Atacadao SA

BOVESPA:CRFB3

Earnings Call Analysis

Strong Sales Growth amid Expansion and Digital Initiatives

In Q2 2024, Carrefour Brasil reported gross sales of BRL 30.5 billion, up 4.9% year-over-year, driven by a strong performance in Atacadão. Despite a 1% decrease in gross margin to 18.7% due to price repositioning, the company's SG&A fell by 3.7%. Adjusted EBITDA rose by 20%, leading to a BRL 151 million adjusted net profit. Atacadão saw a 10% sales increase, and Carrefour Bank delivered a 13% earnings growth. The company’s synergy target increased to BRL 3 billion by 2025. Carrefour continues to expand and integrate stores, reflecting a strategic push for operational efficiency and profitability improvements.

Strong Q2 Performance Amid Strategic Changes

Group Carrefour Brasil exhibited a solid performance in Q2 2024, reporting gross sales of BRL 30.5 billion, which represents a 4.9% increase from the previous year. This growth primarily stemmed from strong sales in the Atacadão segment, indicating successful execution of their strategic initiatives focusing on store conversions and enhanced customer offerings.

Atacadão Drives Growth with Strategic Expansion

The Atacadão unit alone generated BRL 22.1 billion in gross sales, reflecting a remarkable 10% year-over-year increase. The company's strategy to convert retail spaces into Atacadão stores has proven effective, with the number of stores expected to rise to 20 for 2024, including 8 conversions from supermarkets. This aligns with the move to target both B2B and B2C segments more effectively, resulting in a 7.4% same-store sales growth that significantly outpaces market inflation.

Retail Segment Adjustments and Performance

In contrast to Atacadão's success, the retail segment faced hurdles, seeing gross sales drop 11% to BRL 6.7 billion. This decline was largely due to reduced store square footage resulting from the conversion of stores. Nevertheless, same-store sales in retail improved by 2.3%, suggesting that strategic adjustments in store portfolios and pricing are starting to yield positive results. The adjusted EBITDA for retail stood at BRL 181 million, reflecting a 3% margin.

Sam's Club Sees Promising Growth

Sam's Club delivered robust results with gross sales of BRL 1.7 billion, up 16% year-over-year, fueled by a 2.5% like-for-like sales growth and a significant increase in active membership by 25%. The strategic opening of new stores, which is expected to continue, should further bolster sales in this segment.

Operational Efficiency and Margin Improvements

Despite the pressures on gross margins—down 100 basis points to 18.7% largely due to Atacadão's pricing strategy—Carrefour is achieving operational efficiencies. SG&A expenses decreased by 3.7% year-over-year, primarily through cost management initiatives, leading to an adjusted EBITDA of BRL 1.2 billion, which showcases a 20% increase in EBITDA year-over-year with a 58 basis point gain in margin.

Positive Outlook for Banking Division

Carrefour's banking division also reported strong earnings growth of 13% year-over-year. The loan portfolio increased 19%, indicating effective customer acquisition from converted stores. A focus on controlling delinquency rates has led to improved credit quality, positioning the bank favorably as it navigates the new revolving credit regulations, which are projected to impact EBITDA by BRL 150 million to BRL 200 million in the second half of 2024.

Future Synergy Expectations

Significantly, synergies from the acquisition of the BIG Group exceeded expectations, with a revised guidance set at BRL 3 billion by the end of 2025, up from the earlier target of BRL 2 billion. This signals that operational efficiencies and integration processes are progressing faster than anticipated, which should contribute positively to overall profitability.

Key Changes and Forward Guidance

Management disclosed that while challenges remain, especially regarding gross margins in the retail sector, they do not foresee structural issues preventing a return to historical profitability levels. Looking ahead, investors should monitor the effects of the evolving credit landscape and store performance metrics, as management commits to continued cost-cutting strategies to enhance competitiveness and operational agility.

Conclusion: A Promising Path Ahead

Overall, Group Carrefour Brasil’s strategic execution appears to set a strong foundation for future growth, anchored by solid performances in Atacadão and Sam's Club, and bolstered by efficient banking operations. As Carrefour works to navigate the complexities of their retail sector adjustments and improve profitability, investors are encouraged to observe their resilience and adaptability in a dynamic market environment.

Earnings Call Transcript 2024-Q2

[Operator]

Good morning, everyone. Welcome to Group Carrefour Brasil's Q2 2024 Earnings Conference. Joining us today from Group Carrefour Brasil are CEO, Stephane Maquaire; CFO, Eric Alencar; and IR Director, Marcela Bretas, who will begin the presentation.

We'd like to inform you that this conference is being recorded and will be available at the company's IR website, where the respective slide deck is also available for download. If you need simultaneous translation, the resource is available by clicking the globe shaped icon labeled interpretation at the bottom side of your screen. By selecting it you may choose your preferred language between Portuguese and English. If you're listening to the conference in English, you may also mute the original Portuguese audio by clicking mute original audio.

[Operator Instructions] We'd like to underscore that the information contained in this presentation and any statement made during this conference relative to Group Carrefour Brasil's business prospects, forecasts, operating and financial targets are based on the company's management's beliefs and assumptions as well as currently available information. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions, seeing as they relate to future events and, therefore, rely on circumstances that may or may not materialize. Investors must understand that general economic conditions, the state of the market and other operating factors may affect Group Carrefour Brasil's future performance and lead to results which are materially different than those expressed in such statements.

Now I'd like to turn it over to the company's CEO, Stephane Maquaire to begin the presentation.

[Stephane Maquaire, executive]

Good morning, everyone, and thank you for joining us again as we release our Q2 2024 earnings. In addition to the results of Q2, this time, we've also included an update on the progress we've made on the execution of our strategy presented to you during our Investor Day in November. The second quarter of 2022 came with a strong boost in sales across our business units with a significant recovery in volumes.

