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

Good morning, ladies and gentlemen. Welcome to Restoque earnings conference call 2Q '22. We have here today Mr. Livinston Bauermeister, CEO; and Mr. Guilherme de Biagi, Investor Relations Director. We inform everybody that it will be available for download at www.restoque.com.br. [Operator Instructions] Before proceeding, we would like to mention that forward-looking statements that may be provided during this teleconference in relation to the perspective of business projections and financial goals are based on information currently available for the company. Future considerations are not guarantee of performance. They involve risks, uncertainties and premises. They refer to future events and depends on circumstances that may or not occur. investors should understand that economical situations, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the floor to Mr. Livinston Bauermeister, who will begin his presentation. Please, Mr. Bauermeister.

Thank you. Good morning, everybody. Thank you for your participation in our earnings call concerning second Q '22. We have here with us Guilherme de Biagi, our Director for Investor Relations and Strategic Planning. We invite all to follow with us in our presentation of the results for 2Q '22, available in the website besides our earnings release that was recently published. Before I go to the presentation, we would like to emphasize, as in the release, since the last quarter 2019, we have reported the change in some adjustments that we did in our business model. Those refer to some points. Among them, conflict resolution between the sales channels, reduction in promotions and sales, markdown, especially in retail channel and consequent increase in full price sales. We also [ adequated ] the level of stocks. You can see that in our release, very important. And now we are at a better level. The adequacy in the lab -- in the number of our stores, we reduced about 28%, between the second Q 2019 and now 2Q '22, increase in sales. We also adequated our structures of collections and products and invested to unify our sales channel online and omnichannel and physical omnichannel besides many other initiatives of technological updating. Those initiatives started to produce positive effects throughout the last quarters. But they were still impacted by the effects of the pandemic. As you know, we have reported that oftentimes on the first half '22, especially on 2Q '22, such positive effects were even more evident. A great example of that was the robust growth of B2C channel, resumption of B2B, adequacy of outlet channel and better use and increase in sales of full price besides better adequacy of the stock level and following the reduction of representativity of past collections in the whole. As added to that, the last quarter of the year, as you well know, is an important period in retail sales, where the company presented robust results, consistent results in most of its indicators quarter-over-quarter in '21 and also quarter-over-quarter in 2019 before the pandemic. All that consequence of record performance on dates as Mother's Day and Valentine's in the second quarter. And besides that was an important period to consolidate our strategy already established throughout the last quarters, where we give privilege to full price sales. We did a sustainable sales, focusing on a gradual gain of gross margin. Now on Page 4 of our earnings release and analyze in the operational highlights of 2Q '22. We closed the quarter with gross revenue of BRL 333.4 million, a growth of more than 35% against 2Q '21 and more than 3% against 2Q '19, even with a 24% reduction on our number of stores, as I have commented. We had a digital penetration of more than 20% during this period in sales. Profitability. We had gross profit of more than BRL 172 million, growing more than 67% against Q2 21. And with a gross margin of 64.3%, expanding 11.7pp against the same period last year. Such results are due to a set of initiatives mentioned above. And as indicator of sustainability and strengthen our results, the percentage of full price sales in B2C channel was 85% in this period. Following our search to improve our operational efficiency and growth in [ level of active ] customers, we had same-store sales of more than 54% against 2Q '21 and more than 28% against 2Q '19. This is the fourth quarter -- consecutive quarter of positive same-store sales as compared to the same period before the pandemic, reinforcing the strength of our recovery. In relation to customers, we had an important growth in our active base with same customer sales more than 23% in the last 12 months. This way the company demonstrates that it's very robust in multichannel, strong in its brands as well as the capacity of our team that are allowed to accelerate the strategy that connects growth to sales. Looking for a healthier [ whole ] and less discounts with linear operation efficient and adjusted to the current moment as well as capturing future growth. On Page 5, in our earnings release, we present the opening of the revenue in the channels, highlight to B2C that encompasses physical stores, e-commerce and omnichannel that had the best Mother's Day in the last 7 years, BRL 260 million in sales in to 2Q '22, a growth of 45% against to 2Q '21 and more than 12% against 2Q '19. In June, with less sales and more items being sold inside the collection. The company registered in B2C a gross profit of BRL 49.7 million, positive more than 32% against 2Q '21. This is the best historical digital sales in B2C in a quarter that reached BRL 44.9 million, a growth of 26% against 2Q '21, representing a penetration of 15.8% in the sales on that period. The sales of B2B channel reached BRL 49.6 million in the quarter, and they go on with a good performance. Against 2Q'21, the sales were 28.9% higher and against 2Q '19, 15.8% better. After a period of reeducation of our stocks and of the number of stores, the outlet channel that has the name [ Restoque ] has had a performance that is very positive and delivered profitable sales to the company with gross margin of more than 36% in this first -- in the first 6 months of 2021. Page 6. Digital tools maintain important participation in the sales of brands this quarter. It increased 22.5% against 2Q '21 and a penetration that is more than 20% on gross revenue consolidated of the company in the second quarter '22 and more than 25% in the first half of '22. Now I give the floor to Guilherme, who will go on with the results that you can see in the presentation.

