Sendas Distribuidora S.A. (ASAI3) Earnings Call Transcript & Summary

Thank you for waiting, and welcome to the earnings call for the second quarter of 2026 Assai Atacadista. [Operator Instructions] We would like to let you know that this earnings call is being recorded at the ir.assai.com.br, where you can already find the earnings release. We also want to highlight that information and possible statements that could be made during the earnings call related to business perspectives, forecasts, operational and financial targets at Assai Atacadista represent the beliefs and assumptions of the company's management as well as information that is currently available. statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they involve future events and rely on circumstances that could or not occur. Investors should understand that general economic conditions, market conditions and operational factors can affect the future performance of the company, leading to results that differ materially from those listed in such future statements. Now I want to pass the floor on to Gabrielle Helu, the Investor Relations Director.

Good morning, everyone. Thank you for participating in this earnings call for the second quarter of '26. I'll be presenting the executives present today. We have Belmiro Gomes, our CEO; Rafael Sachete; [indiscernible], VP of Commercial and Logistics; Sandra Vicari, our VP of People and Sustainability; Rafael da Silva, our CFO. Now I'll pass the floor on to Belmiro for the beginning of our presentation.

Thank you, Gaby. Good morning, everyone. Thank you for participating. Now here we have the numbers on the first slide. numbers in the first quarter still have pressured consumption. So if you had the opportunity to take out the numbers, but execution was very consistent in this quarter, we gained share. We had an important expansion in our flow. We had an all-time high record preserving profitability, and we were able to advance significantly in our deleveraging. So it's not a quarter with demand acceleration. It's about resilience and economic evolution. So even in this economic scenario, Assai gained market share, expanded the customer flows, preserve margins and led to a leverage market of 2.7. So that demonstrates that even with the pressured ticket, customers continue to search for Assai as a destination. And so total base goes up 2.4%, and you can see that there is a challenging environment. However, the company gains within the cash and carry market, a share of 0.3%. So an important point in the quarter that there was an increase in the customer book, and that happens in our same-store base as well as in the total base, which would be the 3.4%. And then you can explain that movement that we've observed, which is the consumer preserving their frequency, but at the same time, adjusting their purchase mix and basket searching for more for cheaper products, right? So the maintenance of the levels of debt, high interest rates. And I think everyone has been watching the Brazilian economy, and you can see this macroeconomic context. So this environment is not a homogeneous environment. We've already highlighted this and seen this heterogeneous movement where we have lower social classes, especially the Class C with more pressure. So when you look at the consumption dynamic, you can see a persistence in the trade down. We had opportunities to demonstrate in our Investor Day that we had 2 cards with the same store, same taxes, costed BRL 830, which was the leading brand and the other card costed BRL 437. So you can see this ramp-up of the migration of the brand at a moment of commercial pressure. And so they use the trade down -- and so we can see that they don't necessarily reflect the actual customer choice, right? So in order to consider this, they've been having to perform trade down decisions to preserve their volume. And so what we can observe in the social levels that are a little lower. And so you can see this frequency that there is an ongoing flow of customers without an increase in the average ticket. So despite all of this, the effort to perform with balancing out the margin makes a bit of pressure in the actual number is 0.4, but after explains we have an effect of the substitution -- the tax substitution with the removal of some products from the SC, which the state of Sao Paolo has performed, which creates this difference between the gross sales and the net sales. But this quality, this margin continue to evolve. This is due to some initiatives we had considering the dynamics as the scenario we've seen also with the market that's not very -- it doesn't have much elasticity. So we must be careful with the -- there's a bit more caution in the type of purchases. So the expenses have this effect of 0.2%, there's a slight increase, but it's, of course, a lot lower than the actual increase in customer traffic. So when you see the expenses per customer served, it goes 1.6% below inflation, the actual food inflation and the general inflation, because expenses are really connected also to the amount of customer service in customer traffic. So the net income, recurring net income, BRL 241 million, an aversion of 94% compared to the same quarter last year. From an accounting view, BRL 537 million, the company has been very conservative and very transparent providing this kind of disclaimer and showing the operational performance without any tax credit impact so that the market can really keep up with the actual operational evolution of the company. And then after and so that you will cover this, you have the operational cash generation, reduction of the net income BRL 1.4 billion in the last 12 months, breaching the leverage level of 2.37%. Cash availability is also very significant and an important [indiscernible] and Rafael will explain this a bit more, which is purposely reducing the discounted receivables. Since in this deleveraging process, when you consider the availability, we end up working with this level of anticipation that is greater than what we had to work with in previous quarters next page. With this, a bit of what I've already mentioned in the previous part, it demonstrates this effect of the tax substitution. When the product is subject to this tax substitution, the net sales is the same as the gross sales, considering the state taxes. And when it leaves the tax substitution then you have -- when you look at the semi normalized effect, you have this effect of 0.26% within gross profit and 0.20% in expenses. So when you look at the comparison, of course, the company, of course, -- you can see this result considering the net sales, which is in the center of the market, but the comparison is always taking place considering expenses upon gross sales. So when we look at this vertical effect, EBITDA, considering higher pressure of expenses, has a slight stable impact, kept in the second quarter, which is an EBITDA of about 5.6%. So within the environment with challenging consumption, we've been trying to set up this commercial strategy that's more efficient. We have a significant contribution in the margin considering the operational efficiency and maturity of the stores, especially those that came from the extra conversion period, considering the last batch from the SA expansion and a lot of the services added on like [indiscernible] Delhi. But over time, we can really evolve in productivity, the ways we work and privacy. And that has really helped with the composition of our gross margin and maintenance of this margin has been done considering the maintenance of competitive advantage. So when you look at the customer flow [indiscernible] less sales per square meter and especially when you consider the market share. Then the expenses also had a slight impact with the new avenues for growth that we're going to highlight up ahead, but it also reflects the combined scenario of the customer flow increasing and customers still keeping up with trade down. So I'm going to pass this on to Sachete. She highlights the point of the operational leverage. Okay. We can advance to next one.

