Sendas Distribuidora SA
BOVESPA:ASAI3
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
6.5
14.93
|
Price Target |
|
We'll email you a reminder when the closing price reaches BRL.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good morning, everyone, and thank you for waiting. Welcome to our earnings call for the disclosure of our results in the second quarter of 2022.
I want to highlight that if you need translation, we have this tool available on our platform. We can select the button interpretation through the Globe icon at the bottom part of your screen and type the language you prefer English or Portuguese. We'd like to let you know that this earnings call is being recorded and will be provided on our IR website and the company access ri.assai.com.br where you can also find the earnings released.
During this presentation, all participants will have their mics turned off and soon after we will begin our session for Q&A. If you'd like to submit a question please like the Q&A icon at the bottom part of your screen and select your name, company and language enter the queue. As you announced to request to activate your microphone will appear on the screen and that's when you should activate your mic to submit any questions. We would like to let you know that all of the questions should be submitted at once.
All of the information in this presentation and possible statements that might be made during the earnings call regarding business perspectives, forecasts and targets operationally for Assai are just beliefs and assumptions of the company's management as well as information that's currently available. Future statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and that rely on circumstances that may not occur. Investors must understand that economic conditions, market conditions and other operational factors could affect the future performance in Assai and lead to results that materially differ from those completed in the future statements.
Now I'll pass on the word to Gabrielle HelĂş, our Investor Relations Director at Assai.
Hello. Good morning, everyone. I want to thank you once again for your participation in the earnings call for the second quarter of 2022 at Assai. We are presenting those here with we have Belmiro de Gomes, our CEO; Daniela Sabbag, our CFO; and Wlamir dos Anjos, our Commercial Logistics VP.
Before we begin this presentation, I'd like to pass on the word and the floor to Belmiro for his initial remarks.
Thank you Gabi. Good morning, everyone. Ladies and gentlemen, thank you for your participation. I hope this information we shared today could be beneficial to demonstrate the moment we're in in the company and our results in the second quarter. The second quarter is above expectations and in line with our historical pathway in Assai with high rates of growth, combining a healthy combination of evolution of the volume of sales and results.
Our sales volume reached an important level of 14.25 billion and a significant expansion compared to the previous period. This increasement of BRL 3.6 billion where the company more than doubled the amount of sales in the last 3 years comes from a combination of many factors. First of all the increase in the customers registered within the same-store network, the smaller effect of the restrictions from the pandemic which have made the food service public. That's a very traditional and a circle for Assai continues to perform this supply -- like monthly shopping. And so this flow in the store is about 5% positive. The flow in the total base including the stores and the openings were above 22%. We went over a barrier of over 50 million tickets within the second quarter.
Besides all of this we also have very strong performance in our new store network from Assai. Stores our expansion has been very assertive as we've seen this in the last previous periods and batches of new stores. The 30 stores we opened in the last 12 months represented over 18% share. So that means that the total growth of the company was 32% EBIT with a strong customer base growth in the last period. Which means that Assai continues to gain China total store base and gaining market share.
And this adds up the total volume of sales about BRL 50 billion in the last 12 months. And when we take a look at the store network that's open until June 2022, annually you have a sales of BRL 60 billion. So within the sales volume we still do not consider any kind of contributions from any of the stores coming from the extra acquisition. And we're going to get into this in more detail. We've already inaugurated two of the first stores with the personal this Tuesday.
And just now our team in Curitiba launched the second unit of an Assai coming from the extra stores and its last batch of stores we acquired. So this -- it keeps the numbers that we presented in the second quarter and also the numbers we're looking at for expectations within the guidance we have presented to the market of the total revenue of BRL 100 billion in 2024. Even with a strong growth rate and even with the contribution of the expansion stores, the company is still been able to have a very healthy combination between growth, results and expansion.
And with this the EBITDA despite the fact that we had mentioned a possibility of even working with a level of lower EBITDA within its first semester but the strategy and commercial dynamics and other initiatives we've done that our VP Wlamir will get into more details about maybe EBITDA have very strong stability and an important increment in the EBITDA. That's clear near the incremental sales of about 30% reaching BRL 978 million with an important evolution compared to the first quarter.
That's supported by the dilution of expenses and the returns from customers in the food service but especially due to an increase in the customer flow where we have an evolution of 0.8% compared to the first quarter of 2022 with a very strong discipline for expenses. Daniela will highlight some of the financial results. But with this, even with the company being in a strong moment for investments considering the project that was done and all of this important movement with investments necessary for the conversion of the store network. The net income of the company reached 2.4%, 319 million within the second quarter this year.
And to give you more details on this and give you some interesting news that we have up ahead, I'll pass on the floor to Wlamir, our Logistics and Commercial VP.
Thank you, Belmiro. Good morning everyone, ladies and gentlemen. I think that to contribute to this discussion I want to talk about this quarter. This was a quarter that was extraordinary for us when it comes to sales and commercial dynamics. We had significant consistency in our strategy and this is repeated in the last three months, April, May and June.
It's a characteristic that we have at Assai with this normality. We don't really have sales peaks or what we call the high lows. We have a lot of [transistency] in this evolution and the monitoring month-by-month. We have an important intensification of our competitive advantages this year considering the macroeconomic scenario, but we also have been able to balance itself with sales and our competitive advantage as well which made us grow by over 30% in the quarter. And there is even a question from the market overall.
As you've seen we added in most of the stores that are already opened some additional services and new categories as well. So this was important and this concern that we could maybe have an impact in expenses. But actually, we had a reduction in our expenses contrary to this which [indiscernible] it's about 60 bps. Part of this dilution comes from this commercial dynamic that's stronger and more aggressive. 50% of this reduction in expenses is coming from a dilution and 50% is coming due to a reduction in expenses whether this is with trip, third-party services.
