Arezzo Industria e Comercio SA

BOVESPA:ARZZ3

Earnings Call Transcript 2023-Q1

[Victoria Machado, executive]

Good morning, everyone. Welcome to our first quarter results call. I'd like to talk to you a bit about the agenda. We are going to start with the highlights for the quarter, the main points that we have in our results, the highlights for our brands and channels, and finally, the main financial information. And we'll wrap up with our traditional Q&A session.

[Alexandre Birman, executive]

Good morning, everyone. Thank you for your presence in our conference referring to the results for the first quarter of '23. I'm very proud to inform that this is our 50th results call since our IPO, and I have the honor to be here after these 12 years of being an open company. We have Vicki, our Investor Relations [ Manager ]; and Rafael Sachete, our CFO.

The first quarter of '23 showed a solid growth and shown our resilience and the 23% growth, very similar to the 22% from the first quarter. So within this organic base of Arezzo&Co for brands and channels, this is the running rate for our growth.

We're very happy with our results, which shows our gain in market share, the resilience and the strength of our brands. It also shows our ability in a very high efficiency in capital allocation, having a reasonable leverage that will be even higher in our revenue growth quotient.

It's important to point out the difference in the Gregorian calendar and the fashion calendar. Remember, in the first quarter -- is characterized by the exit of the summer collection, which presented for all brands, great performance for full price, where we have historical figures with no problems in inventory at the end. So we can start the pre-fall collection in the end of January, but having as a landmark in the first quarter of '23 and what dictates our health for the following months is the turn to the winter collection that happened on March 6.

So I imagine that you have followed through the media and the stores, very bold products, very attractive clothes that elevated our brand call. We've been consistent in that, and the results have showed our ability to sell high added value products and also increasing our average ticket, and this is our goal, to generate more margin for our chain and sell high added value products.

We maintained an excellent beginning for the winter collection. The first days for the collection had a 5% higher turn in the collection than the same period last year. So March is characterized by this turn to winter. In April, the continuity in preparation for the biggest sell-out events that we have in the first semester as a single day of sales, the Saturday before Mother's Day is our biggest sales day in the year. So this period has started within our brands. There are several activations going on, several campaigns, motivational training, road shows, great energy placed at the edge, as you must have been following. And the results so far have been shown very positive.

A bit about our calendar. Our company is synchronized with our sell-in, sell-out calendar. And right after Mother's Day, we initiate the process for selling to our franchise and multi-brand sellers for the summer one collection. So I invite -- our [ Pulsar ] event will be in São Paulo on May 16.

Now let's go on with our presentation. As we presented, we had a robust growth of 23%. Remembering that the first quarter of '22, we had a growth of 64%. So it's strong growth on a very high base, reaching an absolute amount of BRL 1.3 billion in the first quarter. The sales result considering our franchise in e-commerce and our owned stores sell out monobrand channels of BRL 947 million, growing 22% in level with the growth of the company.

We've been emphasized the work is to be -- have great criteria and follow-up of our client base, so a growth of 19% of the active base. Around our brands, our core brands that we'll go deeper into it, grew 15%, highlights to Arezzo brand, our mother brand, that had 13% growth in this first quarter on top of 37% in first quarter '22. About AR&Co, with strong growth boosted by the stores opening, multibrand penetration through [indiscernible] brand reached BRL 287 million of revenue. Consolidated gross margin in the period of 52.4%, Sachete is going to give more details about that. Our EBITDA -- our recurrent EBITDA of BRL 164 million, our net profit of BRL 73 million, a growth of 27%, so bigger than our revenue growth, as I had mentioned before, and our ROIC of 27.2%.

On this chart, I'd like to look at the soundness of our growth. As I said, it's our 50th call, so we take advantage to present the history of the first quarter throughout these 12 years. And this shows a company that has a very constant CAGR up to 2021. And from that date, the creation of a new revenue base reaching around BRL 1.3 billion in revenue. If you look at the realize of 1Q '19 -- Q1 '19, it's -- the company in these 4 years increased -- grew threefold. And of these 50 results calls, I had the pleasure of coming here to present 47 calls with revenue growth and 46% with gross revenue growth. So despite growth, we never had to give in on margin to support the robust growth of its revenue.