We continue to execute our expansion plan, adding five new stores until this quarter to the Atacadão list in addition to three new stores on the Sam's Club line, ending the quarter with 11 converted stores of the 20 conversions we've planned for the year. We've also increased our guidance for Atacadão store openings to 20 this year, including 8 additional supermarket stores, which we're converting, so an increase in planned store conversions from Atacadão 20 -- from 20 to 28 in total.

On the digital front, we continue to evolve and our GMV came to BRL 2.9 billion in the quarter, up 41% year-over-year with 9.6% penetration in sales. In Atacadão, we reached same-store growth by 7.4%, far outpacing the market. Our B2B customers have returned to more normalized levels of purchases and our initiatives to better serve our B2C customers are attracting greater traffic to our stores. One such initiative was the offer for customers to pay in three installments clear of interest across our stores. We know of the financial struggles much of the Brazilian population is facing. After all, this is a country with over 77 million people in arrears and providing the opportunity for clients to make their purchases is paramount goal for us.

Sam's Club continued to perform well, delivering revenue growth by 16% with the opening of more club stores closer to our members. The last store openings were all successful in terms of sales. In retail, once again, we showed positive LFL rate, adjusting our store portfolio and our new price positioning, increasing our competitive edge in this format and attracting new customers to our stores.

Moving on to the Carrefour bank. Our bank also performed strongly this quarter with 13% greater earnings compared to last year. Delinquency levels under control and a mature credit portfolio. With all of that, our consolidated EBITDA in the quarter came to BRL 1.6 billion with a consolidated margin of 5.7%. And an expansion of nearly 58 basis points year-over-year as a result of our operational leverage, in addition to the materialization of synergies we've realized, which amounted to BRL 2.3 billion in run rate, exceeding our BRL 2 billion proposed for the end of 2025.

We believe there is still room to capture additional synergies, both on the sales side with the maturing converted stores and the cost side with opportunities we had mapped initially. As a result, we are increasing our synergy guidance to BRL 3 billion run rate -- in BRL 3 billion in run rate at the end of 2025. As to our ESG strategy, we have been acknowledged and we're very happy about that as the most inclusive retailer in Brazil by the Ethos Institute in the fourth edition of its diversity, equity and inclusion survey.

To me, this is truly a reason for pride and joy to be acknowledged in one of our core values as a company. On planet protection and biodiversity, we've announced BRL 28 million in investments in projects to fight deforestation and forest reservations.

Last but very importantly, we've played an active role in initiatives to support the state of Rio Grande do Sul. The price freeze we've arranged for in our stores has helped to curb food inflation in the state which offered the population some confidence.

Our national logistics structure allowed us to sustain a constant supply to the area. We've also donated 500 tons of food and launched many other initiatives to support the region. We are now partnering with InfoJobs to boost hiring across the state. All of this to minimize the impact of this climate strategy -- climate tragedy that the population in the state has faced.

On that note, I'd like to turn it over to Eric, who will dive into our financials. Eric?

[Eric Alencar, executive]

Thank you, Stephane. Good morning, everyone. It is a great pleasure to be joined by all of you again. In the next few slides, I will briefly go over the figures you've had access to last night.

On Slide 3, we mentioned the company's consolidated results this quarter. Our gross sales in Q2 2024 came to BRL 30.5 billion. They were up 4.9% over the same period last year, driven by strong performance in Atacadão. The gross margin came to 18.7%, 100 basis points smaller than Q2 2023, given the increased relative participation of Atacadão, which is a business with a narrower gross margin and because of our price repositioning in retail, which has been underway since the end of last year.

Our SG&A decreased by 3.7% despite the expansion of our network and the cost inflation. This result is due to our initiatives to reduce costs and realize synergies while integrating the big group. As a percentage of net sales, our SG&A improved 159 basis points. With the combination of sales growth and decreased SG&A, our adjusted EBITDA increased 20% with a 58 basis point gain in our margin.

Lastly, we ended the quarter with adjusted net profit of BRL 151 million, still not reflecting the realized benefits of the lower interest rates renegotiated for our intercompany loan. So as you can see, we continued on the path to normalize our interest rate or a tax rate.

And moving on to Cash & Carry, we ended the first quarter with 371 Atacadão stores, and 5 new stores all converted from retail. We've revised the expected opening of stores from -- to 20 stores in 2024, including 8 converted from supermarkets with an average square meterage of 2,500 per store. Gross sales in the unit came to BRL 22.1 billion in Q2 '24, up 10% year-over-year with LFL sales of 7.4% above the average food inflation for the period, which was 3.6%. The strong sales performance came both as our volumes in B2B recovered and because of an increased consumer traffic in our stores.

The initiatives we've introduced to better serve this profile of customers has led to very positive results so much so that we've decided to accelerate the rollout of bakery butcher and deli services, including them in more stores. We're making them available in 156 stores by the end of the year. Our gross margin fell 27 basis points versus the previous year with volumes in B2B recovering and strong performance of our sales campaigns for the Atacadão anniversary and the merchant week. Our SG&A as a percentage of sales dropped 69 basis points versus the previous year. Our adjusted EBITDA was BRL 1.2 billion with a 6.1% margin, 41% or 41 basis points better than the last year.

Let me now go over the highlights in Retail. Gross sales came to BRL 6.7 billion in Q2 2024 with good news on the same-store sales, which increased by 2.3% year-over-year. This makes us excited that the adjustments we've introduced in the store portfolios and price positioning are leading us in the right path. The decrease in sales by 11% is explained. Largely explained by the reduced sales square footage. We'd like to remind you that in the last 12 months alone, we've converted 11 retail stores into Atacadão and Sam's Club stores, closing 141 stores, especially supermarkets and added the partnership to operate Super Nosso.

