Marisa Lojas SA

BOVESPA:AMAR3

Earnings Call Transcript 2018-Q4

[Operator]

Good afternoon, and thank you for holding on with us. Welcome to the teleconference of Marisa for the discussion of the results of the fourth quarter of 2018. This event is being recorded and will be available on the IR website of Marisa. [Operator Instructions]

We'd like to clarify that declaration that may be disclosed during these discussions concerning businesses of Marisa, projections and operational matter -- goals, I beg your pardon, and financial information are based upon beliefs and premises of the Board of Directors of the company as well as information currently available. Future considerations are not guarantee or assurance of development. They involve risks, uncertainties and premises because they are based upon future events, and therefore, they depend upon circumstances that may or not occur. Investors must understand that the conditions -- and general conditions depend upon future conditions, and that will affect the conditions.

Now I would like to pass on the floor to Mr. Adalberto Pereira Dos Santos, Director of relations with investors and Vice President, Financial and Administrative, that will start the presentation.

[Adalberto Dos Santos, executive]

Welcome. Welcome to this conference of the fourth quarter of Marisa S.A. I have here with me Mr. [ Farby ], our President; [ Mr. Sergio Farby ], Financial Product, Daniel [indiscernible]; Financial Director and [indiscernible]; Marco Muraro as well, our Commercial Director, [Foreign Language].

[Audio Gap]

I would like to leave you with our next speaker, and I will be with you eventually talking about the results and future results.

Chart #2. [Foreign Language] A drop of minus 2% compared to last year, second semester. A retraction of 0.5%. If we compare it to our expenditure, it has been the best numbers in this series. We have had improvements. We are still on the negative quadrant, but we are looking at evolution very soon. The last part of the year, especially in December, we understand why we got these numbers. Our main category has had a major growth. Growth important in the operations e-commerce; yearly and in the trimester or the quarter, 25%, a very important growth. The growth margin has been impacted by the results of the last semester. BRL 350 million is the number. The margin has been pressured by the conditions of what has been happening over the last semester. And so 49.9% is the margin that we have in the quarter or the trimester.

Chart #4, S&A, a growth with the most impact with -- related to marketing. 60% of rental were renegotiated. They are on contract and 40% temporary ones that we are reviewing. Additional expenditure, BRL 28 million, that are out of the process of the review that I'm talking about. 3% are including the discounts, and we see further growth in March.

We have made adjustments in the company. We are growing with major impact. It would be -- credit-wise, we have the major part. This is the major part and the most important part. Without credits, it would be 21%, considering this BRL 58 million that I just mentioned. [Foreign Language]

We have a drop of 6%, including here the Marisa Card and retail. BRL 59 million (sic) [ BRL 95.8 million ] is the profit, negative -- in the negative quadrant. As I mentioned earlier, it's similar to the third trimester with slightly less losses. We are confirming here this process, and this will continue in the first trimester of 2019.

PSF (sic) [ FPS ]. We are capturing the contributions, [ can I see ], BRL 40 million for 2019. BRL 30 million would be the recurring amount with 25%. Expenditure, 3.9%, according to the process, as mentioned.

Chart #8, the evolution of the portfolio of the private label. In the upper part of the chart, we see the portfolio, the best number of the series, 6.8% in growth. 31.2% to 28.2% (sic) [ 22.6% ], so that's the drop. Fixed (sic) [ EFFICC ] indicators. There is no indication of future problems with losses or deterioration.

Chart #9, the same graph but with the portfolio of the personal loans. We have had some percentage loss over the portfolio, but it goes back to its historic position. The portfolio, as you can see here, rather healthy without problems at sight. Our portfolio is maintaining steady.

Chart #10, EBITDA. A very important information, BRL 27 million (sic) [ BRL 227 million ]. We see here fiscal operations. PSF (sic) [ FPS ] and retail, BRL 31 million (sic) [ BRL 320.5 million ], [ below ] the BRL 93 million of the previous period. So that speaks for itself.

Page 11. BRL 159 million, that was the profit. We have an impact of the reduction of the fiscal credits. That's important. The negative part, we had drop in credits. We'll talk about that a little more on the next chart.