Good morning, everyone, and thank you, Belmiro, for your presentation. I'm going to talk about our financial results, our net income, our debt level in the company, our financial results here. We have an inverted calculation, so the lower the better. We reduced the impact of its financial expense of 25% compared to the same effect that effects our net income reaching this. And what were the main drivers of this improvement in the financial results. So first, the maintenance of our EBITDA and our cash [indiscernible] company, our strategy for deleveraging, the lower level of debt. So through this strategy, the gross value drops. And we also start for the first quarter after many growth. We have this average rate of the cost of debt that is dropping, and this dynamic should remain if there's no change in the economic policy as a supporter or benefit for our financial results to the end of the year. Then we had a positive impact with the tax credit updates with the [indiscernible] credit adjustments, right? And so when you look at the net income, it reached BRL 344 million, recurring net income, 92.7% growth. And so our accounting net income is BRL 537 million with nonrecurring effects of tax credits. So the comparable base would be BRL 344 million, supported by our EBITDA and financial results for the company, which had a significant improvement. Moving on to the next slide. We're talking about this [indiscernible], which is a company strategy for deleveraging, right? So there's an important effort with the entire team to keep up with high-level services, good sales, high margins, efficient management of expenses and capital allocation in our working capital and CapEx with a focus on deleveraging of the company. So the general cash operational generation was about BRL 3.3 billion. We had a CapEx post the impact of the sales leaseback of BRL 600 million with a free cash flow generation of BRL 2.7 billion, and when we get into the interest of the debt and dividends is BRL 2.3 billion, and we have a final cash generation of BRL 1.4 billion. Why is it not BRL 0.4 billion because you have the normalization of the receivables. An important point is within this strategy, we're reducing this receivables anticipation. And over a while, I believe you won't have this effect anymore in the company's results and earnings because for now, we have BRL 1 billion already supported in this normalization. Then on the right side, you can see our financial leveraging. So our financial leverage, we have a drop of 0.8x the EBITDA, reaching 2.7%. You can see the dropping trend and this trend is that should remain until the end of the year. So the company is very confident that things will continue to drop over the next quarters. Now about the gross cash position. I just want to reinforce this. But of course, in our release, you have a cash position is very solid, very healthy. We can move on to the next slide, please. And we closed the quarter with BRL 7 billion between cash availability and also the [indiscernible] that you could anticipate. This is a growth of 20.9% compared to the same period last year and the robust cash position gives us the necessary comfort that we have 2 years of our debt maturities covered by this cash position. We don't need to have any short-term funding, especially in a more stressing scenario. We continue to be comfortable. But of course, the company is supposed to monitor this market and possibly taking on other long-term credit facilities to have safety to really support our strategic plan of deleveraging the SA Group. Then I'll pass the floor now to Sandra, as he talks about our people and sustainability areas.

