Atacadao SA

BOVESPA:CRFB3

Earnings Call Transcript 2018-Q2

[Operator]

Good morning, ladies and gentlemen. Welcome to Grupo Carrefour Brasil's Second Quarter and First Half of 2018 Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded and broadcast live on the Investor Relations website at www.grupocarrefourbrasil.com.br, where you will find the slide presentation as well. The slide selection will be managed by you.

Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from that anticipated in any forward-looking comments because of macroeconomic conditions, market conditions and other factors as well.

Today with us, we have Mr. Noël Prioux, Chief Executive Officer; Sébastien Durchon, CFO; Roberto Müssnich, CEO of Atacadão; José Luis Gutierrez, CEO of Carrefour Retail; Paula Cardoso, CEO of Carrefour Soluções Financeiras and Executive Director of Clients, Services and Digital Transformation; and Daniela Bretthauer, Investor Relations Officer.

First, Mr. Noël Prioux and Sébastien Durchon will comment on 2018 second quarter and first half results. Afterwards, management will be available for a question-and-answer session.

It is now my pleasure to turn the call over to Mr. Noël Prioux to start the conference call. Mr. Prioux, you have the floor.

[Noël Prioux, executive]

Good morning, everyone. Thank you for being with us during this call to present the second quarter and first half of 2018 results of Grupo Carrefour Brasil.

I will start with an overview of the main highlights of our performance and strategy, and afterwards, Sébastien will talk about our financials; and then Roberto, Gutie and Paula will present the key performance highlights of their respective businesses. I will then conclude with our priorities for 2018, and then we will be opening for questions.

So let's begin on Slide #3 with the key headline numbers of both Q2 and the first half of the year. Q2 was another strong quarter, in which we maintained our leadership in the Brazilian market with continued sales growth as well as very solid growth in profitability despite persistent food deflation and an unfavorable Easter calendar effect. Growth was driven notably by Atacadão and Carrefour Soluções Financeiras.

Our gross sales rose by 5.5%, reaching BRL 13.5 billion in Q2. Adjusted EBITDA increased by nearly 13% to BRL 934 million with adjusted EBITDA margin of 7.6%. And net income group share was up almost 40% to BRL 389 million, equivalent to a 3.2% net margin. H1 showed similar trends as those of the quarter. Our gross sales rose almost 6% to BRL 26.6 billion. Our adjusted EBITDA increased by nearly 15%, going to BRL 1.7 billion, with EBITDA margin of 7.4%. And net income group share rose by 52%, reaching BRL 669 million, while our net margin reached 2.8%. We also strengthened our balance sheet, with our net debt standing at almost BRL 1.8 billion at the end of the half year.

All these indicators showed the strength of our multiformat, multichannel model. And as you know, the solid performance date takes place with the framework of Carrefour Group transformation plan, which was unveiled in January this year.

On Slide 4, you can see that Grupo Carrefour Brasil has wasted no time in implementing actions on all 4 of the plan's pillars. The first pillar is to deploy a simplified and open organization. We are creating an organization that brings together client services and digital transformation, and this is fostering a spirit of innovation throughout the group. We are also opening up to partnerships as illustrated by our recent announcement of an alliance with the Gastronomotiva NGO to develop zero-waste recipes and partnerships with suppliers to develop our private label brand.

Our second pillar is achieving productivity and competitiveness gains, and our Q2 numbers reflect excellent progress as well. Overall, distribution cost in Q2 stood at 14.2% of net sales against 14.4% in the previous year. And this defines an acceleration of expansion and an unfavorable calendar impact on sales. Carrefour Retail distribution costs were down by almost 2% in the period as a result of efficiency gains, including a reduction in hypermarket headcount. We're also implementing steps to improve productivity, such as faster payment at the cash register as you will be seeing shortly.

Our third pillar is creating an omnichannel universe of reference, and here too there are a lot of highlight. We continue to rapidly expand Atacadão, with 6 more openings in Q2, bringing the total openings in the first half alone to 10. This is almost the same number as the openings for the whole of last year. We are also developing the new compact supermarket format market, which we will continue to roll out throughout the year, and our goal is to reach at least 10 stores could be exceeded. In digital, our e-commerce activities are growing rapidly, significantly outpacing industry growth, and our GMV more than doubled in the quarter, and our marketplace now accounts already 13% of GMV. We are also working on greater integration between the online and physical worlds, with the rollout of click-and-collect in 13 Hypermarkets and a pilot test of the drive concept at our Marginal Pinheiros Hypermarket in São Paulo to be expanded to more locations in the second half of the year, and we are leveraging data to better target our customers. We have, in a few months, reached almost 7 million registered clients for our new Carrefour CRM program, and there have been over 1.3 million downloads of our Meu Carrefour app after just a few months after its launch.

