Arezzo Industria e Comercio SA

BOVESPA:ARZZ3

Earnings Call Transcript 2019-Q4

[Operator]

Good morning, ladies and gentlemen. Thank you for waiting. And welcome to the Arezzo&Co. Conference Call where the results of the 4Q '19 will be presented. [Operator Instructions] We would like to remind all journalists and others from the press that this conference call is exclusively for professionals from the financial market and current and potential shareholders. Any questions must be submitted to our press relations, Caroline Muzzi, whose contact information is available on the company website at www.arezzoco.com.br.

This conference call and the slides are being streamed on the web and can be also seen on the company website. In case any of you do not have a copy of the Arezzo&Co. press release published yesterday, Wednesday, March 4, you can get a copy from the company website. This conference call is being recorded, and the recording will be available on the website after the call is over.

Before we proceed, we would like to clarify. That any statements made during this call regarding the company's business prospects as well as projections, operational and financial goals concerning its potential for growth are forecast based on the expectations of the management for the future of Arezzo&Co.

These expectations are highly dependent on domestic market conditions, on the general economic performance of Brazil and international markets and, therefore, subject to change. Now I will hand over to Mr. Alexandre Birman. Mr. Birman, you may begin.

[Alexandre Birman, executive]

Good morning, everyone. It's always a pleasure to interact with you. Thank you for taking part in our conference call for 4Q '19 results in 2019, which is always a great moment for us to interact and clarify any doubts. I'd like to take this opportunity to talk a lot about our strategic planning. I have with me our CFO, Rafael Sachete; and our Strategy, Director and Investor Relations, Aline Penna.

2019 was a year where we delivered solid and consistent results. Also paving new roads to grow in the future. Consequently, we learned a lot, and we had many achievements. As I mentioned, we took a deep dive into our strategic plan through a Da Vinci project, counting on a very important consulting firm that has been supporting us for years. As well as a lot of engagement from our team and Board of Directors, which made us even more optimistic about the future growth of our brands in Brazil. We had a very deep analysis through many data and found all the growth gaps that we have in such a big country as ours. We've also developed new strategic levers that without a doubt will guarantee our long-term growth. It was a year in which we celebrated for the first time, our first inorganic movement by obtaining the exclusive distribution of the VANS brand in Brazil, and that makes us feel even more confident to pursue actions to expand our markets through partnerships, licensing or even through traditional M&A.

Now about the fourth quarter, the month was highlighted in sales by the high summer collection with 2 main dates, Black Friday and Christmas. About our brand, which is our main pillar, and without a doubt, I know that it's very clear to you, when you see in the mall, the strength of our brands. So we're a multi-brand and multi-channel company, and that's a reality. Our brands strength is great because they complement each other, even though they're different. When you have all our brands together, and we have a very robust brand portfolio.

Now a few more words about Arezzo. It is strengthening its positioning based on sonority. There's a hashtag that we've been using a lot in all brand communications, which is #JuntasSomos, together we are, in English with a very strong emotional appeal that goes much beyond the product.

And now about the categories, sneakers has been supported the brand growth a lot, together with backs as well as the process that we created a couple of years ago that's very present in the brand strategy with 360 activations that include products, marketing, communication, point of sales material. So in that -- in 4Q, I'd like to highlight a partnership with Pantone, which was very important to maintain the Arezzo brand, which is almost a centennial brand, and it still remains young.

Our strong channel is the franchise channel for Arezzo and now we have the Arezzo Light -- sorry. And now we have almost 100 stores, and we're very confident about that target. So opening 20 to 25 stores for the Arezzo brand in the light segment. Now about the Schutz brand. It's worth noting that in 2018 was a challenge for Schutz. We had some quarters where the brands did not perform as we wished. But now in 2019, it really showed us strength and resume growth by strengthening the branding and being a brand that was very much focused on women that wants women empowerment. And the strong part of it is online, almost 19% of the sales. So it is a digital brand. And it's also showing its capacity to be a multi-category brand, handbags, already accounts for almost 20% of sales of the brand, and multi brand, which is also a relevant channel for Schutz with a growth of 25%.