Now about EBITDA, the numbers repeat themselves. Very solid CAGR. In the 50 quarters reported, 42 of growth in EBITDA and 39 with growth -- with net growth. And also new levels, a company that operated in an average of BRL 60 million in EBITDA in the -- in Q1. Now in '23, we're reaching BRL 164 million. So we show the recurrence and the soundness and the resilience of Arezzo&Co throughout the decades.

I'd like to show the essence in the management of our business, which is to work so that our brands gain market share and manage to increase their audience. And at the same time, we have made efficiency in the management of the main selling channels. To the left, you see how the revenue per brand gives us a good distribution with very solid brands. If you add up AR&Co, Schutz, and Arezzo and this year in basis for the year, we're talking about brands above BRL 1 billion. Anacapri this year is going to get this BRL 0.5 billion. So very solid brands.

I will go back one slide. There was a one point I didn't mention around the percentage that the first quarter has in the net profit around the total of the year. So to the right here below, we placed that in the Q1 '22, recurrent net profit represented 15% of the consolidated net profit in '22, which led us to BRL 386 million in revenue. So it's important to show that the first quarter does not have a relevant way. It's not proportional to the number of days in the year.

I apologize. I'm going back here talking about our channels. The first -- Q1 had strong growth in our multi-brand channel, reaching a capillarity of more than 7,000 points of sales in all of our brands. We've started the sale of the pre-summer collection, and the results are very encouraging. So Arezzo&Co that throughout the pandemic had a unique ability of maintaining itself presence together with the multibrand stores through the implementation of their launch lives with our own studio here and to having deliveries -- on-time delivery. So this multibrand channel here tends to grow throughout the year.

And the DTC channels, franchise is the selling revenue for Q1, around BRL 300 million, very similar with the revenue for our e-commerce and the adding of our owned stores. So really, our company is a multibrand, multichannel company. It's a platform of brands.

Now a bit of the highlights among our brands and then about our channel. Around our 5 main brands, Arezzo had a growth above 13%. You see the very important behavior here, which is the percentage of e-commerce over the total of the brand, even Arezzo having more than 450 brick-and-mortar stores, e-commerce corresponds to 20% of the revenue. And from the total from the web, all omni revenue obtained by the store. And if you need shelf corresponds to 22% of web sales.

Schutz likewise, even more relevant percentage, you see 40% of Schutz sales come from e-commerce. The growth in Brazil was 8.1%. I'll talk a bit about that. Anacapri, you remember throughout the beginning of '22, there was an adaptation process to a new post-pandemic trend. Now in the second semester last year, the results were positive, and they continue in the same strong momentum, and the growth of Anacapri above 22% should be maintained throughout '23.

Around Alexandre Birman, I'd like to point out a figure that's not here. The growth in Brazil was 65%. So it's a brand that has a market share in luxury shoes in Brazil of 55%.

And AR&Co, with exceptional results, resiliency of the brands within Reserva and its subdivisions, managing to maintain historical base, a very strong growth of 45%.

A bit zoom into our core brands. The Arezzo brand, as I said, strong comparison base. It had grown in the Q1 '22 37%. The sell-out channels for the brand, including owned stores and multibrand, are the biggest highlights with 41% of growth in our own brands and 21% in multibrand. Around branding, our investment in elevating the brand awareness of the Arezzo brand, leaving -- making it younger and bringing international renowned people. A brand such as Arezzo deserves to have the best -- the biggest icon of Brazilian fashion representing it very proudly. So the work we did with Gisele Bundchen generated a very high turn of the collection in the first week of sales, 22% and BRL 2 million in the product she was wearing in 15 days. And BriZZa today within the areas of ecosystem had a very strong growth in multibrand, reaching, well, 1,500 points of sale.

The Schutz brand, the -- with highlighting multibrand channel and franchise, 1,200 clients in Brazil, and we launched the global campaign with the international model, Candice Swanepoel.

Anacapri, from the end of last year, very consistent branding work, using Juliette as the model for the brand, bringing this very simple way of being from humble origins that can captivate the audience. So the connectivity of Juliette to the Anacapri is perfect. I met with her personally discussing the future of the brand, and she is a real user. She's a fan of the brand. So this is a partnership that has helped with the branding.

