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

[Audio Gap] Relations Director. We'd like to inform all participants that the earnings may be accessed through Restoque's website at www.restoque.com.br. We would like to inform you that this event is being recorded. [Operator Instructions] There will be a simultaneous webcast that may be accessed through the company's website. Before proceeding, we would like to mention that forward-looking statements are based on beliefs and assumption 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. Now I will turn the conference over to Mr. Livinston Bauermeister, who will begin the conference. You may proceed, sir.

_Good morning, everyone. Thank you for participating in our conference call. Today, we are going to be discussing the first quarter of 2022, the results we disclosed yesterday. With me is our Director of Investor Relations and Strategic Planning, Guilherme de Biagi . We also would like to invite you to refer to our first quarter '21 earnings presentation available on our website so that you can accompany some of the general aspects of what we're going to be discussing. And more detailed results can be seen in our earnings results together with our financial statements. Beginning here. The first quarter of 2022 was an important period for us to consolidate our strategy, as we have reiterated along the last few quarters, in which we favored full price sales and carried out a sustainable clearance, as we see it, focused on maintaining the company's gross margin. On Page 3 of our presentation, we can see there that despite the effects faced along the beginning of the year related to Omicron variant of coronavirus, we ended the quarter with sales of BRL 283.7 million, a growth of 35.4% versus the first quarter of 2021, despite a reduction in the store base of more than 14%. In other words, 34 stores less. And we had a gross margin of 57.3%. And that involved an expansion of 8.2 percentage points when compared to the same period of last year. Following our constant improvement in operating efficiency, we had a same-store sales of 47.6% versus the first quarter of 2021 and 9.6% positive numbers versus the first quarter of 2019. With that, we are in the third consecutive quarter of positive same store sales, even if we compare to 2019, the prepandemic period, showing that we are returning to our growth rates even considering the base as before the pandemic. In relation to our clients, we also had an important growth of our active base with same customer sales of more than 35% in the last 12 months. In the first quarter of the year, the company presented, as you can see in our presentation, an EBITDA of BRL 29.5 million, an EBITDA margin of 12.7%. Some effects contributed to the recovery of the EBITDA such as increase of the recovery of our gross margin, as I mentioned before, and also the decrease of expenses in relation to net income. They dropped 42.7% in the first quarter '21 to 36.9% in the first quarter of 2022. When we compare '21 and '22, there was a reduction of 5.8 percentage points, as we see the representativeness of the income and expenses. As the company recovers the income -- net income to prepandemic level, EBITDA tends to evolve and the mismatch of expenses are positive. Now moving on to Page 4 of our presentation. We can see that we have the best historical performance of digital B2C in the quarter, reaching BRL 44.9 million in sales, a growth of 26% versus the first quarter '21 and representing a penetration of 15.8% in sales in the period. Given the company's focus on the constant growth of the channel with profitability, during the first quarter 2022, a careful analysis was carried out in relation to the investments in media and advertising, with greater availability of products in commercial partners and a positioning that adheres to a profile of our customers, so increased the number of online [indiscernible] in 26.5% when compared to the first quarter of '21. And we also increased the number of visits and the conversion rate on our website. In addition, we transacted BRL 40.3 million through omnichannel tools, a growth of 283% versus the first quarter of '21. The sales together with the B2C sales amounted to BRL 87.3 million. In other words, digital penetration of more than 30.8% of the total sales of the company. The same effect can also be seen when we analyze the performance of our active digital customer base, which grew by 43.7% when compared to the first quarter of 2021, with a penetration of 31.1% of customers with the digital purchase. Therefore, 13% of the total base is already omnichannel, with purchase frequency 3.2x higher than the exclusive customers of some channel. On Page 5 of our presentation, as we have already mentioned, same-store sales had a positive highlight for all brands, with the exception of the ROSA CHÁ brand which is a brand that is not very representative of the revenue with less than 1% of the sales of the company. This reflects the improvement in the operational efficiency of the physical stores that indicates a future potential growth. And in relation to this, I would like to point out that our sales performance in same-store sales was growing along the quarter. And it continues at a very accelerated pace in the months of April and May, just now anticipating the second quarter of 2022, in April, we had a same-store sales of 99.3%. And in May, up to the moment, we have, say, a positive same-store sales of 43.6%, both compared to the same months of the previous year. And you know that May is a very important month for us here at the company because of Mother's Day. Now on Page 6 of our presentation. We would like to break down our sales of our channels. And you can see that the gross sales in the amount of BRL 283.7 (sic) [ BRL 283.7 million ] was very close to what we posted in the first quarter 2019, even with a reduction in the store base of more than 28%. That means that 81 stores less than we had when compared to the first quarter of 2019, so we are talking about stores that had the performance which we consider to be less important for the company, and also despite the effects of the Omicron variant. And another effect is the continuous reduction of sales and the representative of our outlet channels. Many of the sales were reduced in more than 50%, 56.7% to be precise versus the first quarter of 2019 due to the closing of 21 stores. This reduction, as I mentioned before, is in line with the strategy adopted since 2019 that favors full price sales. We refer to the stores who have higher operating efficiency and also a reduction of the leftovers inventory, and therefore, the representatives of our outlet channels. After more than 2 years following the strategy, you can notice that we are having higher revenues, a substantial increase in our same-store sales and a growth, a continuous growth of the number of clients. That is an evidence of the successful and assertiveness of the strategy that we adopted. I would now like to turn the call to Mr. Guilherme de Biagi, who will provide more details to you. And then we will be back to answer any questions that you might have. Guilherme, over to you.