And finally, but not less important, our fourth pillar, is to overhaul the offer to promote food quality. The highlights here is the launch of our private label, Sabor & Qualidade, which I will be talking about in detail on the next slide.

On Slide #5, as you know, Carrefour Group has started its ambition of being the leader of the food transition for all, bringing healthy, quality food to consumers at affordable prices. And on the slide, you can see several initiatives that we have taken in Brazil to advance this goal.

In the second quarter, we launched our own brand, Sabor & Qualidade, with products that comply with the most stringent social and environment criteria. The brand currently includes 13 product categories, including fruit, meat, eggs, poultry, fish and shrimp produced by several suppliers from all 5 regions of Brazil, and we will continue to add new products in the next few months. Carrefour aims for the new product line to account for 10% of sales of fresh produce by 2022 as part of our efforts to develop the share of locally sourced products. Carrefour Group has also set a goal of EUR 5 billion in sales or organic products by 2022, and Carrefour Brasil is playing its part here too. The Pinheiros Hypermarkets has a section dedicated to healthy and organic products, and we now plan to have organic sections in all of our São Paulo stores by year-end and in the rest of our stores in the next few months.

On Slide 6, you see some further actions concerning productivity and competitiveness. For example, we have introduced a high-speed automatic checkout system at Atacadão, and now we have self-checkouts installed in half of our 76 gas stations as well as the Jardim Pamplona flagship hypermarket. We also have new initiatives -- important initiatives at CSF, with online embossing for Atacadão and Carrefour Cards as well as new applications for Atacadão card via -- and now, I would like to hand over to Sébastien, who will be talking about the consolidated financial performance.

[Sébastien Durchon, executive]

Thank you, Noël. Good morning, everyone. Let's start on Slide 8 with our consolidated sales. Our total sales went up by 5.5% in the second quarter, and like-for-like basis 3.4% increase excluding petrol, and 3.6% including petrol. With expansion, notably the 10 new Atacadão stores that were opened, this half contributing another 3.9% for the total growth. This quarter was marked by a strongly unfavorable calendar impact of minus 1.9%, as Easter took place in March whereas last year, it was in April and was therefore included in the figures of Q2 '17.

As you can see on the inflation chart, this quarter also saw continued food deflation, although it is vis-à-vis Q1 standing at minus 2.8% in Q2, vis-à-vis 4% -- minus 4% in Q1. The easing was amplified by the truckers' strike in May, that resulted in June in the largest monthly increase in food-at-home inflation since 2000. Over the first half as a whole, gross sales including petrol grew by 5.8%, with like-for-like growth ex-calendar and ex-petrol of 1.9%, and expansion contributing another 3.7%.

Of particular note is the fast growth of e-commerce. Online sales accounted for 6.8% of sales ex-petrol in the first half, vis-à-vis 3.3% at the first half of '17, and in the second quarter, they represented 7.4% of sales.

On Slide 9, we turn to our simplified P&L, which shows a sharp improvement in profitability in the quarter and in the half year thanks to a solid operating performance and lower financial expenses. I wish to emphasize here that our operating results came entirely 100% from our operations. We did not have here any relevant reversal or provisions nor a sale of future tax assets or any other relevant nonrecurring impact. Net sales were up by 5.3% in the quarter to BRL 12.3 billion, driven by Atacadão, which was up 8.3% in the quarter, and represents more than 2/3 of our total sales.

