And what makes us very proud is this change in the level of our bottom line. In Q1 '25, we expected it to be a loss-making quarter for the company. So we focus heavily on these bottom lines, and we have now delivered BRL 46 million. Actually, we went from BRL 50 million in losses in '25 to BRL 5 million in net income in '26. We know that there is some seasonality, but the first quarter, which is more challenging, we are above the green line here with a profit. First quarter of profits after 6 years of losses in the first quarter of the year. Now moving on to cash. This is a quarter that is more challenging and burns more cash, but we generated BRL 100 million more in operating cash than last year. So we worked hard on the use of capital. And operating cash flow was BRL 34 million (sic) [ BRL 74 million ] lower in Q1 '26 than in Q1 '25. Now financial leverage, we continue very responsible and controlled in maintaining a healthy leverage level for the company. We told you that 0.3 to 0.8x is a healthy level for a balanced capital structure for the company. And here, excluding the mall effect and the additional effect at the end of '25 in which we anticipated a resolution and made significant profit payment in December '25. So for better comparability, our net debt of BRL 1 billion comparable to previous cycles is BRL 747 million. So BRL 353 million in anticipated dividends. Part of that, we would pay in April '26. These were dividends allocated to the mandatory minimum dividends from the prior year. So we anticipated them in December. So adjusted and comparable leverage came in at 0.4x post-IFRS and 0.6x pre-IFRS EBITDA, which maintains a very consistent track record. Now I want to close by reinforcing the message of our ambition. That's what we work for, and that's why we're so focused on continuing to translate this ambition into numbers, and we expect to continue achieving good results for the company. We are working to be increasingly consistent, and we want to continue growing apparel same-store sales, opening stores, renovating and expanding margins, keeping Midway strong, and we expect to see this very positive cycle of the company to continue for a good stretch. Now I'd like to wrap up and hand the floor back to Iza so we can start our Q&A session.

Thank you, Miguel. We'll now begin the Q&A session. To ask our first question, we invite Rodrigo Gastim with Itau BBA.

I have 2 questions on my side. The first is, Andre, can you please tell us about the winter dynamics last year? Because this is a topic investors have been talking a lot about for Q2 and Q3, the baseline for comparison and a strong winter last year. But I want to hear your take on this. Is that a harsh baseline for you, winter last year? I think you didn't have any growth in winter products last year. So is that actually a hard baseline or -- and more than that? Can you now use the factory during the winter season to react fast? Can you tell us about your plans for the winter season? That's my first question. On the second, about gross margin evolution. I really enjoyed seeing the grade that you shared. But can you tell us about the 80 basis points when you talked about your factory processes and improving your operating model, what does that mean in practice? What were the main adjustments to the model that have brought this efficiency improvement? And how much of that has already been captured? Have you slowed down in Q1, but do you expect some coming quarters of consistent growth or you have already captured most of it? And what is it that you expect moving forward?

Thank you, Gastim. I will answer the first question and then turn the floor over to Miguel. Well, this has always been like that. But with all of the climate changes, we've seen things changing quite a lot. Last year, the winter season came early, and that helped us in the end of March, April and May. But then we faced problems in the end of June, July and August with a shortage of winter products. So this year, we've seen some warm temperatures. Winter hasn't arrived yet. And next week, the Southeast is probably going to face a cold sell. So I think we have to look at the whole picture rather than the snapshot. If we look at each month, we will see a strong April last year because we were having lower temperatures. And this year, April has been warmer. So we sold fewer winter products. But in spite of that, our sales continue very solid and consistent. So we're very optimistic for next quarter's results. We've been evolving our experience in our products quite a lot, and we expect to continue achieving good results. Now about reactiveness. Yes, we have prepared better this year, part of our products still come from abroad, but part of them now comes from Brazil and another part from our factory. So we have more flexibility, when we see demand fluctuations, we are quicker to adjust. So we feel prepared for winter this year. We started with warmer temperatures, but we see so much product movement that the non-winter products are doing really well. So we are optimistic about the results. Now I turn over to Miguel to speak about margins and the opportunities we have ahead of us.