Good morning, everyone. Moving on with our commitment to our sustainability, searching for ways to generate more value for the company. We continue to operate in a strategy that is structured by 3 pillars: Efficient operations, developing people and the communities and ethical and transparent management. And this quarter, we've advanced significantly and consistently throughout this ESG agenda. And I want to highlight that we are reusing about 47% waste. Expansion of our initiatives for composting and water efficiency and also the evolution of the fourth consecutive year of the index of the lease of the ISG B3 Index as one of the only retail companies in this Index. So we're also strengthening a more inclusive and diversity [indiscernible].we expanded our representation of black professionals and women occupying leadership positions. And we've also taken on the goal of creating opportunities for immigrants, refuges and elderly professionals. And I also want to highlight over 5% trainees in our -- young trainees, right, so that it was important for the recognition with the Bungue Youth Employability award. With this, adding on to all of this work, we've also published the annual for 2025 of the Assai Institute initiatives that is responsible for all of our social investments, and that also consolidates our earnings in the first 3 years of work performed by this institute and also reinforcing our commitment to the development of communities where we are present. These were important advances that we've had in sustainability. And now I'll pass the floor back to Belmiro so we can continue with the presentation.

Thank you, Sandra. And now I think we're going to talk about our different avenues for growth. As you've seen in the numbers, the macro scenario is still pressured and the company is not just waiting for improvements in the macro scenario. So besides this, in this quarter, we were recognized once again as the most valuable brand in the food retail scenario, and maybe we have one of the biggest assets in Brazilian retail, which is this growing traffic of 40 million people visiting our stores every month. This comes from a relationship that is built upon trust and low prices and our avenues for growth are all starting off with this asset, right? Our focus is to expand our presence in customer routines without losing track of our food core, which is really having low prices. It's not a switch in the model or change in the model, but an evolution of this model. So we're talking about existing customer traffic using this -- taking advantage of these new opportunities. And so we have the possibility of adding into the consumer shopping journey [indiscernible] to increase the share of wallet with initiatives that don't require a lot of CapEx investments, but that can improve also our capital allocation. And so some initiatives in each of these are different stages of evolution. We've had significant expansion in Welby, which is supplemented vitamins. This Is already in 93 of our 300 stores, we should reach this new category in 300 stores by the end of '26. We're talking about like creatine, pretrain workout vitamins, supplements and whey protein. And we're adapting to these habit changes among our customers. Then our own private label, we have about 30 products we already launched as private label products and some categories that represent over 10% there in the categories they're in. So this is an important lever for us, especially if we consider margin gains for the future and also keeping up our competitive price levels and offering to consumers the opportunity to have a quality product, a well-known brand and very relevant prices. So we have new products incorporated every week practically, and this is Irma, we should have a gradual expansion to the end of the year. I believe that next year, these products will already have more significance due to the volumes as I had in big markets here in Sao Paolo. And for digital, we've advanced over 200% increases within the partnerships we have. We have 104 stores with the iFood operation and 16 million users from the [indiscernible] say that also receive these inputs through offerings. The price is helping to increase [indiscernible] for the in and out, we bought 11,000 refrigerators and we sold all of them. This is a project that is still evolving, and we want to take advantage of the customer traffic with products that have opportunity batches and customers can look at this and see the opportunities they have, reinforcing this image of low price. So we're still waiting on the approval of the bank, Central Bank for the second most important phase. So then the pilot project for us iPay, which has operations in about 30% of these stores has also evolved. 