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

Good morning, ladies and gentlemen. Welcome to Restoque's Fourth Quarter 2021 Earnings Conference Call. Joining us today are Mr. Livinston Bauermeister, CEO; and Mr. Guilherme de Biagi, IRO. We would like to inform all participants that the earnings release is available for download on the company's website at www.restoque.com.br. [Operator Instructions] This event is also being broadcast over the Internet via webcast. Before proceeding, we would like to mention that forward-looking statements that may be made during this conference regarding the company business prospects, projections and operational and financial targets are based on the beliefs and assumptions of Restoque's management and on information currently available to the company. Forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions because they relate 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 operating factors could also affect the future results of the company and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the conference over to Mr. Livinston Bauermeister who will start his presentation.

Hello. Good morning, everyone. Welcome to Restoque's Q4 2021 earnings conference call and full year 2021 earnings conference call. We invite you to follow this call along with the slide deck that has been made available on our IR website. There, you'll find a summary of all the information that will be shared during this call and our earnings release. I'd like to start today's interaction by looking back at 2021. We started the year aware of the importance the year would have for the balance of our business. And with the peace of mind and confidence that the measures adopted since the end of 2019 intensified throughout the year of 2020 had prepared the company to face this crisis scenario. And at the same time, to start a new cycle of sustainable growth in spite of an early 2021 marked by the instability of the second and most severe wave of the COVID-19 pandemic, we were able to mitigate the impacts of the crisis by making the most of the lessons learned throughout 2020 and reaping the benefits of the structuring actions that were put in place since the end of 2019, as you are aware. I would like to highlight this would not be possible had it not been for the dedication and hard work of our entire team that continuous committed to offering the best products and experiences to our customers. It's worth mentioning that these actions aimed at the digital transformation of our business, integration of our online and offline sales, investments in artificial intelligence, CRM and data science, revitalization of our brick-and-mortar stores and evolution of our B2B channel agility and reduction of lead times, better use of our collections and a consequent inventory reduction, alignment of the collection structure with the historical success profile of each one of our brands, appreciation of our employees' work, alignment of interest and dissemination of the culture and the structuring of our ESG approach in search of a better operational cycle and cash generation. These are our strategic foundations established since 2019. Our 2021 performance was affected by the context that we faced throughout the first quarter as I mentioned earlier, which impacted the productivity of our stores and distribution centers alike. They had their operations either suspended or limited during that period of time, but that was partly offset by the positive performance of our digital operations and omnichannel tools, which even during the transition period to a new e-commerce platform continued having robust operations and also by the growing productivity of our brick-and-mortar stores that reached levels that are comparable to the highest ones in the recent history of our company. Now let's look at the indicators on Page 3 of our presentation. In Q4, we have seen proof of how appropriate the adopted strategy was. In the quarter, our earnings reached almost BRL 360 million, up 40% compared to the same quarter the previous year and 7.3% compared to 2019, a pre-pandemic period. There has been a growth in the volume of sales compared to the pre-pandemic period, as I said, even though our store base was 36.6% smaller than our historical peak. To support this growth and show our operational efficiency, we had same-store sales in this period that was 72% higher than Q4 '20 and 34% higher than Q4 '19. Our same-customer sales in the period was 27% higher in the last 12 months. It's also worth mentioning that in Q4 we had an adjusted gross profit of BRL 173 million, with gross margins of 60.2%, going back to historical margin levels of our company. We reached an adjusted EBITDA of BRL 47 million with an EBITDA margin of 16.4%. Now moving on to Page 4 of our presentation. Another highlight was our digital B2C channel with a customer base that currently accounts for 30% of our active customer base. Digital sales reached almost BRL 150 million, up over 90% compared to the same quarter of the previous year, reaching its largest share of sales in this channel with a penetration of 19.2% of our total sales. This result was driven by a greater maturity of our digital tools added to an efficient customer service and a constant search for improvements in our logistic operations. It's also critical to mention that we have recently seen a clear sign, which was reported in a material fact announcement made on March 25, 2022 of a potential, definitive solution for the company's capital structure. We would like to highlight that the company's management is working hard to build and make available a structure that is of the interest of the company and its stakeholders. We would like to reinforce our commitment with the business sustainable growth through a total and continuous focus on customer experience and customer satisfaction, digital integration, operational efficiency and institutional positioning as a way to create value to our stakeholders. Now I would like to turn the floor over to our IRO and Strategic Planning Director, Guilherme de Biagi. After his remarks, we'll be available to answer any questions that you might have. Thank you very much. Guilherme, you have the floor.

