Lojas Renner S.A. (LREN3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Lojas Renner conference call. [Operator Instructions] I would like to remind you that questions from journalists may be sent to our press office at 55 11 3165-9586. Before proceeding, we would like to clarify that forward-looking statements that might be made during the call in relation to the company's business perspectives, operating and financial projections and targets, our beliefs and assumptions of the company's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events, and therefore, they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future results of the company and may lead to results that differ materially from those expressed in such forward-looking statements. Now we would like to turn the floor over to Mr. Fabio Faccio, CEO. Mr. Faccio.

Good morning, everybody. Thank you for your presence. I hope you have all read the material information, material facts. And also you have had access to the video explain the transaction with Repassa, and that has a very important strategic value for Lojas Renner. And we are holding this call in order to clarify any doubt that you might have. You already have the details of transaction on the [indiscernible] on the [indiscernible], but the strategic rationale is very important for us. With digitization, digital transformation, innovation, the development of the ecosystem, bringing an assortment of [indiscernible] a broader one for our clients, with fashion and lifestyle and sustainability at ESG. And integrated in these 3 pillars is set up digital in a market that has been growing strongly in the last 2 years. And the new generations are important, and this is a very important ESG and sustainability approach, with fashion products having a longer life, but we've got a second life, in fact. And it has to do with everything about lifestyle and this [indiscernible] move that we made with this transform the follow-up and working in initial internal strategies of organic development of the initiative itself and inorganically, this is the first movement that we do, and that has totally to do with the strategy that we have described in terms of services, secondhand services business [indiscernible] secondhand services. And we already had a partnership since October 2020 with Repassa. And today, with our [indiscernible] store partners of Repassa [indiscernible] products for sale, and clients are receiving this very well, about 40% of the clients say that they will be using the service. Repassa has a very talented team that does an excellent work aligned with our principles and our values besides the strategy itself, and that will further strengthen our ecosystem, to the platform, to the services, to the strategy and also the team that is coming on board and very happy with this movement. And in relation to the -- to the follow-on, it is a very small part of the funds raised through the follow-on. But I would like to remind you this is the first move and other will come either organic or inorganic in the direction. Now I would like to open for questions from you. and we have the material available on our website. We have the video, we have the slides and we will be answering questions by phone and also by the platform. Now we will start the Q&A session.

[Operator Instructions] [indiscernible]

I have 2 questions. The first of the transaction, could you talk about the amount and the structure, the management, what amount the [indiscernible] of Repassa will he be receiving payment in shares? Or will [indiscernible] the condition to performance? And what about vis-a-vis the other players in the market? Repassa already has the partnership with [indiscernible], which is a competitor of Renner. So what about the situation of Repassa with the other players in the market? Will it be possible to continue with other partnerships or will we see an exclusive partnership with Renner?

[indiscernible] this is a Fabio. We know that the audio is not very good. And I think I have been able to understand your question, says Fabio. First, about the transaction structure. We are not talking about any amount involved because we signed this contract last night, and this is still subject to diligence. We still have 30, 40 days in order to close the transaction. And give you all the details. But it is totally cash. It does not involve any swap of shares. It is an acquisition of the shares of Repassa [indiscernible] also has a contract to stay with us with variable targets for at least 3 years, desirable would be from 3 to 5 or even more than that because we are very much aligned in our principles and values and the strategies of the 2 companies as well. So we hope to see a very long-term partnership. And regarding the brands. There are other companies here, Camicado, Youcom, et cetera, as you know. And we understand that this new brand consist of the higher synergy and [indiscernible] into the convenience of our critical platform as well. And regarding partnering, Repassa does have some partners, as you mentioned yourself, because Renner is also a partner of Repassa. And -- with a very major participation in that collection and the partnership continues.

JPMorgan. We could not understand the name, we apologize.

I have 2 questions. The first one has to do with the ecosystem. What about the integration of Repassa. Is it going to continue as a separate platform? Or are you aiming at an integration even with Camicado? And the strategy of the company as a whole is the second question. What do you imagine from now on from the viewpoint of categories, of services and also the size that you intend to achieve?

