Arezzo Industria e Comercio SA

BOVESPA:ARZZ3

Earnings Call Transcript 2021-Q3

[Alexandre Birman, executive]

Really built on a solid base. And we want to maintain this solid base throughout many quarters and many years. This movement would be very complex, especially in macroeconomic terms, especially in this inflation context, really strong. The Arezzo & Co business model has its industrial view having as the main focus of our business, our center of product research, we were able to make an integral management of the value chain. But we don't own the most -- the heaviest raw material. So we can develop our products according to the main offers of raw materials. And also, we can choose the best industrial players for the best profile of products.

So this shows the maintenance of our gross margin, the channel and gave us a solid base for the beginning of 2022 because we have already launched the winter collection, and we maintain a price level below inflation level. So this is the third quarter of 2021. The first quarter with no restrictions of the functioning of our stores when we consider the flow that was resumed, linked to the excellent digital performance of our business. The final results are really very strong.

So this is -- this was a great challenge to maintain the digital culture, even with the reopening of stores. So the team is to be congratulated for this result.

I'd like to highlight as well that our internal budget, our target for 2021. We have here 10 months of the year, and we have a relevant percentage of our business based on the sell in. So we have the portfolio of orders in house. So we can have a good view of the 2021 result, and we provisioned the substantial value of bonus. So this is a merit of our ability to deliver the work of our teams. And this is what we can say about the values.

So the beginning of the fourth quarter, the month of October, we can say it was our historical record in revenue. We reached a catalystic figure of BRL 393 million in a single month. And we expect that this record will be renewed in November, and it will become a baseline of our company. It's really a new level that Arezzo&Co has reached. And regardless of all macroeconomic adversities and a very challenging scenario that we are all going to face our confidence in our business model, we also linked to all routes, a company that will be 50 years old next year. So as a consequence, many turbulent moments that we went through, we are very confident that we are going to solidify our market share.

So this is an overview, and we can see at this time. We are now going to go deeper into our big numbers. So our consolidated gross revenue was BRL 954 million. Gross revenue, especially with the focus on e-commerce, we had our record EBITDA and gross margin BRL 82 million of gross profit. And most of the sellout happens in our franchises that had a very solid result, and we reached BRL 707 million in sell out, including the franchises, the owned stores and web.

So now our main strength in clothing, and our main brand is Reserva. We had a record of BRL 195 million to over BRL 200 million in a single semester in gross revenue and 24% share of web commerce, even with the resumption of our physical stores.

Now a very important topic, our growth. Every time I look at the market share and the growth, I see that the growth of units sold is more solid than the growth in price. We have more people buying, consequently more units being sold. Of course, if we can assemble the average price, the total revenue will explode. But here, I'd just like to give you some highlights. How Arezzo&Co has a very interesting mix in the 3 main categories.

So footwear, practically, 8 years ago, was 100% of our revenue. Today is 75% and growing. So we've grown in bags corresponds 7% in the mix. And this figure is in blue. It's one I'd like to call your attention to. This quarter, we have sold over 1 million clothing items. In other words, a company that 1 year ago was known for being the leader in footwear and bags in the premium female market, today, we can say that it is also a multi-category company.

So our pillars, multi-brands and multi channels. We can also say that today, we are already multi-category. And I'd like to talk about the percentage of the U.S. operation, multi-geography. So this plurality gives us the ability to have an organic growth that is very solid.

So our digital channel, we are showing you the Slide #8. This is our digital headquarters that's being open and throughout this third quarter. This is historical building. It is this for over 6 years. It was the first hub exports. So we've been using it since the year 2000, and we have our major research hub. It's a mix of manufacturing, art and footwear production and technology, resulting in very strong figures. So as I said, we achieved the mark of BRL 206 million, a very strong growth versus 2019, especially, but also growing on a very strong base in 2020.

And total traffic, 57 million excesses throughout this time, through this third quarter and versus the same period of last year, we've had an increase of 1.7%. A source of very important digital revenue, it's our apps. They have their maturities, especially for Arezzo in Schutz, 827,000 new downloads. And as a consequence, a total of 22.5% of apps share. This is a very high percentage. You know that the cost of sale on the app is much lower. So our -- when we look at the app, that's why our profitability is so high.

So also, our B2C online operation that's very strong, 97% on-time delivery. So the conversion rate is 1.3% on all of our digital channels. Continuing, talking about the main pillar of growth during the most difficult months of the pandemic, it was the fast sharing of our omni channels. So we had to be very fast and recover the time loss, but it was a need to take a solution that already existed and it was ready in our toolbox and put it into practice.