Now about Anacapri, the model is that it's easy-going. So the fact that it's flat and being very uncomplicated for women, and in that category, sneakers accounts for 42% sales of the brand. We know that casual sneakers are very strong in all footwear. So our company has been investing more and more in learning about that category to be the leader of the category, and we are. So the Anacapri growth is based on franchise's 35 stores last year and 20 in the fourth quarter alone. So throughout 2011-'12, I remember that we used to explain the brand and the brand didn't have quite the definition of growth. In 2013, we opened the first franchise in the Eldorado shopping mall, Marcela and Ricardo were our first franchisees. I'd like to thank them. And now in February 2020, we've renewed that store with a new concept is absolutely incredible. So now we will really expedite the renewal, the renovation of the stores. So in less than 5 days, 3 stores in São Paulo. So in addition to Eldorado, the Top Center store at avenue -- Paulista Avenue and Bourbon shopping mall. The stores are beautiful, you should visit. So in the first quarter, we should have another 14 renovated stores. So this is strong growth to maintain Anacapri's growth.

Now shifting from the pyramid price going into Alexandre Birman who had a great increase in brand awareness, not just in Brazil, but all over the world, focusing in Brazil and the U.S., same-store sales of 31% already very high and gave us the confidence to open new stores in new places. So we opened in Brasilia and Curitiba in the fourth quarter. We still believe in the potential for some more good stores for Alexandre Birman in Brazil and the relevant growth in e-commerce, meaning 80% of growth. And a strong presence in the main department stores around the world, such as Neiman Marcus, sax and so on. So our brands that we call Start&Co., that means Fiever and Alme. Fiever is going through a very important momentum to consolidate in urban brands, a brand that's genderless, meaning for men and women. So we can strengthen the -- that characteristic of the brand. We have a personality in addition to being an amazing DJ, DJ Alok, he really supported the brand awareness, especially bringing the men in. So from 0% to 16% of sellout sales for Fiever last year. We also had a franchise pilot project, opening up the first store in Frei Caneca mall. Alme, a very recent brand in the maturation stage. We work in a product that is even more focused on comfort. So a very lightweight product and very soft. The results were excellent. We've opened some franchises that are very important for Alme in the Morumbi, Vila Olímpia and Ibirapuera malls. So that shows us our brand portfolio.

About the revenues. At this time, I'd really like to highlight and congratulate Mauricio, Pedro and our e-commerce team because, in fact, Arezzo&Co. is consolidating as the main e-commerce player in the segment that it operates in Brazil. So 51% growth in this quarter, already very high, equal to 3.4% of our overall sales. That result is a lot, based on sales and our team and an exclusive channel for online sales. I mean continuous improvement of user experience on our website. And obviously, the confidence that you know that when you're going to buy your product, it will be the right time and right quality and great customer service post sales. So congratulations to our team as we have very good relationships with our good consumers. And we've also increased our conversion rate, the KPI that leverage that growth was not just traffic, but also an increase in the conversion rate. So we're very confident that even though we had excellent results, we still have a lot to grow in the online universe and transform Arezzo&Co into what we believe and already going into our strategic planning.

About our ambition based on the excellent results that I just talked about in the online work, solid and consistent results. So our ambition is to turn Arezzo&Co into a fashion platform. Having verticalized management of P&D and supply chain, where the brands are together in 1 single app with a loyalty program and 1 single shopping cart because now you have to go into each website, but then you would be able to do all the shopping together. Currently, they're separate. We want this experience that will change our consumers' purchasing experience, adding content and service. And that will be the foundation, so we can create a marketplace where our major differential will be brand curatorship. That's the first point of the strategic planning that I'd like to highlight, it’s to transform Arezzo&Co, the ambition to transform the company to an online platform.

Now going into digitization. I'd like to highlight a few aspects. Congratulation, Kleber and the entire team in BI because currently, we have the empowerment and the front line with online data of many things that we can imagine per consumer per product per turnover. So BI is a very important reality in Arezzo&Co.

About strategy and channel integration, we ended the year with most of the stores offering all the features. For different type of shipping, pickup, store pickup, link sales and so on. In the past days, an example that may be very specific to the city of São Paulo, which obviously is our biggest market. 40% of our e-commerce sales were serviced by the São Paulo stores in these last couple of days. So I'd just like to highlight that all the development of these tools to integrate the channels is done by our internal team. So we must congratulate them.

Now in terms of logistics, we know that even though the -- RFID isn't new, Arezzo&Co really believes in that potential last year, invested a lot. We ended the year with all our own Schutz stores that means 17 stores operating through RFID. And in the first quarter, we'll have the rollout to all the franchisees, meaning 72 stores. Ending the first quarter of 2020, 100% running on our RFID for Schutz, and then we'll roll out that platform for lower brands.