As I said before, the Alexandre Birman brand in Brazil, with 65% growth, our 12 stores have a minimum revenue of BRL 1 million per month. So they're very strong stores. We have a large market share in Brazil. And Alme showing our capacity of being creative using recycled materials, keeping our position true to consumers that buy shoes that are sustainable. So we show our power in that segment as well.

Now an X-ray of our acquired brands in the past -- ones we acquired in the past 3 years. AR&Co platform, as mentioned, has a solid growth, especially multibrand, boosted by sneakers. And digital in AR&Co is very strong with a very interesting connection with the salespeople and how they can access the customers and show -- and sell that is delivered by e-commerce, which generated 65% growth in digital that accounts for 28% of the brand.

High summer also accounts for the first quarter with our beach collection, and they will have a higher presence in the portfolio of the brand, 2023.

Vans, because of confidential information, we can't give numbers of sales, but the growth was 55%. And our expectations with the brand at every quarter has been surprising. It has a very good receptiveness in the Brazilian market.

Carol Bassi, our investment in the women's apparel segment is very high, 76% growth. Our store at [indiscernible] is a reference. Although we have a high baseline, we achieved an average in the first quarter above BRL 4 million in one single store, improving our operations in e-commerce and also showing good growth in the multibrand segment.

To close this chapter about Reserva Go, BRL 175 million in revenue in 2022. It's a very strong brand in a very short time. Oficina, I would like to invite all of you in São Paulo to go see the store at JK Shopping. It's amazing. The first month already BRL 1 million in revenue. So it's a brand that can grow very much in Arezzo&Co ecosystem. Mini is creative and for kids that are preteens, it's ideal for that age group. And Baw strengthened its position and closed the month of April with strong growth and now already in the multibrand segment.

Going to go deeper in our main sales channels. Looking at the sell-out, that includes all our brick-and-mortar stores and franchise, which obviously doesn't go through our financial statement, plus our owned stores and e-commerce. So the total achieved was BRL 974 million with a 22% growth year-over-year.

Highlight to Vans that not only for opening new stores, but also the same-store sale with a 48% growth, and AR&Co grew 44%. It's worth mentioning that the comparison basis year-over-year was 66%, and we already achieved a revenue almost equal to the third quarter of last year, and the sell-out calendar has a higher way. So on the baseline that we start planning for 2023, the data will be outstanding.

About our multibrand distribution and franchise or B2B, both with strong growth. Franchise, our sell-in -- the index between the sell-in and sell-out was 22%. So a good lever for the franchisee, achieving BRL 298 million in franchise in 2023 and our owned stores with BRL 252 million growth. Multibrand, 35% growth year-over-year, a channel that gives us capillarity with the gross margin slightly higher than franchise. We have good portfolio orders, and it's possible to continue growing at this range throughout 2023. Looking at the past 12 months, the multibrand channel achieved BRL 1.4 billion.

I'm almost concluding my part. I would like to highlight the power that Arezzo&Co has in web commerce. When we launched Schutz in the web commerce, and it's a reason of pride to have this platform and our leadership and the verticalized digital ecosystem from customer experience, stores, our platforms, which generated BRL 279 million in revenues this quarter. And e-commerce sales, we dreamed to achieve BRL 1 million. So if we look to the past 12 months, we already went over BRL 1 billion.

With the strong growth in traffic, we have almost an organic search for these brands on the Internet, generating a total of 74 million users in this quarter. The main brands, Arezzo, Schutz, Anacapri and Reserva have their proprietary app with lower marketing expenses. There's a cost to download, but then the customer becomes more loyal in the digital channel, a 40% growth of total sales on the apps, which account for 31% of the total e-commerce revenue. We also had an increase of the web commerce tickets of 27%.

Influenced sale means every sale that despite being done in the brick-and-mortar store starts with the digital contact, especially through WhatsApp. With a tool that was implemented by the company during the pandemic and even with the return of people going to the malls, our sales team continue using this type of contact, generating 42% of the sell-out through digital communication. As I said, it's a company that has their customers at the tips of their fingers and uses data as a tool of management and relationship with the customers. And in the past 12 months, we achieved a 5.5 million people buying at our stores.

A little bit more detail of our omni clients. We all know that they have a higher percentage of purchases, 22% of new customers that entered our base, 10% of clients that were reactivated. We also had omni growth that generated the highest volume of sales in our company. So this shows the power of all our channels.