Our gross margin was 184 basis points smaller this year, a result of our pricing strategy, which we've introduced to increase competitiveness. Our SG&A fell 18.1% year-over-year decreasing by 219 basis points as a percentage of sales. We'll continue to work to streamline the retail operations, increase efficiency and lower costs in the next few quarters, so as to make the format more agile and competitive. As a result, our adjusted EBITDA totaled BRL 181 million with a 3% margin.

On to Slide 9, Sam's Club had gross sales of BRL 1.7 billion in the quarter, 16% larger than the same period of last year, driven by a 2.5% like-for-like rate and the expansion of our network with 7 stores being added in the last 12 months. Our active membership base increased 25%, keeping a strong pace of new members. Our gross profit came to BRL 324 million, with a 22% margin in the quarter, up 181 basis points year-over-year given the increased penetration of our white label Member’s Mark brand as well as imported products. SG&A came to BRL 252 million in the quarter, an increase by 31.6% year-over-year. This increase is expected because of the accelerated pace we are seeing in the opening of stores. As these stores mature, the SG&A rate will also be diluted.

Lastly, adjusted EBITDA margin in the quarter was 4.9% in keeping with that of last year, but remembering that this year, the effects of Easter were all in Q1, whereas those of last year were mostly seen in Q2. Now on to Banco Carrefour. Our credit portfolio came to BRL 26 million, up 19% versus Q2 '23, driving our earnings to 13%, largely a result of the successful capturing of new clients to our converted stores over last year. Delinquency rates continue to fall a result of our conservative added extension policy since Q2 2022, and the improved quality of credit in the market at large.

The financial margins for the bank remained steady year-over-year, mirroring part of the effects of loans we've granted according to the new revolving credit regulation which account for about 1/3 of the portfolio. Our SG&A fell 5.3% in the year, thanks to our cost discipline and the -- our EBITDA in the quarter came to BRL 235 million here, 12% higher than last year.

On Slide 13, we've recovered the adjusted net profit of BRL 151 million we had in the quarter. The result of our operations after tax and depreciation added up to BRL 1.2 billion. Financial expenses came to BRL 770 million and still mirror very little of the savings from the rates we've negotiated for the intercompany loan, which are likely to become more -- become clearer in the next quarter. The tax expense was BRL 181 million, still impacted by the process of consolidating legal entities with accumulated losses but already reflecting the cash gains with the fiscal amortization of the premium in June.

On to Slide 14, our cash generation is still strong with a gross cash flow and operational activities coming to BRL 5.5 billion in the last 12 months. The working capital evolution was largely neutral versus last year. On the investment side, our CapEx came to BRL 2.8 billion, BRL 1.2 billion less than in the same period last year, mirroring the end of investments in integration and more affordable growth strategy of converting stores.

On Slide 15, we talk about leverage. We ended the quarter with a net profit, including discounted receivables of BRL 15.3 billion, BRL 2.2 billion more than in June 2023 because of the increased balance of discounted receivables. The increase in our receivables was both because of the increased sales at large and the increased payment terms we've provided to our clients.

With that, I conclude the financial highlights and turn the conference back to Stephane.

[Stephane Maquaire, executive]

Thank you, Eric. Moving on to Slide 16. This quarter, as I said at the beginning, we are going to make a slightly different exercise. And we'd like to tell you how we're doing in the execution of our strategic initiatives, which were announced during our investor morning event in November of last year.

I think it's important to provide this accountability to our investors, and we want to be transparent as to what we're doing here at Carrefour. Eric?

On Slide 17, we go back to the strategic building blocks. We've introduced in the investor morning event with core guidelines that we were to seek both on the corporate side and on the business unit side. Now Eric will talk about the strategy on the corporate level and then on the business unit level.

[Eric Alencar, executive]

Thank you, Stephane. I'll start by talking about the evolution at the corporate level in the next slide. The first building block is maximizing the return of existing assets. Here, as we said, we are moving forward in optimizing our stores with conversions in terms of format. On the procurement front, the integration of negotiations across business units in the group is already providing decreases in CMV, both in retail and on Sam's Club.

The realization of synergies was faster than initially predicted, and we've increased our target to BRL 3 billion to the end of 2025. The second building block is the increase in cash flow -- operational cash flow generation. We've improved our operating results with our EBITDA growing by 27% year-over-year in the first half of the year.

We have captured debts at market rates and attractive interest rates and renegotiated our intercompany debts. Our corporate income rate is gradually moving back to normal, and we expect to go back to historical levels by the end of the year. We're moving forward in our digitalization journey with increased penetration in the digital side across our business units. Our e-commerce NPS increased 12 and 13 points. And the percentage of perfect orders grew substantially. The financial results from e-commerce is positive throughout the year.

Lastly, as mentioned by Stephane at the beginning of this presentation, we're still consistently moving forward in the implementation of our ESG strategy across its fronts.

On Slide 19, I'd like to talk a little bit about the synergies we've realized in acquiring BIG. We've surpassed by 17%, the BRL 2 billion in run rate synergies in annual terms, which was our target for the end of 2025 last quarter. That was 18 months before planned. We've also revised our guidance to BRL 3 billion in run rate synergies in annualized terms until the end of 2025.

In addition to that, it's important to remember that there are still additional sources of value with the acquisition of the BIG Group that have to be materialized such as real estate assets that add up to BRL 7 billion, new customers to the Carrefour bank and fiscal assets, which are now beginning to materialize. Over to you, Stephane.