Now about inorganic growth. As I mentioned in the beginning, we had our first movement. I'd like to thank the entire VANS Brazil team that is now part of Arezzo&Co, the global team that instructed this to our company. It's a partnership that is just beginning, and we'll reap many fruits. They have amazing brands. It's a partnership that we are absolutely sure that will be long-lasting and very deep. The VANS results are very positive, even above or greater business plan. And I'd like to highlight the integration that was very successful in less than 2 months. So we transferred 450,000 pairs to create a new distribution center and completely integrated SAP. And the e-commerce that was operated externally. Now it's 100% internalized without any ruptures.

And in February, we already have a lot of growth compared to last year. So that shows our capacity to have inorganic movements to achieve that and opens us up to new licensing and partnerships and even considering a more classic M&A, and that is thanks to our maturity with a very strong internal management, including sourcing products, expansion, logistics, franchising, being multi-channel, operating multi-brands and e-commerce. Another important aspect that we've seen, and I especially like to thank the Chairman of our Board of Directors; Carlucci, supporting us in sustainability, where we've taken important steps in understanding a lot of this process, launching specific product lines in each brand, a highlight to Arezzo.

We're very proud of the products, on the cover even where the shoes are made through a partnership with Rhodia, 100% degraded -- biodegradable material replacing polyester. Throughout 2020, we're going to invest more and more, and we want to certify Vale do Sinos, the region here, down south, which is almost 70% of our stores are in as the first region certified with a number of international sales -- seals and stamps from the world -- from all over the world. About our international expansion, focusing on our American operation, an important pillar for our growth, as shown in the results throughout 2019, a year in which -- was very important for our learning and consolidation of our brands, growing a lot in the department stores. We went from 48 to 75 stores. Schutz stores, we're present in 100% of Bloomingdale's stores, that's very important. Strong growth of that called Dropship where the product is shown in e-commerce, but it's fulfilled by us, and that has increased our growth a lot that accounts for 40% of sales in Nordstrom and Bloomingdale. In addition to the online growth, 3-digit growth. So currently, our online channel is very robust.

And in RF, we are presenting our online strategy, which is very simple in the way how it is operated with strong sales results. About the brick-and-mortar stores, the transformation of brick-and-mortar to online in the U.S. happened really fast. We've been learning from that transformation. I did a roadshow with the team in January and visited the cities of Miami, L.A., San Francisco, Las Vegas and Dallas to understand the reality there, of the shopping malls and the moment. And in a moment of transition. So our idea was to open 2 stores, 2 pop-up stores The Grove mall yesterday, congratulations to our director in the U.S. and that's incredible for really helping brand awareness. And the second one will be open in Americana Mall in Glendale, California. So our objective is to continue to expand our operations in the U.S. In 2019, we learned a lot. And you can see that, that was demonstrated as nonrecurrent expenses, but is part of the process for international growth. Now I'd like to ask our CFO, Rafael Sachete for his comments, and he will address our results. Thank you.

[Rafael Sachete, executive]

Thank you, Alexandre. Good morning. Now going to Page 7, the gross revenue was BRL 573.7 million in the 4Q '19, a 12% growth in domestic market and 26.5% in foreign markets. With highlights for the North American operation, which grew 52.8% in the quarter and already accounts for 10.1% of Arezzo&Co total revenue. On the right side of the page, we show the gross revenue in the domestic market, which highlights Anacapri, with BRL 76.2 million in revenue, a 16.5% growth and continue to recover the Schutz brand with a 13.2% growth, achieving BRL 121.9 million.

Now Page 9 (sic) [ Page 8 ], we can see the gross revenue per sales channel. We highlight the performance of the franchise, which grew 10.6% in the period. As well as the web commerce channel, which grew 51.2%. We have to explain the drop of Owned Stores channel due to the transfer 10 stores to franchisees in the past 12 months, being 5 Schutz and 5 Arezzo stores. This considering the transfers of the channel would have grown 4.2% in the quarter. In terms of sellout, our store network showed an 8.5% growth in sales, due especially to the strong growth of online and net opening of 64 monobrand stores in the past 12 months, in addition to sales in the same stores that accounted for 5.7%.