So the main challenge was with the resumption of the flow to maintain our teams of digital relationship and consequently, of nonpresidential sales. So you see the first figure that the share of digital of physical stores sellout is 39.5%. It's really very relevant. We've grown the possibility of customers going to the stores, 75% growth. We've increased our digital sales so our digital shoppers are over 270,000.

And now we're going to talk about the new reality of retail. You have to have a relationship with customers. You have to really know all the information, all of the history. And as a consequence, not depend only on the flow. This is the main premise. And this is considered by all of our brands, and they have evolved their tools. And the figures show that over 3.5 million active customers and this is for Arezzo&Co.

So this active base is actually higher. 30.8% of our customers buy through the online channel and 11.6% buy on both channels. And they have the higher purchase frequency, 128% higher purchase frequency. So 41% of the buying customer base were reactivated. And also, we had an increase of the heavy users. We had an increase of 33% in the heavy user customer base. And this varies from brand to brand, this consolidated average. And also a strong increase in customer frequency. So these were the main figures about digital sales.

Now we're going to talk about our brands and channels. So our brand, Arezzo, it's the mother brand. It's going to be 50 years old, but it continues to be young. Congratulations to the team that is at the Head of Arezzo, maintaining the freshness of the brand. We had a growth of over 10% versus the previous years. And even if it's 50 years old, it's digital.

So 19.8% of its revenue is digital. And it's a global brand because it had, in this quarter, practically, 35% of its revenue coming from the American operations. So it's a brand having a recall of awareness that it's very strong in the American market. It's the result of our 10 years of operation, generating a growth of 43% versus 2019. A brand that 40% comes -- of its sales come from e-commerce. So it includes all of the other brands, Reserva, Schutz and a growth of 85% versus 2019.

And more digital, more than 50% of its sales are online. Anacapri, a brand that has a role to expand our penetration in footwear. So focused on the B class. And we are present in a major chain of stores. So it had a digital growth, although the franchise is the main channel. On the right side, we see the share of the brands on our gross revenue. If we think that Arezzo not so long ago represented almost 60% of our business. Even if it grew by 10%, it represents 33%.

So when we see this graph, we see that Arezzo&Co is really a multi-brand company. It has the ability due to its organizational structure to have each business unit as totally independent with their board, their marketing teams, their style teams. They breathe and they live that brand. So we have this ability to have each brand having its different operations. And we see this pulverized revenue among our main brands.

And in the same way, the graph below shows the y and x vertex. 25% is very well balanced in each channel, and we highlight the multi-brand channel with a very important relevance. In our business.

Now we are going to talk about the ramp-up, the evolution of the sellout and including the physical stores plus e-commerce throughout these 9 months of 2021. So we started at a level that is similar to 2019. In March, we had the full lockdown, 3 weeks in March, and it took us to the first 15 days of April and still see quite interesting revenue with April here where we see nearly 90%. And for May, which is very important to highlight how solid our growth shows. I'm not going to break down by brand since this slide is self-explanatory, but not only in terms of the percentage, but in terms of sales volume.

So the Arezzo brand has a sellout of BRL 120 billion per month and see the ramp-up of Arezzo in the last few months. And in October, we already have a growth, very much aligned with the month of September, especially because of the markdown, which is the calendar for sellout in this month, we didn't have. But still, we have a result very similar to September of 25% compared to 2019. So our channels here has been really bounced back in a very, very solid manner.

And I would like then to show the multi-brand channel, showing that the origin of our business back then in 1992, the '95 was Schutz was a multi-brand channel. So we're very -- backfill in terms of the channel, and we work very close to them and when we talk about [ tram ] data, B2C, we also take close look with the same mindset to B2B, treat each multi-brand client, showing a unique service with personalization, our multi-brand team with our sales reps and our field professionals nearly 200 out in the field working with our over 5,000 points of sales around Brazil.

So it is a channel that has a gross margin better than the franchise. So it helps greatly to add up to the consolidated of our gross profit. And over the whole cycle of the pandemic, we had a continuous growth of the multi-brand channel. I should emphasize the relevance of this channel for our Co, and we're talking about 98% growth compared to third quarter of 2019 and all the data here speaks for itself.

Before passing the floor to Rafael Sachete, I should also highlight a very relevant importance. And finally, for those who have been with us for so long, consolidating our international business with focus on the American operation. So we've had a growth of 73%, reaching close to BRL 100 million in the first quarter. And you can be sure that this level as all the other goals that are reached here at Arezzo&Co becomes just the basis for the next goal, you can be sure that this will be the truth also for the American operation. And here, we see healthy figures.

So I should emphasize on a few in our digital operation of 344.5% growth for our web commerce. This is in reals, but we are talking about healthy also in terms of dollar growth. For the quarter, we had 648,000 access to our site. So today, Schutz and Alexandre Birman has awareness and recall in the American market. It's not something temporary and built. Just quickly, it's solid. It has deep roots.