55% are new customers that have adhered to the product. And then we have the electrical fuel stations. And so most of it is in the free market. We have a cost of energy that's about half of the residential fees that consumers pay. So our objective is that we can provide customers with the opportunity to really charge a hybrid electric vehicle at a cheaper rate than they would pay if they were to do this at home. And so we receive about 20 million vehicles monthly coming from customers that supply or fuel up and recharge in our stores. So as soon as we finish our technical studies on feasibility as most of our stores have left over demand, the expectation is that customers can perform purchases. And this is a project that has been advanced a lot in many countries where we've had growing electrification and also for fuel stations, we have also been assessing this possibility and the chance of maybe integrating all of the systems for this ecosystem for food shopping, drug stores, digital and also in another routine mission to supply these customers and the initiative maybe the most important that I want to highlight was that now we opened first after 30 years [indiscernible] store, we were really quick with this project. It was the first sector. And we launched 4 months after the approval of the new law. Up until then, the food sector could not have a drug store inside the store and have to be in the gallery. So ask me what changes and say, well, in a gallery actually the customers already performed a purchase, it's really difficult for them to get into a drug store to shop for drugs with products already in this part, right? So the first unit was launched in the Iconic [indiscernible], where they opened the first extra hypermarket. It's an extremely well-located store with over 180,000 people visiting, almost 200,000, and it's completely integrated. And so we already have 2 units and they're operational. And by the end of 2026, we should have these units and in this period, we are expecting that 250 units potentially -- would be the potential for the mid- to long term. So we already have a store. We already pay for electricity, AC, safety and all of this. The CapEx for the implementation should be below BRL 400,000. And so we should have a total investment in these 250 of about BRL 100 million. With its sales potential, that's very relevant. And so this drug structure has a full assortment, which includes prescription drugs, GLP-1s, controlled drugs, vitamins and supplements. And this is all going to be integrated, right? So when we opened this first unit. It was not only the first drug store, but also the first online operation where the delivery is done by us. Though within Assai Pharma, customers can also buy through the app and they'll receive the drugs of their house. And so what we've seen in the first days of our operations is that the numbers are above what we expected you can see that for customers to be able. Anyway, since you have to come and shop, the possibility for them to be able to buy the drugs is also an important step. The team really helped us with this. And I think more than just talking about this deployment or more than just us telling you how it was, I would really like to say that we actually have a little video that was made, not by us, but it does demonstrate how this was implemented and [indiscernible]. Today at the capital, we have the first drug store inside a supermarket. Ever since March, this type of retail business [indiscernible]. So the transition is on the subtitles of the video. Thank you. Now after this video, I think we can get into the Q&A session.

[Operator Instructions] We'll start off with our first question from Danniela Eiger at XP.

The first one is about the perspective forward. It's evident that we're in a very challenging moment for consumption in the market, and you guys anticipated this and have many different initiatives to have this. But when you look at the core business, when it comes to food, you have supplements you guys are working on private label. But how are you guys -- how do you guys see the evolution and the mix of categories as well as the trade down you guys mentioned as well as prices considering the food inflation dynamic and this product mix. So if you guys could help us. But of course, you guys have a lot more details and information, right? We would like to know what you guys see as trends in this? And then the second one is, if possible, if you guys could share a little bit of what you guys consider as economics for the Assai Pharma stores. So when it comes to uplifting the sales, contribution margins and nominal amounts, et cetera, because you really have a better margin in the category. And you also need to understand that you guys may be replacing that with something that was already there. So I think it's going to really depend on performance among categories, but it will be great if we look like it is more like in the midterm. What could this bring us evolution when it comes to growth and profitability?