Thank you, Gastim, for your question. Well, in margin evolution, there are many levers and initiatives that reassure us, and we track them from up close. So we started back in '23, with the first stage at the factory to bring in more volume to our factory. So compared to where we are today, we are now at a very healthy level with very low idleness at the factory. So this led to an important gross margin evolution. And we are now at the second stage of another project that clearly defines the entry effect and the margin effect, what we are doing at the factory, what we'll continue importing or buying from suppliers. So we're focused on margins, and there is also a matter of responsiveness, which is very important to us. Last year, we launched a product called Fast Response, which makes the factory more responsive. So we go into the collections with a good part of the procurement to be made during the season. And so we can be more precise in the inventory we send to the stores, both in cluster allocation and collection timing. So we don't need as many markdowns as a result. So there are many initiatives as part of this integrated supply chain led by supply chain, but also sponsored and supported by the whole organization. And we feel confident that this will continue at a consistent pace, expanding gross margins, and we think there is still a lot to be done in addition to what we've done in the last 2 to 3 years. We think this is still promising, and we can continue evolving gross margins at consistent and significant levels.

Our next question is by Danni Eiger with XP.

Congratulations on your new store. It looks amazing. And I have 2 questions here on my side. The first is connected to the new store, but I want to hear from you. Can you tell us about the strategy, not only short term, but the way forward when it comes to this repositioning, so to speak, of the brand? And can you connect that to your product mix strategy, categories, pricing? Because the story you showed, I understand this is not going to be like that in all stores, but I think it's bringing a different identity, a bit more sophisticated, focusing on brand and fashion. So do you have a 2 front for pricing and product pyramid? What are your goals? And how do you intend to get there? And we still see a price-sensitive consumer with pressure on their incomes. So can you talk about the optimization of electronics and homeware as well, how this connects to the product pyramid? And my second question is about capital structure improvement. Where do you see room for improvement there? Can you tell us about the opportunities in capital structure?

Sure. Thank you, Danni. We're also very excited about the new store. It looks amazing indeed, and it has achieved positive results so far. The transformation process at Riachuelo started by focusing on the brand. Back in '23, we understood that the brand had to evolve, but respecting everything that the brand has always been, a Brazilian brand with local creativity and collabs, celebrating Brazil in the national fashion. But now we're reaching a stage in which we've been able to create a store that is inspired by these values and attributes, and it looks amazing, like you said. So this has been the process. The store was made to improve customer experience and to make sure our products are visible so that consumers can buy more and can see the story behind our products. So right now, our goal is not to increase the average ticket. Of course, that's welcome in the medium and long term. But Riachuelo wants to be democratic. We -- our footprint is across the country, and we think that we can continue as a democratic store with a better looking store. And as our products evolve, I think that we have the optionality of increasing the average ticket of our products. That's not compulsory for us because the store has shown positive results, maintaining the same average ticket, but all companies with a strong brand and good experience have the optionality of increasing the average ticket, but that's not in our plans for now. Now about the other categories, we are very much focused on fashion. We've been making some choices. We stopped focusing on electronics, and we've been increasing our focus on fashion. So we are analyzing this on a store-by-store basis. We still see potential in homeware, but we want fashion to come first. Now about capital structure, I turn the floor over to Miguel so that he can answer the question.

Thank you, Danni, for your question. Well, we still see some important pathways for us to go through in our capital evolution. Taking a step back and looking back at what we've done in recent years, we deleveraged the company. We went from 2.5x EBITDA to about 0.5x as we said earlier, and we sold the mall, which was a very important asset that contributed to almost all line items in our balance sheet, revenue, EBITDA, profit and cash flow. But we thought it made sense to do this so that we could focus more on our core businesses to continue expanding EBITDA, profit, generating cash and evolving our business without this important asset. We still have other assets, some stores that we are analyzing. But priority, I mean, is capital advance, especially when it comes to Midway. We launched the [ FedEx ] of personal loans last year. All the products are still in-house, and we're being very diligent to make sure that this portfolio will perform like the rest. And we see the opportunities of other FedEx being launched in the future as consigned loans. And in '27, we have the first installment of the debentures that we issued late last year, going from [ BRL 240 million to BRL 0.95 billion ]. And we also see opportunities in this new exchange window and debt renegotiation, maybe some lines that are more competitive and that can bring additional benefits to our capital structure.

Great. That is very clear. Congratulations on your results.

Okay. Next question is by Guanais with BTG.

I have 2 questions on my side. Andre, can you explore a bit the initiatives and the brand buildup that you've been doing? Do you see more opportunities for store expansion? I want to understand what you're thinking in terms of expansion moving forward in addition to the new store model that should attract productivity gains. Now this was a positive highlight in the quarter in terms of growth and credit quality. So can you tell us about the product opportunities at Midway Financeira, Francisco? And within your current product portfolio, do you expect any growth considering the macroeconomic scenario in Brazil?