Many different initiatives in different areas in the company really focused on expenses. So we've already prepared ourselves for 2022 knowing that expenses would be very relevant considering the inflation scenario in all of the different sectors as well as with expenses. We started the year with an issue and discipline that's very strong and we were able to have this combination between sales, adjustments and expenses without losing the operational efficiency and quality in services. So I think this combination of factors made us have a brilliant quarter when it comes to sales, EBITDA and expenses. So this combination was excellent.
We can move on to the next slide please. So now as we get into a bit of our digital strategy and our last mile, first of all I want to talk about the last mile. We started off nine months ago with operation. As I mentioned previously now we are operating in 55 cities, and we have significant robust growth. The growth of sales with our partners has been growing at a higher stronger pace and even quicker than our physical expansion. So we basically tripled our sales in the two quarters in six months if compared to the fourth quarter.
We've seen that there's still low penetration when we talk about share of sales. It's still less than 1% of our total business. But especially with historic conversions of the extra stores and even the organic stores where we're opening stores that have better location, there's an interesting convergence providing convenience to customers that prefer this option. So we also have the conditions to grow when it comes to the last mile option. And moving on here, we already had an app where we are working on improving and we just launched this week with an app that we just launched called “Meu AssaĂ. And what’s our main objective, improving the customer journeys and really having the strategy. It's not e-commerce but it's a strategy that we like to call [figital].
So bringing the digital elements combined with the physical world. So we have three stores that we've started this initiative with in the market of Curitiba which everyone knows very well. It's a very demanding market. We started our pilot project there. In the first two days, adhesion from customers was above 30% way higher than our expectations.
And I think that will allow us in the company and Assai to have a greater loyalty directing our sales campaigns with customized offers including additional services. And there's a huge amount of opportunities really in this platform that we plan to work on. We plan to roll this out to all of the stores until December this year. So all of the stores can have this app operating. So we had been questioned a lot about this.
And now we're taking our first step. We're really happy with this opportunity. And in the first days our numbers have been quite exciting. So on my side, I think that's pretty much it.
And now I'll pass the floor back to Dani.
Thank you, Wlamir. Good morning, everyone. So now as we move on to our next slide where we discuss our financial results and cash generation. We had financial results in the quarter that were 320 million and it was equivalent to almost 2.5% of our net sales and our interest on lease liabilities of this amount. So we have an expense of about 221 million and 1.7% of the revenue.
So this comparison with last year increased mainly due to the CDI which was almost 4x higher in that same period. So we went from 0.8 to 2.9% in this quarter and 80% of this increase of our financial results are mainly due to an increase in the interest rate.
And I think an important point to highlight here is the cost of our debt in the company which was reduced by approximately 100 bps in the last 12 months in this important initiative and work we've been doing to increase the interest rate. With this scenario with the increase in interest rates and we have some interesting initiatives to offset part of this increase and is a less relevant effect which is probably about 20% of the total of this increase in financial results which is related to fundraising we've done to be able to fund our hypermarket conversion project.
And this is all very much in line with what was planned ever since the beginning. So with the store launches of these conversions that are already starting as Belmiro mentioned, we have strong cash generation for the next quarter. These stores bring us and we'll have a deleveraging of the company very quickly. And I'm going to get into the details more up ahead. But another point I want to highlight is our debt today which has a cost of CDI plus 1.5 average term of four years.
And over here, I think it's important to reinforce this and how this is very comfortable for the company. These are all very well distributed throughout the next year. So this is very compatible with all of the cash generation we've had up ahead and this gives us even more comfort.
Now moving on to cash generation towards the right side of the slide. It's important here to mention that we have a generation of almost 3 billion with the growth in the past 12 months of 1 billion and this growth was very relevant. As you all know, the company is a strong cash generator and we have a cash conversion rate that was very relevant. 90% of our EBITDA is transformed into cash. So basically, if we were to add up these 2 lines of investments and payments of the commercial points or real estate we acquired from the hypermarkets and extra, it adds up to 4.6 billion.
So it's about 1.6x EBITDA. So this variation in our debt level here in this period is exactly due to this investment. So our leverage position is going to be completing the quarter with 2.7x.
Once again, this level is really in line with what we estimated and really in line with the forecast for the extra project. And it drops very quickly as we have the store opening. So this generation will strengthen the company even more considering the quality and the very privileged location. And the leverage at the end of the day will be taking place in an anticipated way actually that we can mention until the end of 2023. And then I'd go on to the next slide on profit.
Some other comments. As a consequence of everything else presented, we have our net income in the quarter reaching 219 million a growth of 21% versus the last year and almost 50% in regards to the first quarter of 2022, a margin of 2.4%. And in the quarter our profits were BRL 0.5 billion. So the results that reflect a bit of everything we've already discussed now in this presentation. With the sales dynamic that was really extraordinary and a strong leverage operationally with a dilution in control of expense as Belmiro mentioned. And all of this was essential considering the inflationary context and peak in interest.
So I'll pass on the floor back to Belmiro to talk about the status of our expansion.
Thank you, Dani. Well, on our expansion as I mentioned in the beginning we had 33 stores. Most of them were organic in the past 12 months and the performance in these stores when it comes to sales and the maturity ramp is very visible on the company's results. The contribution effect in this quarter but also in the previous quarters, was a significant setting the same for [indiscernible] and Assai with the store openings including growing in sales but also balancing this out with our results.
And in the second quarter, we were able to go over 1 million square meters of sales. That is an important milestone and that is an important symbolism with the stores built. I want to thank our team that's conducting this process not only for the conversions of the extra stores but all of the new stores as well. Each of these units are almost like an individual company.
