Arezzo Industria e Comercio SA

BOVESPA:ARZZ3

Earnings Call Transcript 2017-Q4

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the conference call sharing the results of the fourth quarter of 2017 of Arezzo & Co. [Operator Instructions] This conference call is being simultaneously translated into English and questions may be asked normally by participants connected abroad. [Operator Instructions]

As a reminder to journalists and other press professionals, this conference call is exclusive for professional of the financial market and current and a potential shareholders. Questions should be sent to our press release -- or to our press services professionals.[indiscernible]

Our contact is available on the company's website at the address: www.arezzoco.com.br.

This conference call along with the slide deck is being simultaneously translated over the Internet and may be accessed through the company's website. If you do not have a copy of Arezzo & Co press release published yesterday, Wednesday, March 7, you may look it up at the company's website.

Again, as a reminder, this conference call is being recorded and the slide deck and the audio facility will be available after the end of the conference call.

Before proceeding, statements made during this conference call relative to the company's business prospects, operational and financial projections and goals relative to the growth potential are released on assumptions based on the company's management expectations regarding the future of Arezzo & Co.

Forward-looking statements are highly dependent on conditions of the domestic market and generally economic of the country and international markets, and therefore, they are subject to change.

Now I would like to turn the conference over to Mr. Alexandre Birman. Please, Mr. Birman, you may start.

[Alexandre Birman, executive]

Good morning, everyone, and I would like to thank everyone participating in our conference call. Here with me, I have Daniel Levy, our CFO and IRO; and Aline Penna, our Investor Relations manager.

It's a great pleasure to share with you our results, our challenges and also our strategies. The year of 2017 was very special. It was marked by continuous evolution of our company that celebrated in that year, the brand of 45 years of existence.

I would like to highlight the new organizational structure that permitted us to grow. Thanks to our capacity of forming and attracting talents, our new government that has also paved the way for our long life and also very special highlights.

The new age that everyone is familiar with, and we are already leaders in our industry, which is digital transformation, which is as seen that I have been trying to invest a lot of time, my time, the time of people in my company, I have had the opportunity at the invitation of Maurício Bastos, our Strategy and Innovation Director, I took a course, and it make it very clear for me that the evolution of our roles over the next few years will be much faster than we can think.

In order to do that, we are leaders and we have launched for the end of the year, Arezzo Bay, the area that we call Hub 2154, and it's going to introduce many innovations for Arezzo & Co.

In December, we already founded or rather we opened a new group called Schutz business store with some important concepts. And the most interesting things that have, based on our sales considerably, so we have remote checkout with a better purchasing experience for our customers. I'm here with RFID where consumers may get shoe samples of [ kid ] shoes, foot growth, [indiscernible] and then it will automatically show possible clothing and combination that they can wear with long shoes. And also there's a large touchscreen for online on e-commerce and also excess foot [indiscernible] that we have in our inventory in this manner.

Our sales for women may sell items that are on our physical stores and also in our online stores. And we also have a hologram into existing products that are still being developed but generally being sold.

All of this is part of a concept that we believe is very important that we call frictionless, meaning no friction, experiences more seamless.

An important point that we have seen that -- but we still have a lot to evolve, for example, waiting times for our customers in our stores. We want to connect more and more the products that are displayed in our stores and them being connected to the inventory and so they can

[Audio Gap]

that sale is in new order.

Now e-commerce has also started its investments in managing the relationship with consumers, in the consumer's journey. So this project that we implemented in 2017 and has evolved greatly, more than 6 million customers already registered, thousands of contacts per week, there's their history. We need to have the right product at the right time to the right customer.

So this path of digital transformation has just started, but we are sure that we are ready. We have a team and potential to make transformations.

Now following our strategic plan, we know that there are 6 main pillars on which we work. New brands, new channels and new geographies, rather 3 pillars.

So I would like to take the opportunity to highlight the main opportunities of our company for 2018 and more strategically speaking. So we'll be consolidating our brand Fiever, you can be sure that sneaker business is very strong. This is the reality for all brands, this is part of our research team in Europe Selfridges in London.

And I have a chance of meeting there the CEO of [indiscernible ] manages Selfridges, and they have remodeled almost 30% of the store to sell sneakers only and then they have been increasing the larger share of their sales. So we have another new brand only. The evolution of our operations in U.S., which is very fairly important, and the continuous expansion as I said before of our OWME concept for e-commerce that will account 10% of our revenues.

