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

[Audio Gap] and Mr. Guilherme Biagi, Investor Relations Officer. We would like to inform all participants that the earnings release is available for download in the website at restoque.com.br. [Operator Instructions]. There is also simultaneous webcast that may be accessed through the company's website. Before proceeding, we would like to state that forward-looking statements are based on beliefs and assumptions of Restoque's management and on information currently available to the company. They involve risks and uncertainties because they relate to future events, and therefore, depend on circumstances that may or may not occur. Investors should understand that conditions related to the macroeconomic scenario, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements shared with you today. I would like now to turn the conference over to Mr. Livinston Bauermeister. You may start the presentation now. Thank you.

Thank you very much. Good morning, everyone. Welcome to the conference call of the second quarter of 2021. This quarter was marked by the gradual reopening of trade throughout the country. Thanks to the learnings that we had from the first wave of the pandemic, together with the structuring actions that we have adopted since the fourth quarter of 2019 that we have been sharing with you in recent releases, we have been able to quickly reestablish the operation of the physical stores, focusing on product turnover at full prices and also with the advances in the integration between physical and digital channels. As the reflection of this strategy, at the end of April and also during the month of May with Mother's Day, the most important month in the first half of the year for our business, physical stores resumed sales and performed quite similarly to what we had had in 2019, same month 2019, which was a regular year without the effect of the pandemic. Thus, we've reached same-store sales of 4% positive even with the operation of 87% of the total standard time of our stores because of the social distancing and restrictions to trade operation. On the other hand, digital sales doubled during the same period, reaching BRL 44 million in the second quarter as opposed to BRL 22 million in the second quarter 2020, showing the acceleration of sales and 113% increase amounting to 25% of sales in B2C channel in the period. There was a growth of 258% compared to the same period in 2019. Therefore, digital sales in the first 6 months of 2021 reached levels of BRL 80 million overcoming the entire year of 2020. Digital sales in 2020 achieved an amount of BRL 79 million. In addition to the strong growth in digital sales and the resumption of sales in physical stores, with higher turnover of products at full price as I pointed out before, the gross profit for the period reached BRL 103 million and brought an increase in gross margin of 5 percentage points as opposed to the gross profit in the second quarter '20. At the same time, we maintained our strategy of balancing expenses, adopting a discipline of SG&A, optimizing expenses and prioritizing projects. It enabled a reduction of SG&A with 5 percentage point of net operating revenue as opposed to the second quarter '19. Continuing on improving our services and also customer satisfaction rates, which contribute to long-term sustainability and growth of digital sales, we've reached 97% of our deliveries within the defined deadline. At the same time, we understand that the delivery time is a decisive factor at the time of purchase through online platforms. And we achieved the very significant progression in all modalities with delivery times below what we had been doing in the second quarter '20. Alternatively, we are also very pleased to announce, as you've read in our release, that for the third consecutive quarter, we have been awarded RA 1000 seal of Reclame Aqui. It's a seal of excellence, which now has been granted also to John John brand together with Le Lis Blanc, Dudalina and stock.com brands that had already been awarded this RA 1000 seal for the past months. As I've told you, and we keep on emphasizing, we currently have all brands eligible for the seal awarded with it. Bo.Bô brand, even though it scores excellently, it's not too eligible because it doesn't have the minimum of 50 complaints in the portal, which is also positive to some extent. With these results, we are very confident that the strategic decisions taken over the last 18 months, as you've been following up, focused on customer experience and satisfaction, acceleration of digital integration, operating efficiency, focus on branding, pricing strategy and sustainable promotion, these are some of the key aspects that we've been highlighting throughout the period. So as a result, we have better turnover of products at full price, and it also reinforces our institutional positioning to all our stakeholders, including our shareholders. So it really places us at the right path and the right direction to deliver consistent results in line with our commitments made to the market. Concerning financials, I will now turn the floor to our Investor Relations Officer, Guilherme Biagi, and he's going to go over some of the financial data, and then we'll be back for your questions and considerations and clarify your questions. Guilherme?