Our gross profit reached BRL 2.7 billion, with the gross margin, 0.29% -- 29 percentage point to 21.7%, driven largely by Atacadão's better performance and also Carrefour Soluções Financeiras sales which both recorded strong growth in gross profit, respectively, 13.4% and 46.4%. As we already pointed out, all our businesses showed productivity gains over the quarter. Overall, SG&A accounted for 14.2% of our net sales, 20 bps down vis-à-vis last year in spite of the unfavorable calendar impact and of the accelerated pace of expansion. At Carrefour Retail, SG&A were even down 1.8% in reals as a result of the reduction of our headcount as well as productivity actions, together with a tight control of expenses as a consequence of the significant increase of our gross margin and the SG&A efficiency that I have just mentioned. Adjusted consolidated EBITDA rose by an even 12.9%, and Q2 adjusted EBITDA margin consolidated, 51 basis points to 7.6%. Our financial expenses dropped 74.5% due to the reduction of net debt with the IPO occurred last year, together with the improved interest rate environment.

With that, the net income group share was up by almost 40% to BRL 389 million. The second quarter showed an even stronger performance with the net sales up 5.4%, gross profit rising by 7.4% going to BRL 5.2 billion. Adjusted EBITDA rising 14.5%, with margins going up by 59 bps and net income group share increasing by 50 -- by over 50%, going to BRL 669 million.

Now we are going to get into details of each business unit. I would like to give the floor to Roberto, who will talk about the excellent performance of Atacadão.

[José Müssnich, executive]

Thank you, Sébastien. Good morning, everyone, my friends. And I would like to talk about our Atacadão. We saw another strong and consistent quarter, as you can see on Slide #11, with sales accelerating and margins improving. Gross sales in Q2 were up by 8.4%, growing to a little over BRL 9 million. A sharp increase over the -- 0.5% increase in like-for-like sales, and compared to 0.5% increase of like-for-like in the first quarter. In the half year, we had an increase of BRL 1.2 billion in revenues year-on-year. And the acceleration of sales despite the deflationary environment that Sébastien described was due to our unique model, with absolute leadership in prices in all segment and overall throughput efficiency. And I usually make jokes internally saying that, when we go to the several different regions of Brazil, we become like earthworm, that is to say, we belong to the Earth, creating a strong relationship with the local industry and with the expectations and needs of our customers, whether they are individuals or companies. Our volumes have been significantly increasing as we -- as well as our market share. The number of customers over the last 2 year stepped up over 20% in total and plus 6% in like-for-like. We did not see any meaningful impact on sales on the truckers' strike, thanks to the unique commercial and supply model and the quality of the inventory that we maintained in all regions. Gross profit in the quarter rose by 13.4% in the quarter, going to BRL 1.2 billion, and gross margin improved by 70 basis points, going to 15.4%. And this increase of our gross margin also comes from the strength of our commercial model, which enabled us to maintain our price competitiveness over the quarter, while sales were accelerating. Distribution cost, 8.2% of net sales and will broadly stable versus last year in spite of our accelerated expansion, which clearly shows the efficiency gains made in our existing stores. Such efficiency derives from the ongoing diverse of our operational teams, not only to maintain the aspect that are inherent to the store environment and general satisfaction but also to keep loss indices low. Adjusted EBITDA rose by almost 20% in the second quarter, with margin improving 70 basis points going to 7.2%. I would like to mention as a positive highlight, our Atacadão card, which was so much expected for a large -- less than a year ago, with nearly 1.2 million cards already, which reflects very clearly the brand's strength and how close we are to our customers, whether they are individuals or companies.

Expansion, we posted the strongest ever first half of the year, with 10 new stores, 6 of them in the second quarter. Thus moving forward with our expansion strategy and our target of opening 20 stores this year. And the next 10 stores are already being built, including this morning, we are opening the 11th of this year, including 1 conversion of Carrefour Hypermarket in the Northeast.

Let me detail the opening several different regions in the first half. Three stores in São Paulo state, 2 in Rio de Janeiro, 2 in the Northeast, 2 in the Midwest and 1 in the South. In the first half, we have already added 60,000 square meters of sales area. And at the year-end, we should reach approximately 120,000 square meters of sales areas -- new sales areas. We will build in the year a total of 302,000 square meters in all operations. And with this expansion, we are generating more than 5,000 new jobs throughout all Brazilian regions.

Our performance in the first half was equally strong, with gross sales up by 7.1%, of which 2.6% like-for-like to BRL 17.4 billion. Gross profit was up by 12.4%, with gross margin improving by 63 basis points, and adjusted EBITDA rising 18%, with a margin of 6.7%.

Thank you very much. I would like to thank all the members of the Atacadão family, and we owe them this great performance, and thank you so much for each one of you.

Now I would like to hand over to José Luis Gutierrez.