So thank you, Danni. This is the consumer consumption environment. We see the numbers continue to be pressured. It's really connected to low income. When we look we see the cash and carry channel as a whole. In the channel that's most impacted as what we're seeing is lower income as I was already having this in previous quarters, looking at the inflation received what's the actual index, which is the movement of this fixed basket. But in Brazil, we have a bigger variability. When you get paid down of brands that's really unique, right? Here it's a ramp-up, right? So you have such a big amount of brands that allows customers to perform these adjustments, right? So we see an increase of customer flows in our same-store base and total base. When we looked at the trade down, and it's still about approximately 2%. So customers haven't been following the inflation, right? So that's what is not -- that's not what's coming out from the customer's pocket, right? So while you have this high debt level and most of the income committed to the payment of interest is kind of what happens in our results, and we don't see consumers have space for this. So what you mentioned is we have these different initiatives that we're not just waiting for the macro environment to get better, but some initiatives that were mentioned intent, for example, the private label should help a lot because as consumers also migrate, they can choose our product and the brand that's going to give us a higher margin. But at this moment, we see consumers that are really pressured. So where have we most felt is low-income consumers, not high income. When we look at the research of Nielsen for modern retail, we see that impacting companies that service high income and obviously, the impact is almost 0. When you look at Class C, D, then you have a more relevant impact, and we feel this directly in this customer that buys us, but also the customers that supply their house with us, right? And the impact, as I mentioned in the beginning, is and what we should see from now on is, well, July we've already closed. Of course, we already had positive same-store sales, 0.50, without any calendar effects. So that demonstrates that we should have a continuity scenario in a same-store kind of adjusting by 1 point up or down, but that's what we've been working at. However, in this scenario of consumption pressure, it should remain for while. So that's why the company has really been betting on new growth possibilities. And that represents about 5%. And so any new initiatives like a U.K. that's it, right? And so especially, we expect higher revenue than [indiscernible]. We look at the 40 million customers, we have an average of 200,000 people going through these stores. So we wanted to bring this because our feeling is that it captures exactly what the customer sentiment is, right? They have to come and shop, they have to come and supply themselves. So if they can solve this in a single journey. We can also interconnect both of these to generate cash back and the success of the , right? So what are the main points we have, positive or negative.

Well, that's operational expenses that are there. So in the same way as the CapEx is way below what we would need for street drugs. When you look at operational expenses, you can kind of perform a similar calculation, right? So you have the cost of personnel [indiscernible] rent, safety, et cetera. And all of this is -- most of the Assai stores have available space to be able to add a drug store without having to implement any major revolutions in the assortment. So within this, we've also been having an ongoing revision of the amount of products you've been working on in some categories. So it's really been possible to accommodate the pharma operation without any major impact. So the CapEx of drug store is like 1/3 of -- than what we would have [indiscernible], et cetera. So our view is that we have to really work on the legal changes there and because that's -- we have an investment of about BRL 100 million with the sales potential of a store. It's like 1.5 store revenue. But of course, we don't want to break down our expectation of revenue per store. We're showing an ambient study or phase of this project, but we see this as a huge potential.

Now our next question is from Joao Pedro Soares Citi.

The first question here is the cash back. Could you tell us a little bit about the strategy currently because one of the questions we get when we compare with our history and the drugstores in the galleries, I think here, the biggest evolution is that you have mutual interest, right, in both of them working well and this cash back can be crucial to help really lock in [indiscernible] right, cash and carry through the drugstores and everything. So I wanted to hear about the initiatives you have been considering and how you're looking at this [indiscernible] of the drug store cash and carries. And then the second point is when you look at the sector data and you break down same-store sales in same quarter of next year. We can see that volumes dropped significantly in August and September. So it seems like there's a more favorable base, especially for volumes in the sector when it comes to the third quarter. And I wanted to hear about this and if it makes sense, et cetera.