Thank you, Livinston. Good morning, everyone. So let's move on to Slide #5 of our presentation. I would like to reinforce the positive performance that we had in Q4 2021, especially when analyzing the same-store sales of the quarter. We had a positive indicator for all the brands when compared to the same quarter of 2020. And when compared to Q4 '19, we'll see that almost all of them have reached excellent results in a more expressive and competitive time for retail, which is the holiday season. This performance would not be possible without the hard work of everyone involved in our operations from the design and building of the product to the admin personnel, logistics and sales execution in stores and in our digital sales channels. On Page 7, talking about digital sales of the company. We'll see sales in our B2C digital outlet channel and omnichannel, we see that we have reached BRL 245 million in Q4 '21, up 67% compared to Q4 '20. And when we add up all of the variables, this represents a share of 22.4% of the sales in the quarter. On the next page -- on the same page, you can see the service level of our digital channel. There has been an increase of percentage of on-time deliveries, which happened in 96% of the deliveries that were made in 2021 compared to 85% in 2020, so a clear improvement and a reduction of our lead times in one day from 2020 to 2021 as well as the optimization and efficiency in the [ sending ] or shipment of orders, reducing to 1.2x the average number of items per order. Our customer base has grown 22.3% compared to December 2020 and 7.6% compared to June 2020, the hardest moment of the pandemic. Looking at our active digital customer base, the growth was 46.4% compared to December 2020. On the next slide, you can see that with our strategy to obtain greater operational efficiency that was implemented since the end of 2019 we're able to combine sales growth and a constant inventory reduction in the last 18 months with quite positive results. In the end of Q4 '21, we have achieved an inventory reduction of BRL 53 million, down 18.6% versus Q4 '20 and BRL 80 million, which is down 25.7% versus Q4 '19. We have reached the lowest level of inventory since 2018, representing 7% of the total number of items which gives us breadth for new commercial [ bets ] and less pressure and moments of clearance. Now on Page 12, I would like to reinforce the positive performance of the B2C channel as a whole with the greatest revenue in the last 7 years in Q4 adding up to BRL 268.5 million in the quarter, up 55% vis-a-vis Q4 '20 and 22.6% vis-a-vis Q4 '19. With a highlight for Le Lis Blanc, John John and Bo.Bô, which grew 63%, 57% and 95%, respectively. Now on Page 13, I would like to highlight that in 2019, we had nonrecurring adjustments in our results and accounting adjustments in our results. The months were realized in total in Q4 '21 to constitute provision for the obsolescence of inventory in an amount of BRL 29.1 million provision for receivables amounting to BRL 7.4 million, diverse provisions adding up to BRL 12.3 million and BRL 10 million for the provision of future contingencies and the recognition of the impairment of the acquisition of Dudalina and low in our intangible and fixed assets in the amount of BRL 558.3 million, but these adjustments do not have any effect on the company's cash. These are our highlights for the quarter, and you can see further details in our earnings release. Thank you so much for joining us. And now we can start our question-and-answer session. Thank you.

[Operator Instructions] We have just received a question about whether the tax credit that we see in the accounting statements are the total credits.

We would like to highlight that we have some deferred assets that have not been recognized. These are tax losses from previous periods, totaling BRL 712 million, in addition to the premium of the acquisition of Dudalina of BRL 324 million.

[Operator Instructions] If there are no further questions, we'll now close the question-and-answer session. I would like to turn the floor over to Mr. Livinston for his final remarks.

We'd like to thank you all for joining us today. Our call will be recorded and made available to those of you who couldn't join us today. And we are available to you should you have any questions through our International Relations Department. So we are here for you. Have a great day and a great week. Thank you, and see you next time.

Thank you. This concludes Restoque's Fourth Quarter 2021 Earnings Conference Call. Thank you for joining us, and have a great day. You may disconnect your lines at this time. [Statements in English on this transcript were spoken by an interpreter present on the live call.]