I would like to pass the floor to Rafael Sachete, who will show our financial highlights.

[Rafael Sachete, executive]

Thank you, Alexandre. Good morning. Thank you for being with us here on our conference call. Talking about our revenues, we achieved BRL 1.285 billion in the quarter, as Alexandre mentioned. Great performance in all channels and company brands. CMV and gross profit achieved 19.6% in the quarter, with a high impact from the U.S. operations, with 40 percentage points, which impacted our results, and the difference coming from other channels broken down by channels and brands.

Our SG&A achieved BRL 432 million with the drop over gross revenue of 0.40 percentage points, which allows us to leverage our expenses over revenues in the period, leading to an EBITDA of BRL 152 million in the period, 22% year-over-year, generating a leverage of 0.10 percentage points, which, in turn, converts on a net income of BRL 63 million in the period compared to BRL 57.548 million year-over-year, a 27% growth with a leverage of 0.2 percentage points year-over-year.

It's worth to highlight that in the revenue, we're not including revenue from Vicenza that were acquired in the first quarter, but not having the closing yet. It's also important to highlight that these figures also include BRL 11 million in revenues from the Paris Texas operations in March. Just in March, we had the inclusion of the revenues in this financial statement.

This is the EBITDA and net income reconciliation. In the first quarter of 2022, BRL 65.6 million came from a credit -- tax credit of PIS and Cofins that is nonrecurring from previous years, which brings an increase of net income and EBITDA that's not recurring. This impact was presented in 2022, and this brings the reconciled recurring numbers.

Our distribution center expenses was already communicated in the past quarter that we would transition to our distribution center in Espírito Santo. And for some time, we have double logistics expenses to ensure the safe moving of our products and keeping our revenues at these levels. And also the adjustment of HG's incorporation of the goodwill. And with this, we conclude our net income and adjusted EBITDA.

Our ROIC achieved 27.2% in the quarter. It's an important KPI analyzed by the company's management. I'd like to highlight 2 important points. First related to suppliers. We had a drop in the volume, a reduction of 20 days on revenue days. And this period, we had a strategic decision spearheaded by the company to support our suppliers in a moment in which the world and financials is higher all around the world, and Arezzo&Co is careful with its franchisees and suppliers. We took that decision -- made that decision, so we have this one-off decision that will repeat itself in the next quarter. And the third and fourth quarter of 2023, we will notice that it will go back to normal and resume to the levels of days of accounts payable similar to what we saw in 2021 and 2022.

Another important point is inventory. It's important to say that there was a change in the business model and adjustments of the company's volumes compared to other business models. We started with a more present industry. Our -- we went from 87% of nonproprietary sourcing to 82%. So this increase of 7 percentage points in proprietary outsourcing and shoes and handbags with the inclusion of HG and Sunset, that brings many benefits for the company, especially developing handbags that the company did make, also brings a different storage pattern.

And inventory, a more B2C model with a higher presence of online in which the time of storing products is higher than B2B. Additionally, we also have a pilot of inventory models for 2023. We would like to reiterate that the levels of inventory are very healthy and suitable. And we're constantly reviewing this metric and these volumes and adjusting the company to the reality of today's landscape. Our expectation for the next quarters is to progress to a profit close to what we saw in 2022 in terms of days of inventory. And now this makes sense for us.

On the next slide, we talk about our cash and debt position. Here, I'd like to point out nonoperational guidance. BRL 199 million left cash for payments of acquisitions already communicated to our investors, and BRL 72 million that's in the payment of JCP for the company interest over own equity. So the debt of company would be around 0, but it is around BRL 6 million.

These are the main points I'd like to address. Now I open for the Q&A. Thank you for your time.

[Victoria Machado, executive]

Thank you, Sachete and Alexandre. So we'll start our Q&A session. We have a lot of questions. I'll start with the question from BTG Pactual, a question that came from other analysts as well.

Luiz says, please could you comment on the state of the supply chain for Arezzo&Co? And how you see the evolution of the account of suppliers and inventory in the next quarters?

[Alexandre Birman, executive]

So I'm going to start answering. Luiz, thank you for your question. When I was asked a long time ago around the mission of Arezzo&Co, and its mission is to take care of the health of their partners, be them franchisers or suppliers. And during the pandemic, we showed our commitment to this principle. We didn't cancel any orders. We managed to expand payment terms for all of our franchises, and therefore, maintained all of our suppliers with their financial health intact as well as our franchises.

