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

Good morning, ladies and gentlemen, and welcome to the results of the first quarter of Veste S.A. We have today Mr. Alexandre Afrange, who is the CEO; and Mr. Guilherme, who is responsible of International Relations. Our earnings release is available for download at www.restoque.com and the earning results section. Before I start, I have a disclaimer. This webcast is being recorded and translated simultaneously. The slides are being presented both on our IR website and on the webcast platform. [Operator Instructions] Please note that any statements that may be made during this broadcast regarding the company's business projections and operating financial targets are assumptions made by management as well as information currently available to the company. Forward-looking statements are not guarantees of performance and 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 the general economic conditions, industry conditions and other operating factors may affect the company's future results and the results may differ materially from those expressed in such forward-looking statements. Let's now go to the presentations of Veste S.A.'s results.

Hello, good morning. Thank you for your presence. I am Alexandre Afrange, CEO of Veste S.A. Here with me is Guilherme de Biagi Pereira, Director of Investor Relations and Strategy. This meeting today brings us the opportunity to present great results, and we are very optimistic about them. Next, we are going to show you a very brief video that is going to show you how we work daily to bring you a more sustainable and more profitable company. [Presentation]

First quarter 2023, we have worked on our expenditures strictly in investments. Clearly, that allowed us to reach a profit of BRL 6.5 million, a reversal of BRL 59 million in relation to the first quarter of 2022. After 4 years, we have reached profits in our first quarter, thanks to investments done with people, stores, refurbishment and marketing. This quarter, we have grown our EBITDA margin over 61%, and now we reached an EBITDA margin of 18% with a growth of plus 5 percentage points in relation to last year. We may assure you that the first quarter started pretty well with excellent results, sales growth evolution and progress in the gross margin. Here, our main indicators for the first quarter. I would like to highlight 3 of them. First, same-store sales, 18% of growth versus 2022. This is the eighth consecutive quarter with this indicator. Growth margin 64%, with a growth of 6.5 percentage points versus 2022. And net profit is BRL 6.5 million, that is a reversal against BRL 59 million of indebted that we had last year. Total sales, BRL 331 million. B2B and B2C channels, great performance. B2C, plus 12%. And B2B, plus [indiscernible], which offset our downsize in the outlets. We sell with less sales and true price. We grow with [indiscernible] e-commerce sales are aligned into 2022, and we grew our gross margin in 8 percentage points. Our capital investment was applied to speed up our growth. Stores refurbishment is one of our pillars. We have some [ red ] stores and other ongoing and [indiscernible] stores. Those stores that have been through some refurbishment, they allowed 50% growth in sales and they elaborated with over 220% in our entry to the great results. Our stores are much more charming, comfy, allowing a totally different customers' experience. And this is the customer that we like to attract and finalize. As we have planned last year, we closed 25 stores. And even though we have great news, our active client base has increased 2% with stable frequency, but they spend more anytime. Our annual expenditure has increased all of our brands. Customer satisfaction is what move us our end. We reached the NPS score last March. We want to keep it and grow it to be a highlight in the market. So we started off 2023 really good. And thanks to this achieved performance in the first quarter, we remain enthusiastic about the results we plan to deliver in the year 2023. Guilherme de Biagi, our Relations Director, has the detailed numbers to present now. Guilherme, please?

Hello. Thank you, Alexandre. Good morning. Now let's take a deeper look into the financial view of the company's results this quarter. Move on to the second video. Starting by revenue per channel. The first part shows great results with consistent results in the B2B and B2C channels. 13.2% increase in our revenue. Let's go into details. B2C grew 11.7% and B2B 23.8%. So the positive performance of B2B performance is due to better price collections and to expand our exportation. In addition, we are truly in the transition to take Le Lis and Bo.Bô brand to become wholesale brands, allowing our multi-trend clients to buy more and to increase our sales and market share. Parallel to this, we see sales contractions in this channel where it's been taken place in the past years. We understand that to reach an appropriate number of stores and inventory, it has to do with the strategy of full price in the B2C channel, where we are going to have a fewer garments to be sent to our clients. In the quarter, I also would like to highlight the sales indicator amounting 18.1% versus the first quarter of 2022, eighth consecutive quarter of growth in this indicator showing the health of our same-store sales. Here, we see full price evolution. Let me highlight that the company is increasing revenue in the B2C channel together with the full price sales indicator. Such a positive effect allows better margin for the company's revenue and to the general workability. We had increased [ 80 ] percentage points in the full price sales, switching from 61% to 69% even during a sales period of fund in the retail market. Here, you can see a little bit of what we have been doing in diversing platforms and increasing conversion. Our digital system represented by the B2B digital, side stock and multichannel also represent a 60% of our sales in that period. Our finance base shows us 12.9% versus the first quarter of '22. Clients with more frequency than multichannel and more sales, more expenditures. It's also important to increase the number of clients that we [indiscernible] is more than one shopping channel. Now gross margin and EBITDA. Gross margin BRL 169.8 million, a growth of 27.2% versus the first quarter of '22 with a gross margin of 64%, plus 6.7 percentage points versus was the same period than last year. The margin growth is due to an increase in the gross margin in all company's channels, leading to a margin growth of [indiscernible] points. We keep analyzing diversification, [indiscernible], strategy, and we also have some discounts given. In addition, we have a modern presentation of the B2B channel. That has led to a less 20 basis points. That represents a small impact and the margin consolidated increment of 66 days in the period. SG&A, including depreciation, was BRL 123.7 million. We had an advancement in our operational expenditures due to market investments, we bring investments with more [indiscernible]. In addition to that, we have a personal annual expenditures and commissions with the positive performance [indiscernible] and results participation, thanks to operational improvement. The quarterly EBITDA shows a growth where the total risk note amounted BRL 47.7 million, a growth of 61.4% versus the first quarter 2022. For the second quarter, conceptually, our company shows some profits. That is the net margin, 2.5%. And now the company is after a continuous indicator improvement. Last but not the least, the company closed the semester with these investments for long term. Now these were my comments for the quarter, and they are also in our results release. Now we are going to open for Q&A.

We will now begin the Q&A session. [Operator Instructions]

We would like to thank all the stakeholders, especially all collaborators that have been performing their tasks [indiscernible]. The webcast of Veste S.A. is closed. We'd like to thank you all for your participation, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]