So we had these openings in the first semester in seven different states which demonstrate that the company’s strategy to expand into all of the national territory with three stores in the capital we're entering in a betting with our first unit in the city that's very important in the [Veladero] region [indiscernible] first store as well [indiscernible] also in the historical center of [El Salvador]. Our fourth store in [Belen, Petrolina] also in the border with [indiscernible] and our second unit in [indiscernible].
And so about expansion, we've also started off with some conversion projects were extra start within what we had presented as information for the market. The company is fulfilling its schedule. And the first units we had mentioned we will launch we already opened. You see on the left side of the screen. A big unit in [indiscernible] the federal district. It was opened on Tuesday. A huge store it's a very beautiful store. Less than 100 days for construction work is one of the quickest construction projects we've ever done to be able to supply the unit and perform all of the construction work and the unit already performed exceptionally in the first stage as well as the expectation for the store network.
That's going to be transformed up ahead since the other stores as you already mentioned at many moments. Most of the stores that come from the extra hypermarkets are within capital or metropolitan regions. These are stores that when it comes to physical structure and capacity for stocking up and sales area as well parking spots and especially the surrounding public are in really high density regions. So the performance is expected for each of these stores on average is about over 50%, 60% or 70% compared to an organic store opening. Just today in the morning [indiscernible] launched our second unit which is the unit [indiscernible]. And I will continue with a very strong store launch schedule.
The second semester is going to have a very intense store opening schedule. We can move on to the next slide. At this moment, just so you can have an idea we have 50 construction projects underway at the same time and our results of this means that just in personnel in the construction work, we have about 12,000 people working on processes for the foundation. All the work with the switching of flooring, installation of equipment, all the remodeling necessary to be able to transform a property that was supposed to be for a hypermarket into a wholesale operation. So this, of course, considers a shift in the furniture pallet parts and inventory in the store but also installing the freezers, scope chambers, other kinds of visual communication and visual merchandising.
So part of the stores already have a big shift. So you can see [indiscernible] like this area where you can add a cold cuts and also an expansion in the assortment and offer for new services which is all part of the evolution in the model and an adaptation of the wholesale model for a target audience that you have in these regions with results that have been extremely positive even above plan. As we perform adjustments and fine-tuning in the model. So we have 61 hypermarkets or conversion. 20 conversions are going to take place now in the third quarter of 2022.
And we should have 40 stores till December launched. [indiscernible] So as the stores and conversions really made the company reach a cash generation which is very significant in the business model of the history we drop in the average curve is very quick.
So there's a huge effort in our team, taking advantage of this opportunity. I also want to thank all of our teams involved, many different partners and the companies that are really standing together with us these construction projects happen. They're all going on in 15 states, but the federal district and different states in Brazil as well [indiscernible]. On our side, in regards to expansion that's pretty much it. And then within the call we'll have more time for Q&A.
But the main message we wanted to share is that everything is in place and according to what was planned, everything we considered for the execution of the construction work, capacity to open up stores and all of this is actually even a little better than what was timed originally.
And when it comes to the market as well, an increase in our vision and we're going to get into this as well when we talk about ESG but we have an economic moment that's going to be very favorable to us in this opening now in the second semester. So now as we finish EBIT and we talk about ESG we celebrated this a lot. We had a certification as a great place to work. And this is what considers the best places to work and recognizing, of course, from an external perspective, what our team has already seen in practical terms when it comes to Assai culture really being a company where people like working where they work.
And this has been a very strong differential. Culture is also what's been supporting our growth. You can grow, the volumes are growing and the speed we have if you do not have besides training and processes also a very strong culture that can permit and create this ownership feeling. But really seeing this clearly demonstrated by an external company as the very important fulfilling [indiscernible].
So in the end of the second quarter, we ended with over 60,000 direct employees. And with the new hires and the job generation of the new units we should end 2022 above 70,000 employees. An important highlight within this deal that we've received with the diversity requirement which is really high score above 90% in the market. Besides other forms of acknowledgment and recognition that the company has achieved according to the different initiatives we've worked on [indiscernible] and also the corporate initiative for ratio equality. We also performed the first census for diversity as well as a partnership with the institute [indiscernible] Brazil plus advances when it comes to diversity for LGBTQ higher than a lot of people with disabilities were almost 10% higher than the legal requirements.
So we also had some incentives from the Assai Academy where we create an important support platform for SME. And we had an increase of about 82% of the people signed up.
And from this group about 54% were women also entrepreneurs. We have many SMEs that are women that are really led by women and over 56% are black or brown. So as well as the reduction in the greenhouse gas emissions and another set of initiatives that the company has been working on strongly to be able to consider social responsibility to topic and equality and inclusion of people. So I think now we'll reach the end here as we move on to questions and answers. [indiscernible] But quarter very, very strong expectations.
We've ended the first semester for all the turbulence we saw and the uncertainties coming from the pandemic and many adjustments we had to perform considering the external impact, inflation impacts in the company that we saw results and sort of news. We have a second semester that's also super challenging up ahead considering the amount of stores we have to launch. When it comes to the market what we're seeing up ahead is that for the third and fourth quarter we'll have something that's really in line with what we've seen in the second quarter due to different initiatives being made by government for interim distribution vouchers and such as that will impact the prospect of the whole. And when it comes to store openings, the customer change sales base.
And the section we believe Assai is a reference company [indiscernible] in the sector and the reopening of these stores and our division will take place considering a ramp that's even a little better [indiscernible] all expected. There'll be another tasers and the purchase experience value offer. Everyone from our 60,000 employees in different areas and functions and roles for their work when we look at the numbers and we talk we have about being a company that of BRL 60 billion in a year as revenue you can be share that there's [indiscernible] an effort from many different areas and teams and departments working daily to deliver not only the numbers we're presenting here because we are publicly held company. But also especially the customer service where with each purchase, each ticket and each sale we perform at an Assai store.