So the conversion rate of the web commerce is very healthy. It's nearly 2%. The growth of number of orders, 62%; and of pairs, 52%. So definitely, we have a digital operation that is quite healthy.

And going back to the left here on the last line on the slide, our channel that gives us a good solid result for revenues is our wholesale channel. We had a growth that has been very strong in terms of stores or doors, as we call it. And I should talk about Nordstrom, Bloomingdale's, Saks Fifth Avenue, among many others, and also other partners that are just digital as a shoebox, Reebok, among many others. We had, recently in October, the biggest reorder at once with Nordstrom where we reached $1 million of reorder. And this shows us that the sell-through is the turnover of our products, which is quite healthy.

And as North American market works in advance, we already have all the orders placed, not only for the fourth quarter, but also for the first quarter of 2022. And the figures are quite amazing. So now the American power operation took off, and you can count on this growth increasingly.

Now I'd like to pass the floor to Rafael Sachete, who will get into our financial figures. Over to you.

[Rafael Sachete, executive]

Thank you, Alexandre. Good morning, the press and our analysts and all our investors. Well, talk a bit about the highlights for revenues for the first quarter of 2020 -- third quarter of 2021, we had a great performance of sellout, a great performance with our brands, a growth in all the brands and all the channels of the group compared to 2020 and 2019. So we have a great revenue, I should highlight here a growth of Schutz of Alexandre Birman, and we see above-average growth but all of them had great performance.

And we look only into the brands that we already had in the group for the 2019 period, we are talking about over 20%. So it shows how solid our brands are and the ability to keep up the growth even during adversity. And I should also focus on web commerce that has been growing when comparing to 2020, that has been quite high, 36% growth, supporting our revenues in all channels, as Alexandre has mentioned, with a very mature brand with a chain of stores. We're talking about a 20% of web commerce for Arezzo. And also our growth in multi brands, specifically supported by AR&Co and VANS and the mature ones also of 97%, which has been supporting our growth.

Now getting into the gross profit and adjusted EBITDA, there is quite an expansion, especially supported by AR&Co inclusion, which has a profile of sales that is more. We're operating on stores and web commerce and also migrating channels of AR&Co, reaching 24% of the sales directly, which has a greater gross profit.

So we're talking about 42%, BRL 405 million net income for the period. And this figure is aligned with our EBITDA. And obviously, this B2C sales bring a greater cost, especially when it comes to our own store operation and in terms of people cost. And when we talk about our web commerce, the biggest investment has been in marketing to bring flow to our website and also in terms of handling and shipping the goods in a way that is customized for individual customer.

This also increased our cost there in our EBITDA, which is BRL 125.1 million for the third quarter with a growth that is quite robust compared to the same period of 2020 and 2019, where we see 98% to 62%, respectively. And we should highlight also our EBITDA margin relatively flat compared to 2019 or dropping slightly, but we should say that in 2019, we had 2 big impacts, which are different from what we're going through in 2021.

First was the operation of a store in Rio of the franchising that brought to BRL 4 million in EBITDA for the period and also in2019 where there was the bonus change because we weren't really seeing ahead any change. And now we see the difference with the store and the impact that is being provisioned.

So in terms of the comparison, it's greater than the other one. In terms of EBITDA, that's why we're really seeing a leverage of 0.6%. And to our ROIC, talking a bit about how we're doing with our operations. So we reached 27.6%. Our adjusted ROIC. We have 29.3%, where we have a disclaimer of what that would be of the adjustment we have here, the nonrecurring results effect where we had the rollout in the second semester and some effect of the acquisition, which we see here the CMV and also the exclusion of the asset effect of buying Reserva. And here, the ROIC adjusted is more at 29%, and we realize that it's quite high for this segment.

And talking a bit about where we're at with our cash. We have BRL 271 million in net into 0.5%. The EBITDA, the recurring EBITDA, close to 0.63, which we understand it's quite healthy. And that is quite aligned with the strategy of the company to be able to have acquisition with our own cash. And in that way, to keep a high price in terms of investment of new stores, operations and distribution center and expansion of own stores, specifically VANS and Reserva. And also the growth, a robust one of revenues that demand a greater use of working capital. And we see here that we're really well aligned and controlled when it comes to the net debt. And we realize that it's at an acceptable level in terms of the size and robustness of our results.

Alexandre, this is the highlights for the financial part.

[Alexandre Birman, executive]

Well, congratulations, Rafael, for the great management of the financial figures. So I'd like to bring some ESG highlights. We believe that environmental and social should be referred to NG governance because of the model, which we have a well-structured governance where we have won the award of best governance right from the moment we when listed. It shows how we do have in our track record in terms of governance, some importance. And also, we will be focusing on our ecosystem as well.