[Stephane Maquaire, executive]

Thank you, Eric. Let's start with the Cash & Carry unit on Slide 20. Our strategic priority which is our #1 priority is to strengthen our leadership position in the market. So first of all, we continue to expand our network. And as a result, our sales have grown by double digits in Q2, with 4% coming from that expansion. In addition to the positive results of the maturity of stores that led us to revise our guidance for store openings in the year to 20 new stores, 8 of which are at a smaller footprint.

Focusing on accelerating our LFL growth and strengthening our value proposition with the Atacadão store for B2C customers, we've already added new services to 80 stores. And until the end of the year, that should come to 156 stores, 36 more than what we had reported during investor morning. Self-checkout is already available also in 56 stores and should arrive at about 90 stores until the end of the year. We've introduced a pricing strategy that's more focused on B2B customers and offer installment payments in up to three installments with every credit card in all our stores.

We're seeing a substantial increase in B2C customer traffic with the average ticket of these customers going up by 9% year-over-year in June. For B2B customers, we've driven or we boosted the return of purchase volumes to a more normalized levels with our campaigns such as Merchant Week in June. Our converted stores continue to mature with LFL sales of 21% in the first and second quarters of the year.

75% of the productivity per square meters target. Our EBITDA margin on the store level is at 3.8%, with profitability evolving and keeping with the expected maturity curve. We've increased the penetration of our digital channel in sales, which came to 7% in Q2, 1.6x greater than last year. As a result of these initiatives, we saw a strong acceleration in our LFL sales, which came to 7.4% in Q2, outpacing the overall inflation of the period.

Slide 21, we'll talk about our retail strategy, focused on optimizing our store portfolio and recovering profitability. Our store portfolio includes 11 store conversions from retail to Atacadão or Sam's Club and 123 store closings in cases that were not profitable that's between December of last year and April of this year. Converted stores are maturing well, and sales are already 2x higher than they were pre-conversion.

The stores we've closed had a negative impact on the unit's EBITDA by BRL 212 million a year, that led to immediate positive effect starting in Q1 '24 when they were closed. We've also revisited our price positioning and adjusted our pricing strategy and assortment strategy to be more competitive, offering Cash & Carry prices for specific products and specific locations.

In addition to boosting the white label penetration. As a result, price perception has improved by 40 points since November 2023. That's the barometer we're following. LFL sales growth accelerated to 2.3% in Q2 '24 and the penetration of white label products increased by 80 basis points in June and year-over-year terms. We've realized logistics synergies by simplifying and streamlining our network and in negotiations with suppliers, we've leveraged the group's scale, which led to a price reduction of about 30% in assortment, a reduction in inventory levels -- 2-day inventory levels and an improvement by 9 days in our supplier line.

We're also working in streamlining our operations and decreasing our corporate expenses to reflect the new size of our retail operations. In Q2, we've seen improvements in our SG&A as a percentage of sales, which went down to 219 basis points a year or 219 basis points year-over-year and also in the EBITDA margin, which increased 20 basis points year-over-year or 80 basis points versus the previous period. On this front, we know that there's still room

from growth, and we do not see reason, structural reason for retail not to return to its historical profitability levels.

On Slide 22, we talk about our club strategy in the first quarter of 2024. We've opened 3 new Sam's Club stores. And by the end of the year, there are still between 4 and 6 stores that we have to open. This led to an increase in sales by 19% in Q1. It's important to highlight the same member sales indicator. So like-for-like and same-store sales but within a sale's club, we also have to look at same member sales, which measures how much a specific client has purchased regardless of which store.

This indicator has increased from -- by 9.2% in the year-to-date. So an existing member is also purchasing on the newly opened stores to purchase -- to make their purchases closer to home in a more convenient way. We've used data to refine our promotional initiatives and also our marketing and assortment initiatives. The number of active partners increased 25% in June '24 in year-over-year terms and the renewal rate has increased by 300 basis points in the year-to-date, whereas like-for-like sales have increased by 4.6% in the first half of the 2024 versus the same period in 2023.

In the sense we've developed exclusive products and use data to determine and focus the customer preferences, refining our assortment of products. The result was a 340 basis point increase in the penetration of imported products and by 300 basis points in white label products in the first quarter of '24. SG&A expenses on the same-store basis has decreased by 30 basis points as a percentage of sales in the first half of '24. As sales grew and we introduced initiatives to optimize our structure. As a result, the profitability of this model is in the right direction.

Lastly, on Slide 23, we'll talk about our banking strategy, focused on growing our portfolio, whereas we keep delinquency under control. To continue growing our portfolio, we kept attracting new clients in converted stores. We also fostered opportunities for cross sales and increased the clients' life value, reducing turnover. We had 1 million clients attracted to converted big stores with larger or increased activation beyond what we predicted. The penetration of our bank cards in sales of the group has increased by 20 basis points in the first half of the year versus the same period last year and churn rate has decreased 21% in the same period.

When it comes to managing delinquency, our credit policy is still restricted since the second quarter of 2022 with greater balance between risk and profitability and operating below our internal risk appetite in addition to working on recovering the loss credit via digital payment means. As a result, we're seeing a significant reduction in NPL levels in Q2 '24, as we've shown before.

We are already operating at one of the lowest efficiency levels in the market, but we're always seeking opportunities for improvement. As new clients mature, and the cross-selling of products increases, we've improved our financial markets. We've streamlined our operation even further to gain efficiency showing a decrease in SG&A by 6% in the year-to-date. We've also optimized our customer value chain, improving the cost of acquisition and cost of services to our clients. As a result of these initiatives, our efficiency index has improved by 200 basis points in the first half of the year in year-over-year terms.