Thank you, Guanais. I'll answer the first question about store availability. So we always see the returns we need in order to open a new store. We expect a return of 25%, not considering the Midway business. When we include Midway in return that is actually over 30%. So we always have to make sure that in our projections, we get returns of at least 25% for retail only and over 30% if we include Midway. So early last year, we carried out an analysis that showed an opportunity for Riachuelo to open around 150 stores in Brazil, especially in malls. So we decided to open from 15 to 20 stores a year. That's the intended base. And that's what we did last year. We talked about that in other opportunities, and we continue with this execution. This year, we continue with our opening guidance of 15 to 20 new stores this year, many of them are under construction, and we continue confident in this process. We think this will help create a very positive top line layer diluting fixed costs. I apologize. Now I turn the floor over to Fran, who will answer your question about Midway.

Guanais, thank you for your question. So yes, the macroeconomic scenario is a bit challenging, and we've been talking about that in recent quarters. In spite of that, we've been able to navigate this scenario well. If you look at our indicators, the portfolio is growing at 13%. So we are growing and decreasing the provision for bad loss over portfolio. So we've been able to select customers well and price better. And as a result, we've been able to continue growing in spite of the harsh macroeconomic scenario. When you look at our product shelf in our portfolio, you see that the personal loan business is gaining share. It has an accretive ROI for us now. So we've been exploring the possibility to grow our personal loan business. In absolute terms, it's growing a bit more, but that's because loans have been gaining representativeness. And we designed the quarter and it is within our guardrails. We started operating with consigned loans now. We've been doing that since late last year. This is still preliminary. We still haven't broken down the numbers, but we're testing customer acceptance and channel distribution in the app and in stores. And the performance has been satisfactory. We're happy with what we got so far. So also for consigned, we see a significant opportunity to grow our top line at Midway with a lower risk. So even with this macro scenario, we continue optimistic. The first quarter was very much aligned with our budget, and we continue optimistic to continue implementing the growth avenues at Midway throughout the year.

Our next question is by Vinicius Strano with UBS.

I have 2 questions here on my side. First, can you tell us about store renovation opportunities? What are you planning in terms of uplift, in terms of store renovation and CapEx? And now about costs, the 6x1 scale change, is this going to impact your factory? And also when you hire your factory personnel, is that at an appropriate level to meet your volume demand? And what about the efficiency gains implemented at the factory? And one last question. Looking at Midway, it's growing and penetration in Retail sales. So can you tell us whether this is because consumers are now asking for more credit and being accepted at your acceptance criteria? Or are you now more open to financing retail sales?

Thank you, Vini. I will take your question about renovations and also the Midway question. I will start with the Midway question briefly, and then I'll move to renovations, and Miguel can talk about the 6x1 scale and costs. So Midway, we haven't been opening more credit. This penetration is not related to a higher credit appetite, but actually about the value proposition of our card and the connections we've been doing between the financial business and the fashion retail business, we've been operating this machine better. So this is actually related to our value proposition and not with an increase in credit appetite. Now about renovations. What are the opportunities we see? Like I said earlier, we started this process with the pop-up store in Pinheiros in December last year. 2 weeks ago, we opened the store at Barigui mall. And we are -- we have 2 stores. We're going to renovate the first level and the second level will be renovated later. So we're still understanding this new format, but the first impressions are very positive. We are waiting for the numbers to settle to do the math, but we believe that the results confirm one of the pillars of growth for the future as store renovations. And we continue with the same parameters that we have for store opening. We demand a high tier above the cost of capital to approve any renovation because we've been very disciplined. And so we expect double-digit growth because that's what's going to offset the cost of capital for the renovation. So renovation costs less than a new opening. So we are still working on the finishing materials to make sure that before we scale the renovations, we make sure it's within a good cost basis to preserve returns. So that's our vision. Now I turn the floor over to Miguel, who will talk about the 6x1 scale. And I don't even remember if there was another question.