So to reduce the carbon emission through reduction of shipping and also the raw material we use, we have the commitment with the United Nations to be in the business ambition campaign. And this photo, you see on your right, is a very recent one of a different positioning that we want to carry on, starting November 11 next week with the Alme brand.

We will be explaining about the whole investment on decreation of 5 single products, and the brand will be based on few products, all made from raw materials with a high reduction, especially it's sold from sugarcane. And also it's a pointer for specifically some raw material that is recycled. And also, we will be focusing on the Alme brand that will take a space with a focus only on being a brand that is nearly carbon free. And from there on, to position itself to really bring in a new set of customers that in the decision-making process has the main point to be focused on sustainability.

So in terms of how we have managed our social part and also in terms of the known program of Reserva, which each items sold. We have 5 meals donated. Figures are strong. And we are going to the whole part of having our ABV tech certification for all our plants. That will be very important also for our suppliers. And also as AR&Co and Reserva to have the whole Arezzo&CO to have the B corp certification at of the final phase. That's where we're at in terms of what's relevant to our business.

We should now open to Q&A.

[Unknown Executive]

Okay. We will start with Ruben Couto's question from Santander. He has 2. The first he says, quite interesting, the BriZZa line figures. Can you tell us how it's at in terms of Arezzo? What do you see in terms of the market into the future and volume?

[Alexandre Birman, executive]

Well, thank you. Thank you for bringing BriZZa's topic here to our presentation. We try to focus on other initiatives, but Arezzo&Co has many projects for our growth so that it can be of existing ones or mergers of the ones. We have that in the future, will become the major revenue platform.

So Arezzo, with the flip-flop segment, it's a BRL 5 billion market, which we had at the end of 2020. And this will have a very strong focus from 2022 on now. We would like to also disclose, can we? No, we can't. Our CFO and also our legal director here. I mean there will be a new endorsement a celebrity that will be there endorsing BriZZa during carnival, definitely will bring greater awareness to the brand. We believe that BriZZa will end 2021 with about 2% of the market. And our internal growth or objective is to reach 5% of the share in the market. Obviously, when we think about the BriZZa price for the flip flops, it will be even greater.

[Unknown Executive]

The second question was this new average of digital sales and also Reserva after a year. What can we expect in terms of the expenses from now on? You talked about leverage. So it will be interesting to understand how you expect in terms of S&G from now on?

[Alexandre Birman, executive]

Thank you for the question. And I can give you more data. Rafael. Well, when you look into our result that we say contribution margin, which are the mature businesses like the franchising, the multi brand, the Arezzo Schutz, Anacapri, all have had a high leverage of its contribution margin. So not only in terms of these main exponential points, as you said, you would add more data. But I would say that we have a high ability to leverage our EBITDA quickly. And perhaps that would be in a situation where we would not invest as the first question was talking about BriZZa because they all start with the investment, as we all know.

So if you start with a segment or a new distribution for an existing brand or a new geography for an existing brand or a new brand, there is adverse expenses that are discretionaries. There are hours to invest in these new pipelines of future growth. And that, in the beginning, has an impact in the consolidation of EBITDA. But Arezzo&Co could easily deliver 20% EBITDA margin, which are internal B2B. Although we always had the continuity of developing, innovating, creating our core business.

[Rafael Sachete, executive]

Thank you, Alexandre. And just to really add to that, the number of projects we're talking about. We have BriZZa, we have Bambini, we have [indiscernible] and Schutz apparel, which I can say are taking baby steps and bringing revenue in where we already have a structure. And even with the American operation, that already brings a great result, although the margin is different from Brazil. Yes, that's what I was going to say, the margin in America, the revenue is quite important. And definitely, it is not the same as the mature ones we have in Brazil, but we believe we will soon reach the maturity level. It will really depend on our own investments, as you mentioned.

I mean you need investments. And if we wanted to grow quickly, we could even have a better margin at this point. And we have the other ones that are ramp-ups that are not new, but are ramping up and really are adding to our EBITDA.

So in terms of the volume, we also had for provisioning for bonus for 2021, which is different from 2019. Yes, it's BRL 10 million compared to 2019. That's for the quarter. So I believe that also brings a message in terms of the cost of management for the operation. It has been really smart. And we have been really paying attention to managing it. So we can have a better leverage when compared to our revenue and our gross profit.

This is kept, although there are inflation pressures, specifically when it comes to the operation ones when we talk about shipping, rental, and this is definitely one that we need to take into consideration that we had to find that in our revenues. But in terms of the way we responded, in terms of our price model from end-to-end, we tend to see in terms of [indiscernible] and the cost of sales or per sales will be fit so that we can keep our EBITDA margin and have leverage through sales.