[José Luis Gutierrez, executive]

Thank you, Roberto. Good morning, everyone. On Slide 12, you can see the main performance indicators of Carrefour Retail, whose sales and profitability remain stable sequentially despite various unfavorable factors in Q2.

Gross sales in Q2 reached BRL 4.5 billion, up by 2.1% on a like-for-like basis including petrol. This represents an improvement in the like-for-like performance when compared to Q1 when we reported 0.1%. Total sales were broadly stable year-on-year despite the ongoing deflation and Easter calendar effect, which was a negative 3 percentage points at Carrefour. We estimate the strike impact at 1.7% for Carrefour Retail, of which, half comes from lost petrol sales and the other half from performance of nonfood sales at our stores and also from a reduction in e-commerce. Also, if we include the impact from the strike, we would have posted a like-for-like basis of -- on a like-for-like basis, 3.8% on H1. Sales performance was up 3.4% with a little over BRL 9 billion, of which 1.2% like-for-like. Hypermarkets and convenience stores gained 90 bps and 60 bps of market share, respectively, year to date until May according to Nielsen data.

The second month, gross margin was 24.2%, stable vis-à-vis the first one, but year-on-year, it was down due to several factors, notably, a very challenging comparable basis, as gross margin in Q2 2017 then was 100 basis points above the 2017 full average. Full year effect -- mix effect was greater share of e-commerce in our sales due to its strong growth, increased participation of consumer electronics, levered by the World Cup, and lastly, the truckers' strike impact.

Since the middle of last year, we have taken a number of efficiency measures, including headcount optimization in stores and process improvement, allowing us to bring SG&A expenses down by 1.8% in Q2 vis-à-vis Q1. As a percentage of net sales, distribution cost stand at 20.4% in Q2, compared to 20.7% last year, including easter sales from Q2 last year, distribution cost would be 21.4%. On a comparable basis, our distribution cost decreased by a significant 100 bps. EBITDA margin was 3.9% in Q2 and 4.1% in the first half. Adjusted EBITDA decreased from BRL 259 million in the second quarter last year to BRL 161 million in the second half of 2018. Half of this drop comes from the Easter calendar effect and from the impact of the strike. The rest of the change reflects the impact of continued deflation as well as price investments made in 23 of our hypermarket in the state of São Paulo as part of a comprehensive plan to adjust the value proposition to our customers, aiming at recovering volumes. We will continue our cost control and productivity efforts in the second half of the year in order to be able to benefit from any pickup in the macro outlook, and particularly, food deflation. In addition, we implemented several commercial initiatives to improve even more our sales performance.

Now I hand over to Paula to talk about e-commerce, multichannel strategy as well as the performance of Carrefour Soluções Financeiras.

[Paula Magalhães Cardoso Florez Chaves, executive]

Thank you, Gutie. Good morning, everyone. As you know, I'm the head of 2 businesses now, the CSF bank and e-commerce, and I'm in charge as well of managing digital transformations and IT of the group in Brazil.

Now I would like to start by talking about e-commerce. Afterwards, I will talk about the initiatives of digital transformation and the performance of the bank. So let's start with e-commerce. E-commerce continues to be the fastest-growing segment within the Carrefour Retail, and Slide 13 shows a few key numbers how we continue to rapidly ramp up.

GMV was up 123% in the quarter, which is nearly 6x more than the average market growth of 21% as measured by EBIT. Orders doubled again, rising by 103% as we continue expanding the number of SKUs, and the number of visits was up by 70%, with our conversion rate up a 10 bps.

Average tickets rose by 5.1%, and the number of SKUs now stand at 380,000 vis-à-vis 208,000 with the previous quarter. In e-commerce -- food e-commerce, we increased the number of SKUs by 34% vis-à-vis the first quarter, resulting in a 27% increase in average ticket and repeat purchases up over 45% in Q2. We also continue to develop our marketplace, which now counts 374 sellers in Q2 vis-à-vis 134 at the end of Q1, and while market-based penetration now stands at 13% of sales compared to 11% at the end of Q1. In search for improving profitability. Although, the share of e-commerce as a percentage of retail sales ex-petrol more than doubled, reaching 6.8% of sales at the end of H1 vis-à-vis 3.3% at the same time last year. And in Q2, the percentage even increased to 7.4% of sales.