Having said that, I'll pass the floor back to my colleagues so we can start with the Q&A session.
[Operator Instructions] We'll move on to our first question, Danniela, our sell-side analyst from XP.
I actually have two points. The first one is the main focus here about the extra [circumventions] that started off effectively this month. And my question that called my attention a lot is the fact that you used a lot of the word at least in the conversions when we consider the 40 conversions to then at least 52 new stores this year. So I wanted to know first of all if there’s room to surprise us with these numbers a little more. And if this is maybe just because you can accelerate even more than what's previously expected.
But also if you could give us some updates on I know it's still really starting, but if you could give us some of the expected economics from the conversions and what you considered in the past. Just so we can have an update in this. And my second point is about the sales dynamics and the acceleration of the same-store sales which was really strong.
Not only with you guys but with your peers as well. And I think there was also an important contribution from the distribution wholesale operations as well for them to have performance above expected and even in the profitability strategy. But my question is understanding up ahead, how are you looking at this? And you mentioned that the corona voucher and government support should help. But we also have a month of July without this support.
But has this accelerated your sales? And how the B2B recoveries has already kind of gone back to the pre-pandemic levels or we still have a bit more room for same-store sales also with the continuity of the recovery of this channel? I think these are my questions.
Thank you, Danni. Well, about the conversion, yes, we've used at least because we have a bigger amount of construction sites and then the number of openings we had considered. So we have another 8 units that should be entering in now with the legal licenses. But why are we being careful with this because, of course, it depends on external factors, public authorities, licenses and even the capacity to deliver these construction work. So they depend on the structure.
And so the idea is to open up a bigger amount of stores or being as I mentioned once, the leverage came in first from these investments before the store openings. And so for us the sooner we open these stores it's going to be even better. And so the objective here is to have a bigger amount than what we're announcing. We should have some visibility throughout this. And if we can bring a more positive number in this sense in regards to reopening’s we already have a very strong expertise.
Opening up stores from hypermarkets and from other companies we’ve bought points in downtown region. So they have this kind of characteristic.
And when you consider the sales ramp and considering the strategy we're trying to open this out with the biggest volume of sales. Even if we work with businesses in more distant regions, even if this impacts it which is even stronger. So the expectations are very positive. And even for the margins and higher density regions especially at the standards of stores we're opening at this moment which we are very positive. So the numbers we've highlighted in the beginning of the project when we had the business line for the project are adjustments upwards.
But of course it's very soon. We just launched our first store. But just to give you an idea this unit [indiscernible] we’ve launched. If you look at the first day there is an estimate of revenue of about 4x or 4.5x of what they were making before even after correcting the numbers according to the inflation. So we would highlight the numbers in this sense. And about the same-store sale point, I think we have to compare same stores with the same and all the same cash-and-carry with the cash-and-carry’s because I say we don't have the distribution wholesale operation where of course, you can reduce margins and you can burn a big amount of margins and have a higher volume of sales.
But this doesn't generate recurrence. So strategically, we are focused to work with the final end customer. The utilizers which have high recurrence and we work with the reseller public. And so if we look at the sales per square meter, the highest indicators we've reached almost BRL 5,000 per square meter and that's already considering the expansion, of course. So when you move on to a mature store network that reaches about 5.5000 rent per square meter.
So it's a lot higher than if you look at the other market players. So what we saw in the first quarter, we have an event that took place and it's the company which considers a really high volume of sales and this, of course could sometime may bring in this kind of strategy.
And sometimes give us a bit of a lack of room for margins and competitive advantages especially considering the new stores, which is where of course we invest because in our vision, this is the target audience that will generate loyalty. They’ll buy with you this month, next month, the rest will come every week. So this is a competitive advantage that we're really looking at. And this is visible when you take a look and compare not only the same-store sale indicators but the combination of the total sales indicators and profitability. So when you have this combination more and more I think each company has a strategy.
There's no right or wrong strategy. Someone could be better or worse but I think it's the strategy we used. And considering that we have only a cash-and-carry operation that was a very precise strategy when you combine these 3 factors. I hope to have answered your question properly.
Well, moving on, the next question is from Luiz Poli Guanais, the sell-side analyst from BTG.
I have two questions here. I think the first one is just about a specific question on the capitalization of the interest. I understand there's an occasional effect considering the amount of stores that are closed. Could you mention a bit of the schedule for the capitalization during the next quarter. And if this should be reduced over time? I think you mentioned this point and we're seeing the scenario for cash-and-carry in Brazil considering inflation which is very favorable in its migration in the format. It's already gained a lot of share considering this trade-down effect. And we've seen this now more than ever. But with the conversions I will see in the next quarters do you think there's an expectation for some of these estimates 6 months ago on Cash-and-carry was in a good favorable scenario? Well, these are the 2 questions.
So well, I think I'm going to start off with the last point, and then I'll pass it on Dani to talk about capitalization because I think there's a curve for this. So I think this scenario is favorable. So I think Assai had been what's really pushing the market a bit more. So it's not just about the price. Of course, that is a lot. They're very important. We've made some adjustments and changes. But of course we've been very careful with this. So we've made these operational costs to reach about 9% in this quarter. And this, of course, makes you keep a margin that's lower even today with the purchase experience that is a lot more attractive.
Our purchase experience it's better or comparable at least with the market itself. And so this has been taking place. And this, of course, makes the channel migrate this amount of companies of customers we've been able to work with. And so we've had about 3.5 million customers more per month. So what we see is the scenario is even more favorable.