But there are many challenges too. The main challenges that we have are: the continuous evolution of our franchising model that we had started in 2016 and 2017. We were able to collect excellent results from that.

We've reduced our default rates. We are aware that we still have a lot to do, so that we all work together, focusing on our consumers, focusing on sellout. Now there's a new pilot for the Schutz brand for the second quarter, and we believe that this is a continuing process of evolution.

Additionally, the computerization of our businesses that is becoming more and more digital. So we implemented our project of the sales management, SAP, and we need to really make a better connection between customer demands and the management of our inventory.

And there is a continuous growth of our business, all our brands in all our channels that has been getting better and better every quarter.

I would also like to highlight some significant projects that will support our business strategies that I have just mentioned. And they include a project of culture. We are bringing an important consultant with wide experience in very successful companies that will help us to solidify our organizational structure to increase engagement in our team. And we have most of the opportunity that we have to just, for example, we still improve our physical structure of facilities, especially in the city of Sao Paulo. We're investing in that in 2018 and the project also more dedicated to sustainability.

Obviously, we are a sustainable company otherwise we wouldn't be 45 years in the business, but we're going to formalize our actions with a project called Itaúna, that all with continued growth of our margin. So our expectations are very high as you can see, and I'm sure that we have a team that is ready for that.

Now speaking more specifically about the results. For the fourth quarter of 2017 and the year, we have the feeling of mission accomplished, that's very important. Our opinion is that we had an excellent year. Our top line growth was almost ended in around 10%, based greatly in growth and volume, which in our opinion is the healthier growth because it increases your market share from more products being sold to more people.

Store. Increasing the number of stores, especially at the end of the year, which gives us a greater base for growth in 2018, and consequently, we have a strong increase in our margin reaching very healthy levels for our company, especially expanding in our net profit, which as we will highlight, will leverage our ROI.

For the fourth quarter, what really makes the wheels turn, which is the sellout. If you look at the results, only the naked figures, they can be considered okay. However, I would like to highlight a few important aspects that make us have a different view of this result.

First, the comparison base that we have with the fourth quarter of 2016 in which we achieved a growth of high-single digits. Also, it's worth breaking down this fourth quarter into 3 months.

October, we had a greater growth in that year, high growth of the category for the tomboys, which had a higher price range and really leveraged the sales. After November 2017, we had better results than the previous month.

One other thing that I would like to highlight is our growth in volume and number of tickets was much higher than our total revenue growth showed in the fourth quarter. Because there was a change in the mix. High summer of 2017 was marked by sales in slippers and sandals, which usually have a lower ticket. So the total mix of our business had an average price lower than previous year, but it generated more volume and more tickets. And this issue of mix is something that we have to be prepared for to meet the demand of the consumers at the right time.

Highlight for the first quarter of 2018. We have a shift, for example, boots is selling very well and this will mean an increase of the average consolidated price. It doesn't mean that like-for-like and the same products will have a price adjustment.

December of 2017, we had the lowest leftovers in our history, which is one of the greatest indicators that how vital our business is. And this result enabled us to advance the winter collection budget, launching pre-fall in the beginning -- on 17th of January and winter collection right after carnival on February 20.

The results are excellent. We had up till yesterday the highest turnover in this period in our history. And also, we achieved all our selling goals for the winter season 2018, which gives us a good visibility of how this -- these first years (sic) [ months ] of the year will be. I would like also to talk about our communication, which generates value to our brands.

Highlights for [ Shizel ] at Arezzo. She's an icon. We have a 17-minute -- second video that is being broadcasted, and it's generating visibility to our brand.

Schutz is very into relationship with their consumers. We launched something and heard us, we launched the flagship store at Oscar Freire. Fiever, we just launched jog, which is a very nice. Anacapri continues to be very engaging. I would like to invite you now to invite you to our green collection at Anacapri today and also Alexandre Birman has a strong launching overseas on Sunday. The actress Lupita was wearing her Alexandre Birman shoes when she won the Oscar.

Our [ promise ] is higher than 20%, which gives us confidence that we are on the right track and digital transformation for the omnichannel. And this year, we launched for the multibrands store owners on February 21, the brand OWME, and which gave them the assurance that new -- they will have new products for April 24. We're going to have the opening of our flagship store for e-commerce and multi-data.