Let me now talk about these several multichannel initiatives that we have carried out in -- and also in digital transition. The expansion of omnichannel is rapidly expanding, and I would like to give you a few figures completing what Noël has already said.

20% of our mobile phone sales in São Paulo are delivered at our 13 stores of the click-and-collect. The cross-sale from clients that opt to pick up product at the store exceeds 30%, and more than 20% of these customers are new to Carrefour. Also repeat purchase from drive customers in e-commerce food is about 40%, which implies the customers are enjoying the drive alternative. We also recently implemented a data and analytics department. We hired an experienced market professional to lead this area as well as our CRM program, Meu Carrefour, and consolidating data on all customer-related information, markets research, store potential for further expansions and artificial intelligence initiatives, all this supported by our new IT structure in place to ramp up all the group's digital transformation initiatives.

I would like to talk about our One Carrefour Vision, which is aligned with the group. We have created a department that manages all initiatives from the client's viewpoint. We already have, first, a brand for all our formats and card; second, a website for food and nonfood; third, a single login to the site ATP or apps and the Meu Carrefour CRM program and a loyalty program for all formats in the bank, and we will have a single after sales service -- post sale services, 1 contact number, and we will converge to 1 single app. We have just signed a partnership with one of the most advanced digital companies to implement this project. Client experience thus will be One Carrefour, and this is true omnichannel, and reinforces a difference that only Carrefour has in the Brazilian market. We already offer free Wi-Fi in our hypermarkets and beacons 260 points of sale in partnership with Google. And by the way, as you have probably heard, the Grupo Carrefour in France announced a strategic partnership with Google and Brazil is part of that already, and they will help us in many initiatives in innovation and data.

And finally, we have at least 3 startups, working on proof of concept with our back-office teams in taxes and pricing, and they should translate into additional efficiency gains. And now, I would talk about the performance of Carrefour Soluções Financeiras.

Slide 15. As shown on Slide 15, Carrefour Soluções Financeiras posted another strong performance in the second quarter with growth in billings, a strong increase in adjusted EBITDA and further improvement in the quality of our credit portfolio. Total billings in Q2 reached more than BRL 6 billion, up by very strong 34.9%. Of these totals, the Atacadão credit card already represent 22% compared to 20% in Q1 2018. The number of Atacadão cards grew by 15% in the quarter, with the penetration of the Atacadão card reaching roughly 10% on average at the Atacadão stores at the end of the quarter.

It is worth mentioning that we generated 750 new jobs at Banco CSF due to Atacadão in the last 12 months. Billings of the Carrefour card, a more mature operation also grew by 7.7% in the quarter. Our credit portfolio rose 28.6% growing to BRL 7 billion according to previous methodology under IFRS, and the quality of our loan portfolio continues to improve with the balance of loans overdue more than 90 days representing 9.8% of the portfolio vis-à-vis 12.1% in the same period last year, an improvement of 230 basis points, while the balance of loans overdue more than 30 days falling by 220 basis points growing to 13.5%, the best historical performance in the last 5 periods.

As we said in the previous quarter, there is a new accounting rule, IFRS 9/CPC 48, in place since January 2018. According to this new norm, the trends are similar, but the figures differ a little as you can see on the bar chart on the right-hand side of the slide. The credit portfolio rose 19% to over BRL 7 billion. Loans overdue by more than 20 -- 90 days dropped by 4.1 percentage points, and over 30 days past due were also down by 3.7 percentage points. As you can see, whatever the norm, the quality of our loan portfolio continues to improve. Adjusted EBITDA reached BRL 211 million in Q2, nearly doubling sequentially, in spite of the drop in interest rate and the new rules for credit cards implemented last year and the investments made. That's very solid growth confirms what we said last year that we would gradually offset the impact of new regulations by increased credit activity, enhanced efficiency.

Looking forward, we continue to expect the Atacadão credit card to breakeven before the end of this year.

Now I would like to hand the floor over to Noël for his concluding remarks.