This is [indiscernible] new Business Officer. It's a pleasure to talk to you today. I will try to begin to answer your question. And then Fabio, will take the floor. How do we see integration. We believe that there are 3 pillars of synergy in our ecosystem and that are -- will be detailed in the next couple of weeks. The first one is how we can use our brand and optimize for Repassa in this ecosystem. The second has to do with optimizing our physical penetration of our brands so that we may improve the experience of the client and with the opportunity of increasing this potential and may fix [indiscernible] being the best possible and the most convenient and the most [indiscernible]. And the third one has to do with increasing the number of solutions that we can offer, [indiscernible] in this journey of the consumer with the best possible investment. So this is the part -- the first part of your question. And the second, if Fabio wants to add to that, our strategy is to consolidate as the biggest ecosystem of lifestyle fashion and all the movements necessary will be on our radar screen so that we may accelerate this ecosystem. We have already talked about the values. And Fabio, would you like to add to what I said?

No, I think you said it all. He is our officer of new businesses and together with his team, he was very important in this transaction.

[indiscernible]

Could you share the size of the market? What is the size in other countries? Because this market seems to be very small in Brazil, and it's already very big abroad. So how do you see this trend? And it is important for you to have this position. I think it's very cool and also about the business model. You look after everything because there are many models that are possible, [indiscernible] for instance. What about for the economics?

Thank you for the question. I will start by the last one and then [indiscernible] will add to what I say. Market size, Yes, you are correct. The market is already big aboard, growing very quickly, but it is also growing very fast here in Brazil. We had to make a [indiscernible] around BRL 7 billion the current market and growing very fast. Bigger than or faster than the transfer segment as a whole for 2025, we believe it will be BRL 31 billion with an exponential growth in the last few years. And the younger generations are very keen on that. About the business model, you are correct. It is a different model, which is a managed model. And we understand that this gives a much better journey leading to [indiscernible]. So we're very careful about that. But anyway, I will ask [indiscernible] to get into details about the model.

Excellent question. We believe that we have a digital reselling platform made -- unique model, focused on quality. And there are 3 important dimensions. The first is that it is [indiscernible] different to that in PPP, you have a platform of connection between the seller and the buyer. At the managed platform, we do this connection with focus on quality end to end. So we are focusing on this journey that lead to [indiscernible]. And where do we position ourselves? Some platforms are focused on luxury goods. And how do we optimize the platform, a managed platform focus on the B, C+ segment and with a faster growth. Because our focus is with this one, we believe that Repassa is positioned in a unique fashion for the Brazilian market and to cater to the dozens of millions of markets of potential -- of dozens of millions reals in the potential market that Fabio described.

Ruben Couto from Santander.

I have 2 questions. I understand that you're not going to disclose the amounts involved. But could you talk about how much was generated in GMV last year? And it seems to me that you have a higher frequency, for instance, you have [indiscernible] how many purchases are made by clients for the year, for instance. So maybe you could share with us. And still about the [indiscernible] business within Repassa. Do you believe this could be an additional channel for Repassa to distribute these products, could you see a platform having less promotions in the stores and placing the products in the markdown for instance of the motion through the Repassa platform, about the amount and features and indicators, et cetera?

We closed the transaction based on the due diligence that is just starting. So we cannot talk about any details about this transaction. It will depend on the due diligence. So there is nothing we can say about this company's figures yet. It was started in 2015, so it's a new company to start with a very accelerated growth such as [indiscernible] of this market. And I will try to answer the second part of your question. And then [indiscernible] may add to what I will be saying. There are many synergies that are possible. We understand that the probability of the synergy in [indiscernible] low. And we are really -- the main synergy that we will be tapping into. But it will be from now on, that is to say -- would you like to add to what I'm saying?

As you said during the [indiscernible] day, when you addressed our investors, our focus is on the client's journey. Everything that is relevant in the clients' journey is part of our strategy and each one of our brands plays a role whatever is relevant for our customers, whatever is relevant for our brand will be discussed by us. The focus is on B and C+. What will be your focus?

Thank you, [indiscernible]. Thank you, Denis, for the question. The focus of our target audience is very similar. It is very strong. And by that, I mean, B and C+. So with the value proposition and principles and values that are aligned with Renner and the synergies that will start to spring from this transaction. The target audience will be similar, but going to A- and B+ for this kind of service. Most probably, the [indiscernible] will be very similar as far as the target audience is concerned.

The Q&A session has come to an end, and the floor is now over to [indiscernible].

On behalf of [indiscernible], I thank you very much for the opportunity. And should you have any doubts, our Investor Relations team will continue to be at your disposal to solve any doubt that you might have. But we have a very good [indiscernible] for this operation aligned, and we are very sure that this is just one -- first step, and this will become a very big step together with others that will be coming in the future. Thank you very much, and have a very good day.

Lojas Renner conference call has come to an end. Thank you very much for your participation, and we wish you a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]