Right now in Q1 '23, with the increase of interest rates, some of our suppliers requested to advance payment. We understood their situation. We decided, so to speak, take the consequence of it in our [indiscernible], which is more robust than our suppliers. So we are totally aware it was the correct attitude in such an unstable moment for our suppliers. The trend of these scenarios should become normal. This was -- everything will come back to normal. This is not defined as recurrent. So we intend from summer purchases that you're going to receive in the second semester to go back to historical terms of payment.

Now Sachete will continue with the answer.

[Rafael Sachete, executive]

Perfect, Alexandre. Thank you, Luiz, for your question. I also explained a bit our ROIC, but that's exactly it. There is an aspect of our care with our supply chain. To answer your question, the chain is solid and very well structured. The partnerships that Arezzo&Co has built in our supply chain are long-standing, and these suppliers are solid and strong financially on our side. We made a momentary decision of support while the world is more uncertain and with higher interest rates and also with scarcity of credit for some companies.

As Alexandre mentioned, negotiations for the supply for the second semester already reflects the same levels that we saw last year and also in '21 around the days for accounts payable that you should expect when you look at the next quarters that from the third quarter, we'll recover the same levels as the previous year. And I think around inventory, already brought the answer, but it's worth repeating that we're continuously looking for efficiency in our line of inventory. We have structural changes and more direct sales to the consumer through our own stores and e-commerce, but we're looking and surely will manage to bring higher levels of efficiency in inventory for the next quarters.

It's important to reinforce that this inventory has -- is very high quality, it's an inventory that is present for our supply moments. There is no -- nothing to be mentioned here on the quality of this inventory.

[Victoria Machado, executive]

Thanks, guys. Next question from [ Danny ]. She says the company reported a drop in volume of shoes and bags for yet another quarter. Does it make sense to think that this drop is more brought by the core brands Vans, Reserva, and Vans must contribute positively for this growth? If so, what are you thinking around the strategy for growth of price versus volume?

[Alexandre Birman, executive]

Well, [ Danny], thank you for your question. I'd like to point out here a piece of data that is important for us, although we always measured our performance in a quarterly basis. But in some moments and situations, it's interesting to analyze the numbers for the past 12 months. So in the past 12 months, we had a growth of 7% in our volume of shoes and 18% in growth in bags. This said, you're right in your point that we face a new moment around what is the perceived value, and everybody must be aware of the high growth of luxury brands globally.

So the concern into offering the best cost benefit ratio is our big model. It's not a matter of exactly a price, if it's BRL 100 or BRL 110. It is whether that BRL 110, we'll see that this should be costing BRL 150 or if that BRL 100 means it should cost BRL 120. What we cannot have is the feeling that the client comes to the store and says it's expensive. This has not been happening. You're a customer of ours, and you must have friends that buy our brands, especially Arezzo brand. And what we hear is that Arezzo can offer a great cost-benefit ratio. So -- but we are improving -- increasingly improving our degree in fashion, our brand experience and the quality of our raw material in gradually. Without frightening the clients, we've been managing to bring this added value to our consumer.

As a consequence of that, and not in general terms, when I look at e-commerce sales and in the main stores, they grow a lot in volume. However, as Brazil is very big with the big capillarity, some regions, maybe smaller multibrand stores, it does not -- do not compensate to work with some of our brands. So it is a strategic guideline that has been well thought through and structured. We don't intend to have a drop in volume. This 2% for shoes and 7% in bags, they should not go over that. They should actually -- must actually increase.

Actually, on bags, without explaining operations -- but we've had imported volume that was delayed due to problems with the [ IRS ], and it was postponed our invoicing for April. 60,000 bags is the volume, which is the delta volume that we had in Q1 '23. So with that, we'll have a flat loss in the volume of bags compared to Q1. So it's something we need to analyze, but it's worth pointing out that we work with fashion added value, brand experience. So it doesn't justify the same kind of analysis for a supermarket or for a wholesaler where the price/volume issue is black and white. Here, we have added value. We have brand experience. What -- we don't want that the client thinks it's expensive, though we are constantly monitoring this in the point of sale that we do not have a lack of [ conversion ] in the end because the client didn't think the price was fair for them to make a good transaction.