Yes. Thank you for your question. About the 6x1 scale, we are tracking these movements closely, and we've been making many initiatives, implementing initiatives at the factory and at our store operations since last year so that we can prepare and test some new models, starting with operations and then going into factory. In operations last year, we implemented a project in which we transitioned the fixed work hours of our store teams to flexible working hours. So we don't have to start a Friday with 20, 30 or 40 people at a store because they get in at 10:00 a.m. and leave at 2:00 p.m. So we can start with a smaller team early in the morning. And then at the end of the day, when we have more volume, especially in malls, then we want to adapt our scale to make sure that we have more people at the store at peak hours. So we started the workforce management project in the registers to align with the volume of customers at the stores and decrease waiting lines. So we started with this pilot in the registers last year. And now we are doing a pilot and the sales lobby. And we've been implementing a 5x2 scale 44 working hours a week, but rather than going in at 10:00 a.m., they will start a bit later and leave later as well. And at the factory, we've been working to reinforce the partnerships we have and the beautiful work we've been doing for some time now with the sewing factories in the Pro-Sertao program. And we've been working with government organs in the state of Rio Grande do Norte, and we've been investing in machinery that make the productive process lighter and increases productivity. When you're sewing shirt and things like that, we've been investing to mitigate this impact so that we don't lose productivity. So we're keeping track of all of that from up close.

Our next question is by Joao Soares with Citi.

I would like you to explore 2 points. The first, pricing. We have not been seeing an aggressive movement, so to speak. But at the same time, in our surveys with consumers of apparel, we noticed that price has been a problem, especially with local players. And we know that there is an inherent risk of the government lifting the federal taxes to cross-border players. So what is your take on the pricing movement today? Is there any need for adjustments? The FX rate is helping. So do you see room to be more aggressive? Or you think that this can impact the Riachuelo product quality perception? Can you tell us a bit more then about pricing? And the second question, personal loans, okay, that increases profitability and ROI, but the environment is very competitive with fintechs and the payments market. So is your product competitive today? And what is the value proposition of your product? Can you tell us a bit more about personal loans?

Thank you for your question. Well, actually, the landscape is quite competitive, but we have a small share of the market only. So when we see the addressable market of customers that come to our stores and are buying with our cards, our penetration is still low with those customers. So we believe we have a competitive edge because our cost of customer acquisition is very low because customers are already there in stores or on the app. So since we already have a relationship with the customer, we can price our loans better. So it's now 0.8% to 1% credit card market share that we have and Riachuelo is at 4% or 5% and our personal loans business is at 0.3%. So we have a huge addressable market. When customers come to the store to buy a product, we can grow our loan business there with a good customer selection. When we open the credit portfolio, we grow even in lower risk customers for whom we can offer better prices. So yes, this landscape is very competitive, but we have the customers already in our stores buying from us for a long time. So this has enabled us to increase our penetration with those customers and to do that with great profitability. I agree with what you said, Fran. And the profit pool of Financial Services in Brazil is huge. So if we capture a bit of that share, it can be worth a lot. And the number of companies that can find this niche and do this well can generate a lot of value. And our competitive advantage is something that many people cannot see, which is the very low customer acquisition cost. Many companies have to attract customers on the digital platforms or with other suppliers and our CAC is almost 0. So when we combine these 2 elements, we have a strong competitive advantage at Midway. And now talking about price. Our mission is very aligned with the democratization of fashion. So when we look at surveys and our price evolution in recent years, we haven't been increasing prices much, and we've been very competitive. We improve fashion, we improve our products, and we continue competitive. And you might think, oh, you're improving the product, but you're not increasing prices, so how does that affect your margins? But we also see a margin expansion 10 quarters in a row. So having said that, looking ahead, I see that regardless of what happens in the competitive market, we'll continue working on those levers and a margin increase and the better use of our factory will allow us to navigate a worse competitive scenario in case it happens. So on one hand, with margin expansion, we can be more aggressive in prices and the integrated supply chain protects us. And on the other hand, improving product and experience also protects us from different types of competition, 11 quarters in a row of growth. And everyone talks about the tax for -- taxes on cross-border players. Of the 11 quarters, only [ 6.5 ] of them had taxes on those cross-border players. And so that shows that we are not reliant on this to grow. We've been growing double digits in apparel, and we continue confident about our mission. We know that if we improve fashion, improve products and continue working on the levers to improve margins, we will have great robustness, and we will be more and more prepared to face all kinds of competition.

Amazing. Just a follow-up here. When you look at personal loans and all this growth, I understand there is an issue of ROI, but what is the result of this on your Retail sales?

Well, we do not operate personal loans, thinking about this part of the ecosystem. In other cases, of course, we have products aimed at boosting retail, but not in the case of personal loans. Personal loans is supposed to generate value on its own.