At the end of the call, I will give you more details about this new brand OWME. I would also like to highlight our operations in the United States. We have good outlook for 2018. And throughout this call, we will also talk about that.

Alexandre Birman brand, a very important expansion inside the United States, opening our showrooms in the city of Milan as well. We're focusing on New York now.

And now going back to the fourth quarter, I would like to conclude with a few comments, and then afterwards, I will pass the floor to Daniel, who will give us more details about our financial highlights.

You all know that all the investments mentioned here are in our P&L as expenses, so they're naturally growing our margins down.

All of these projects are choices but are part of our strategy. And it's very happy for our team's capacity to carry them out because we have many projects, if you remember in the past, Anacapri, the launching of e-commerce, launching handbags that gave us opportunities to continue to grow our business. We are in line with our plan, which even generated good bonuses for our team which makes me very proud.

In terms of financial performance, we had a strong reduction of our inventory and an indicator, as I said before, that is very important. We have low default rates, strong cash generation and excellent increase of our ROIC, which was above 27%.

Saying all this, we have great outlook for 2018 and we count with your continuous interaction because they make us always think and go deeper in the knowledge of our business. I would now like to pass the floor to our CFO and my friend, Daniel Levy.

[Daniel Levy, executive]

Thank you, Alexandre, good morning, everyone. Continuing with our presentation, I would now like to go to Page 4.

Let me go deeper into our analysis of results of the fourth quarter of 2017. We can see, on the left side of chart, that the gross revenue where the company achieved BRL 448 million in the period, a 6.8% growth year-over-year. In the domestic, market we grew 6.7%, and in the foreign market, our expansion was 7.8% in Brazilian reals.

Our gross revenue achieved BRL 1,679,000,000, a 8% increase year-over-year with increase of 8.7% in the domestic market and 1.5% in the foreign market.

On the next page, we see the opening of the gross revenue in the domestic market with achieved BRL [ 400,000 million ] in 4Q '17 with highlights to Arezzo, Anacapri and the [indiscernible].

Arezzo branch showed a growth of 8.2% in the quarter year-over-year, boost especially by the expansion of the multichannel brand, Chanel, with an increase of 38.4% in web commerce, a 34.2% increase.

Also, the revenue of franchise channel expanded 4% in 4Q '17. We highlight this comparison base in the franchise channels, where the multibrand grew more than 20% 4Q '16, showing how challenging the results were.

Schutz presented a drop of 6.2% in the domestic market revenue, impacted by the success obtained in 2016 with the tomboys and sneakers and with high -- products with a higher average price than the sandals sold in 2017. The good news is that with the built already arising and then the high-summer products, in November, it was -- we already saw a presuming of the increase of sales.

We now have the United States with 33.5%, which are now important brands in the market. In the third quarter, Anacapri growth revenue has had a significant evolution of 26.1% as compared to the same period in 2016. They brought new accounts for 12.3% of the growth revenue as compared to 10.4% in 2016. These results consolidated performance of last quarters as results of an increasingly more assertive product mix and investment in market. It's important to highlight we're opening 25 franchises of the brand, and important -- which helped to drive the performance of the channel that grew 31.5%. The brand efficiency payment has also had a strong performance in terms of revenue in that period with an expansion of 43% in Q4 '16 with a highlight of sales in the domestic market with a high of 66.4%. These returning its presence in domestic market has had an increasing revenue of 14% in Q4 '17, driven by our owned stores and web commerce. As a reminder, their brand has had a significant growth of 115% in the year of 2017.

Now moving to Page 6, you can see the gross revenue per sales channel. You can see that the result in the fourth quarter of 2017 was driven by the strong growth of 17.1% in our commerce channel and 10.8% in our multibrand channel.

In our owned store, there was a bound of 3.1% because of the greater representativeness of the shoes in this channel. In terms of sellout, our own chain of stores including franchise own started a record -- has had an evolution of 5.5%, reflecting a significant result in online channel and the opening of brick-and-mortar stores in the year of 2017 in addition to the 2.8% same-store sales in the quarter. The franchise channel accounted for 51.6% in origin co-domestic sales with the selling same-store sales of 1.2%. And in the period with a level offering the project is appropriate with the continued capture of gross margin in next work or in the chain of store.