On Page 9, we can see the growth of the number of stores and sales floor. We closed the quarter with 752 stores, 737 in Brazil and 15 overseas, an increase of sales were 4.5% and 67 net openings in the past 12 months. Of those, 37 only in the last quarter.

Now on Page 10. We show on the left side, the gross profit of the quarter, which achieved BRL 218.2 million, a 12% growth and a margin of 46.7%. Among the factors responsible for reducing the gross margin, we can highlight, especially the lowest -- lower representivity of Owned Stores in the mix because of the transfer, as mentioned before. So on this page, on the right side, we have the EBITDA performance, which achieved BRL 85.1 million in the quarter, a 32.8% growth. And a margin of 18.2%. It's worth mentioning that we still suffer the pressure on margins because of the operations in the U.S. Excluding operations in the U.S., the EBITDA margin would have been BRL 331 basis points higher. It's important to highlight about EBITDA to understand better how the company sees the results in the management with a view. First, we have a tax -- nonrecurring tax credit, but it was important for our business in the quarter, especially because it's connected to our business management model, focusing on cash generation and paying dividends. For the past -- next 12 months, it will be likely that we will have full conversion of that credit in cash to support our strategy, which is very good for our business model. Also, the way that we see our EBITDA in the management point of view. The company sees its EBITDA looking mainly in a consolidated manner to mature brands and Arezzo, Anacapri and Schutz, which account for in the quarter, 95% of our revenues. And more than that, if we think about results. If we look at EBITDA, that includes revenue, costs, expenses to the brand like personnel, R&D, marketing, we had an important growth of leveraging in the brand of 50 basis points. This makes us sure that we're generating value for our shareholders in the long term. After looking at the results of mature brands, we have to look at the corporate expenses that include R&D, finance, logistics and other areas that support the company.

We also separated our strategic investments, which include our digital transformation department with important investments, our new brands here including also Alexandre Birman, which is considered not mature yet, our strategy and the operations in the U.S. With that, we reached the final number that you can find on Page 11 of our EBITDA. In addition to the tax credit, we also achieved our goals, which paid bonus with more relevance of acknowledging the expenses in the quarter of '19 -- 2019. The EBITDA margin went from 15.2% in the fourth quarter to 18.2% in 4Q '19, so 68 basis points of increase. If we discount the credit, our EBITDA margin in Brazil would show a reduction of about 40 basis points. On Page 12, we can see the net income of the quarter, 46% (sic) [ 40.6% ] higher than 4Q '18, a positive impact because of the recovery of tax credits.

On Page 13, we show the operating cash generation of the company in this quarter accounted for BRL 61.5 million, 75% higher year-over-year.

On Page 14 on the left side, we have the CapEx for the quarter, which was BRL 22 million with highlights to investments in digital transformation, like BI and channel integration, investments in the pilot for RFID of Schutz and our distribution center in Cariacica, Espirito Santo to include VANS brand operations in the North American market. We had residual amounts of opening Alexandre Birman store in Dallas and investments in system integration, and e-commerce of the brand and also renovation of Schutz store at Madison Avenue in New York. On the right side of the page, we see in that business. We closed the quarter with a net cash of BRL 96.9 million, and net cash EBITDA relation of 0.3x.

Lastly, on Page 15, our ROIC for the period was 28.3% against 29.2% year-over-year. NOPAT was BRL 179.6 million, 9.5% higher than the 4Q '18. The indicator was impacted mainly due to an increase of working capital levels, which was caused by higher inventory of the U.S. operation and integration of the VANS operation. And also, the working capital was also impacted by higher amount of taxes to recover, as I said, which will be converted into cash generation still in 2020. Well, those were my comments. Now I would like to open for Q&A. Thank you very much.

[Operator]

[Operator Instruction] Our first question is from Olivia Petronilho from JPMorgan Bank.

[Olivia Petronilho, analyst]

I have 3 questions actually. The first one, looking to Brazil, maybe it was a positive surprise in terms of growth. And in Arezzo there, you said that there was a very strong trend, and October, November, maybe December would be a little bit lower than we expected. How do you see this beginning of the year. We now have more than 2/3 of the quarter gone. So what is the trend compared to what we saw in 4Q '19? And about the U.S. operations, you mentioned the initiatives during 2019, opening stores, focus on this type of distribution. I'd like to understand what we still will see in terms of U.S. investments this year to improve operations. So what should we expect in terms of investments? And third, about VANS, you said that the results are very good, above what was expected. I would like to understand what are the one-off costs for that operation. And what about profitability? How would that happen with the company?