[Noël Prioux, executive]

Thank you very much, Paula, Sébastien, Roberto and Gutie. It has been a busy first half, and we will maintain a dynamic pace in the second half. I would like to conclude on Slide 16 by reaffirming the priorities for 2018. First, we will continue to roll out our omnichannel strategy. We have launched a pilot test of our drive pickup concept in São Paulo, and we plan to extend that to selected other stores in São Paulo still this year. We have deployed click-and-collect in 13 hypermarkets to date, and we will roll it out to all our hypermarkets by year-end. We will keep growing our e-commerce activities, in particular, our marketplace, with a target of reaching 500 sellers by year-end, a fourfold growth over the year, and we also anticipate multiplying the number of SKUs by 3 over the year.

And we will continue to roll out our Meu Carrefour CRM program, with the aim of reaching 9 million registered clients by the end of 2018. Second, we will keep the accelerated pace of expansion with concern the CapEx target of BRL 1.8 billion this year, and we plan to open 20 Atacadão stores and to expand square meters of the proximity formats and choosing case-by-case whether express or market. And thirdly, we will leverage our financial services in all formats. We will continue to ramp up the Atacadão card with the aim of reaching around 2 million cardholders by year-end, and we will also achieve breakeven before the end of the year. And we will be testing the pilot of the digital mean to payment until the end of the year.

And finally, we will continue to differentiate our offer through food quality, notably, by revitalizing our own brand and developing our offer of local and organic product with a focus on healthy food. So after a strong first half, we will continue implementing our growth project this year within the framework of the group's transformation plan.

I would like to thank my team for the good results we delivered in this quarter. Thank you so much for your attention. And now we will be happy to take your questions.

[Operator]

[Operator Instructions] First question, from Richard Cathcart from Bradesco.

[Richard Cathcart, analyst]

I have 2 questions. The first one is to Roberto and Paula. Could you talk about the Atacadão card? Because I understand that it is being used in the retail store, that is to say, in the Grupo market and stores. I would like to know whether the ticket is higher, whether the frequency is higher, whether you're able to -- also there's 2 other clients as well, those who cannot pay with the credit card, and Gutie, about the investment that you mentioned in hypermarket, could you give us some more color about this investment? Do you believe that it is going to be more? Or some of the stores are candidates for conversion?

[José Müssnich, executive]

This is Roberto. Thank you for the question. The Atacadão card is being very well received in the stores. And as you know -- I believe that you know that 1.5 years ago, we didn't have any credit cards at the stores, and what we see the growing penetration already reaching between 10% and 11% in some of the regions, mainly the Northeast, with even higher indices because of consumer habits overall. We also saw that the small merchants and individuals, they also used their cards because of working capital need for their businesses, although this is a way that we cannot really identify. We cannot pinpoint that, and we see an average ticket up to 15% higher. So there is an advantage there, which is being offered by the card. And this is too new. We cannot say anything more concrete than that, but we have the best expectations regarding in-store operations and talking with our people. It is very interesting to see how consumers, in general -- our clients, in general, they accept the model very well. Gutie?

[José Luis Gutierrez, executive]

Good morning. At the end of last year, we launched in the hypermarkets by means of our commercial platform for food, giving more important to private label products and a better communication at the point-of-sales. Besides, we made an adjustment in our pricing system in order to improve our positioning in more competitive areas and the result of the test were a strong increase in volume, and this led us to roll out this initiative at the end of the quarter. This initiative will be funded basically by the growth in volume as well as special programs with our suppliers and the cost reduction that we will have, and beside, we have other initiatives regarding improvements in margins of nonfood as well to offset the investment need.

[Operator]

Julia Fagá from Itaú.

[Julia Fagá, analyst]

We were very well impressed with the results of Atacadão, and we would like to understand 2 things. First, regarding revenue, you talked about share gains, and I would like to know if this is sustainable, whether you could gain additional share in the future? And what you will be doing in order to reach that? And about the margins that were very positive as well, do you believe that they could grow back because of the strike? And you mentioned the taxes that could be probably transferred to the prices?