Cash flow, very positive. Fiscal credit doesn't affect that we have positive effect in the EBITDA. And the CapEx, we have also unaffected. Cash flow, BRL 148 million, very positive, especially when compared to the negative numbers of the last quarter of 2017. That has contributed to cash flow, which has put us in a very comfortable situation, within the levels that we have in mind and we aim at maintaining. That's it.

In the last chart, I have some considerations about the impact. Considering the results and the measures that we have taken, we have made contact with the Central Bank of Brazil. We have taken on new endeavors, looking -- along with the Central Bank of Brazil, looking at restabilizing the situation. 24 units of drop. We want to reverse that. And the closure, we hope to have 18 units by then, even better than the last semester of last year. We have implementations aiming at maintaining our focus, absolute focus on the strategic -- in the digital efforts; measures aiming at regaining our levels of sales in retail. We want to regain lost clients that were frequent clients in the past.

A few left items. I just mentioned the balance of sheet associated to provisioning so that we can support what we have in mind. We have to pay fines, and we have to abide by the contractual clauses. We are, all in all, working on what we call the clearance of the balance sheet and the efforts towards that. We are prepared for this process of regaining our growth, as we have been doing so far, and it has to do with all I have shared with you so far. That's all for now. We'll start now Q&A session.

[Operator]

[Operator Instructions] HSBC, Mr. Felipe.

[Felipe Cassimiro de Freitas, analyst]

I was aware of the launch of the new collections. Marco is online. I would like to know what has changed in the new collection, if there is -- or if there are new elements, if there is new fashion. And how you perceive the receptivity of the clients in the stores. And the second question, 2.5 months of 2019, and considering the time, I would like to know what has happened in the stores in terms of results.

[Marco Muraro, executive]

I will start with the second part, and then we'll go to the first one. 2019 was very positive. January is a month that is very convoluted or polluted, if you will, because we have a number of bureaucratic aspects to deal with, inventory and such. We have been able to do all we had to do in January successfully. Despite the campaign, we still need time to see the results. February has proven to be positive. March has the effect of Carnival. It takes up speed slowly, and the second quarter probably will be positive. Now the qualitative aspects of the collection. Qualitative-wise, we had -- from the second semester of last year on, we had improvements in the quality of the collections among other aspects, especially in the continuing of the identity of Marisa with its timing concerning fashion. Despite the losses, we know that February has proven to be positive. And all in all, we are aligned, and we are up to speed with our goals. I think there is good positioning. In the launching in March, the company is a company that is fashion-based. This is our business. We are investing in quality trends and so forth. We've more and more noticed that Marisa is in this game, and we are head-to-head with the big competitors, the big players in the market. Our prices are competitive and democratic. We have had good acceptance from the clients, from the stores. We have been able to make advancements. The last quarter, you see that despite being not the ideal, had good results. Quality of product is a major investment and has been clear. And marketing now is going to align with the fashion.

[Felipe Cassimiro de Freitas, analyst]

Last question, omnichannel-wise. The initiatives that have been commented on, 70% of growth year-by-year. This last trimester or quarter, you bet more heavily. All in all, my question is, what have you been seeing and done in this sense?

[Adalberto Dos Santos, executive]

I do not have the data concerning the omnichannel, but I think it would be interesting to have Mr. Pimentel sharing information. But it has been positive. Omnichannel is one of our main projects currently.

[Marcelo Pimentel, executive]

Good afternoon, all. The main project, as Adalberto mentioned, it's the omni project. And that will come strong in 2019. We started in the end of last year. We have SAP as a platform now. That has been with us since the end of last year. And we are doing our best to operate more aggressively. And within the timing of the market this second semester, with the structuring of the team, we are investing in a partnership with the commercial team. We want to have a wider range of assortment. 40% of the digital sales is made of products that are exclusive for e-commerce, especially shoes, plus size, children's collections. And that has been contributing heavily to our growth in sales. Black Friday, for instance, has been very important as well as the schedule of the digital markets and efforts. 2018 in the second semester and 2019 certainly will happen the same. We are head-to-head with the calendar and schedule for the digital platform. We have links. We have new partnerships. [ OMA ] is one of our partners. We started with 10 stores, as Adalberto well put. Our expectations were surpassed, not only sales-wise, but as a tool to bring new clients to our stores. That is to say that, currently, we have double digits for the model omni ticket stores, and that is combined with physical stores. We have worked hand-in-hand with the stores. And therefore, we have had around 10% of recall of clients that collect products in-store. Now it's a second stage. The increase of what we are proposing for the stores, in the second semester, we'll see that clearly happening. Aside that, we have tests concerning the use and the focus on products of the stores, including the tickets store and the omni project. We are preparing to invest in the marketplace where we are going to make available products of Marisa for the whole of the market through all those channels.