[Alexandre Birman, executive]

Olivia, it's Alexandre. Thank you for your question. It's a pleasure to talk to you. About your first question about the sales in the first Q 2020. There we have Carnival and that impacts our strategy. We always launch winter after Carnival. And this year, Carnival was a little bit earlier than last year. So we were able to work a lot on the winter collection, especially free fall, which we launched before. I'm going to talk about the launching that will take place this week, and the results are similar to the fourth quarter of 2019. Tending to be close to the results we had at the end of last year. And this, obviously, excluding the VANS effect, which is still not part of our same-store sale base. Now I'm going to talk about the U.S. operations, which was your second question. And the third, specifically about VANS, if there's anything else you want to know, please do ask.

Our strategy to invest in the U.S. market is very important to diversify our geography. We know how mature our business is in Brazil, and we're investing highly in diversification. That's the keyword for 2020. So we're going to diversify our channels, our brands, our target audience in Brazil. And last year, what we chose to do was to diversify our pillars in terms of brands, target and geography. We decided to focus on geography. And the U.S. is the largest market in the world. It has a very high level of competitiveness. But there isn't any large player that works in our sector, which shows the power that we have, especially in department stores, despite closing operations, the large department stores are still strong like Nordstrom, Neiman Marcus, Saks, Bloomingdale. So those stores have very good operations with very solid growth. And also, the online sales have been giving very good results, especially for Schutz. The Schutz is gaining brand awareness, and it's the brand that consumers really do adhere to locally.

All those investments and learnings do have high expenses connected to them. So we've been investing carefully, but still more than what -- we have a gross profit. So for each period, we want to improve this leverage, but there are some expenses that show in our DRE. And we see them as nonrecurrent. And I think that it's part of our learning curve. So we still will have some expenses in the first quarter, but throughout 2020, we believe that we will reach more maturity and stability in our operations in the U.S. You also asked about the VANS. Since -- could you please repeat it because you asked a lot of things. Could you repeat your question about VANS?

[Olivia Petronilho, analyst]

Yes. Great. How do you see the results of VANS in this first quarter? I think that my question was more about, if you expect any structural changes, what is going on with integration, what type of cost will be linked to that process? And if you're bringing production to Brazil, that kind of initiative. So how should we think the profitability of VANS going forward?

[Alexandre Birman, executive]

Okay, I understood. We have several -- we had several expenses in December. But -- and some in January. So within the value that the brand will bring, the investments have high return rates. So $3 million to $5 million still will be nonrecurrent expenses that are part of the integration process.

There's nothing more in terms of pre requirements, some small details in operations. But the integration team is to be congratulated. It really flowed very smoothly and seamlessly, and it was great. So we took over the VANS office, and we included all their employees. We did a process of team building, culture building, VANS is part of -- an important moment of our company. We did leadership meetings with all the managers and this Sunday we had a convention with the VANS team. So culture and people which is so important in an integration process is being very well cared for. We did meeting with the people from VANS, bringing a guru that we have for team building for the immersion. So in terms of people and logistics and systems, everything is doing fine. So we hope that the VANS continues to grow as it showed in the first month, it's incredible how people love the brands. We're opening stores. In the first quarter, we're going to open the first VANS stores in very important mall shopping in Brazil, like BH shopping, Barra Shopping, and very good partnership with Multiplan.

So we're talking about 10 to 15 stores this year. There are very large stores with excellent sales. So we're very confident, and we also have the growth of online. So the part of the sales that at Arezzo&Co, we call multibrand, but in English is called the wholesale Brazil. The lead time of this product sale is very much advanced. So the portfolio in the first quarter was already fulfilled and now we're ending the sales for the second half. About the migration of sourcing in Brazil, it is a continuous and gradual process, but we're reviewing quality. We had a meeting, we have every Wednesday. It was very interesting to see the main products of VANS being made in Brazil. We have a partnership with 2 plants that are excellent. We brought in January, the global sourcing executive of VANS, to Campo Bom, who spent some time with us 2, 3 days with our team to understand our capacity and he was impressed. So it's not something that you do overnight. But definitely, the growth of sourcing in Brazil will be at a very fast pace. This is what I had to talk about Vans.

[Operator]

Our next question is from Helena Villares from Itau.