As a reminder, in Q4 '16, the company has had a significant expansion of selling same-store sales up 17.9%.

Lastly, the multibrand channel has had an evolution of 10.8% in the quarter as a reflection of some of the company's actions in terms of winning new customers, more cross-sell between all the 5 brands as compared to the same period last year. The number of customers in the multibrand channels increased 8.1%, thereby, reflecting the recovery and the confidence and the [indiscernible] power of small business people.

On Page 7, there's an evolution of the number of our own stores and franchise as are reflected in terms of total square feet with growth this quarter, 618 stores, 611 of them in Brazil and 7 overseas. We opened our 42 stores, 24 Anacapri, 13 Arezzo and 5 Schutz new stores.

Now on Page 8, you can see on the left-hand side, the gross profit of the quarter that reached BRL 169.6 million, an evolution of 10.7% as compared to the same period in 2016 and a gross margin of 46.6%. The growth in the quarter of 140 basis points in gross margin is explained by the effect that I'm going to list here, the most important to the least important.

Number one, improvement of gross margin in a foreign market and increase of each representative in the company's mix. Two, improvement in the gross margin in the channels of our owned stores and web commerce and also the exclusion of ICMS, with [indiscernible] of Brazilian taxes and also a greater share of the web commerce channel in the company's revenues. Still on this page, on the right-hand side, as you can see the fourth quarter EBITDA was BRL 54.5 million with a margin of 15% and which represents a growth of 1.1% as compared to Q4 '16.

In spite of the 140 bps of expansion in the gross margin in the quarter, there were an investment of 12% in our commercial expenses as a result of additional provisions of profit sharing, considering that we will retain our growth for the period, and there will be also discretionary expenses in innovation processes, strategic processes and the advanced launch of OWME, our 6 brands and the acceleration of international expansion of our brand in Alexandre Birman for our Q1 '17. Even so, we were able to raise the level of profitability and EBITDA margin by a 90 point in the year of 2017.

On Page 9, you can see that the net income for the quarter has reached BRL 55.3 million, a net margin of 15.2% and an expansion of 54.5% as compared to the same period this year.

As I highlighted in the 4Q -- quarter of 2017, the company has obtained an injunction as that determines the exclusion -- permanent exclusion of our obligation to pay income taxes in CSLL over our tax -- over the benefit that we had on the ICMS, which may have a total gain of BRL 21.9 million. We should highlight that in 2017, our net income grew 33%, totaling BRL 154.5 million but an increase of 200 basis points in the net margin.

Now moving to Page 10, you can see the company's operational cash, which was BRL 45.9 million in the quarter in line with what we had in Q4 '16.

In the year of 2017, the same cash generation reached BRL 174 million, 71% greater than what we had in 2016.

On Page 11, on the left-hand side, you can see the CapEx for the quarter of BRL 7.6 million, and that amount includes, especially, system integration, integrating the systems of e-commerce and SAP, our new operational system and in our private-label stores and some expansion and net renovations. We closed the quarter with a net cash close to BRL 156 million, which is very good.

And lastly, on Page 12, you can see that the return on invested capital for the comp on ROIC, once again had a significant growth in the fourth quarter of 2017 reaching the level of 27.4% that is 630 basis points above fourth quarter of 2016. Some of the factors accounting for these improvement is the 31.4% growth in our operational results, better working capital and also reduction of our fixed assets.

So these were the comments we had to make about the fourth quarter of 2017. And now I would now like to open our questions and answers session. Thank you very much.

[Operator]

[Operator Instructions] Our first question is from Mr. Ruben Couto, Itaú BBA.

[Ruben Couto, analyst]

I would like to know your opinion for Schutz in 2018. From what we understood, the brand has a good increase in the quarter. I would like to understand if this expense for the entire first quarter? Or it just improvement throughout the year and something that we would find going forward and why? And what are you doing to bring Schutz back to the growth levels in line with the other brands? If you could also talk about the rollout plans for the new Schutz plan, what you're going to do throughout 2018 to deliver these renovations?