[Victoria Machado, executive]

Thanks, Alexandre. The next thing -- question from [ João ] from Citi has sent in -- which is around international operation. They say margin was negative, and you mentioned that part of that was explained by the macro environment. How relevant it is today the macro for the performance of the operation? Which measures are you taking to revert this trend and improve margin?

[Alexandre Birman, executive]

Thanks for the question, João. I'm going to try to correct a bit what was said. In my opinion, the macro environment in the U.S. scenario or international scenario, it does not dictate anything around our business. When we refer to department stores that are concentrated sales, it's different than in Brazil that we have franchise. They have 2 or 3 stores, 7,000 points of sale in multibrand. The sale of B2B in the U.S. or wholesale is then for just a few large retailers in department stores. They had an excess of purchase throughout '22 due to the concern with lack of supply due to the effects of the pandemic, and they reduced their purchases at the end of '22, beginning of '23.

This is public data. There are some large players that have -- players that are very consistent in their growth, but that announced at this period a reduction of sales to department stores. As we do not depend on that, so to your questions, we quickly started activating the growth of our DTC channels, especially e-commerce, and we managed to surpass part of this reduction of purchase from department stores through e-commerce.

And now, we continue very proactively to invest in brand awareness, and we're going to open next week. If you are in New York, you are invited on May 10, in 1 week. We're going to open a very relevant store for Schutz branding on Broadway. It's a location with the highest traffic. For those who know that between Spring and Prince Streets, we got the [ allowance ] for 6 months in rent and a rebate of 50% of the invested CapEx. So it won't be a flagship of those that only generate [indiscernible] and do not generate bottom line. It is a store that actually is being projected to have a lot of profitability. And also due to the fact that there is a large area -- basement area, we're going to use it as a fulfillment center for the whole e-commerce that is done in New York, especially in Manhattan, corresponding to around 10% of all of our e-commerce sales in the U.S. We're going to have dedicated freight and -- to our delivery. So there are several measures that we're taking to set this -- to offset this reduction.

So another relevant action will be the entry of the Arezzo brand in partnership, now different from what I said, Macy's reduced purchase of our brands to start with Arezzo. It's going to be a launch that is going to be strong, 100 points of sale, 50 models in each store. We're talking about around 50,000 pairs of shoes, very strong in structured marketing investment being prepared for the launch of Arezzo with Macy's for their winter collection in the Northern Hemisphere on September. So it's still a trial, but with good prospects of becoming good future growth.

And around profitability that you mentioned, several measures have been taken. We, during the pandemic, had reduced expenses with people in the operation -- in the United States. Throughout the past times, there has been a remigration, so to speak, of people there, but we mentioned that the most efficient model is to actually have operation in the sense of most transactions of CSC here in Brazil, more specifically in Campo Bom, where we're sitting now, where the cost of labor is cheaper than in São Paulo. So we are in the process of migration and unifying the areas, always with focus in improving profitability. And we believe that for the next -- the second quarter, we will have better results than the ones acquired in Q1 '23.

Lastly, but still around international, but now outside of the U.S. and going to Europe, we've had some calls to discuss this MVP, so to speak, this beginning of strategic test of Arezzo&Co and putting all its know-how and the verticalized management of the value chain, of the shoes business from the product creating and prototyping and this omni distribution to emerging brands and having icon products, especially in Europe. So this strategy for different investments of Paris Texas and investments that we managed to accrue in the first month of revenue in our financial statements in March.

In April, we've maintained the same pace, around BRL 10 million to BRL 12 million revenue a month. With that, we're going to leverage our sales in the European market, not only with the new brand, but also using the distribution channels that Paris Texas has to bring, especially the Alexandre Birman shirts brands. So in the international area , we are -- international is very active. It's a strategic assumption of the company that throughout the years, we're going to change our strategy with focus on our growth and profitability.

[Victoria Machado, executive]

Still on international, and Goldman Sachs has a question -- Irma from Goldman Sachs. If we think that the brand's position, Arezzo, Schutz and Alexandre Birman are suitable or if we see any change?