Thank you, Livinston. Good morning, everyone. Now complementing the points that Livinston has already brought to your attention, I would like to update some of our innovation projects, technology, CRM and artificial intelligence that we have developed. During the quarter, we completed the change in the structure of technology team to work focused on a new agile journey that covers the organization in squad. In upcoming weeks, we are going to complete the integration that will enable more inventory availability for e-commerce, bringing more visibility of allocated inventory in our distribution center in Aparecida de Goiânia. We have also delivered the pilot of the pick mobile solution. Stores will fulfill omnichannel orders in a more efficient way, reducing the time required for picking and checking orders, reducing breakout of inventories and also improving the experience of consumers. We've also adopt give back solution, which allows increase of sales and also the frequency of purchase. We expect to finalize the rollout to the entire network in the beginning of the third quarter as well as implementation in e-commerce. Based on the first results and on market benchmarks with this solution, we have observed an incremental potential in B2C channel of up to 5% in sales. It's worth noting that this initiative reinforces our long-term strategy and, at the same time, generate short-term results. We've also started development of the new Le Lis Blanc app, an investment that will improve our relationship with consumers and also create an additional sales channel. At the same time, after we implement that, we are going to expand to all the brands of the company. In terms of logistics, we have also evolved by automating inventory operations using RFID, a step that, in the future will, help us break -- reduce our problems of inventory and improve reliability and availability of sales channel. Now Page 10, we can see gross revenue. We've reached BRL 246 million in the period, expressive growth of 330% over the second quarter '20. It was a result of the expansion of all our channels, highlighting 661% in B2B channel, 511% in physical stores, and once again, growth -- [ digit ] growth for digital channel, 113% in the quarter as opposed to the second quarter '20. Slide 11, we can see the table with our fiscal year income. We presented, as highlight in the quarter, net revenue with 333% growth, gross profit as presented before of 374% increase reaching BRL 103 million and gross margin of 53%, resulting in 5 percentage point increase over the second quarter '20, resulting from the adjustment of our strategy for greater turnover of products at full price as we've been describing throughout the quarters. We should also highlight the reduction of SG&A over the net revenue, reaching 48.3%. This was the result of reorganization of expense with renegotiation of lease contracts, prioritization in resourcing digital marketing and also balance of our personnel expense. And finally, as a result of all these points, we've reached a positive EBITDA for the second consecutive quarter, showing a trend of recovery. In the quarter, there were BRL 12 million positive and EBITDA margin of 6%, an increase of BRL 30 million over the second quarter '20. Finally, on Slide 12, we can see the progression of our inventory levels. As we've mentioned in previous releases, the inventory balance reported in our balance sheet reflects the series of measures we have taken over the last quarterly to optimize utilization at full price, generating higher cash. Using 2019 as a comparison basis, the winter collection showed 23% higher utilization rate in 2021, with inventory levels reduced by 50%. As a consequence, inventories reached the historic minimum levels of the last 6 years to BRL 279 million or BRL 101 million below the same period 2020, which means reduction of 27%. These were our initial comments for the quarter, and they are also detailed further in our earnings release. We thank you all for your participation. And now we open for the Q&A. Thank you very much. We are here to answer your questions.

[Operator Instructions] I would like now to hand it over to Livinston for his closing remarks. Mr. Livinston Bauermeister, please, your closing remarks.

Thank you all very much. We have shared with you a summary of what we've been doing, what we've been doing for the recent quarters. It's something that proves to be very consistent. Our Investor Relations team led by Guilherme Biagi is here to support you. I am here as well to support you, and we are going to keep on working during the next quarter. This is a quarter that's going to already show very good same-store sales, very much aligned with the third quarter '19. And we are trying to deliver consistency to our work, something that we've been sharing with all of you. We are here at your disposal. Have a great day, everyone. Thank you.

The conference call for the second quarter of 2021 of Restoque is completed and is closed now. Thank you all very much for your participation. Have a great day. You may disconnect now. [Statements in English on this transcript were spoken by an interpreter present on the live call.]