[Helena Villares, analyst]

I have 2 questions actually. The first 1 is about e-commerce. First of all, I'd like to understand. If you remove the effect that was positive in the performance, how would it be? So if we -- would it be similar to what you were delivering this 4, 25%, even 35% of growth. And the second about e-commerce. How is the -- how are -- what about the franchisees, how do they see this? We have talked about this in the past, but I think that now that it's stronger. I'd like to understand, and you have more of a track record in omni-channel, I would like to know how the franchisees are receiving that? My second question is about multibrand. We've seen they're doing much better now. And even you talked about the recovery of that channel. For 2020, what do you expect from multi-brand? And about the fourth quarter in addition to the improvement in Schutz and that's very clear, the improvements in the fourth quarter. Did you have any other structural changes? Or is it more about a macro effect?

[Alexandre Birman, executive]

Thank you, Helena, about your questions. Starting off with e-commerce. The good news that I have is that the Black Friday effect on our business is very low. It's about -- it's a really insignificant percentage of the total actual of the fourth quarter, just some figures in the 3 days of Black Friday, we grew 77%, and the fourth quarter 51%. So you can see that it's very similar. If you consider the number of days in the quarter compared to the Black Friday. It doesn't really make a difference -- different than other types of like home appliances, for instance, that consumers really plan and wait for the Black Friday to buy. So for us, it's not really relevant. About your second point relating to e-commerce.

The relationship with the franchisees, it's something that's been very transparent with them since we launched it in 2015. It's a very integrated process, working together with our franchisees, and the most important thing is that they really see a natural benefit in this in e-commerce. You might remember that when we launched our e-commerce for Arezzo, there's always a rupture. We know that it's high. It was less than 1%, and we send the report for our franchisees on a weekly basis, data from customers, what they wanted to buy, especially when they were specific customers to that store. And without considering channel integration, the franchisee has access, so use e-mail or send SMSs to invite them to the stores. Now that the channels are integrated, our biggest growth is in-store pickup and ship from store. So franchisees are actually increasing the revenues because the revenues are there. So we're bringing in traffic to the store. We're increasing our product supply in e-commerce by using the franchisees inventory. That's the thing. So it's very positive for franchisees and our pricing policy, which is always -- it's been something very essential in our business. And the -- which was defined by our founder, Anderson that the price that is the sale price in the store is already on the label, it comes from us. That price already comes on the label. So there's no fighting in between the channel. And now about multi-brand, starting off with the fourth quarter was Schutz really resuming its growth and it's relevant.

Over 35% comes from multibrand that's very strong for Schutz. E-commerce is at 19%, so still growing a lot. And it was Schutz, but it's worth noting that Fiever and Alme have high-growth in multibrand, even though the revenues are low, if you consider the whole of multibrand, and that helps when we do the cross-selling. In 2020, from the multi-brand channel will have VANS revenue. So it's going to be a lot of growth in that channel and shows our strength. And the good thing is that we've been showing how we're using the customer matrix. So the multi-brand shoe stores, we've already launched VANS. It was a big event at the Couromoda trade show. So starting very positive, and it shows our strength in multi brands. In 2020, in the first quarter, excluding the VANS effect, we will have double-digit growth in that channel.

[Operator]

Next question is from Irma Sgarz, Goldman Sachs.

[Irma Sgarz, analyst]

My first question is about marketplace for the brands in e-commerce, the rollout of that initiative. The idea is very interesting in having and bringing in another brand to add on to your product supply. I also believe that, that could be a channel for you to have emerging brands that could even create more noise in Brazil, so to speak. And has a future potential for future M&A. So that's what I'd like to understand, what are you thinking about that rollout and the future of your marketplace, that platform, I mean? And my second question is about your share, actually, the sneakers market share in the total for the company. How much does it already account for in some of the brands? Sorry, I know how already it has a significant share in some of the brands, but I'd like to hear the global figure for sneakers for Arezzo&Co. And how do you feel -- what do you feel about that? Is it a global trend, where women are dropping their high yields going into this kind of casualization, how do you see that share going up in the company's total market share for sneakers?