Lastly, another challenge of our strategy is mitigating the impacts of the new revolving credit regulation. In order to do that, we've diversified our revenue sources, cut costs and manage our risk appetite to protect profitability. Products, excluding revolving credit, increased by 500 basis points in their share of revenue in the first half of '24. We also saw a better balance between the financial margin, OpEx and delinquency rates.

At the end of the first half of '24, about 1/3 of the credit -- revolving credit card portfolio was already being impacted by the new regulation. The bank's EBITDA increased by 73% year-over-year. In the second half of the year, when 100% of the revolving credit card portfolio will have been impacted. Regardless of all the mitigating initiatives we adopted we should see an impact and you should see a decrease in EBITDA in the second half when comparing to that of last year.

We calculate the impact should be around BRL 150 million to BRL 200 million this year. In spite of that, we're confident that in 2024, we'll be able to deliver better -- equal to or better EBITDA than what we had last year. So now in closing, this was a longer presentation this time. I expect that our message was clear to you. We know that at a time of an inflection point when it comes to results, looking at the decisions we've made are generating positive impact for the business. This is very important. We had a very positive first half of the year with very encouraging sales trends and results. We'll continue steady in executing our strategy for the year, and I'm still very confident that 2024 will be a year where Group Carrefour Brazil will become even stronger.

That being said, I'd like to thank all of you for joining us and supporting us. Let's now move on to your questions. Thank you very much.

[Operator]

[Operator Instructions] Let's start with the first question by Clara from Itau BBA.

[Clara Lustosa, analyst]

We have two questions actually. The first would be about the same-store sales with Atacadão. I think this was one of the this half of the year's greatest highlights, far exceeding our expectations. So we would like to have more clarity about what, in your opinion, were the main drivers of that understand a little bit of the competitive range? And where do you understand you're gaining more market share? That would be our first question.

And the second one, a little bit on the purchases, whose payments will be divided into as many as three installments. We see that the share has increased in the second quarter. We would like to know how much of those purchases accounted for in this quarter considering that this is an initiative that eats a little bit up of the working capital.

[Stephane Maquaire, executive]

Thank you so much, Clara, for your questions. Just as many other initiatives we've adopted to strengthen like-for-like sales with Atacadão. There were many in this half of the year, we announced we would strengthen our B2C strategy. We saw with the return of food inflation, our B2B arm accelerated significantly. So we adopted several initiatives, which explain why our performance in Q2 was the way it was.

Obviously, the Atacadão anniversary which is in April every year is a very strong opportunity to meet our clients, first of all, B2B, but also B2C clients. And when we look at it in year-over-year terms, we see an additional push every year to our ability to attract new customers and increase the level of sales in our stores. This year, the merchant week in June was also very successful. So another very strong moment for Atacadão.

So this is part of the answer to your first question. In addition to that, we also added Bakery Butcher and Deli services to many of our stores about 80 stores so far, but we should have twice as many offering these services increasing our B2C services in our stores, payment in three installments, offering the Cash & Carry price to B2B customers in many products as well as many very effective strategies that lead to more products being sold and more clients within our Atacadão stores. Eric?

[Eric Alencar, executive]

Well, what Stephane said, pretty much answers your question. I just wanted to add that payments in three installments. As Stephane said, in a country with 177 million customers in arrears came within the context of all of these initiatives that we're adopting. There was no specific promotional initiative that was an outlier. There was really an increase in B2B and also in B2C with these activities. You've already seen the increase in receivables, which is a result of this increase in like-for-like sales, which sort of took off from what happened in the rest of the market and also the three installment purchases as well.

And I can tell you that we've seen an impact of that in our sales, but you can already model that even though this is something we do not report how much that means.

[Operator]

Our next question comes from Felipe Cassimiro with Bradesco BBI.

[Felipe Cassimiro de Freitas, analyst]

This quarter, the company reported a substantial decrease in sales taxes, which boosted the revenue versus the gross revenue. Could you talk about this decrease and tell us what we should expect of it moving forward?

[Stephane Maquaire, executive]

Thank you, Felipe. Let me turn this over to Eric.

[Eric Alencar, executive]

This is a line that's really between 9 and 10, which came to BRL 7.5 million and this was mostly because of the new accounting rule that we are adopting to calculate the PIS/Cofins and ICMF taxes that were calculated before in -- when the merchandise came in, and it is now calculated when it goes out. So I'd like to tell you that this has really no impact on the company's gross results.

And this quarter, in particular, we saw a magnification of this result because there was large movement of product across stores and units of the group, so there was an impact there. And this explains 70% of the impact. The rest was because of a shift in the sales geographies, considering where we were before and also the geography of where the product was. Now moving forward, you should expect something around 9%.

[Operator]

Our next question comes from Danni Eiger with XP.

[Danniela Eiger, analyst]

I actually have two questions. First, looking forward a little bit on the release, you talked a little bit about the trend of food inflation over the quarter, which ended June slightly over average .I just wanted to understand whether you're continuing to see that acceleration or whether it leveled off at the 5% we saw in June? And how can we expect the trend for B2B sales? Whether it followed the inflation trend. And consequently, we should see an upside in Q3 looking at the average for the quarter.

So my first question would be looking at your growth moving forward. And the second has to do with [ Carrefour ] property. We're hearing news that indicate things are moving forward. I remember you saying that you were -- you had been prepared, but it was more about what the market was doing. So I just wanted to hear about the project and where it is, where it stands. Whether there's any update on that front?