[Unknown Executive]

The next question about Luiz Guanais. He asks about BriZZa and the other opportunities of growth in Bambini and BriZZa for the next quarters. And how could we think about the engagement on the platform online and investments on customer acquisition?

[Alexandre Birman, executive]

Well, answering the second question, we have investments for the acquisition of new customers due to our major investments that are rather in terms of brand awareness. So our brands have a natural traffic that is extremely high, especially the brands that are already mature, let us highlight Arezzo, Schutz, Reserva and then Anacapri. And a brand that we don't mention much, but it's Alexandre Birman with a very high online penetration.

So our brands already have natural maturity growth and not only the increase of customers. So it's worth highlighting that most of our brands are not found online on other e-commerce platforms. And with the exception of the Arezzo&Co owners, this, as a consequence, we see a concentration of flow. And as a consequence, a lower investment in the acquisition cost of new customers.

Now talking about the initiatives that you mentioned. I'm going to point out the VANS brand. It's had a surprising, amazing results when we see the total Arezzo&Co, it corresponds to 13% of our total. So it's a very recent operation. We started in 2020. So practically, over 18 months, almost 12 months of pandemic. So it's something that from now on, its growth, it's going to be even greater.

I'd like to give you a specific example. We inaugurated in September, the largest flagship store of South America is located in Avenue Paulista at an iconic building of the city called [indiscernible]. It's very ambitious target of BRL 1 million. And in the first month, sales were BRL 1.3 million. So the target of October, we established a target of BRL 1 million, much higher for a return of investment on a healthy level.

So we thought it was an effect of the novelty. So October, BRL 1.4 million. So in 2 months, it's over BRL 800 million. So what can be the brand from now on. So this is what Rafael Sachete is heading. And I'm going to invite Rafael to talk a little bit more about VANS because we have a great ability to grow. And it's a multichannel brand.

[Rafael Sachete, executive]

Talking about growth, we are talking about a growth of 61% on the quarter comparing last year, and the brand will tend to maintain these figures. And we'll have a revenue closer to BRL 450 million in revenue, with a clear potential for the next months to reach BRL 700 million of gross revenue with possibilities of expansion. So a number of stores with a very clear view that it's a complementary channel.

So e-commerce and our own stores. We are opening new stores. The brand is performing even better than expected. And we've opened stores in other cities, in all of the marketplaces, we are opening new stores. And the brand is showing a great engagement from customers and the expansion of the mix of consumption portfolio. It's seen as a young brand, but it has a mix of products, and these items are generating much more customer flow and in our physical stores as well.

The brand fans, it's the first brand that we licensed. So this was a plan that more robust of new brands. We started now in 2019 before the pandemic. So during the peak of the pandemic, we couldn't think about growing. But now this initiative is -- and so we have Arezzo&Co focused on the clothing market. We have our arm for licensed brand. Today, only the VANS brand. But the way we relate to BF by implementing all of the brand guidelines, all of the leverages of growth, this has been a reference. And we've been contacted by major global brands that want to expand their operations in Brazil or enter the Brazilian market.

So this is really a differential that we have in addition to our traditional brands of Arezzo&CO, we have the licensing of brands that will be greater in our strategy. The Arezzo brand is really a legacy brand. So it was focused over its 50 years in women's, bags and footwear through generations. So children's footwear has always been something that is naturally required by mothers who became after -- so daughters will became mothers and they had daughters and it's a generational cycle.

And in 2021 entry in this segment the result was exceptional. We had returned to schools in August, and we have the very strong distribution in the multi-brand segment, and we intend to become a very strong player, 20%, 30% of the women's market.

[Unknown Executive]

This next question is by Helena from Itau. She asked about the Schutz brand. Is the good performance related to the movement or it's due to more competition?

[Alexandre Birman, executive]

Hello, Helena. The Schutz brand, respecting all of our brands, but it has a special place in our hearts. So I had the joy to be able to create when I was only 18 years old. So it was the first brand after Arezzo that on that occasion, exited for 20 years already. And Schutz throughout its 26 years of existence, was able to generate a legion of loyal customers, very loyal. Internally, they are called Schutz lovers, a brand that has a naturality in its communication. It's a matter of lifestyle, and it conveys a feeling of joy, a good feeling. So it's a very -- it's essentially a women's brand.

And before the pandemic, it already had changed a little bit its behavior in the casual segment in sneakers. And so although its origin was a more high-heel shoes, it was able to migrate to sneakers. And during the pandemic, the casual lines grew a lot. And over the last few months, we saw events taking place. So no more restrictions almost. So we have weddings and parties and Schutz is coming very strongly. It's desire. It exemplifies this woman who wants to go back to parties and get well dressed and so almost 45% of our sales are in this segment.