Well, as you mentioned, if you were to consider the products that were made now, and I want to invite you guys to go and visit the [indiscernible] store and see with your own eyes how [indiscernible] was implemented. It's very different than the products that we had before like drug stores in the gallery. These are outside of the store. We could have done this before, of course, but we were never interested in this, right? Because we think it needs to be really integrated with the customers. When inside the store, they can leave their cart there and go buy given the list of drugs that they need and that can be separate already for them when they come out to check out. When they -- after they get their perishable goods, if they waited in, they check out, they don't want to stop anywhere. They're going to go straight home, right? So their relationship with the cart is very different before and after paying, right, for their shopping. So anyway, in a store with about 200,000 customers going by if I generating cash back of about [indiscernible] to spend at the drug store, they're probably going to do so. So they're probably going to visit our store. So in our view, we're going to be providing an actual service to our customers. Just as you saw on the news article made by Global, most of the customers and people that visit food facilities, et cetera, are the people that also need ongoing drugs for chronic conditions. So we're going to have operational costs that can be passed along to the customer partially. In our view, it's -- we were able to open up the first one 4 month after the change. That means the customer is really focused on this initiative, and we believe it should add a lot of value to just say a lot of sales, a lot of margin and no additional extra costs. I show you the CapEx numbers and you can compare that, what you see as CapEx, maybe you can even bring in part of what this would be expenses. Same stores for August, September last year, there was a drop in volume. That was a period where we really felt a setback in commodity consumption, so especially that drop last year with rice, meats and some carbs and this consumption has still remained at low levels, and that's how we've been very careful to estimate possible recompositions because we knew where it was concentrated. So since it was very much concentrated in carbohydrates at that time. And when we look at the volumes of the other commodities now in the first and second quarter, you can see that there's some price pressure that they don't really state the truth is that there is a reduction in carb consumption and an increase in protein consumption. So a lot of the adjustments in layout and assortment. Was ready to prepare for this movement, which is as I've already seen. So when you see the food service customers, there is always 16 million customers in our app. We can see the recurrence of volume. And so those guys from food service, the guys from pizza stands, restaurants, snack shops, et cetera, they have been keeping this frequency, but they do see a drop in the volume. I hope to have answered.

Our next question comes from Vinicius Strano, UBS.

I wanted to explore a little bit about what you guys see as a customer sensitivity to price in staying, right? And also get a better reading on your view in regards to competitive sitting, right? There was a shift in management from your main competitor. I want to know if you guys have any notice any difference space on pricing and commercial practices is if you guys could talk about the market share per region. We have and also the performance of region between [indiscernible] and the market.

Okay, Vinicius, thank you. And now going back per region in Brazil, I think the movement of their regions is a lot more related to the income classes than the region itself. So if I look at the Northeast Brazil and north of Brazil, there's our performance because it concentrates most of the population of the low income. That's going to be very visible right and also within each of the regions. And so you can see that in the Southeast [indiscernible] when you look at this within Southeast, you'll see the stores at [indiscernible] with a high population have no impact. So when you look at the other part, where you had a proposition that's a little more pressured, and then that's going to the data of the families at to -- we reached a new all-time high level of commitment compromising income rate, so it's not standard. And what we've seen in a real tough way is a consequence of a series of factors. I said I was not going to talk about the bads anymore, but that was a significant impact in June of course, right? So a bunch of factors in the economy. And at this moment, that's led to repercussion, right? So while we see [indiscernible] consumers is at their limit, right, what they can spend. And when we look at the average ticket accounts and BRL 500. And then within these BRL 500, they're going to have trade downs of products without I don't want to mention brands here, but if you're experiencing the food sector, we've seen a significant movement to this sense, right? So what's the positive side to this was the best possible movement with the scenario we have in to have is private label project, a company our size, the brand as strong as ours because customers are willing to search for quality, but they have a price limit and private label can be selling is very relevant. So we have very positive expectations, right? And [indiscernible] from the customers, they're really willing to perform brand trade downs and winning products, especially so they are at the limit of what they can actually spend. Then you asked something else about management.

Yes, it was -- but we do and it was about the competitive scenario overall and also specifically about the competitor.

Okay. Well, obviously, as each company has changes -- but as you can see it's the consumer environment, right? So consumers are paying high interest rates and as you can see, the beds and initiatives you've had are really based on keeping customers in-house, gaining new customers and increasing the share of wallet. So we don't see like market elasticity that can allow for major movements, right? And so you -- we've seen certain changes in the commercial policy. But at this moment, what pressures is the most is the markets are.

So our next question comes from Irma Sgarz at Goldman Sachs.