[Stephane Maquaire, executive]

Thank you for your questions, Danni. The first question about food inflation. You mentioned 5%, so year-over-year. I think it's important to remember that in the third quarter of last year, we saw more food deflation, increasing month by month. So this year, food inflation was around zero point something more positive as we saw in June. So those 5% are likely to go up. We're seeing a demand that was very negative last year. So we see that food inflation is leveling off on a month-by-month basis.

We saw that in July, which is similar to what we had in June, perhaps a little bit more positive. We will have the IPCA 15 in 2 or 3 days for August, but annual inflation is expected to go up even further because of the food deflation that we had in Q3 2023. So on the B2B side, obviously, we'll be comparing the worst quarter for B2B this year with an acceleration of inflation within the year. So looking ahead, we have a third quarter with great opportunities on the B2B side just as we saw in Q2.

Now moving on to your second question about Carrefour property. What we said before is that we're working to sell a minority share of our property assets, or real estate assets. We are still taking baby steps. As you said, it is still early to tell you any news on that front. But we're also seeing opportunities in the market, but still, it's early to say that the work is over. So we should see how it goes over the next few months, but we're feeling very positive that this is a good opportunity for us. Do you have anything to add? Okay. So thank you, Danni.

[Operator]

Our next question comes from Nicolas Larrain with JPMorgan.

[Nicolas Larrain, analyst]

Good morning, everyone. Thank you for the opportunity to ask my questions. We had two questions. The first of them is about B2B in Atacadão. I'd like to understand whether in your perception, this was a restocking movement in Q3. I just wanted to understand what's the state of B2B inventories, whether they're already moving back to regular historical levels or in Q3, we should see a recovery on the B2B side.

And my second question has to do with the synergies. I think it was Stephane that mentioned a few sources that you hadn't mapped out initially. I just wanted to understand whether you have anything to say about these new sources of synergy.

[Stephane Maquaire, executive]

Thank you, Nicolas. To your first question, as I said, on the B2B side, our prospects are -- as raise can be in Q3. Just as in Q2, B2B customers have increased their inventories. This is a movement that's still underway. Inflation should continue to grow, as we said before, so in our opinion, there is a very interesting opportunity to be ceased in B2B. As we said, it was at the end of Q1, when we began to see a an upswing in B2B, which is now very strong or has turned very strong in Q2.

What we expect moving forward is obviously the maturity of the stores that we've converted. As we said, we've come to 75% of converted stores to Atacadão. These additional 25% will deliver the most important share of synergies. So that's what we have. Moving forward with the convergence of the IT side of these very systems, which is something we're working on. And also with the integration of the BIG Group, we're always seeing new opportunities to streamline our operations. Seizing the opportunities we have. And as we said, we are negotiating with our suppliers, thinking about other sources that we may have moving forward.

[Operator]

Our next question comes from João Soares with Citi. We will now open your microphone, so you may ask your question. Please, you may proceed. We believe Mr. Soares is having trouble with his microphone. So we'll come back to him so he can have time to fix the issue.

Our next question comes from Irma Sgarz with Golden Sachs.

[Irma Sgarz, analyst]

Two very quick questions. First of all, I'd like to hear about your prospects for the bank. Your previous comments were very helpful about your EBITDA going down year-over-year. I think you mentioned a BRL 200 million impact in the full year. Now thinking a little bit about whether that is already including the impact of these new products whose penetration is increasing to offset the impact of the revolving credit regulation. If you could give us more details about that, that would be great.

And also thinking about 2025, I know it's still a little early, but we know that the revolving credit regulations may also affect the first quarter or even the second quarter of next year. How much should we expect in terms of the negative impact for 2025? And my next line of questions goes back to the gross margin and prices in retail. I understand that much of the decrease in gross margin comes from the pricing strategy and a little less from the markdown in old prices.

But I just wanted to understand where our head is in terms of what the fair level is for these operations in the second half of the year and also in 2025. If there's any room for increasing that again in some -- at some point, maybe with the increase in synergies or maybe any other initiative that make up for that taking us to better levels in 2025?

[Stephane Maquaire, executive]

Thank you for your questions, Irma. What we told our bank unit is that, in the second half, we should see an impact between BRL 150 million and BRL 200 million on our EBITDA and that's because of the revolving credit regulations. Now that's for the second half of the year.

Now for next year, we should see pretty much the same level as we've seen in 2024. We believe that in 2024, it was slightly higher than in '23, which is extremely positive. Our banking team worked like crazy to deliver these results with new sources, new products and also an even greater efficiency level, which was already pretty positive for our bank.

So we're very happy about what the bank is delivering this year. Things such as the impact of the revolving credit regulation, which has already had some effect. But thankfully, our EBITDA continues to go up in the first half. And we should think about what we will lose during the second half so that we have a '24 slightly higher than '23 in terms of our EBITDA level.

Now I will turn it over to Eric to talk about '25 and perhaps the gross margin for retail as well.

[Eric Alencar, executive]

It's good that you asked this. We had said that this quarter, we would already give you a sense of what the end of the year would look like for the bank. And you asked when the full impact of the revolving credit regulation would come in. Currently, it accounts for 1/3 of our portfolio. At the end of the year, it should represent 98% to 100% of our credit portfolio.

So you asked about the impacts for 2025. We do not believe that the results for the second half of this year are a proxy for what we should see in 2025, and I'll tell you why. We are not giving any guidance about that, but I can tell you already that we're very optimistic. If you look at our bank, you will notice, even by looking at our presentation, there was a 19% increase in our portfolio of clients, especially those coming from the stores, an increase in billing, an increase in same-store sales, and there was also a 30% increase in the number of additional products, such as insurance and personal credit and a decrease of nearly 30% in attrition, which is the departure of clients, which we are being able to retain because of these initiatives.