[Unknown Executive]

This was a good quarter. We had very good conditions to get closer to the industry overall. Good market conditions in order to execute our commercial model. And the increase in margin was very much because of the efficiency of our negotiations and also the efficiency of commercial in general. The strike, when we said that it didn't have a very good -- a very big negative impact, I would say that we were able to handle the strike vis-à-vis our inventories. Each store, you know that, regionally, we have inventories and what happened was not a price increase. We didn't transfer this to prices. We knew how to play with our client in terms of being flexible in order to cater to everyone. And what we did was the following: We didn't use all of these elasticity, so to say, to a few, but we gave many the opportunity to supply their inventories. And of course, we had some more difficulties during the strike because of produce and fresh produce. This didn't happen in the regions where we are present because our suppliers are next door almost to the stores. So we didn't feel this impact even in fresh products, such as fruit and vegetables, and we were able serve the weight and maintain our commercial model. Regarding the use of our credit, Sébastien has already talked about that. Yes, there is 0.8% of use of credit in this margin. And of course, when we look ahead, we will always do better and better. Our model is extremely resilient, and we have already shown during our Investor Day and our road show, we have already shown the consistency of our model. It is a fair model, it is straightforward, and it will continue to perform as we have always performed, of course, stepping into the opportunities of the market moments that exist. So I hope I have answered your question.

[Julia Fagá, analyst]

So do you believe that we could expect 0.8% being maintained?

[Unknown Executive]

Yes, 0.8%. Yes, for this year, we understand that this could be maintained. But afterward, it will be depending on the efficiency of the model and the market itself, of course.

[Operator]

Franco Abelardo from Morgan Stanley.

[Franco Abelardo, analyst]

I would like to ask a question about Atacadão, and the strategy during the strike was clear. But if we look at the second half, I know that you had a big increase in the second quarter. But in the second half, I believe that the scenario could be even more positive because of deflation of food and the base will not be as challenging as it was before for Atacadão. So what do you expect in terms of growth of like-for-like at the end of the year? Do you expect to accelerate this growth, maybe a higher contribution from stores that are reaching maturity by the end of the year? Or becoming more mature as the year goes on? And do you believe this could impact the pricing strategy as well? Along the same lines of the previous question, do you intend to invest more in pricing in order to accelerate this growth? So these are 2 of my questions to Atacadão.

[Unknown Executive]

Thank you very much for your questions. And in fact, we are a top line model. We have no investment in pricing, we already do the everyday low price as a consequence of our strategy. What we see for the second half, we see a continuation of this growth and you must not forget that we have in like-for-like the expansion of last year, 11 stores, so you have to take this into account. These are 11 good stores. And of course, our expansion will have an impact on total sales, but we have some opportunities to maintain the like-for-like pace. And inflation, we were coming from a very deflationary environment and there is IPCA, the deflation of the IPCA that you see and that Sébastien showed very well, internally it does not follow the same pace. It could be even be stronger, and in fact, it was stronger in this period. And we expect with this balance and today, we see already in July, it's stronger inflation, a small one, but already a little bit of inflation in terms of revenues, in terms of like-for-like sales. This helps us, and this gives us an additional drive. and we continue to grow, we continue to invest and we go straight ahead with the same model and very consistently so.

[Franco Abelardo, analyst]

I would like to ask a question about e-commerce to Paula. Paula, what is the mix that you have between food and nonfood? And the nonfood, what is the focus of your marketplace strategy? Do you intend to supplement the categories that are sold directly or not? Or do you intend to bring onboard sellers that sell consumer electronics and other categories that could compete more head on with the e-commerce sales?

[Paula Magalhães Cardoso Florez Chaves, executive]

Well, we cannot talk about share yet, because we started this operation this year. It is really a startup that is growing very strongly but with a lower ticket, and nonfood already has 12 months of operations, so it's much more mature. So it's very difficult to compare. It's very difficult to compare food and nonfood in this case. And when we go to the marketplace, you see that Carrefour has -- it's very clear their provisioning or our provisioning, we intend to reinforce these areas or arenas. In automotives, for instance, we have grown quite a lot there. And we use to sellers to supplement our assortment with a longer tail, but reinforcing what Carrefour already has as the brand strength, but of course, we do have long tail sellers as well.

[Operator]

Robert Ford from Bank of America.

[Robert Ford, analyst]

Gutie could you talk about the pilot that you have in Pinheiros? What is the impact in the frequency of purchases and cross shopping and for organic? Do you see similar opportunities for the whole category?

[José Luis Gutierrez, executive]

We introduced one of the stores and where we are doing this pilot, and we have already 10 years operation there. And we are reinforcing the strategy of the group in non-food as well, developing other categories in food like organic and healthy food. And for the time being, the results are good and we already have 3 additional stores in São Paulo, by the end of the year in this category in that group. We developed and rolled out to all the other stores of the group.

[Robert Ford, analyst]

And what about the total sales, Gutie?

