Veste S.A. Estilo (VSTE3.SA) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Veste S.A.'s conference call for the second quarter of 2025 results. Joining us today are Mr. Alexandre Afrange, Veste's CEO; and Ms. Elisa Lima, Investor Relations Officer. We inform all participants that the second quarter 2025 earnings release is available for reading on the Veste's IR website, www.veste.com in the Earnings Center section. Before we begin the conference, I will make a brief disclaimer. This conference is being recorded and simultaneously translated. After the end of the conference, the presentation will be available on Veste's IR website. [Operator Instructions] I would like to clarify that any statements made during this webcast regarding the company's business outlook, projections and operational and financial targets are the management's belief and assumption as well as information currently available to the company. Forward-looking statements are no guarantees of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operational factors may affect the company's future results and lead to results that differ from those expressed in such forward-looking statements. Let's now move on to the presentation of Veste S.A.'s results.

Good morning, and thank you once again for participating this morning. I'm Alexandre Afrange, CEO of Veste, and I will show the results of Q2 of 2025. Elisa Lima afterwards will deep dive in these results. We've had good figures during this quarter. I have good results to report consistency is the word we elected to define Q1 of 2025, and this allowed us to grow with the quality of brands, efficiency in the channels and profitability. During the quarter, we totaled BRL 17 million of adjusted net profit. Now gross sales grew 7.2% with same-store sales of 7.3%. The adjusted gross profit increased 8.9% with adjusted gross margin of 64.3% with controlled expenses. Adjusted EBITDA was BRL 75.4 million, a growth of 12.3% vis-a-vis Q2 2024. The accumulated adjusted EBITDA was BRL 122.2 million with a growth of 9.5%. We ended the 6 first months with adjusted net profit of BRL 6.5 million. This is sustainable and profitable growth throughout the quarter, the sound performance of wholesale and the events of Le Lis. Our main brand had an excellent quarter. The gross sales increased 9.4% and same-store sales grew 9.3%, once again consistent performance in all channels in all the regions of the country. 90% of the brand sales were full price during the same period last year. The sales at full price were 85%. This strengthens how assertive we are with prices and collection. Now the customer base growth is something that touches all our brand and the creation of collections and event planning. Le Lis has a recognized history of long-lasting and investing track record, and this is what customers can expect from us. In figure, the customer active base grew 2.3%, a constant evolution. The highlight was the success of the complete migration of the digital platform to the VTEX. This ended in July. This was a strategic decision. The new platform allows us to scale the digital channel and the development of apps, which are important for our current model. Now the brands with apps present good results. This quarter, 28.3% of digital sales took place through this channel. We highlight John John, 40%; Dudalina, 26%. The Le Lis apps in its final stage of development. We're totally convinced that digital sales of the brand will have more space for a new cycle of growth. Bo.Bô grew 8.8% during the quarter with same-store sales with 6.9%. We exceeded the supply from last year. We regulated the productive chain and reassumed the growth -- pace of the brand. Dudalina grew in the quarter, although sales presented a drop of 2.1% as planned. The sale was lower in July because we had to reduce the inventory throughout 2024. The B2B and B2C digital channels grew in the quarter, and the brand performed well in April and May in B2C, especially during Mother's Day. Dudalina made progress in franchises from the 30 stores that we're going to open next year, 15 are in operation. John John, we stabilized sales. We adjusted the product mix, and we improved the purchase flow delivery and close allocation. B2C has grown with excellent same-store sales of 8.1% and exceeded our margin that grew 21.5% vis-a-vis quarter 2 of 2024. Now Individual grew 35.9%, reflecting the consolidation of the new assortment and the return of important customers. This is a high of 15.8%. In the consolidated B2B channel, we grew 15.3%. We gained in sales and margin. Competitive prices and appealing collections in all brand explain the growth. This is the third consecutive grower in the wholesale. Now the second quarter highlights how we trust our strategy. We continue with 5 main options to broaden the customer active base. We want to have an integrated purchase among channels to accelerate B2B transformation to gain efficiency in the supply chain and to improve and to strengthen our technology infrastructure. Consistency and evolution are the word of what we do. We grow with quality soundness and innovation. We are building a company for the future. Now I will give the floor to Elisa.