Okay. Next question is by Pedro Pinto with Bradesco.

And I also have 2 questions. The first, can you tell us about your capital allocation agenda? Logistics is gaining space, and we saw that happening also with the CapEx this first quarter. Maybe Miguel can give us an idea of the magnitude, either in nominal numbers or percentage numbers of how this logistics CapEx can impact you? And more than that, what impact can we expect on the business? What are the milestones and KPIs that we can track when it comes to logistics CapEx? Now my second question, Andre talked about fashion at the center of everything you do and then homeware at the expense of electronics and other products. But within this context in which gross margin continues to be a strong highlight, how the different categories have helped here? And can you tell us about telecom phaseout? And in the subcategory of apparel, is there anything boosting margins a bit more than others? These are my questions.

Okay. Pedro, thank you for your question. I'll start with your first question. Our DC was created back in the 2010s, and it's highly automated. It's great to go around the DC because it was very well done back then. But when we projected the growth of the company in terms of revenue and volume, we understood that in a few years' time, we would have the opportunity to have an even more efficient business and even more automated business. And so also responsiveness and the integrated supply chain is key. And I mean responsiveness, not only in the factory, but actually throughout the whole supply chain, which has to be very well oiled, allocating product in store quickly and precisely to prevent -- avoid reverse logistics. And we have ramped up our digital channels, which have been growing at a stronger pace and with consistency for some time now. And we see that most of this better channel experience requires us to unify the picking and packing at the distribution center. So 1.5 years ago, we made the decision to start significant investments in logistics in our Guarulhos DC. We started doing that in the second half of '25 and another part of this will be done in '26 and the last part in '27. The magnitude is manageable considering the general or overall CapEx level that we consider healthy. So historically speaking, we used to invest 7% to 8% of revenue in our company's CapEx lines. And in recent years, we have suspended that to reduce our leverage from 2.5 to 0.5 or 0.3x now. And we were using 4.5% of revenue in CapEx, and now we're closer to 6%, 7%, with the new stores and renovations, we can get closer to 7% or 8%. We think that CapEx will not impact our financial robustness. This is all very well managed at our -- at the ideal debt levels. So we'll start to see impact on the results starting in '28, second half of '27 or '28 when we complete the automations that we started in late '25. And in '28, we expect to see significant gains in the company's SG&A because we're going to have more automated lines. Part of the DC is now operated manually, but we expect the levers to generate gross margin gains as well because then we'll be able to supply the stores more efficiently and more precisely, avoiding markdowns and inventory accumulation. So these 2 lines of P&L should benefit starting '28 with the automation running in a leaner company when it comes to SG&A and logistics, and that will lead to incremental gross margin gains. So we expect to see a ramp-up in gross margins in the long run because we'll be more responsive and more agile with our DC, which accounts for over 95% of the supply of our stores.

Our business has 4 main product lines: fashion, homeware, beauty and technology. And the margin order is -- follows the same order, starting with fashion. But we decided to discontinue technology to do this phaseout. 50% to 60% of them have already been phased out, and this will improve the overall margins of the company. And we've been focusing on fashion as a major growth lever. We've been talking about that quite a lot. And what will make a difference in the long run is to keep on sustaining fashion growth and the levers within the fashion business, which will keep expanding margins. We just showed you 1.2%, but in 3 years, we grew 5.2%. And we believe that in fashion, we still have the pricing lever, the promotion lever or category planning lever that will allow us to have a greater turnaround of the pieces. And so when you add the mix effect with greater share in margin and the margin effect that will continue to expand, this is going to generate a very positive economic effect on our numbers. Well, I could also try to go into the different fashion subcategories, but there are too many details and some internal dynamics, and we're also working on that to expand margins, and this is what gives us great opportunities to continue looking ahead. And our third mission among our ambitions is to continue increasing apparel gross margin in the coming quarters.

Our next question is by [ Nicolas ] with JPMorgan.

I have one question about expenses. On the one hand, we see that the top line in same-store sales is quite strong, but you also mentioned that there has been an increment in marketing and personnel expenses, personnel. So can you tell us about the expense trajectory for the year, considering the sales level? Do you see room to dilute expenses thinking about the full year?