So when you consider the increased prices in the food sector as a whole that creates in a population with more income. The search for a cheaper purchase or even buying the same product follows this movement. And so depending on the store even with the high income public they've adhered to this model. So we see a lot of room for this as well really looking at the assumptions in this project when it was idealized and the acquisition of the extra hyper stores, that would be capped at a stable level or even higher. So we're going to be careful with the openings and seeing what they actually deliver but the expectation considering our expertise and expansion of the market we do have room for improvements as you've interpreted. And I think that's completely correct.
Then I'll pass the word on to Dani. She'll talk about capitalization. Just before I move on Luiz, is this clear?
Yes, it's very clear.
And before we move on I would just like to contribute one point that I think is important, Luiz. I have some data from Nielsen here. And just to give you an idea cash-and-carry this is a modern market where you have retail cash-and-carry in pharma. And the importance of cash-and-carry in the beginning of January was 36% of the channel and end of June it was 41%. So just an important point of 5% in the importance of food retail. So this reinforces what Belmiro mentioned about how we have a long path ahead.
Well, Luiz, thank you for your question. And now we'll talk about capitalization. I'll take advantage of your point here to answer this because we've seen some questions in the overall market. So first of all, we're following an accounting standard so they should be kept leading this profit. So I think it's important to remember that this capitalization is not only about doing it or not doing it.
But doing it because we're following this accounting standard. And this is not something new. If you consider quarters over quarters over quarters within the CapEx rate to have an interest line that's capitalized as well. So this amount of course, started being more significant due to the relevance in the hypermarket conversion project. But this is a practice that's quite recurring.
You also asked about the point in regards to how this amount will behave over time. Certainly, that’s it. As you launch a store, you don't capitalize more of these interests. And so as Belmiro mentioned to you guys, we have a number of stores that's quite relevant that we're going to be opening every quarter. So now just to share a bit of our assumptions and estimates, of course, this will keep in mind with the schedule and there could be some variations. But the amount for this quarter should be dropping halfway in the next quarter and then once again halfway considering the fourth quarter.
So this capitalization naturally considering the store openings will drop as expected. And of course, according to what's established by the guidelines.
So moving on our next question is from Ruben Couto, who is sell-side analyst for Santander.
And just to confirm this point here about the margins. This quarter had a very healthy margin considering this context with the inflation and the store opening rhythm and conversions. But the pressure of course, considering all of what we expected to see in the first quarter did not happen. But now with the delivery of these conversions in the second semester should we expect some kind of an impact in the EBITDA margins in the second quarter? Is the strong growth considering the maintenance of the margins at these levels we're seeing now?
Well Ruben, you saw that in the beginning of the year we mentioned that the EBITDA margin could suffer a bit of a penalty of about 50 bps. This year this did not happen in the first semester. Considering all of the positive scenario that we had so far it's still too early to say it won't happen. But as you look at the trend it shouldn't have probably happened with the 50 bps. But [indiscernible] we're still keeping up with this ranting all the scenario with the corona vouchers and market share.
But the reopenings are always a necessary point and the need to keep competitive advantages could come around even though we have a different profile of reopenings [indiscernible] that maybe require less levels of investments and margins. But there's still a big amount of stores. So if its strong performance in sales and the store opening you may have some kind of dilution effect that we keep with that estimate that we mentioned about 50 bps. But now maybe considering this to be a little lower so we're going to be careful and be conservative as we look at the third and fourth quarters. If we have the need to do so we'll invest margins.
But if not, we're always going to be working on balancing if there's additional need. Then the company will deliver always the best or highest level of margins possible.
The next question is from Thiago Macruz, our sell-side analyst from ItaĂş BBA.
I have two questions there. With such a huge amount of store launches in six months do you think there would be additional opportunities for procurement and improving the dynamics for the purchase of these products. I wanted to understand if that is possible? A little more intense as we have spoken to you guys and some other private players we’ve noticed that the gross margins were onset by the delineation [indiscernible] How are you looking at this. [indiscernible] These are my two questions.
Well, just getting back to this. I'll pass the word on to Wlamir so we can talk about the margins and negotiations first. Competition had very strong performance in the first and second quarter. But part of this is a lot more related to the significance of the representation that this expansion has. About 1 bit of the sale in the 33 stores we generated an important dilution effect. Just as they performed better we had less impact in the expenses than in the significance it represented in the previous years.
Of course, we're always focusing on our competitive advantages. It's difficult to say an exact answer about this in the entire scenario of the market. Even with the government incentives and everything there's a very different scenario than what we had looked at now in this quarter. So maybe you have the right interpretation. It could be that the third and fourth quarters will have a less level of competition activity than what we noticed in the second quarter.
Because, of course, the result of a good amount of the operators in the market that are looking in this channel. Everyone kind of also had a second quarter that was also very strong.
So actually, this should lead to greater concern and carefulness in having a very significant drop in prices. And [indiscernible] there is another point also. How we're still going in a very high inflation period. If you don't correct your prices for the sales of small businesses you can maybe lose a bit of inventory because these customers have the capacity to buy and their elasticity is very big. If you look at the third and fourth quarter, we see a stable scenario for margins in regard to wellness practice now in the first and second quarter this year.
Thiago, we will continue here. Thank you for that question. And now about the supplier. We do have excellent relationship with our partners. And when we take a look at this I think the biggest concern we have really is we're in this inflation period process ever since 2020.
And this of course makes the negotiations a little more challenging, the price adjustments. So we're not the first ones to give the bad news to customers about our price increase. So we have a negotiation process that is done a little more intensely. But we do have some structure in a way to lead opportunities for purchase opportunities in this inflation moment. And procurement areas are decentralized.