Thank you, Livinston. Good morning, everybody. So complementing what has been already mentioned, I would like to bring to our investors the view of the sales mix between full price and sales. Page 7. If you see, you will note quite an improvement in that period. The percentage of sales at full price in this period was 85%. And 12pp positive against 2Q '21 and 31 positive pp against Q2 '19. As an example of this improvement, we can emphasize the sales -- the selling sales during June. During this period, BRL 35 million in sales, a drop of 67% versus 2Q '19 and 19% against 2Q '21. And at the same time, important increase in full price sales, more than 200% as compared to 2Q '19. We thus understand that we go back to a sales curve that follows historical seasonability of revenue of the company, and we have an adequate proportion between full price and sales. Now Page 8. The same-store sales of the quarter was 54% against 2Q '21 and more than 28% against 2Q '19, with good performance, very strong of all the brands, except for Rosa Chá. As we have mentioned, that represents only 1% of the revenue of the company, and it's going through strategic realignment. On the same period, the SSS for full price sales was 77% against 2Q '21 and more than 90% against 2Q '19. We thus understand that the strategy adopted, as I mentioned, in June, with less sales, increasing market share, increase in organic sales on Mother's Day demonstrates the success of our collections and receptivity of our clients, even with the reduction in the number of stores, more than 25% against 2Q '19. Page 9. We show the tax results that dropped 8.2% against 2Q '21 and increased sales 35% on the same period. Therefore, it's a good performance of sales even at a level of inventory that's more balanced. So we finished the semester improving the inventory. And the period was finished with only 17% of previous collection, 12% from last summer and with huge potential of sales and 5% of older collections reaching less -- this smallest historical representativity. I also reinforce that we continue with the focus of being very stern administration in relation to stocks. Page 10. You can notice that our active base of clients of active client base reached 602,000 active clients, 23% plus versus 2Q '21, representing an increment of 112,000 clients on the same period. This result is better than December 2019. It represents 101% of the position before the pandemic and with less stores, showing that the company not only went above the sales before the pandemic, but it's also strengthening the relationship with the clients, active and potential, through a strategy that's focused in the customer and segmented per profile and also paving an avenue for future growth that comes from this continuous renewal of our active base at the same time that we focus on increasing lifetime value of our customers. Now Page 12, we brought an important thing here that happened during this quarter, was a continuity in the movement of revitalization of the brands. It's important brand awareness of our brands and also in the revenue of the key stores in our company, besides being an important tool for each brand to express and resignify its identity. In this period, we took one more important path in this a step on the sales with the Le Lis block reopening the flagship store in Iguatemi shopping mall in São Paulo, besides other shoppings and the results from these stores in the first months of the operation, as shown here. After reopening, we are quite positive. For instance, Le Lis Iguatemi São Paulo had better revenue as compared to the last 4 years, 161% compared to 2Q '21 and more than 36% compared to 2Q '19. The revenue per square meter of JK Iguatemi was fourfold higher, 90% versus 2Q '21, 25% versus 2Q '19. Le Lis Iguatemi Alphaville had an excellent reopening with same-store sale, 92% versus 2Q '21, more than 46% versus 2Q '19, and its revenue per square meter was more than 27% as compared to '21, more than 72% compared to 2Q '19. John John gained a new store in shopping -- in Iguatemi shopping mall São Paulo. It had increased and billing and productivity per square meter was 3x higher than previous years. The SSS in the quarter for the store was 135% against 2Q '21, more than 150% against 2Q '19. Now Page 14. In complementing the informations already presented by Livinston concerning the revenue in this period, what we understand is that in this quarter, this result demonstrated that the operations mature and aligned to the new contract of the company with positive performance among channels, in between channels and brands. So 2Q '22 represented a huge advance in the quality of our sales. We follow strategic pillars, and we were able to decrease selling in sales, increased selling in full price and deliver operational and financial results with quality with a sustainable business model. So the gross revenue of the company was BRL 333 million in 2Q '22, more than 35% against 2Q '21 and BRL 617 million in the first half. Page 15, our consolidated gross profit. BRL 172 million in the quarter, a growth of 67.7% against 2Q '21. And gross margin was 64.3% against 52.6% in the second Q '21. We grew 11.7pp in the period. The advancement in the gross margin was seen in all the channels with emphasizing the recovery of the B2C channel, more than 620 bps, reaching 70.4% in 2Q '22 due to the improvement in sales at full price, representing 85% of sales in B2C on this quarter. Now Page 16. On the second quarter and showing our EBITDA, it was BRL 54.6 million with EBITDA margin of 20.3%. When compared to the same period last year, the result is 4.7x higher with a margin that's important, 14.4pp higher. And Y-o-Y, the EBITDA reached BRL 84.1 million, 5.7x higher than the same period last year. These were my most important comments for this quarter and also, they are more detailed in our release in the financial statements. I thank your participation. And now I call [indiscernible], I call Bauermeister.

Thank you, Guilherme. Now before Q&A, I would like to emphasize something relevant that we made public on July 2020 -- in '22, concerning our structure of capital. As it's mentioned there, the steering Board approved general assemblies of debentures, and they will be held on the 18th of August, next week, to decide about the increase in capital for the company in a range that goes from BRL 1.580 billion to BRL 1.765 billion, BRL 2.5 (sic) [ BRL 2.10 ] per share. The shares will be subscribed by our current shareholders and also may be subscribed by the debenture holders concerning the rights they have because of debentures. We have had indications of public information that about 90% of these rights due to debentures can be used in subscribing capital. What would represent was approved, a reduction in our financial indebtedness of about 90%. And of course, these approvals are still pending. They will be decided during the assemblies. But it brings excellent perspective of balance and readaptation in our capital structure. With that, I finish our talk, and I open for questions and answers. Besides making clear as always that our team of investors relation is at your service for any questions that you may have. So I open now for Q&A.

The floor is now open for questions. [Operator Instructions] I would like to give the floor back to Mr. Bauermeister for his final considerations. You may proceed.

Thank you all for participating in our earnings conference call that is recorded for future scene. Once again, we are here to answer all the questions you may have in relation to the company and the results. Thank you, and have a good day and an excellent weekend.

Thank you. The Restoque earnings conference call for 2Q '22 is finished. Have a good day.