We still haven't reaped the results of all of that, and we're only just beginning to measure it. So all of these initiatives that are bearing fruit right now. We expect to be providing you more details later in the year about what we expect for 2025. But all of these items that will not turn up as strongly in 2024, should pop up in 2025. And we've been talking since the beginning of last year, this gross margin adjustment.

Our clients know the Cash & Carry B2C. They know that it's a different reality. And we said it would take a while for customers to understand and come back to our store. And we're very glad to see that this increase in like-for-like sales proves our theory.

So where are we today? And you can see that in the [ idea ] for retail. A sharp focus in reducing our SG&A to be increasingly more competitive. So right now, we cannot rely on an expansion of the gross margin because that would come only as a consequence of us reporting a consistently positive like-for-like rate and not only for any specific quarter.

So right now, you can count on a team that's more focused on lowering the SG&A to boost competitive edge and bring customers to the store, then in playing this game of expanding our gross margin to deliver results. This is sort of where our heads at. We do expect that with better negotiations and white label products and more synergy across our business units. This will improve, but there's a lot of work to be done to get us there still. That was perfect.

[Operator]

Our next question comes from Luiz Felipe with BTG Pactual.

[Luiz Guanais, analyst]

Two questions from my side. Also picking up on your last answer about your SG&A. I'd like to ask what we should expect in terms of SG&A for the next few quarters? What's operational leverage and what will be cost cutting for you? And another question about your curtailments. During this quarter, you reported a reversal in your curtailments, which had a positive impact. I just wanted to understand what we could expect along those lines for the next few quarters?

[Stephane Maquaire, executive]

Thank you for your question, Luiz. I'll answer your first question and then turn it over to Eric for your second one.

Well, the cost-cutting will continue. We're in the process of streamlining our organization because of the integration of the BIG Group, we become more complex. So whenever we streamline, we see new or see more space to streamline further. So there's still a lot to do, still a lot of logistic work to be done to streamline. Also on the corporate side, there's a lot of room to provide more flexibilization and increase efficiency for the company at large.

So what we should see in the next few quarters is an even stronger cost-cutting initiatives and also positive like-for-like results, which will give us an increased opportunity to reduce our SG&A going back to our historical levels. Eric?

[Eric Alencar, executive]

That was perfectly right, Stephane. It's not operational leverage. It really is cost cutting because the operational level work takes place after you cut costs. And this is a philosophy of ours. As to nonrecurring expenses. We've had BRL 200 million in reducing provisions. And we didn't focus on that because even though this was positive, we do not believe it to be recurring. BRL 40 million was also because we sold a few plots of land at prices which were above what we expected, above what the assessment gave us.

And there was also BRL 180 million which were the reverse -- litigation reversals. And of these BRL 180 million, BRL 140 million have to do with taxes. And the vast majority of that was because of the amnesty in Sao Paulo, which led to the reversal of BRL 140 million in tax payments. We had about BRL 200 million that we had provisioned for. We've invested BRL 50 million and reversed BRL 150 million.

I think this is something that many retailers did. We did it in a smaller scale, but that's where it came from. So moving forward, reducing those provisions will depend not only on further amnesties, but also what the perspective of our management will be in terms of possible or likely changes. What we have today is really our best estimate.

[Operator]

Our next question comes from João Soares with Citi.

[Joao Pedro Soares, analyst]

Well, I have two questions. First of all, I wanted to go back to the discussion of installment payments. We know that you operate in installments in a few different markets, not all of them. I just wanted to understand how do you see your competition responding to that strategy, what concerns you in any way and also wanted to hear about the long-term concerns about working capital. We wanted to hear about how that weighs on your long-term strategy.

Now another thing I'd like to hear from you is store opening guidance that you've revised. You mentioned during Investor Day a few smaller stores that you're opening, I assume in smaller markets. So I just wanted to understand what's the profile of these new stores that you're opening. If you could please elaborate on that, that would be great.

[Stephane Maquaire, executive]

Thank you for your questions, João. I'll answer your second one and then turn it over to Eric. Atacadão was already operating stores of as large as 3,000 square meter stores and we understood that we had to look into opportunities for conversion of supermarkets into Atacadão. We did that in the past. And as soon as we announced during our investor morning last November that we were going to convert 20 stores, hypermarket stores into Atacadão and Sam's Club. We did an excellent job and found that we had an opportunity in a few cities, not necessarily smaller cities, but a few cities offered an opportunity for Atacadão even in terms of opening a new store, opening new stores in larger cities or even in smaller cities as well.

We ran a pilot program in the first quarter of 2024. It worked in terms of sales and profitability. We assessed other opportunities. These are all 2,500 meter stores. So not very far from what Atacadão was doing already. And we realized there was an opportunity for us to have a converted supermarkets converted to Atacadão. And in the second half, we've added another 2 stores. So of 8 stores that we mapped out, 3 have already been converted to Atacadão. All of them showing a ramp-up in sales which we thought was accurate. In terms of sales per square meter, we remain at the same level as what we're seeing in these stores after only a few months. It's early but we saw an opportunity to have a larger network of Atacadão stores.

These are only 8 stores. So it won't really have a major impact on overall Atacadão sales, but we saw that in terms of having these additional stores in additional locations was worthwhile. Eric?

[Eric Alencar, executive]

Look, João, well, a few points about three installment in payments. First of all, this came from a study that we have been conducting for a long time. And this led us to improve our payment terms to also work to improve the company's working capital, but we know that when you extend your payment term, you also have to work with more receivables, which has an impact on your working capital. And what we've seen in the last few months is that this is already leveled off.