We have commercial offices spread around all of Brazil to be able to facilitate and take advantage of regional opportunities not only in the big urban centers. And what we've done to support this [indiscernible] to have upper head is strong planning. So in March, we reunited about almost all of our suppliers or those that were most significant to be able to talk about our expansion plan so that they could be prepared considering this scenario with some industries and supply chains that have lack of product so that we can maintain our inventories in a healthy position and competitive manner. So this relationship is very close and we're quite comfortable about this. It is a little more intense considering the inflation pressure as we've already seen in other periods in Brazil but it's under control.
I hope to have answered your questions.
So moving on to the next question it's about Felipe, sell-side analyst at HSBC.
My question is about pricing margins already been answered. So I'm going to go on to the digital aspect. Larry mentioned that there would be some new features in this platform and it seems that the strategy is really focused on discounts and prices. So could you give us an idea about the strategy for digital? Is it about being more aggressive in the pricing compared to the competitors and I want to understand a bit of the strategy for digital. And so about the converted stores besides the introduction of service areas as you mentioned with [indiscernible] et cetera. Is there room for creating a dedicated area for e-commerce considering better services for these consumers? I understand that the store network space is really limited for the sales area. But these new stores have an area that's well bigger. So I would like to understand if there's any strategy in this sense.
Thank you, Felipe, for that question. Well, just getting back to this point on digital we had already highlighted that in Assai when we were with GPA before it would make sense to compete with [indiscernible] the digital front. But we had this initial process with the last mile operators. But now with this new app we're going to work on what we call figital. You provide digital experiences but you can keep customers in the physical stores as well. And of course, it's going to be an important appeal for discounts, prices, product launches and things that the industry itself has an interest in.
But there's an important interest in the segmentation. So we're going to be working on this pilot project. We should bring in more details throughout the third quarter but there's a lot more interesting stuff going on. Uniting what the market has seen with the digital experiences towards the physical world and even in the services itself to be able to maybe schedule something in a store. So there are some innovations and some interesting things that have been going on in the top.
For the converted stores, yes, considering their location the size of these stores, you have room to [indiscernible] pickup from store and to explore some other features that the current store network maybe didn’t have the conditions to work on or even the region where these stores were located. Do not have this demand that we see in these regions with a higher purchase power. So yes, there is this objective to be very focused on the reopening of the stores considering this traditional model. But yes, there is this trend for adapting other services to the customer with what's connected to this digital universe, of course.
So moving on the next question is from JoĂŁo Soares, our sell-side analyst from Citi.
Two quick questions on our side. The first one is about services. Could you talk about more specificity from a regional perspective and where you've had to offer more services and a greater expansion in the assortment and say a bit more of the competitive advantages and dynamic. Just to understand from a regional perspective where you have to perform more adjustments. The second question, which is more geared to Dani.
I wanted to hear more about the leverage considering the higher investments we've seen with these 50 construction projects underway. I wanted to understand any step, of course, the money from the real estate fund that you're going to be receiving. So how will the leverage look like for the end of the year. A bit of the expectations if there's any changes in regards to this?
Well, thank you JoĂŁo. For the services point it's not connected to a specific region in Brazil but maybe more regions within the capital cities or locations where the stores are located. So of course, we have a bigger trend in expanding assortments as you're in a scenario with higher purchase power and also the amount of businesses in [indiscernible]region as well. So the services of adding battery services, cold cuts, slicing cold cuts and wines and so these are extra services that have been done in all of the regions in Brazil for cities where you maybe don't have such a high offer of services. For example in [indiscernible] but this continues in the capital cities as well.
The objective is not to have like a big monthly shopping but the need. For example, they have the need for a slice to cold cuts or battery services that can be supplied when they come for their big monthly shopping. So you may have an increase in expenses of this but most of this has been very marginal because most of the expenses in the fixed cost of these stores already take place naturally with the rent and other expenses that take place are incurred with the result of additional services. So we actually went over the number of about 100 batteries that are put and they continue in all of the regions in Brazil. Also with the beef we had some changes that allowed us to also gain a little more of a competitive advantage compared to the neighborhood batteries.
There's a search for quality in the population that also comes to the profile of public in cash-and-carry. So we see this natural [indiscernible] in the model. But there's not a specific region like both more to the North and more to the Northeast. All of the regions are receiving these new services. And about leverage here this level of 2.7% is very similar until the end of the year with very little variation.
And as we mentioned from 2023 onwards where we already have a significant volume of store launches. We'll start off in the second semester to deleverage the company so that it can be below 2x.
As we continue our next question is from Vinicius Strano. He is sell-side analyst from UBS.
Could you maybe talk about what you've seen when it comes to the evolution of volumes in the current scenario? And here a second point also about the offer for Financial Services. Could you talk about the main features and how you plan to scale this up with the Assai card? And if it should gain more importance now with the opening of the hypermarkets that have been converted.
Thank you for that question, Vinicius. When it comes to volumes as I mentioned we had a positive increase in our flow. We've gained volume. This has not materialized in the total [indiscernible] sales because we still have trade down with an evolution of the prices for food. So the population has still performed trade downs for a brand or product or even categories of products to be able to handle the increase in price of the food. So when we look at the volume measured by kilo there's an evolution that's like greater than [indiscernible] you update the inflation on the volume of sales. So it's been positive ratio and we've been looking at this very carefully considering this increase in the customer flow. But as long as the trade down effect exists we want to capture this entirely in the sales volume. I hope it was clear and also about financial services. Dani, do you want to answer?
Yes, let me do. Certainly, we are foreseeing an acceleration in the amount of Assai card which will naturally accelerate and grow with the store openings, the conversion as well. And we're estimating a growth level of over 30% for the credit card base growth and we should be talking about over 600,000 cards issued. So we have a real big estimate. But anyway, with this of course, there was a growth and that was very important in this quarter. And our revenue was above 20%. So this growth is very significant. And the card really would help this acceleration process.