I wanted to take advantage of the last point, and it's a great moment for private labels. And could you talk about the lessons learned so far? I think it's a real ignites in the past, you guys always had a bit more resistance considering the size of the operation in Southeast. Now as you guys launch private label as well, but I wanted to hear how you guys consider additional categories and products and the challenges that you guys may be found over time. And maybe a bit of how you guys consider the brand strategy as well, right? You have the Chef brand, of course, for one part of this private label segment, but you guys also consider segmenting private labels. And with this, would you guys believe that the best path is to separate privately from these brand, we'd like a commercial name or having some kind of umbrella brand.

Well, at the moment, you have a consumer that's really willing to have a brand trade down. The SA brand is the most valuable and the most well-known any research can show you this, of course, there is a risk when you associate all of the products. So we brought a very skillful team with a lot of knowledge and the experience from a quality perspective. [indiscernible] and so the [indiscernible] included so far and maybe the project could even advance quicker if we have -- if we weren't looking this -- we have test labs and a series of initiatives to ensure that what we're going to deliver to customers is really valid, right? So we have like the SI signature, then you have the name blue as long. So there are some processes or so adjusting and getting to lessons learned, but some of the biggest challenges so far because of the volumes, because Brazil doesn't have that many suppliers of private labels [indiscernible]. Our volume within the city of Sao Paolo with 120 stores under activity is really heavy, right? So we've probably get -- we're probably going to do this even once in suppliers that are already the buyers of natural brands and that should also maybe lead to reduction of these investments. So we see this as a major potential, right? So now as we see we have the scenario where we can have this private label scenario that's very relevant. So the objective is not to have an increase in sales, but improving the margins and use this as pressure with our existing suppliers. So when we see customers really adhere to buying a private label. It could be that after we'll also have a pontoon chef. But at this moment, as we have than the need for speed, it will have a lot of products and they're going to continue with the SI brand. [indiscernible], you want to add on to this in any way?

But, I think that was great. And I just want to say, every week, we're launching new products, and I want to highlight our concern with the quality. It's not a first price product, but it's a quality -- product quality that's very similar to leading brands, and this strategy has been growing a lot. The number of items in the store with greater presence and customers' basket, and we'll be able to add a lot more strength to the private label.

Our next question comes from Lucas Esteves at Santander.

We have 2 points you want to discuss. First, the gross margin continues to demonstrate because it's in evolution. And I wanted to know from your view, how much of this comes from the tutors are opened in the last few years? And how much comes from other structural initiatives like the Buttery Delhi bakery. And I know there's also a tax effect, but I would like to know about the operation. And if there's still space for expansion from now on, right? So when I add the topic, and you guys also mentioned SI services to about 40 million customers per month and that's still impacting and the Assai Pay pilot project demonstrates over half of the customers are new. So how far do you consider this financial verticals and monetization potential or opportunity? And is it more of a -- or is it more of a relationship to increase conversion, et cetera?

Well, financial vertical, yes, we're very anxious to get the release for this, right, for financial services. And the Assai product is good but it's really restricted to only a few of our customers. So maybe one of the biggest value levers we have is really the financial aspect that this could really help our sales as you grant credit through a private label. And then at the same time, you can also have new revenue, and we see this as a great chance for someone to look at the installed testing our potential. And so that already operate more time with this product in the market really. Well, fortunately, we're still waiting on the approvals of this project from the FIC agreement we have. But maybe it's one of the products that we can have the most value lease, right? But we didn't expect that this could take so long, but it is a product with high potential. And so -- we then also working on this project so we have a clear idea of the potential market and -- what's the level of penetration that you provide? And as it's more of an internal product, you'll have moments where you're going to be leveraging sales and there's going to be moments for us product to extract even more value from this protocol. So these are kind of -- just as I showed you about the pharma, what we're considering is to create this ecosystem that is richer right up ahead. So I want to talk about the like electrical carding station and all of this within this relationship as has in this customer base. So gross margin, we have part of this -- and so when you look at the increase in margins, we would see some sections like Delhi and ice-cold cuts are very polemic, but now they had a lot of margin to the business. So we're always very cautious about this. And in our products, we've been working on, but especially with the private label, which should add a lot of value to the brands so the customer -- the company is working to have a growing margin even in expensive environment that we already considered as a really an environment that's very challenging, right? So thank you. But we don't have a great, great Friday.