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

Good morning, everyone, and welcome to earnings results concerning the first quarter 2021 for Restoque. Here with us is Mr. Bauermeister, CEO and DRI. I'd like to inform all participants that the earnings call can be found for download at www.restoque.com.br. [Operator Instructions] This event is also being simultaneously broadcast over webcast. Before moving on, I would like to mention that forward-looking statements made during the company's remarks -- during the conference concerning the company's business outlook, operating and financial forecasts, are based on beliefs and assumptions of the company's management and also on information currently available. Forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions. And they refer to future events, which depend on circumstances that may or may not materialize. Investors should have in mind that general economic conditions, industry conditions and other operating factors might affect the future results of the company and thus lead to results that will differ considerably from those expressed in these forward-looking statements. I'd like to turn the floor over to Mr. Livinston Bauermeister who will conduct the presentation. Please, Mr. Bauermeister, you have the floor.

Good morning. Thank you, and welcome to our earnings call for the first quarter 2021. As you know, the year 2021 was marked by high instability, generated by the second and more severe wave of the COVID-19 pandemic. Operating restrictions to our stores remained on between January and February and were intensified in March. During the first quarter, we operated during only 67% of our normal working hours, taking into account closings of stores and reductions in our working hours. Despite all of that, lessons learned in 2020 and the structural actions that we have adopted since the fourth quarter of 2019 have placed us in a well -- in a good position to face this moment. We continue to advance in a very effective way around our structural measures, which have been and will continue to be fundamental as we build long-lasting, consistent results, and as we have also managed to mitigate the impacts of the crisis during this quarter. The integration of the physical and digital channels is increasingly more advanced, as you can see in our earnings release. Digital sales have reached historical records, having reached their highest level of quarterly sales for the company in this modality. Sales were BRL 36 million in the first quarter as opposed to BRL 14 million in the first quarter of 2020, a growth of 156%, which accounts for 24% of our B2C sales channel. In the month of March, when physical stores were more restricted in terms of working hours to operate, we operated at around only 28% of the working hours when compared to normal operating hours. Digital sales reached BRL 70.4 million, accounting for 55.6% of sales in the B2C channel. That number exceeds or represents a growth of 631% when compared to March 2020 and 1,632% when compared to March '19. Our digital active client base also saw a growth of 63% in the quarter when compared to the first quarter 2020, showing that winning new clients and the strategy of bringing back old clients was quite effective. Structural improvements in our digital platforms, combined with investments allocated to generating traffic, which grew by 58% by the way, have led to a higher engagement in the channel. Operating indicators for sales conversion at the websites were superior to 19% than 2020, with an average ticket coming out at 18% higher. We have also advanced relevant indicators in terms of digital operations. We delivered 98% of orders within the deadline and have reduced the average delivery time across all modes, maintaining a very competitive average freight cost. In April, we also got a new certificate, RA 1000 of the Reclame Aqui portal. This time it was our brand Le Lis Blanc, which reached the score of 9.3. Dudalina, an outlet store client, had already received that seal. And now our next step is to get that same certification for John John, which already has great score, and it's quite close to getting the seal. As for inventory, we managed to reduce inventory by 25% in the first quarter when compared to the first quarter of last year, which represents a reduction of BRL 95 million. We continued to efficiently manage our procurement and to have a higher turnover of our full-priced products through our B2C and B2B channels. Even with lower sales, because of the pandemic, we managed to normalize our inventory turnover. We continue to advance in our technology projects across different fronts, as mentioned in our earnings release. And as I mentioned early on, we operated in the first quarter with an average time of 60 -- 67% in our physical stores. And despite of that, the lower working hours, because of our good digital sales, still our consolidated sales came out 18.6% below that posted in the first quarter in 2020. Coming from a more promotional-leaning market, our margins were also pressured coming out at 49.1% in the quarter for our gross margins. And even though we have reduced our SG&A in proportion to the drop in sales, EBITDA in the quarter was BRL 3.2 million, clearly showing the operational de-leveraging of the business. The other financial numbers and indicators can be found in our earnings release, as you can see. For possible questions, we, of course, will remain available to address those. As for the second quarter, after a drop in operational restrictions in May, we have operated at 61% of our normal operating hours: In April 51%; and in May, 86%, just to be sure, because of fewer restrictions to operations. The performance for the second quarter, with this better forecast, motivates us as we try to resume some level of normalcy and a good growth level and an improvement in our operating and financial indicators for the remainder of the year. That's what I have in summary to share with you this morning. Other information can be found in our earnings release. As I mentioned, they are all broken down in numbers, easy to access. And I remain available for questions or comments that you may have. Thank you very much.

[Operator Instructions] Since there are no questions, I'd like to turn the floor back over to Mr. Livinston Bauermeister for his final comments. Please, Mr. Bauermeister, you have the floor.

Thank you all for participating in our earnings call, and I remain available to all. If you have questions or comments, our IR team is also available. Have a nice day, everyone, and see you next time.

Thank you. This concludes Restoque's First Quarter '21 Earnings Results Conference Call. Please disconnect your lines at this time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]