So now we'll continue with the next question from Joseph Giordano. He is the sell-side analyst from JPMorgan.
I wanted to explore a bit of the options that we still have based on this platform to accelerate growth because we've seen some competitors exploring this a bit more. And I wanted to go back to a topic here. We see a digital platform with the app being added and Belmiro mentioned also that you're starting to see good service growing a lot. So I wanted to understand how you've seen this opportunity to accelerate this initiative with the distribution wholesale in the company and considering how this could be something that's more digital to connect this and remove that table with a funnel where you capture orders. So I wanted to know also about what you're seeing when it comes to the inflation of costs and how this has been? I wanted to understand if there's any shift from a CapEx perspective that you've noticed today?
Thank you, Joseph. Well, the distribution wholesale is still a possibility that we have. And so our focus is to continue with its conversion of these actual stores. But there's still an underexplored market. So part of what the market also considers as digital is not always digital. So it's the same operation that happened 20 years ago. We are already happening online but is then placed with like some kind of a digital backup or something. So we already have a good amount of the orders that are made and posted when you work with stores in the digital prep. We should be structuring this but there is, of course, a capacity to explore this and we should be looking at this more carefully. There's of course, an important event in this but the focus at this moment is to have the actual conversions and of course to provide a digital experience with this digital strategy for customers that are in the stores today.
But there's a possibility for a distribution wholesale as well and it’s going to proceed as it's implemented with the new technologies as well. And so considering the construction materials I think I'll also answer this point. Yes, this has been impacted by the inflation. And so this of course, should reflect on the cost of the stores. On the other hand, with this amount of construction projects we've been able to have gains and scale to reduce a bit of the cost. And so there are some companies that have two, three or four conversions taking place.
So this of course, led to some gains in negotiations and we saw an important growth with the prices of steel. And this, of course, was impacted by the increase of fuel so the low added value products. And when you have an increase in fuel costs they have an increase that's sort of significant and very strong. But it seems like now it's stabilized. Of course, at a really high base.
But this is nothing that in our vision will lead to a major impact in the overall project and what we established and planned.
Okay. Perfect. And just a quick follow-up on the distribution wholesale. As we look at this from five or six years we've already passed actually gone to the expansion of 30 stores per year. How do you look at the potential for distribution wholesale considering the share of the revenue because the [ROIC] for this investment is pretty high considering the asset base and you really increase your store turnover.
So with the distribution wholesale a big part of them don't work with perishable goods or like commodity products [indiscernible] products. So the amount of products that are sold are modified and reduced. Possibly now it will start having some stabilization. And so same customer that buys from the cash-and-carry operation will also buy from a distribution wholesale. But they are not going to deliver like oil or rice or flour because the cost of transportation for distribution wholesale would eliminate all of the obtained margins. So in the distribution wholesale market is really focused on price.
If a customer is buying for 30 years at a cash-and-carry operation but then tomorrow you have another guy selling the same product with a lower price. This customer will quickly shift. So there's not much loyalty and he'll just start buying from the cheaper guy. So basically, in our strategy what we saw is this window of opportunity. So considering the commercial point we want to be the first place, have a good location and have a loyalty in the customers.
And about three years ago or one year ago or four years ago, there was not much of a shift. And so the strategy of the company adopted was first looking at the map in Brazil, place units in all the national territory and once you have the structure you create a possibility for this. So this project is going to happen as we worked on this now with the extra movement.
And this took on our priorities for obvious reasons. But it's difficult to estimate what this would represent in the share. But when you look at the total share sometimes you could say, "Oh, it's not that significant. But when you look at some specific categories of products, especially non-perishable high-added value products it could be very significant. So we've seen that in the market depending on players can operate at about 10% or 15% or 20% even in the distribution.
[indiscernible] an operation that you have a high ROIC because a good amount of the assets you placed are added. But of course, it messes with your cash dynamics. If there’s uptick grants and payment terms when you have this volume of sales but it's an important growth lever that's not been explored by saying. It's very important.
As we continue our next question is from Irma Sgarz, our sell-side analyst from Goldman Sachs.
I just have a very quick question here about these two waves of conversions. The first one is what happened now? And if it's some way is separate from the second wave? And if there's some characteristics in common that could maybe be different from the second wave of store openings? And also with this situation with the store conversions, of course, this is a huge project, and congratulations for what you've already started as the first step.
But I wanted to know how you're looking at this issue with really delivering this little clock of 10 stores per month? Do you have some concern or some other factor that maybe you're looking at more in regards to the authorization or the municipal government? And the volumes of people you need to hire, construction materials you need to have? I think that no considering the previous comments. But anything else you're considering with a bigger focus on to be able to be sure that all of the deliverables will take place within the schedule?
And the third question is just to confirm if the other stores about 30 stores that if I’m not mistaken now will be coming around in 2023. What's the schedule like for these stores? I had imagined beginning in the first quarter but I wanted to confirm this.
Thank you, Irma, for your question. Well, normally, the first wave, you'd imagine that the stores of the best sales and the best ramp-up. That's not possible after the balance with obtaining licenses and also the execution process. So depending on the construction and the amount which is the case of the stores that were worked on. And you have these projects for stores we have underground parking where the time for construction that are longer depending on the region and the neighborhood. There are some different operational schedules where you can work. But of course, what's most determining this is the legal documentation. But then if you already have most of the licenses for the beginning of the construction work, there are other documents you also have to have during the construction process or even after the completion of the construction process. So there's not like a profile of characteristics that's very different between the first and the second wave. From a perspective of sales and results, it's more like considering some aspects of engineering, then revenue or other things.