[José Luis Gutierrez, executive]

Organic products, only organic products, because the category is much wider, because we have the nongluten, lactose-free, gluten-free but organic products, which have the entry. This is an additional sale to the firm that we didn't have before and with a good result for perishable products.

[Unknown Executive]

And what about the interest in -- for Carrefour Retail as a whole. We understand that the whole Carrefour strategy in nonfood has to be used in all the formats, of course, and in the different assortments, of course, but in the model that we have that supplies to the whole chain.

[Operator]

Next question, Joseph Giordano from JP Morgan.

[Joseph Giordano, analyst]

I have 2 questions. The first one is to Paula. It has to do with omnichannel and the retail expansion. Do you have a role model for your operation? That is to say abroad, in China or in the United States, that you think could be used as a role model and adapted and brought to Brazil? And secondly, the multichannel strategy, how does it match the expansion plans in proximity, supermarkets, Carrefour Express and Markets in click-and-collect?

[Paula Magalhães Cardoso Florez Chaves, executive]

Yes. We do benchmark, and we believe that the operation of Carrefour in France brings us a lot of teachings, mainly in drive and this is a very mature market for this operation. We have been learning quite a lot from them, so this is -- we have a benchmark. And what was the second question, could you repeat it?

[Joseph Giordano, analyst]

Omnichannel and expansion of retail?

[Paula Magalhães Cardoso Florez Chaves, executive]

Well, our focus this year will be on hypermarkets, but of course, when Noël talked about our distribution strength, he talked about all the formats. And there is a very big potential for us to go to supermarkets as well, but this year, our focus will be hypermarket in terms of click-and-collect in Brazil and food and drive in São Paulo.

[Joseph Giordano, analyst]

And the [Indiscernible] that you mentioned in the last Investor Day, what about the pace of integration of the Carrefour card with the app? And do you see some relevant adoptions already?

[Paula Magalhães Cardoso Florez Chaves, executive]

We have not launched this yet. By the end of the year, we will be using the -- what was launched in France as white label and we use the Carrefour here in Brazil, and we've started in August the pilot for payment means in gas stations in the app. So in the second quarter, and then we start piloting it, then the [indiscernible] express paying by the app, we will have the proof of concept the first one now in August in gas stations as well.

[Operator]

Gustavo Oliveira from UBS.

[Gustavo Oliveira, analyst]

A follow-up about pricing, investments in Carrefour via the usual. Carrefour Retail, I would like to know if you're going to make the same investments besides the stores that you mentioned? And in the question that was asked before, the 23 stores where you had already launched a program, are they or some of them candidates to conversion?

[Unknown Executive]

Well, they are -- already have a very competitive situation, and maybe there could be some change, but there is no plan for that, and the 23 that we have, none is a candidate for conversion.

[Operator]

[Operator Instructions] Richard Cathcart from Bradesco.

[Richard Cathcart, analyst]

Thank you for the follow-up. I would like to ask an additional question. About the question that Gustavo has just asked and that I have asked before. So I understand you're planning to have a rollout of these initiatives of competitiveness to all the hypermarkets. And Gutie, before, I understood that you said that this investment will be funded by the greater volumes at your negotiations with your suppliers, et cetera. So do you mean that we should not expect any relevant pressures on the gross margin for the second half of this year and next year?

[José Luis Gutierrez, executive]

Yes, yes, you are correct. It is important to understand that in this project, well, this is one element of the project, and there is much more work in terms of assortment, et cetera, and these sort of reformulation of the commercial product. And the very important point here is that the investment has made up a start, and then we recover this due to the increase in volume, and then these stores, we can already see a relevant of volume, so that impact decreases and decreases over time gradually. So it becomes positive. And what we have in the result of the second quarter, the retail is the biggest impact. And after that, it is not going to increase, and it's going to decrease over the year.

[Operator]

The question-and-answer session is closed. And we would like to give the microphone back to Mr. Noël Prioux for the closing remarks. So Mr. Prioux, you have the floor.

[Noël Prioux, executive]

Thank you all very much. It was a pleasure to have the chance to answer your questions. This half year was good, and we expect to keep this pace in the second half as well, so I wish you all a very good day and hope to see you soon. Thank you very much.

[Operator]

Grupo Carrefour's conference call has closed. We thank you very much for your participation and wish you a very good day. Thank you.