Thank you, Livinston. Good morning, everyone, who are attending our conference call to discuss the results of the first quarter 2022. Complementing the points above, getting close to the end of the presentation on Page 9, I would like to bring our investors a view of our active customer base, which reached 582,000 active customers in March 2022. And as a reflection of the evolution of our omnichannel tools, 31% have been made purchases in our digital ecosystem, with an important highlight for BO.BÔ brand, which in March 2022 reached 63% of customer resorting to one of the digital purchase means. The customers' active customer base continues on our growth path with a growth of 40.1% versus the first quarter of 2021 and is already looking to surpass the prepandemic level of -- in the second quarter 2022 despite a reduction in the store base. Our highlights is for the brands LE LIS and BO.BÔ, which have already reached 100% and 125% of the active base that was reported in the first quarter 2019, respectively. On Page 10. With the resumption of sales in the B2B channel and the increasing use of omni platforms, the logistics operation has made efforts to reduce the lead time. Among the efforts employed in the distribution centers and in the constant development of logistic providers, there was a reduction of one day when compared to the same period of 2021 and 5 days in lead time versus the first quarter 2019, which was the prepandemic period, a result that helps us in the rapid restocking of our own stores and also our multibrand partners. On Page 11, we can see that at the end of the first quarter, the financial base of inventory was reduced, both when compared to the first quarter '21, minus 11.5%, and the first quarter of 2019, a drop of 38.1%. Therefore, the company reached in the first quarter of 2022 one of the lowest historical levels of pieces from old collections, with more than 12 months old, in stock, representing 7% of the total of pieces, which gives more space for future purchases, fewer clearances, and as a consequence, as you have monitored along the last quarters, a reduction of outlet channel sales. And then on Page 15 and 16, finally, I would like to point out that the company continues to invest in the revitalization of its stores, a fundamental part of our business. And as of April, we opened the new architectural project of LE LIS brand. It's an innovating product that reinforces the position of the brands in the vanguard in female position. And we have a new store in the JK [indiscernible] stores. We also had along April the opening of John stores at Shopping Iguatemi in São Paulo, along with its architectural project. Then we invite everyone, those who didn't have the opportunity to know it, visit our stores that has already allowed us to retain positive results in April and in May. Well, those were the main comments for the quarter. And we have all this in detail form in our earnings release. And I would like to turn the call over to Livinston again before we have the Q&A session.

I would like to end our presentation before start our Q&A session. I would like to thank -- special thanks to our Restoque's team, senior management, supervisors or sales team, logistics team, our teams at the plants. We are very involved in the past few years in spite of all the difficulties that the pandemic has imposed to deliver results to our shareholders and all stakeholders in general. And the results that we have shown show all this. It's a teamwork. This is a work done by everyone that deserves our appreciation, and I would like to thank everyone. And now I would like to start the Q&A session, should we have any. Regardless of all this, our Investor Relations team is at your disposal should you have any questions or require any individual clarification.

[Operator Instructions]

We have one question that we received in text by [ Jean Paul ] with [ Omolon ]. It's a long question. I'm going to try to summarize it. Basically, he says that he has been monitoring in a very optimistic manner all the points related to our capital structure and everything that we have already disclosed.

We would like to thank you for the comment. We say -- we'd like to say that the management of the company is very involved in solving the capital structure in a definite manner. And as we have some news related to this topic, we are going to disclose by a material fact to all stakeholders and all shareholders in the market.

In his question, he also mentions or he asks if we have the intention to establish any joint venture with other market players and also to have the May collection of LE LIS brand because he sees this as a Brazilian Armani brand.

We would like to thank you for the complementary comments. So if we consider any joint venture, we are going to disclose this to the market. At the moment, we are focused on delivering a better performance and improving our operating results. And for the time being, we have no joint venture in our mind so that we could disclose with any other brand, although we have been focusing in the past few months, as you have seen, to establish collab actions with other brands. And we have been very successful in these initiatives. So we would like to thank for question and comments.

I would like to say that there is another question from [ Clay Denoud ]. Once again, he has asked about the process of the capital structure and the proposal that was presented by the partner.

As I mentioned in the previous question, the company management is evaluating the draft proposal. And more than that, we want to give a definite solution to our capital structure. And any new fact will be disclosed by means of material fact. Thank you [ Clay Denoud ], for your question.

[Operator Instructions]

We received another question from a text. This one is from [ Walter John ]. And he's also asking about the capital structure, debt service and debentures.

We'd like to remind you that, together with debenture holders, we made the decision to delay the payment of the interest of the debt. And this is going to be done up to June. And meanwhile, we are going to be analyzing together with debenture holders what the capital structure will be like. We understand that before this period of June 3, we are going to give the market more information by means of material fact, as I have already mentioned.

[Operator Instructions] If there are no further questions, I would like to turn the call back to Mr. Livinston for his final remarks.

Thank you. I would like to thank everyone for attending this conference and also those who took part by asking question. I would like to say that we are available, we are at the disposal of our investors, the market. And you can use the channel of our Investor Relations to get in touch with us.

The conference call of results of the first quarter 2022 of Restoque has come to an end. Thank you, and have a good day, everyone. [Statements in English on this transcript were spoken by an interpreter present on the live call.]