So there’s also no other restriction in regards to the region in Brazil. So we started some conversions in all of the regions because all of the state to where these stores are located already have an outside presence or an operation and even to avoid us from having a concentration of openings in the same region leading to an important bottleneck in the team. So the fact that we have 12 different regional offices and many bases around Brazil helps us a lot at this moment to be able to work on the conversion trend. So what we should see is the profile of waves and performances very similar.
Some stores where we have a high expectation unfortunately, to have some processes that are legal to obtain the licenses and improve projects and adjustments for these stores. In [indiscernible] regions that are going to be left in the second wave. The objective, of course, we already have these projects completed. And so we should complete this round of the start patch for the opening in the first quarter of 2023. And the objective is that we'll have this first focus with this project completely finished and the stores inaugurated.
I hope to have answered all of your questions.
So continuing our next question from Vinicius. He's our sell-side analyst from Bank of America.
So just a follow-up here about our initiatives for assortment. Could you provide some more details on the categories that are being added? And what's the percentage of sales that you should convert? And how you've seen the impact of this initiative when it comes to flow margins and cost structure? And if this has in some way impacted the returns on investments that you're considering for the conversion? And so second question is would pharmacies category that makes sense for Assai?
Wlamir, do you want to answer this?
Thank you for that question, Vinicius. The issue with the assortment is we have this concern because we don't want to transform are [indiscernible] to a hypermarket because of an issue with operational costs. So we're developing some categories especially when it comes to beverages and for general groceries and also for personal hygiene, cleaning where we have opportunities to expand our assortment. But this is not a rule that's valid for all stores. We're not adding more of a sales area for this in our stores that already exist in this store network that comes from the hypermarket conversions. We already have a bigger store area where we can work or expand our capacity for exposure in these sectors. But we've been very careful with this so that we don't go over level. So we operate with about 8,500 SKUs currently. And these stores were opening up with about 10,000 SKUs. So about 1,500 extra SKUs between products or merchandise and services.
So the mission of the purchase ambition as well different to our customers. Normally, they're not going to go all the way to Assai to buy beef or something. So they go to Assai to buy their monthly supply. But then before we offer the services, they would be directing to retailer of neighborhood factory to perform this purchase. So we capture this. And there's bit of a different mission.
And this has led to a combination to a better purchase experience for the consumer. And when it comes to services we can also work with B2B. So restaurants especially in battery that end up buying from us because we have quality products with fair pricing and you offer the slicing services for cold cuts and so we're improving our assortment. And this is not valid for all of the stores. There's some different phenomenon here we have adapted. But with the hypermarket stores we're going to open up a lot of opportunities. So initially, at this moment we want to open up the store.
And over time, we'll see that there is a bit of a profile in each region in store. And if we understand that there's a potential in capacity to increase this assortment, growing over 10,000 SKUs without compromising our operational costs we'll do this. So far that's the objective. I hope to have answered your question, Vinicius.
Yes, I think if you could just add on maybe have you noticed any kind of increase in the customer flow due to these new categories so far?
Actually, the customer flow growth because, for example, in a category like car tires. Customers are not going to go to our store to buy tires. So some categories for example, attracting customers. But for others, you take advantage of the existing customer flow and the migration or trade down between channels and you offer a bigger assortment for the customer increasing the basket size. So you have an increase in the customer flow due to the addition of new categories but you also have an increase of purchases from customers that are already in the store. So it's a combination of these two factors. But yes, you do increase the customer flow.
Okay. And the last point was just about pharmacies. If this is a category that makes sense to add?
Now at this moment, it doesn't make sense for us. And maybe I can add to this. IN the store conversions we've seen lots of stores with a guy. So we better to rent this out to another pharmacy then to get into the sector. So we have no interest in this. Thank you very much.
So we continue our next question is from Andrew Ruben, sell-side analyst from Morgan Stanley.
You mentioned foodservice customers coming back to the stores. Do you have a sense of where that segment is versus pre-pandemic levels? And also if there's any other types of customers you call out where you still see room for a post-pandemic sales recovery?
Yes. So Andrew, thank you. So for customers from food service we've seen them coming back but it's still not back to pre-pandemic levels because during this period of foodservice closed. So a lot of people that worked in restaurants we see that a lot of the restaurants are really full nowadays but there's a lot of restaurants that closed down during the pandemic. So we believe there's still a possibility for recovery in volumes in the food service segment.
We also know that the increase in prices also impacts the cost of eating out. So I think if this was not for the high inflation in food services it could maybe be at a higher level. So there's still some factors that haven't gone up totally. We have this issue with the school cantinas and part that's connected to like a gradual recovery.
Also the restaurants where we mentioned this profile that are really impacted. There's a bit of an uncertainty if it is something that's going to be long-lasting or if it [indiscernible] temporary. But we've seen some sectors that still have a possibility for recovery in the post pandemic scenario. Lot of things connected to the schools or educational sector and other activities even for recreational activities that were done with meetings and parties and activities where there's still maybe a little room for progress and growth still. So we see there's a scenario of stability in the pandemic with possibility for a recovery up ahead as a potential still for recovery.
So the Q&A session is officially ended. And now I would like to pass on the word to Belmiro for his final remarks and [indiscernible].
So thank you all for your participation. The IR department is available if you have any other questions additionally. Have a good afternoon. Thank you.
Wlamir dos, any other final remarks?
I just want to thank you all for participating until the end for the Q&A. And thank you for the presentation and we'll see you all in the disclosure of the third quarter. Thank you very much. Bye, take care.
The earnings call for the second quarter of 2022 at Assai is completed. The Department of Investor Relations is available to answer future questions and comments. Thank you so much for participating. Have an excellent day.