[Alexandre Birman, executive]

They're still suitable. There was an inflation in the U.S. market -- shoes market. We were able to offer an excellent value for money with small adjustments of 10% in Schutz. It operates with price below the 2 large players at target price at our Broadway store. We'll bring an average ticket of $180, which is very appealing for the product we offer. Those in New York, we will send an invite through one of our partners to go see the store and will be there on May 10.

About Alexandre Birman, it's 20% below the most luxury -- non-luxury brands like Jimmy Choo at [ 600 ], and we think it's the right positioning.

[Victoria Machado, executive]

Okay. The next question is from Pedro Pinto from Bradesco. Strong and continuous performance in the past 2 years, the multibrand, that draws attention. Is there any relevant space on the number of doors that entering -- preserving positioning? Do you have space to gain share of wallet? And what brands do you see doing that?

[Alexandre Birman, executive]

The company was born multibrand. It wasn’t born as a retailer and then went to multibrand. Since Arezzo was created in 1995 and Schutz in '95, we started selling at the trade shows, and we have a very strong tradition. And I would like to invite you to be on São Paulo at the B&L building. We have 1,000 multibrand store owners. You can see the passion and dedication and the pride they have in working with our brands. So we have gains not only on [ doors ], but a share of wallet of the retailers.

About multibrand that will bring strong revenue to Arezzo&Co is the Vicenza brand. We already have a strategy and generating great results, although it's not in our financial statements yet. It will be in June. And they have a great performance in the, multibrand, but it's still under its performance potential.

Vans has a huge capillarity today, and we even have a limit for the brand to stay premium with high desirability. So -- and handbags of Arezzo has the potential to grow in multibrand. So when you do a cross-sell between brand, channel and product, it's continuous with many opportunities. We can see our forecast for the summer, and we will continue to show strong growth.

[Victoria Machado, executive]

Our next question is from Vinicius from UBS. Could you comment about the drivers to invest working capital in the quarter? How Arezzo&Co has been evolving with expansion of new categories? It also draws attention to the strong performance of Vans. Could you comment more what were the drivers for the rent to grow?

[Alexandre Birman, executive]

Perfect. Going to start your question about Vans. I would like to invite our Executive Director that knows more about Vans, Rafael Sachete will talk about Vans, and then I'll talk about your 2 other questions.

[Rafael Sachete, executive]

Talking about the Vans potential for expansion. Until 2022, it was operated by VF in Brazil with the sub penetration and also e-commerce and multibrand. The strategy that we've been applying is to expand all these channels, generating the experience of brick-and-mortar stores with a very good pipeline to open new stores with excellent performance. We have 2 flagships in Brazil, one in Ipanema and Rio de Janeiro and another at [indiscernible] and São Paulo. And all the stores that are open, either own stores and franchise, have excellent performance. And we have a pipeline of opening 20 to 25 new stores in the next 20 months in Vans.

Additionally, for e-commerce, it changed through Arezzo&Co, BRL 1 [ million ] per month. We had strong revenues in Vans only in e-commerce. Also the presence of e-commerce hiring that -- say that we're just at the beginning. The e-commerce performs above average than other brands in the group and activating new clients, activating base and stores that bring new clients to the base. And the client profile for Vans is an omnichannel consumer. They're younger, and they either buy through the app or the brick-and-mortar store and gets it shipped to them much higher than the average in the market.

And multibrand channel is very important, split into different customer profile. Our presence is in large chains like [ São Paulo ], but also a strong presence in specialized stores for sneakers, surf wear and skate wear. So the brand strategy is to grow strongly in all channels, and the pipeline for this growth has a lot of room to evolve the brand in the next years and quarters.

About pricing, our strategy historically is a plus-plus. So we developed our R&D [ equivalence to ] all our products. So we know exactly the cost of raw material time to produce each model. So we have a fixed cap. What we've been doing is working at improving the product's quality, raw material, to offer an even more exclusive product, also with a linear market for our chain. So we generate a price stability at the other end and always surprising by the excellent value for money.

About the Reserva brands, the prices are stable. We have a basic T-shirt at BRL 129. It's a premium price, but we think it's a fair price. And to go into the best price segment, we have an initiative for the simplest brand where we already have BRL 1 million in e-commerce. We're going to open the first store at [ Baja Shopping ] in the following months entering the best price segment, around BRL 69, BRL 70.