[Alexandre Birman, executive]

Hello, Ruben. It's Alexandre speaking. Thank you for your question. Schutz, I personally am biased to talk about it. You know that 26 years ago, when I was 18, I opened this brand, and we're all in couple [indiscernible] of here, there's a tradeshow here called [indiscernible]. And in March 1995, at the same trade show that we heard about the anatomic info that made Schutz be born at [indiscernible], and today, they are exposing again, they're exhibiting this info again after 3 decades. So it's a brand that has a very important strategic assumption for Arezzo & Co. Schutz is always our star. What do I mean by that? It's always in front of all the others. I'll give you some important examples. It was the first brand to have e-commerce that was at the end of 2011, and today, it accounts for 11% of that brand sell. It was the first to have handbags and now, that accounts for 20% of the brand sales. It was also the first brand that had strategic tally for growth and with the multibrand bringing big support for the rollout plan, which took place with a lot of success.

And now we have 2 new plans. We started one a few years ago, so we had -- which is the international expansion focusing on the United States. So I would like to highlight that we will open, in May, a pop-up store at Soho, which will be important to establish the brand with other types of consumers, and in August, probably we will open this store and focusing on the profitability at Iguatemi Mall in Miami, so it's a regular mall store. And also digital transformation, and about your question, we saw that Schutz project since 2018 had to be revisited, and we needed a new store. So that's why we're calling Schutz digital store, and it has all that innovation and shopping experience, as I said when we open our call, focusing on dynamic, service, actual omniexperience, e-commerce, and you have only one cart for the brick-and-mortar store and the online store. You can see the products through RFID. We have holograms and the remote checkout, which is, I think, every retailer should have, which is not that easy due to fiscal issues in Brazil. But we were able to advance greatly. That's why Schutz give us a good confidence that 2018 will be an important year to resume growth. And about the rollout of this concept, our goal is to close 2018 with about 50% of the chain already renovated. So we have great advances in that sense and to speed even more the process. The franchise for Schutz, which is or has a small representativeness in the brand's revenue, we're going to have a pilot store with our franchise based on sellout, which we believe that will bring more fluidity to boost our sales.

[Ruben Couto, analyst]

I was going to ask about the renovations of 50% of your stores. How much do you intend to invest in CapEx? And if the store that you're going to open in the U.S. in August is going to be the same format? Or if you're going to change anything for that market?

[Alexandre Birman, executive]

Our investments for our own stores and franchise -- the franchise needs might have some support in terms of lines of credit with banks. But with low interest rates, it's interesting. These stores will grow in sales. Just to give you an idea, the Iguatemi store has a little bit more than 20% increase so that increase was just due to the renovation. The 2 stores were done with CapEx higher than the average because they were done very quickly, and secondly, it's a new concept of retail that we're betting on and we saw this a lot in our research travel to Europe. We don't want you to have the feeling that you're at a retail store. We want to make the store more cozy. And also, the customer will feel more comfortable and more embraced in her shopping experience, and also, with all the technology. So at the moment, we're going deep with our suppliers to really have the best cost feasibility. We will open, in March, our store at JK Shopping center, which will already be a replication of the rollout model. And I will have better details closer to that date, but it's part of our budget for our CapEx for 2018 approved by our board.

[Operator]

Our next question is from Tobias Stingelin from Credit Suisse.

[Tobias Stingelin, analyst]

You mentioned a little bit about the pop-up store in the United States and Iguatemi Mall. If you could give us more detail. If there's anything else going on into the American markets specifically? And how we should see that development? I remember that you were going to stop last year to start this project again. I don't know if it's too early for an update, but if you could talk to us about that American market. And just -- it's a further question. This credit that you had specifically, and we're familiar with this subvention for the investment, and you can get that reduction. Despite having the suspension for investment, you got this injunction now. How comfortable are you with this injunction because -- and what are the other cases that you have in that regards? And what you think about the tax bracket going forward?

[Alexandre Birman, executive]

It's Alexandre. Thank you for question. I'm going to split the answer in two. The first is about the United States, I'm going to talk to you, and then afterwards Daniel will answer about the tax and fiscal issues. About the United States, it's worth pointing out that our operations of Arezzo & Co. in that market has 2 brands, Schutz and Alexandre Birman. I'm going to start to talk about Schutz. In addition to what I mentioned, now in February, we already renovated our store at Madison Square Garden with this new concept of digital store, and the growth has been amazing. In March, we had more than 30% of same-store sales at that store, sell-in was also very good. So Schutz had that concept, which fits well with the American market. We also, in addition to those news, we're going to open this store at Soho. With earning pop-up, it means that the lease time is a little bit shorter, but it will really help with brand awareness and show the potential of that region in Soho, so that then we can define the size and the exact location of the permanent store.