[Felipe Cassimiro de Freitas, analyst]

Marketplace-wise, I would like to know how advanced that is. It's fulfillment-wise or you have other projects?

[Marcelo Pimentel, executive]

We foresee that for the second semester, initially, we are going to have Marisa store within under different marketplace, which is slightly different from what we have done so far.

[Operator]

[indiscernible] Investments would like to ask a question.

[Unknown Analyst]

We had an internal exercise. The number currently -- recurring in the event of BRL 148 million in fiscal credit. The EBITDA consolidated would be negative BRL 13 million according to the numbers that we have. Retail, negative BRL 33 million. And the net result was BRL 133 million, almost twice or double-fold compared to the prior quarter. The company has some debt that mature in the second semester and in the order of BRL 100 million. And they could be paid if we have a negotiation with the debtors or sales of assets. How does the company aims to deal with the liquidity of such? And what are the alternatives that we have here to put on the table, considering that we have your company and the subsidiaries increasing? By that, I mean, especially compared to their peers in the sector.

[Adalberto Dos Santos, executive]

We are having technical problems. Please bear with us. Are you all hearing us clearly?

[Technical Difficulty]

[Adalberto Dos Santos, executive]

The pieces of data concerning EBITDA and liquidity. Liquidity of the assets, we abide by the criteria of the [ OCDM ]. We can deal with that with our people of [ RA ]. There is a material difference in EBITDA and others. Now net profit is not necessarily related to the generation of cash flow. We haven't had any problem with the generation of cash flow or liquidity. That lines, we might have some difficulties, but we haven't had any case like that so far. Leveraging, we never overpassed 2.5. For this year, for internal use and to be presented in auditing, we have 3 scenarios. A realistic, a moderate and aggressive, not necessarily aggressive as the literal word, but with a little more investment and commitment. Growth near 0%, therefore, maintaining steady. Even in the most pessimistic stage, we are in the positive quadrant. What we had to hire for 2019 has already been hired. [ Felipe ] has very deep knowledge of the technical aspects. Leveraging the company totally has to be done with certain caution not to lose EBITDA. Leveraging is not total. The number that we have today is rather reasonable for the monet of the company. If we have this situation, and that is the monetization of the fiscal recuperation or the recovery, in 1 year, the fiscal recovery may bring in BRL 130 million, plus the EBITDA that will be the result of the projects that we have in mind. The rightsizing without digital credit would be enough to put us in a very comfortable situation. We are certain of that, and we are working on that with our board. The rightsizing and the monetization will be enough to leverage. So that is not a theme that concerns us whatsoever negatively.

[Operator]

[Operator Instructions]

Therefore, we close right now the session for Q&A. Mr. Adalberto Dos Santos, please, your final remarks.

[Adalberto Dos Santos, executive]

I would like to thank you all for the participation in the teleconference. Just to recap on the last point of my speech. It has been the best turn of year of the company. We have quantitative and qualitative signs that what we have done has proven to be very positive. Inventory from an accountancy and the physical storage has been very positive. We are implementing a lot of the projects that were started last year. PSF (sic) [ FPS ] in the third (sic) [ first ] quarter are -- could be very positive, considering January and February cash flow. We have the fiscal matters. We have additional cash flow costs, a balance of sheets rather clean -- a clean slate, if you will. Everything is provisioned, and our front team is rather well prepared and well prepared to deal with the conditions that we have ahead of us.

I would like to invite us to get to know our stores and the new collections. Thank you all.

[Operator]

The conference call is closed at this very moment. Thank you, and good afternoon.