Nicolas, thank you for your question. So we've been talking a lot about this. We started capturing operating leverage to reposition the company at a healthier level. And at the beginning of the journey, we captured 1%, 1.5% gain in operating leverage, reducing our SG&A levels. We now think that we are at a healthy level. So this enables us to make good decisions to continue investing and planting the seeds to make sure we will reach our targets of same-store sales growth and to continue improving our product development and innovation in basics like the Ultra and fashion and the collabs we've been doing that have been very well accepted. We've also been investing in internal areas of the company. We talked about our supply chain department, but also marketing with the relaunch of our brand and the new point of sales experience with our pop-up store in Pinheiros and now at the Barigui Mall. So we made a decision in the past to reposition our expense level at a competitive and sound level with guardrails and making intentional decisions to reinvest in the long run. And our commitment is to continue accelerating the company, ramping up EBITDA and profit. And this requires us to make investment decisions. And as a consequence, we'll see some dilution, but we'll continue planting the seeds so that the company can continue growing in the future. About specific quarters. Well, I spoke about this at different occasions. In one quarter or another, expenses vary because you may dilute your cost of sales a bit less. Like this quarter, we had an SG&A over revenue of 39.3% or 39.4% (sic) [ 39.5% ], so 0.2 percentage points above last year. And the G&A grew less than inflation, only 4%. What grew more was sales expenses, and we've been investing in the business front and marketing, which will generate value for the future. But we believe that throughout the full year, we should keep a leverage level in line with what we have been doing since we made the decision, which has been quite precise, which helped us gain results and EBITDA margins and keeping expenses under control.

Our next question is by Eric with Santander.

I have 2 quick questions. First, looking at your focus on qualifying your product mix, you have a history with great collabs. So can you tell us how these more innovative products have contributed to your top line growth? And can we see new things happening here, like the relaunch of Pool, and I want to understand the levers you have or the pipeline you have in mind for new initiatives there? And the other question is about working capital. What is the size of the opportunity? What can we expect moving forward considering your integration level with the factory? What can we expect in terms of gains moving forward?

Eric, thank you for your question. Well, our business is moved by products and innovation. So I firmly believe that our growth depends on our ability to offer high-quality products to our customers and our innovation capacity. So what we've been doing now has been quite fruitful, and we are now oiling the machine to be even more creative and so that we can innovate more and more. I see us as a fashion company with retail and not a retailer that has undifferentiated products just fighting for price in a price war. On the contrary, our innovation capacity will allow us to offer different innovative products with stories to tell. And then we'll be able to differentiate and to be more competitive to sustain the numbers that we have been achieving for some time now. So yes, we'll continue focusing on that. That's something that the company and I firmly believe in. And yes, they are all very important. About working capital. This is very much related to our management capacity and also the comparison between expectation and reality because the more we bet in the future, the more pressure we have to sell. So we're always trying to balance expectations and reality, how much we'll be able to sell, how much we're planning to sell and to buy. So we see that we have evolved quite a lot in this management, and this helped us to improve the margins. But yes, I still see some opportunity. As the company becomes more mature and the new supply chain processes come up and the integration with our factory matures, we tend to work with a percentage working capital over revenue levels that are lower. About working capital, well, this is actually something similar to what we said in expenses, but with some important points moving forward. So just like in the beginning of the journey, we worked hard on expenses. And we had also done some important work on working capital, generating BRL 1 billion in cash back in '23. And part of this came from working capital and inventory efficiency. And just like in expenses, we believe that in order to invest in quality products, we have to invest in the Ultras and jeans and Pools and collabs. So you must prioritize, and that's what we've been doing intentionally and capturing efficiencies here. If you look at our working capital over Retail revenue. In the last 3 years, it has reduced 18% -- from 18% to 19% to actually 12%, 13%. So we see this efficiency. And just like Andre said, we want to be more responsive. So as we become more efficient in this chain as a whole, we start the season with fewer finished products in our collections, and so we can react faster and we can have inventory efficiency. And we have an internal pool of initiatives, and we expect to have another lever of value generation there.

All right. So this wraps up our Q&A session, and I turn the floor over to Andre for his final remarks.

Hi, everyone. Thank you once again for joining us today. And we continue working hard. We've done a lot, and we're very happy with the results, 11 quarters in a row of double-digit growth in apparel same-store sales, margin expansion and all that. And like I said in the beginning, I think we are halfway through this journey. And whenever we open a new door, we see more and more opportunities. So I feel more and more motivated with the opportunities offered by Riachuelo. So our plan continues the same. We want to come back here and show you growth and margin expansion as well as improved customer experience. Thank you so much. It's been a pleasure.