So it's a level that's been -- not a level that's been going up substantially. And we ran all the numbers about this. And so far, this has proven accretive for us and also important for our customers. As for the competition, I don't think we can say we were major innovators. There were already many players in the market working with installment payments. So in many markets, what we did was only to match the competition. And in other cases, we really are at the forefront. But in many cases, we're only matching practices that were common in the market already.

[Operator]

Our next question comes from Bob Ford with Bank of America.

[Robert Ford, analyst]

Thank you, Stephane, Eric. Eric, how long do you expect to introduce the three installment payments and how do you expect it to go for you and the increase in same-store sales that we're looking for Atacadão? And how should we think about the results of that. And could you also elaborate on these efforts to renovate your offering and any response from the competition you've had so far? And lastly, how should we think about your personal loans in terms of balance and risk?

[Stephane Maquaire, executive]

I'll turn over to Eric, but I can say that this has been driving -- strengthening the like-for-like rate in a few points. I know if we have this information, Eric?

[Eric Alencar, executive]

Bob, it was challenging for me to understand parts of your question, but you can come back and ask them again. I hope you're doing well. About three installment payments. As we've said, we are not breaking down how much it represents, but with the increase in receivables, you can have a good sense of what it represents. As for other products, other banking products. And let's go back a little bit Bakery Butcher and Delhi services represent about a 5% increase in sales in those stores.

About 5% of customers leave with one of these products. And because of the positive response to that we identified that we've gone from 120 to about 159 stores by the end of the year because we realized that especially our B2C customers were requiring that. So we see it very positively. This is not for every store. This Atacadão is still Cash & Carry store at heart and not all stores have that DNA but in some stores, we saw that as a great potential.

When you look at our billings, we see that of the BRL 16.5 billion that we have in billings, BRL 434 million come from other products, which include personal credit. If you compare that with the market, you'll notice that there is great potential for us to work on that still. We work very conservatively to reach the same EBIT results, the same credit card model working with narrower margins, so you need to work with higher risk. But ultimately, the equation is we're removing risks. And with the provisions, we reached the same EBITDA that we have with the EBITDA. If I fail to understand any part of your question, please feel free to ask your questions again.

[Operator]

So we're moving to our next question, which comes from [ Angel's ] question. He will be asking his question. Mr. Andrew Ruben will be asking this question in English.

[Andrew Ruben, analyst]

Two from my side. First, on the store maturity uplift, we see the converted former big stores are tracking ahead the other 2022 and '23 openings. I'm curious how we think about the go-forward path from there? Is there any reason to expect the converted stores to have a different mature margin level versus the rest of your base? And then second, quickly on the synergy raise. Could you walk us through if there's any incremental reinvestment or cost to achieve the higher synergy target?

[Stephane Maquaire, executive]

Thank you, Andrew, for your questions. I will answer in Portuguese. So we try not to mix too many languages in my head. As for the maturity of converted stores into Atacadão, we're seeing substantial growth by 21% in the first half of the year and also in Q2, and we see that these stores are seeing store level results, which slightly exceed the historical standard that we saw for any stores that we opened or converted. This is very encouraging, and we believe they should slowly recover in terms of maturity and profitability. So we see that the older crops are pretty much at the same level as the even older crops.

So a few started a little bit better in terms of profitability, maturing a little bit better, but their curves are expected to reach the same historical levels as what we've seen in Atacadão. So a source for synergies in the future, which is obviously very positive in which we haven't realized yet because we need these stores to mature even further so that we can capture their full synergy potential.

Your second question was about investing even more to realize more synergies. Well, we do not see the need for much more than what we've done lately. We should see slightly more store conversions to Atacadão and Sam's Club, as we've said earlier, but at the same pace we're at the same level as what we had in the first half of the year.

We'll continue to invest in systems to improve the complexities of our system. So we believe we -- it will take a bit more investment in the next few quarters for us to realize all these synergies. Is that right? Exactly right. So thank you, Andrew.

[Operator]

Our next question comes from Eric Huang with Santander.

[Eric Huang, analyst]

We just have a quick follow-up. We saw a revision in breakdowns for this year. I just wanted to ask, based on that and on the results that you're reporting for our converted stores and also the renewed synergy, whether that changes your mind in terms of future openings, especially thinking about Cash & Carry and thinking about these slightly smaller stores, I just wanted to understand a little bit better what's in your head thinking about your expansion moving forward?

[Stephane Maquaire, executive]

Thank you for your question, Eric. It's still early to talk about the store opening plan for 2025, but we are still following what we've announced in the investment morning last year. We said we would invest on 40 hypermarket stores, converting them to Atacadão and Sam's Club between 2024 and 2026 with 20 stores for 2024. So we're already walking along that line. This might change as additional opportunities appear without really steering off this road very sharply.

In our 2025 plan to expand Atacadão, we should have organic store openings as well, but it's still a little early to say. In global terms, not much has changed compared to what we've announced in the recent years. We see room for maybe another 100 stores, Atacadão stores and also to Sam's Club, as we integrate the big group, we may double the number of Sam's Club stores. We had 40 Sam's Club stores and we might reach twice as many in the next couple of years. So the vision remains unchanged.

[Operator]

With no further questions, we conclude the question-and-answer session. Now we'd like to turn the conference back to the company for their final remarks.

[Stephane Maquaire, executive]

Thank you so much for your questions and comments. This has been a very positive half of the year for us. We planned for a lot in the first half of the year when we had our investor morning in November of last year, I think that we've delivered a significant share of what we set out to do. So we're very confident about the second half of the year, which should be very positive as well as the year 2024 at large where we will strengthen our group very much, and we're very happy about that.

[Operator]

Group Carrefour Brasil's Q2 2024 Earnings Conference is now closed. The Investor Relations department is available to answer any additional questions you may have. Thank you to all attendees and have a very good day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]