Within Anacapri, we have also products for the [ big ] class. We can offer products between BRL 99 and BRL 159 with excellent value for money. So our brand matrix generates experience and fair value for its product. It's very comprehensive. It goes from Anacapri to Alexandre Birman, which showed the highest growth in our owned store channel in Brazil achieving 65%, with an average revenue of BRL 12 million. They're small stores of 40 square meters with high yields.

[Victoria Machado, executive]

We have 2 questions that are very similar. [ Guillermo ] from JP and Santander about margin. The EBITDA margin in Brazil was better than the SG&A after the first -- fourth quarter and making up for the drop in gross margin and operation year-over-year. Thinking about the dynamic exclusively in Brazil, what happened to the gross margin in 1Q '23? And if we can imagine that the EBITDA margin will be stable in the year or even expanding year-over-year.

[Alexandre Birman, executive]

About the EBITDA margin, running the risk of compromising, we can expect leveraging of the EBITDA margin. All the efforts of the past months, we're analyzing projects and initiatives that were maturing. We chose to analyze carefully which of these initiatives would have a greater tenure, and the company is focusing on its core. We have the leverage for the EBITDA margin for 2023 about gross margin that you mentioned. Half of that impact comes through reducing price in the U.S. operations to make up for the operations in the department stores.

And also it's not enough. I confess. We think that 0.5 basis points is not a reduction of gross margin. But when you look at the diversity of brands, channels, products that we operate with, in the first quarter, we also have the sales and promotions. And so it's not a change in price scenario. The gross margin is already reaching expectations in May, especially for our sell-out focusing on Mother's Day. Our work -- our homework is very well mapped to increase that margin.

[Victoria Machado, executive]

This is our last question for today's call. It comes from Vinicius from Merrill Lynch. How have you been seeing the performance in different initiatives in women's apparel? And how can we think of evolving that category? Do you think that there's opportunity for more segments? And which ones still makes sense?

[Alexandre Birman, executive]

Thank you, Vinicius. Thank you for your question. I'm going to answer more comprehensively. As a platform, Arezzo&Co is very well prepared. When we speak of Vans, we see all the positive aspects. And we analyze what can go -- could go wrong when we join brands and management. It's not easy to operate in several systems. All the technology and logistics involved. So we're very solid in our platform.

Within this scenario, today, we have high interest rates. And we will focus more on the brands that we have today for the next months in 2023.

And about your specific question of the women's apparel segment, our only acquisition was Carol Bassi that showed strong growth of 76% in the quarter. The customers love the brand, and they could sell high value-added products, and customer loyalty that leaves very high average tickets at Carol Bassi. We're very happy. We're going to refurbish the store at [indiscernible] and create a showroom of the brand at the store. So it's an important investment that is in line with our goals, and it's a brand that generates a high EBITDA margin.

About the inorganic initiatives, we have the Reversa, which is a branch from Reserva. It focuses greatly at the Leblon store. We had a store that has a very high legacy in Brazil that had exceptional results. So we're continuing our test and improvement of products.

About Schutz, we opened 2 independent stores, and we decided to try -- the rollout of Schutz will be stores separate from apparel, and we created a hybrid model in which apparel would work as a product category in the same store. So that was the decision we made. The project is at the end of its preparation phase, and we're going to open the first store at [indiscernible] mall with estimates of apparel to increase 20% in the same store. There's no growth in area, just a full change of the layout and the way that the products are displayed. So if we look at the categories that stand out the most, jackets, tops. So we're very confident that the store will generate revenue above 20% with a reasonable CapEx of BRL 10,000 per square meter. And after this definite store, Schutz will be ready to grow in the women's apparel segment as a product category inside the Schutz store category. So that's what we have for women's apparel.

[Victoria Machado, executive]

That was our last question. Alexandre, we can close.

[Alexandre Birman, executive]

So I would like to thank you all for being here at our call. One hour sharp. Thank you for your attention and your trust. And those 50 calls, many of you have been with us since the beginning. And despite all adversities, we have our culture that is highly adapted and quick and can build the scenario and make decisions very effectively focusing all ways and keeping our -- being perennial towards 2054. I hope you all go and buy presents for your mothers at our Arezzo&Co stores, which is very important for our sell-out. Thank you.

[Rafael Sachete, executive]

Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]