And we are preparing since March of this year. The great moment of concretization and Schutz lifestyle, it's in clothing. As of March through the inauguration of flagship store and the sale on e-commerce, it won't be distributed on multi-brand, but it's creating a lot of expectation and desire. So we're going to be focusing on the Brazilian market. As I said in the presentation, Schutz had, in this quarter, approximately 30% of its revenue coming from the U.S. market. So it's a brand with an international penetration, and it's distributed in over 40 countries.

And Schutz certainly will surpass the brand that we've dreamed BRL 1 billion. Yes.

[Unknown Executive]

And shares also about -- what are the main learnings? And what's the case that you can mention?

[Alexandre Birman, executive]

So Bau was our, within the umbrella of Arezzo, under the leadership of our partner and great partner, Rony Meisler. From the day he was with us on the Chair of Arezzo&CO. He raised the team of Bau, a brand that I didn't know before. It was a niche brand with really a level of loyalty that was very high generation that is transforming the world. So it was very fast the integration of Bau.

Behind Bau, there were the founders of the brands, the brothers who had entire freedom to interfere with the launch of the brand and Rony, putting on the way he leads the Reserva brand. So at Bau, we were able to migrate our distribution center to fast space with logistics capability that is much greater.

And this morning, I checked yesterday's sales. We sold BRL 800,000. So from -- so November is the best month for our brands. And Bau now, this year, it will open its first physical store with its customers.

Now we want to enter the shoes segment with a very restricted company. And certainly, like Reserva, having 20% of its revenue from shoes. It grew by 4x its revenue we choose. Bau will also have its line of shoes. So Bau was really -- if Reserva was the fruit of our first moment in inorganic moment, Bau is practically the fruit of the fruit. And this is our idea to have to cascade and be able to create our great ecosystem, which is in an excellent phase related to everything that we mentioned, not only in our presentation, but answering a few questions, and it's related to the growth and to organic projects.

Arezzo&CO has really an ability to face any macroeconomic context and deliver solid results in the long term.

[Unknown Executive]

So a question by Joao Soares at Citi. He'd like to understand what are the main drivers behind this performance. And how do you see the brand until the end of the year? He also the potential growth in the long-term of the organic brands.

[Alexandre Birman, executive]

Thank you, Joaon. Reserva is really an explosion. We had no doubt. It was no surprise for us. We always believe very much in, first of all, the leadership of the brand and personified by Rony, but also by his partners, [ Nandan ] and Jayme and the entire team of exceptional people having a differentiated culture. In addition, the brand, we knew it had a very high level of desire among customers. So what did we do differently? We invented a cycle of collections with monthly releases.

So this collection cycle, it's not only for products. We don't have only products. It's the entire -- the million overview that has mastery in terms of the strategy, a campaign and the sales -- point of sales and also the sell-in process that is born in the sell in. Everything is linked. So the first monthly collection launched in Carnival with Mangueira Samba School. And every month, there is a monthly collection. So it increase its penetration in the men's segment.

And as I said before, a very strong growth in footwear due to the internalization of this process, especially sourcing, Arezzo&Co has a mastery at a global level, especially being able to have its supply chain controlled and at the same time, very agile. And also the digital expansion of Reserva. It had its seed planted, but it was able throughout the last few months to have an absurd performance, growing by 400% and also related to the opening of new stores.

For the fourth quarter, we ended the month of October. And the result is even stronger for -- and the months of November and December have a very strong weight in the total revenue of Reserva. In December, it's a brand that grows basically 3.5 to 4.0x the average of its monthly sales, and we are very confident that this figure that you've seen is going to be a base for the fourth quarter.

So Reserva, when we think about the brand, we would dream that it will be BRL 4 billion. And we will say that this figure will be reached much before our expectations.

[Unknown Executive]

Great. We have 3 for Irma. The franchise channel, we see the short-term recovery.

[Alexandre Birman, executive]

So Irma, how are you doing? We'll be in New York together soon to answer your questions. Our franchise channel, when the pandemic started in that very difficult moment during the months of April, May, almost until August 2020 with stores closed. We have a main premise to maintain the stores open alive, not to close our stores. There are 2 premises. One of the sales and the same vision for our exclusive suppliers, and we were able to achieve it.

We cannot forget that over BRL 60 million invested over the last 12 months. And as we've shown in our EBITDA to support the maintenance of our stores and also the implementation of our digital tools and led with mastery by our teams to thank all the loyalty and credibility that Arezzo&Co has. And results are also seen in the sellout franchise stores since the month of August in the consolidated of our network. So we are very confident in this strong recovery.