[Alexandre Birman, executive]

Good morning, Irma. This is Alexandre speaking. Thank you for your question. Starting off about this brand platform. We're very confident about that path. We have a team that really understands that business. We are bringing in people. We're onboarding people that already come from other companies that operate through this kind of online distribution. And the marketplace is relevant. Our e-commerce director has a lot of experience at Magazine Luiza, a retail store and is doing great work with a great team. So the first step is having our existing brands. That's the first thing. So that should happen in the period from 6 to 9 months, and we were already -- have a lot of gains for our brands. That's the first step. In parallel to that, we're setting a number of different ways to really streamline because our biggest asset are 8.2 million customers that have of -- one single access is 5 million, equals 5 million. So that's our biggest asset. If we consider our mandala strategy, 8.2 million consumers. Imagine that, that's women in classes A and B, meaning that we have 80% of the women in classes A, B as our brand consumers. And that really adds a lot of value for our business. So we started off 2020 with a number of meetings.

Yesterday, we had a very long meeting about that here as a company. So we're studying a couple of different paths. I'm going to give you some of the options. One of them would be a partnership with a player that already has a large marketplace but does not operate in the fashion segment for the A,B class. So then we would go in with all our brands, with our creatorship work and content work in this company would add on with their technology. And meant -- their knowledge is managing a marketplace. The second one would be the opposite. We have a greenfield development and showing that not only using our brands, but also integrating channels, we were challenged a lot if we were on the right path or not. But we're absolutely confident that what we developed internally is the best way. We've shown excellent results in our business. So it would be to develop an internal platform from scratch. And the other one would be to acquire a platform that operates marketplace, but in a lesser scale. So there are different paths. And how would we offer our brands. We believe that today is very hard as emerging brands to be able to distribute. So when you create an online business, the main attributes that you have to have is traffic. In a new brand -- so usually on Instagram is like something very -- sourced from a garage. So we have 5 million of access per month. So we can give these brands an opportunity to more exposure and to generate revenues. So that's the path that we're very firm on. We have a team that has solid experience in this area. So throughout 2020, we'll keep you posted on the evolution.

And sneakers, So thinking about our view about sneakers. I just came from a research trip that I do for 25 years, and you have 2 extremes. On the one hand, surprisingly, in the high luxury brands. There's a -- the platforms are coming back. So the wedges. So Schutz, for example, will work strongly on the wedges for summer. And the cash flow ware is really taken over by the sneaker. So our Arezzo&Co. saw the movement, 3, 4 years ago. And if I show you the ramp-up of the sneaker participation in our business, it gained a lot of share in the past year. The company total, it already accounts for 50% of our sales. And we understand that this will reach more than 20% this year in 2020. We have several projects internally about to optimize -- streamline even more our sneakers.

And although we are the largest casual sneakers provided in Brazil, we still have a lot to evolve in the category, and it has a different timing. Our cycle of 18 launchings per year is not the same for sneaker, has to be more constant -- the replenishment is even more important for sneakers. It's different from the categories like flat -- the affligers and the white soles are different segments. So we're learning a lot, investing heavily, creating merchandise areas exclusively for the sneakers of each brand. So we're really into sneakers right now. But on the other hand, the heels and wedges are still going strong. So I think that something we're going to grow on instead of decreasing on.

[Operator]

Our next question is from Felipe Cassimiro, HSBC.

[Felipe Cassimiro de Freitas, analyst]

I would like to explore the inventory that Rafael mentioned briefly at the end. And the inventory turnover increased 6 days. What is the breakdown for VANS and SO. I ask because I think that the trend for inventory in the should probably form in line with the turnover for the company. And you also have a lower sell-in in Brazil, which also has an impact. So I would like to know a little bit more of the details of the factors that impact the company's inventory turnover? And how do you see that going to the future?

[Alexandre Birman, executive]

About the inventory is a good point. We had 3 days increase of revenue compared to year-over-year. And in general, 3 days, 95% of the impact comes from VANS. During the transition, we turned off the operations with the date base of January 1. So when the inventory transfer, both from Owned Stores that are stores that we took on as Arezzo stores as well. And the inventory that was concentrated on web commerce and the inventory concentrated in wholesales of distribution for our multi brand, they were all transferred at the first day of the year, so it generated a significant number, and it caused that impact. And a little bit of impact of OS.

But when we look back, we see revenues growing a little bit different than what we see in Brazil. So we see that for the cause of the past days. And that grew 40%, 45%. So that makes me have more inventory to sell for the next 3 months, greater than the growth. I think that might be clear. And about the strategy that we use for inventory. If it follows the same standard of Arezzo&Co. We have a little bit more concentration of inventory in Arezzo&Co because the cycle for sourcing is a little bit more lower with more imports. So throughout the years, we will face some growth of days of inventory first, because of the business model VANS and second, because we don't have base of revenue for the past 365 days, it's new. So it will have some impact, but it won't be important, it will be about 3 to 5 days.