And the store at Iguatemi Mall aims at being a test of the economic feasibility of our retail stores there. It will also -- our investments will be in July on the new digital platform and new e-commerce that will really give our consumers an experience, at least, the same or better than we have here, which is already excellent. And I'm sure that we will have a very strong growth of e-commerce in the United States and mentioning the work that we have been doing in the wholesales channel.

About Alexandre Birman, it really is hitting great highlights. As you can see with the figures, this is taking place. The brand in the United States already have an amazing recall. And to speed even more our growth, we should probably open a store -- a flagship store, although it's not large, it's a small store. In terms -- and in terms of shopping experience, you will feel that you are in your bedroom closet. So it's a great closet, a shoe closet, but it's a whole -- in a block at Madison that you have great competitors like [ Globalson ], and it's great to position the brand. We will also launch e-commerce, and probably, we're negotiating a store in Bal Harbour because that mall has a great result for the brand.

So it's the continuous growth, continuous learning, and throughout 2018, we will be more aware of the actual potential and everything that we're doing and the learning that we get from the United States. I hope I answered your question. I would like to pass the word to Daniel to talk about the second part of your question.

[Tobias Stingelin, analyst]

Thank you very much, Alexandre. Just a follow-up, we were talking about Aventura Mall store, so we are going to use it as a basis for your future expansion. What changes in your mindset with regards to that store compares to the other stores you already have?

[Alexandre Birman, executive]

Well, not changes in the expense of our occupation or our flagship stores, we have 2 now. They have locations where the cost of occupancy is very, very high, even in the malls that for Brazilian is very well known, high traffic. The rental -- the cost of the rent per square immediately goes way down, and we know that traffic and, probably, top line will be very similar or even greater than what we have today. So the natural equation of that is really a very positive bottom line.

[Daniel Levy, executive]

Good morning, Tobias. This is Daniel Levy. As to the injunctions that we were granted at the end of the year or waving as -- as a waiver for us to pay taxes as the nature of the tax benefit is to fund our operations, which wouldn't make much sense according to the legal opinions that we have to tax, a tax benefit. Since you're getting a tax benefit to tax it on the other end, it wouldn't make much sense. So many other companies were already doing that and they already had initiatives of excluding, so they are based on the assumption that this benefit cannot be used today and dividend -- for the payout of dividends, it's part of the equity. So following those rules, we waited for this injunction to then grow on with this accounting adjustment. This injunction, according to the legal opinions that we have had so far and the way that Schutz has been evolving, and we were one of the first companies who won this type of injunction formerly. We've been seeing that the tax thinking in those lines is for this too. First thing, you're continuing the future because of the nature of the tax benefit that are being given. So the nature of tax benefits, once again, the incentive for these regions, for operations in our case, specifically, in the state of Espírito Santo and we renew them, we can renew it every year. And we have the guarantee that at least for the next 5 years, we will have the scenario without any major modifications.

[Tobias Stingelin, analyst]

So what about the year?

[Daniel Levy, executive]

Well, if we are finalizing our strategy, we believe that from that we will be talking about 7 to 8 percentage points in terms of benefit in our final quote. This is not our final number, but this is a more significant change in terms of our tax liabilities for 2018. So it's about 8 percentage points decrease in our tax rate for 2018.

[Operator]

[Operator Instructions] Our next question comes from Irma Sgarz from Goldman Sachs.

[Irma Sgarz, analyst]

I would like to go back to e-commerce. The amazing growth that you've been delivering over the past few years and the outlook on how much this sales channel is important for you in your brand? So when you look into the future, and we've been seeing a strong growth in your marketplace, in many different platforms, how do think the balance between sending through your own website or through third party websites? What do you -- how do you see that? You have been doing it a little bit such as fixed websites, but when you look into the future, what is the way you see in the future for your brand? Are you leaning more towards one-brand website to more multiliner or more multibrand stores?