And this week, we are receiving all of the managers from all of the stores in Brazil here at Arezzo&Co. Daily, we've been training 100 people and preparing for the 2 months of the year 2021.

[Unknown Executive]

The second question, she wants to tell, with the brands we have to know, how can we think about the mix of channels in 2 to 3 years?

[Alexandre Birman, executive]

Well, when I posted the graph of channels, nearly 25% of our main ones is of the Brazilian market, I should say, we see that all channels will have a maintenance of a quite a strong growth. So multi-brand is 33% today, but you can already estimate quite a well-balanced out of one quarter for each of the channels. And the revenue of the foreign market is 11% of our total, 11% to 12%, and it tends to outpace the internal growth and to reach 15% in the next, I would say, quarters.

[Unknown Executive]

And the last question she asked about the imports chain, if there's any concern or for items used and also in the handbag product.

[Alexandre Birman, executive]

Okay. Let me split your question into two, if you allow me. First of all, I should say that import has a very low amount of our total, except for VANS. When we took over in 2020, there was nearly 70% of its mix from imported products. And we inverted that to have 70% made in Brazil, but they're still 30% imported, especially the most exclusive products of the collections or our brand has ever nearly 100% is of our domestic market with footwear, all produced in Brazil.

So as you mentioned, it's a percentage that is not quite relevant. It's not even 20% of the total handbags that are imported. It's really a small percentage. It's obviously important dollars. But we have been able to either pass down that amount to the end price, but also to have some items produced in our country. So it's not something really to be concerned of.

[Unknown Executive]

And Joseph from JPMorgan asks, how we're seeing that in Brazil with the reopening of the stores, how do we see that?

[Alexandre Birman, executive]

Well, we see a point that is even hard to say, but nearly, I mean, an expression we use in Brazil, we say that in land of the blind, those that hold one eye become king. So that is where we're at. I mean, definitely, we are leading and we have no competitors ahead. And that's true for [ Hozefa ] for the main brands in the menswear collection had the hardships and I mean Reserva definitely was able with Rony's leadership to capture the market share.

But definitely, it is quite a competition that has really been reduced, and we see that in our results.

[Unknown Executive]

And Danny from XP says, well, you definitely show the increase of the demand and in terms of all the social events that are back. So when we see about the growth because of this continuity to increase also because of Black Friday. Since we've seen many research that there is this really wish of many consumers, do you see any brand that is able to really get -- or take advantage more of that?

[Alexandre Birman, executive]

In terms of harnessing, you are right. It's quite a reality. This comeback has definitely been quite surprising. I'll give you a data on Monday, November 1, we sold like a Saturday, October 30. So definitely, it's been really a strong comeback. People are investing. And I believe, I mean, everyone is seeing that. And all our brands are standing out, and we already reached a month of the fourth quarter where we see results very strong.

As I said, we already beat our record in revenue in one single month, reaching one single month, BRL 393 million. So we expect November, December to really consolidate the track record and to really show amazing results.

[Unknown Executive]

And also another question that came, we should not go without talking about the EBITDA towards the Soma project and also in terms of others in terms of decrease of participation. If there's any change in the company shareholders' format.

[Alexandre Birman, executive]

And well, as you mentioned, I can't really say more than really explained, as I presented in this call, we have at Arezzo&Co and not only in this moment for 2021. This is a legacy that we brought right from our founding when Arezzo was founded by my dad in '72, with really strong growth. We have had a continuous solid growth, focus on the long term. And our mantra and many of you have heard of it, we say, heading to 2254. And actually, it's been an iconic point to that my dad brought to Arezzo. After those who are a bit older know about the color plan back then.

So I won't be hearing 2154, but Arezzo will be I won't but let's transform this business. That's where the whole franchising model came and where we had the plant in Belo Horizonte, the creation vertilization also of the outsourcing of our production and so on and so forth. So our view has always been on a solid structured growth. And since 2019, we started this new path that has been complementing our growth, which is VANS coming to our portfolio in 2020 Reserva. And then the circular business with its truck, also Bau, which has another focus also of my shoes, specifically for social Class B, so on and so forth.

So we are quite prepared when it comes to inorganic growth. So be it through an investment as it was already mentioned. Or through some type of acquisition or through some type of an incorporation. Our big focus is organic growth, but the company has as its goal to take action in terms of what's best for the company, focusing in the long term.

So as that has been mentioned by our material fact, yesterday, we had many interactions with all the companies you can think of smaller ones, I mean, bigger ones, we have been. And our big focus is to be able to bring opportunities that are really creative, that can really bring a rationale in terms of values, and that can take us to 2054.

[Unknown Executive]

I bring together 2 questions here. Where we are talking about [indiscernible] Richard. So he's talking about the women's wear for Reserva. What's the first steps taken? And Joseph asked about Schutz, if we have any more details of the expansion.