Thank you, Alexandre. I'm very happy to present the result of Q2 of 2025. Right from revenue to net profit, I strengthen what you say, we have excellent news. We will start by the gross sales that was BRL 398.9 million, an increase of 7.2% vis-a-vis quarter 2 of 2024. This is due to all channels. And this is a very important data. B2B was a highlight with a growth of 15%. B2C grew 6.2% with same-store sales of 7.3%. And this performance was driven mainly by the digital B2C with a growth of 15%. Now outlet growth grew less 2.7% within our strategy with a share of 6.3% in the total accumulated revenue and to -- and full price sales continue focus, and they accounted for 84% of B2C, 5 percentage points above the same quarter last year. This took place in all brands, driven mainly by Le Lis. Now adjusted gross profit was 376. There was a growth of 8.9%, BRL 207.6 million. And adjusted margin of 64.3%, 60 basis points below last year. Why? Because number one would be greater share of the B2B channel with a negative 20 basis points. Number two is a draw of the outlet margin. And this took place because as we dropped significantly the inventory of the company as a whole throughout 2024, the available inventory and outlets is lower and mainly more broken. Now the adjusted EBITDA was BRL 75.4 million, 12.3% above the second quarter of 2024 with an adjusted EBITDA margin of 23.4%, an increase of 0.5 percentage points. Expenses, under control. There was an increase of 7.1% vis-a-vis the same quarter 2024. In net revenue, there was a drop of 1.1 percentage points, showing greater efficiency. On the last line, we had an adjusted net profit of BRL 17 million. This is a result of 52.9% above Q2 of last year. This is an adjusted net margin of 5.3%. Now during the first 6 months of '25, the adjusted net profit was BRL 6.5 million and profit before taxes presented a growth vis-a-vis last year. Now financial structure. The strategy continues to support profitable and sustainable growth of Veste. So for this, we continue with a sound level of indebtedness with a net debt of BRL 139.3 million, which is 6.9x the accumulated adjusted EBIT. Another key point would be a control of inventory to enable our cash. We ended June with BRL 263 million in inventory, a drop of 10.1% vis-a-vis the same period last year. The inventory drop throughout the last quarter represented a drop of 50 days in coverage when we compare it to the same semester in 2024. Now all brands want this to be close to 200 days. The inventory is more sound with a drop of 39% when we compare it to the same semester in 2024. Now with this, we can continue investing in the business and the update of our stores are priority. Within this quarter, BRL 9.2 million were destinated to store CapEx. We had important openings and new concepts like Le Lis in Batel, Curitiba and Campo Grande; and Dudalina, Salvador Shopping. We are happy with our results in the quarter. We have a plan. We have the brands and the people in order to grow and to change the level of profitability in the upcoming years. I thank you all for your participating. And now we will entertain questions.

[Operator Instructions] We have a question number one from Allan from Bank of Brazil that wants to know if we have a distribution expectation.

Of share distribution, if we end the year with a net profit, which everything shows, we will respect the dividend policy that is to distribute 25% of our net profit to all our shareholders. So it's important if we generate profit, we will follow the same policy of distribution that we've always followed.

Now we have a next question from Jose Carlos that wants to know which are the expansion prospects of our franchise stores, which is a very competitive channel and what would be a strategic strategy for sell-out to continue growing.

Jose Carlos, thank you for the question. Yes, we have been structuring ourselves within the franchises in the past 2 years, outlining our new processes and surrounding ourselves by experts in this channel. We do believe that this is an avenue of growth for us. We are especially focusing on Dudalina of the 30 stores that we plan to open next year from now up to next year. We have 15 in operation. Now the franchises are maturing. We have a major expertise in retail. Therefore, the experience can be transferred to our franchisees. Therefore, our retail experience will be transferred to the franchises in terms of that sellout strategy, and without the competitive market, it always has been. So we've been here for a long time. And I believe that this is a matter that we will lead day by day with a clear strategy. And we will continue focused on this channel when we think about the Dudalina brand.