[Alexandre Birman, executive]

Thank you for your question, Irma. I'm going to start from the end because the strategy of our online distribution, and I will hear you have a [indiscernible] as you mentioned [ fitch ], we don't operate with [ fitch ]. And you -- they're only asking who's remaining from a time in 2015 when we used to sell Anacapri as a test. And then we decided to launch a single brand e-commerce. You will see some of our products in some fashion e-commerce that are very specific, but we didn't have a very high positioning in Brazil. But there are very few multibrand stores. E-commerce -- in e-commerce that sale are -- I mean, they are very specific, more in the segment of fashion. Our main strategy is through our own brands because we believe there's a large difference. When you talk about marketplace, there's a big difference, a fundamental difference in our opinion and this is a reality. Not just in our vision, but also it happens in countries where e-commerce is more mature.

When you work with brands in the marketplace, fashion brands, it's not the thinking if you work with products there. Almost like commodities, in the brands, it's also important when you want a TV, refrigerator, and you want the product, you don't you want a brand. You want its cost effectiveness. Most of those brands are good and it's not different, no one will -- and I want to buy LG, well, Samsung has a better price, certainly, it sell Samsung. So I want to buy the black scarf, I'm with generic; if it's Arezzo, whoa! If it's too expensive, you buy a different brand, but you go to Arezzo. This is the main thing for us of being in the marketplace. And when we think of fashion, where brand is very important, even more important than the product in itself. I mean, you don't just want black shoes, you want an Arezzo shoe of whatever brands. So that's why we have such a strong strategy, that's why we're focused so much with our operational actions including technology, logistics, management, and finally, because we believe that this is the way to go. We are testing our store for our brands to sell our remaining stock of our collections. It's like an Outstore, an outlet for the remaining collections, but it will be exclusive for our brands focusing just on that. So 2017 and '18, there was a strong growth. In the first quarter of 2018, we really have to be consumable, really more confined will buying online, there's more efficiency. And we have really amazing phases in terms of sales such as the one we have hundreds of thousands, the customer bought a sneaker that had a zipper. We didn't know whether it was just for a decoration, she didn't like it, she got in contact with us and then we [indiscernible] a functional zipper sneakers for her. And we developed a special sneakers and we gave to her. She was in a wheelchair. So this is our main focus. Thank you all very much for this evening, and we are very excited about that.

[Operator]

Excuse me, but if there are no further questions, I would like to hand the conference back over to Mr. Birman for his closing remarks.

[Alexandre Birman, executive]

I would like to take the chance to thank you all for your participation. I count on your attention for us to finalize with some issues that we find important. But before I would really like to congratulate all women attending this call, there are millions of women that are consumers of Arezzo & Co. in Brazil and in the world. Please, let's give them a hand for all women in the world.

And so talking a little bit about OWME. So it will take a while before Brazilians learn how to speak it. The abbreviation of OWME. So OWME. So if a more mature women, women who know what they want, they are speaking for balance and beauty, so it's like OWME. So [indiscernible] comfort segment have seen -- these consumers do not value so much beauty or the looks. So we are working more in comfort. And in our opinion, we have managed, and we should all go check our brands. Instagram, you'll be seeing some products to go live, it's going to be on April 24.

So the target is women about 35 years of age and so [ 60 AB1 ] classes, there are anatomical shoes adjusting to the curve of your feet and then the timing for collections will be different to our very fast cycle for other brands.

We'll be focusing more on replacement of dead selling items. And also, it has PSS, which is this essence -- or the insoles and the lining of the comfort that the brand offers is unheard of.

We're opening our flagship store on April 24 and launching simultaneously our e-commerce and our multibrand, and the flagship [indiscernible] is already under construction, and it will be a very interesting experience. It will have one focus on gastronomy and one in wellness. So it will be a unique environment in which you will be offered a fresh towel for your hands, iced tea, and it's going to be an experience. We will have nature noises, and it will be a unique experience. So I would like to invite you all to go there on April 24 to see our new store OWME. I would also like to talk about our principles, which is the foundation of our every day. A goal met is at the base for the next goal, and that's why we met the goals of 2017 and started 2018 our entire team focusing on meeting the goals for the year. I would like to thank our team. It's thousands and thousands of people who dedicate their -- themselves. They struggle and really embrace our business. And one of the important thing about our board that really support our governance and to help us to keep on track and that has been very important and continuous evolution with our Board of Directors. So let's go towards [ 20 54 ] and have a great 2018. Thank you very much.

[Operator]

This call is concluded. Thank you for participating, and have a nice day. Thank you so much.