[Alexandre Birman, executive]

Well, you have the size of the market of apparel and footwear with menswear and also women's where, it's 50% of the total. So we already have a big market has been addressed in-house with constant opportunities of market share gain. So obviously, the womenswear will bring a new path of growth to our company.

So to penetrate in this segment, we have 2 classic ones. The first is in organic, which is a constant search for what can fill in, in the best way with the attributes I mentioned in the previous question, which is bringing value that is perennial for our shareholders and also, which is more within our hands, which is a transformation, which is spreading existing brands for the apparel market.

So it's quite interesting to see all these 2 cases. So let's start with Schutz, which will be one-of-a-kind approach, we get a bit surprised of thinking about something exclusive that is done for the first time in Schutz is the first brand in Brazil that will migrate from a footwear and handbag to a full one.

So this investment comes as expenses more and more as we get closer to the rollout, which will be now in March 2022, it is a brand that is quite broad and a loyalty to it. And let me just give a simple data to understand the reach of Schutz brand just for footwear and handbags. 5 million of Instagram followers. So far than the capacity of this brand to explore a powerhouse with womenswear.

So we have an exclusive team hired. We have a studio for the whole internal creation, it's all up and ready, it will be amazing and it will be a successful rollout. We want to really invest on that. And Reserva definitely will be one that is not necessarily one of a kind. There has been one where we see brands that start with menswear and then transform also into others that Reserva will carry on this journey with all these brands that we learned from, the ones that worked and the ones that didn't.

So the first is really to take it easy and not to rush things. At Reserva, we don't want to become a womenswear, menswear and no gender overnight. So we will have slots. So we already started with a simple shirt, which doesn't only bring the no gender audience, but it also brings one single type of sales, which is subscription. You increased loyalty. So we've had already 20,000 shirts sold, so 7,000 subscriptions. So Reserva will then roll that out.

But for winter 2022, the collection will be extended where we will get to all the different categories in womenswear. But with a very casual approach, streetwear as we have today with womenswear -- or menswear wardrobe drop, excuse me. We will have the womenswear as an extension of menswear. With adjustment of fitting, we have a team that is really prepared to focus on womenswear. And I am sure that the same way we have rolled out footwear accessories with womenswear will be the same.

[Unknown Executive]

Two more questions. And the first is Bob, and he talks about CRM efforts. How are you reactivating customers? To what extent you believe some will keep dormant? And what do you see in terms of adapting our message to ensure relevance, and at the same time, encourage frequency and ticket?

[Alexandre Birman, executive]

The journey is very important. Thank you, Bob, for your question. Our efforts to reactivate clients are in 2 ways, but I should say that our sales team have a capacity where we have over 7 million sellers that have been empowered with an app, with a list of customers that for 2 months did not buy. So the main source today of reactivating clients is that. So that's why we believe in digital. It's our context, our personal context of sellers, and they have monthly goals to reactivate. So that is definitely our big propeller when we talk about reactivating our customers and getting their loyalty back.

And in terms of digital, we have digital marketing and something more focused in long-lasting actions and the volume that they correspond to in terms of our base. And in terms of number of taxpayers, number is relevant. We're talking about 10 million clients. 3.4 million are active. So it's 60%. So it's a constant capacity of reactivating, that are the main KPIs.

[Unknown Executive]

So Filipe asks about ZZMALL, talking about the integration of new brands and any update in this strategy of ZZMALL.

[Alexandre Birman, executive]

Thank you. ZZMALL was a very important strategy during the pandemic to try to increase distribution in the digital channels. We created an app to join all proprietary brands with an experience that can be made easier. And in terms of the solutions that we're offering to our customers, not only in terms of the convenience of buying, but in terms of shipping costs, but also in terms of loyalty programs, where we are exclusively rolling out through the app, ZZMALL, which has a great experience.

The brands 3P, it's something that we try during this period, but the focus is on IP, and this is really the focus of ZZMALL. And with the team that we already showed you that are focusing specifically on this investment. That way, we will close the Q&A.

Thank you. I believe we went over an hour. So I'd like to thank you all. We have all the presentations available and the update of the strategies of each brand. And I'd like to take this time to emphasize the invitation to take part in the Investors Day, which will be in November 25 at 8 Thursday, and we're getting our house ready to have you here in person. At first, we would -- we're thinking about going to Reserva's headquarters, but we can only have 60 people there. And when we opened for signing up, we have over 200 people. So we had to transfer to our headquarters here in Sao Paulo, and we are looking forward to have you all here, those that have never been here to be able to also get updates on our strategies and our results and introducing our team that dedicate their lives with passion, love to build our future heading to 2154. Ready to go.