[Operator]

Our next question, Ruben Couto, Santander.

[Ruben Couto, analyst]

First of all, I would like to go back for the revenues of the fourth quarter, especially e-commerce, it's clear that it wasn't black Friday, but there was some specific movement from Schutz, for example, or brands that had a recovery performance, especially in the e-commerce channel. And from what I understood from Alexandre's comment from now on, we expect that this year will be strong as well for e-commerce. So this change of level of the fourth quarter compared to the other 9 months, will it grow to that same level, not 50%, but at least 25% to 30%. That was happening in the first months of the year. And you can also give me an update about Arezzo Light format. How many stores, do you have anything new to share? Is it going according to expected? Is the mono channel also working as expected? Can you explain a little bit more about that? Just to get an update.

[Alexandre Birman, executive]

It's Alexandre here. The result that we had from e-commerce is not a wave that we're surfing on, but it's fruit of hard work that we started from the very beginning, almost 10 years ago, launching our first e-commerce for Schutz, and bringing a good team. Our team is very solid, it's worth pointing out. Our founder of e-commerce is Mauricio Bastos and now he's the executive for digital transformation and e-commerce, very solid and very robust. Under his leadership, a very good pipeline. So it really is the result of a long-term work with a lot of investments in learning and a very strong team that we're very proud of. So it's worth going to visit us at Rio Grande do Sul. The result is highly based on the increase of conversion through greater intelligence of user experience and also adding some very interesting aspects that we didn't have before, which -- the shipping in which we can offer a better value for money in shipping costs for and time. So that's very interesting for our consumer. So there are many initiatives. I don't -- there is no one silver bullet. But I think it's sustainable, and it will continue to grow even stronger considering the company total and adding new brand to our portfolio, which is VANS and which is the beginning of new brands, the growth you can expect for 2020, especially in the first quarter will be even higher, considering new brands compared to what we delivered in the fourth quarter of 2019.

[Ruben Couto, analyst]

What about Arezzo Light.

[Alexandre Birman, executive]

Oh, I'm sorry. Arezzo Light. We presented the strategy to -- at our Investors Day of 2017. So we had 2 years of Arezzo Light and everything we say here, we look at the long-term always. We never open stores just by opening them and 0 closings. So 100% of accuracy in the shape of the franchise that is different in terms of invested capital, service level agreement, we have a group that we call Arezzo Light. The franchisees have very good synergy among them. And the pace of opening the stores is well structured. So we opened 51 stores in 1 -- 2 years. For 2020, we expect this about 20 stores, which is our goal. So we will reach the 100 stores, which is the plan for wave 1 of expansion of Arezzo Light within this target time for 4 years. So we're doing well. Arezzo -- it's part of the capital area of Arezzo brand. So we're going to learn from that model to use in other brands. So it's part of the plan. It works well, especially the infinite shelf, inventory you offer for the consumer that is physically at the store at the franchisee. We have the offer of our e-commerce, and we can deliver it to their home paying commission to the franchisees. So that's the greatest percentage of revenue from that sales channel.

[Operator]

If we don't have any further questions, I would like to pass the floor to Mr. Alexandre for his closing comments.

[Alexandre Birman, executive]

I want to thank everyone for participating in our call. This interaction is very important for our business. I would also like to thank our team, especially for 1 more year of learning achievements. 2019 is our 48th year of existence. I would like to thank our Board of Directors for the leadership to our strategy. This past Sunday, March 1 was a very important day for our business. We had a sales convention, with record audience, we had 7,000 participants, of which 1,300 were there in person. So it was a very strong work from our team. Congratulations Nerito and his team. You're great in sales, and that was the reason of our convention to launch, the winter collection, a prepared team with training on the mix of products, the collection, marketing stack to the new uniform motivational initiatives. That's very important for our business, launching the winter collected for all threats. I hope our team of the success and I would like to invite you to visit our stores and e-commerce. I'm sure you will see novelties that you will love and we'll make women want to have another pair of shoes and another handbag. Congratulations. And 2020, on our way to 2154. Thank you.

[Operator]

Arezzo conference call is over. Thank you for participating, and have a great day. Thank you.

[Statements in English on this transcript were

Spoken by an interpreter present on the live call.]