Atacadao SA

BOVESPA:CRFB3

Earnings Call Transcript 2024-Q3

[Operator]

Good morning. Welcome to Group Carrefour Brasil's Q3 2024 Earnings Conference. Joining us today from Group Carrefour Brasil to begin the presentation are the company's CEO, Stephane Maquaire; CFO, Eric Alencar; and IR Director, Marcela Bretas.

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

[Operator Instructions]

We'd like to reinforce that the information contained in this presentation and any statement made during this conference relative to Group Carrefour Brasil's business prospects, projections and operational and financial targets are based on the company's management's beliefs and assumptions as well as information currently available to the company.

Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions, seeing as they refer 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 said statements.

Now I'd like to turn the conference over to the company's CEO, Stephane Maquaire, who will begin the presentation. Mr. Maquaire, please, you may proceed.

[Stephane Maquaire, executive]

Good morning, everyone, and thank you for once again joining us as we discuss our Q3 2024 earnings. This quarter, we maintained a strong pace of growth in sales with larger volumes and market share gains on a like-for-like basis in Atacadão and in retail. We've added 3 new Atacadão stores and 4 new Sam's Club stores during this quarter. This was an unprecedented store opening -- number of store openings in the quarter for this format. So far this year, we've already opened 14 Atacadão stores and 7 Sam's Club stores, concluding the execution of our expansion strategy for this format in 2024.

On the digital front, our GMV came to BRL 3 billion this quarter, up 21% year-over-year, with a 10.5% penetration in sales, which was a record figure. On the Atacadão side, we reported sales growth -- same-store sales growth by 5.6%, outgrowing the entire retail market, a result of the initiatives we've adopted to better serve our customers. We've also advanced the introduction of services in self-checkout counters in our stores, attracting even greater traffic, especially of B2C customers.

In Retail, like-for-like sales growth continued to increase. And we reported strong growth by 7.1%, reinforcing the positive time for sales following the adjustment in our portfolio of stores and our new price position focused on higher competitiveness for this format and the attraction of new customers to our stores. Our purchasing club, Sam's Club, has reported revenue growth by 17% year-over-year. And this was a quarter when we invested in expanding our stores and opening new stores, as we said earlier, as well as expanding our customer base, which will be critical to solidify the value proposition of our club moving into the future.

This was a lot more than we had for the BIG Group in 2022. At that point, we had 2.1 million members to this format. So this movement to invest in expanding our stores and customer base is key to solidify the value proposition of this club format into the future.

The Carrefour Bank also performed robustly this quarter, as earnings grew by 13% versus last year. Delinquency levels have been decreasing since 2022. So we have a very healthy delinquency curve when we compare to the rest of the market. We also saw the credit portfolio maturing. This quarter's consolidated EBITDA amounted to BRL 1.5 billion with a consolidated 5.7% margin, in keeping with that of the same period last year as a result of our operational leverage and the materialization of synergies which in this quarter amounted to BRL 2.7 billion in run rate terms.

As to our ESG strategy, we have accomplished the Gold Stamp in the GHG protocol from the Fundação Getulio Vargas Foundation, which acknowledges companies working with transparency in data and emissions and also working safely in their external auditing. In Q3, we saw an overall reduction by 48% of our emissions, including both Scope 1 and Scope 2 versus the same -- or versus the base year 2019. That's 10 percentage points above the target for the year, which is a 38% reduction.

On diversity and inclusion. In September, we had our Diversity Week that joined over 4,500 collaborators who could, during the week, discuss topics such as nonviolent communication, building inclusive and healthy work environments, active parenting and could also reassert our Group's inclusive culture commitments.

When it comes to fighting hunger and inequality, by September 2024, we had donated over 4,400 tons of food, nearly exceeding the donations we reported in 2023 as a whole.

On that note, I'd like to turn it over to Eric, who will go into our financials for the quarter. Eric, please?

[Eric Alencar, executive]

Thank you, Stephane, and good morning to everyone. It's once again great to be here with all of you again. In the next few slides, I'll quickly go over the figures you had access to last night.

On Slide 3, we look at the company's consolidated results for this quarter. Our growth sales in the third quarter of 2024 added up to BRL 29.5 billion, up 4.8% versus 1 year earlier, driven by Atacadão's strong performance. Our gross margin was 19.2%, which is 89 basis points lower than in the third quarter of '23. That was because of Atacadão's larger relative share, seeing as this is a business of smaller gross margins because of our price positioning in retail, which has been underway since the end of last year, and also because of the impact of new regulation limiting the amount of interest the bank can charge.

Our SG&A has decreased by 1.5% despite the expansion of our network and cost inflation. This result -- this is the result of our initiatives to reduce costs and realize internal synergies. As a percentage of net sales, SG&A has improved by 89 basis points as well. Our adjusted EBITDA was BRL 1.5 billion in the quarter, up 5% versus 1 year ago. And that's as we make up for our efforts in gross margin with SG&A gains. Our EBITDA margin was in line with that of Q3 '23. Lastly, we ended the quarter with adjusted net profit of BRL 412 million, which is twice as much as last year, reflecting a favorable tailwind -- operational tailwind and lower intercompany debt rates as well as a smaller tax burden.

Now over to Slide 5, we'll talk about Cash & Carry. We've ended Q3 with 374 Atacadão stores, adding 3 new stores to the network, 2 of them converted supermarket stores and 1 hypermarket conversion. Gross sales in the business came to BRL 21.4 billion in Q3, up 8.3% year-over-year, with 5.6% like-for-like sales. That's outpacing the Cash & Carry market with the positive dynamic in volumes despite the deflation month-over-month that we reported between June and July. The initiatives we've adopted to better serve our B2C customers have led to very positive results. And this quarter, we've essentially doubled the number of stores offering bakery, butcher and deli services compared to July, adding up to 151 stores offering such services.

The all BIG stores that have been converted into Atacadão are maturing as expected and once again, reported solid performance with like-for-like growth by 14% and also outperforming last year's already strong 22% result. These stores' EBITDA margin came to 4.2% this quarter, in line with what we had mapped out, up 2.7 percentage points versus last year.

The gross margin remained virtually steady versus last year, down by a mild 20 basis points, which is an absolutely normal fluctuation in the course of our business, mirroring slight changes in our mix of products and clients and sales as well as the inflation shifts that we reported in the quarter.

SG&A as a percentage of net sales was, on the 1 hand benefited by the maturing converted stores and operational leverage gains coming from the strong sales performance. On the other hand, this quarter, we've accelerated the implementation of in-store services, and these services have a 6-month maturity rate -- maturity margin. So they put a little bit of pressure on our very short-term expenses. Adjusted EBITDA was BRL 1.3 billion, 6.7% margin, which is profitability that's in keeping with last year. And resilient -- shows the resilience of our Cash & Carry strategies.

Now moving on to Slide 7, we'll talk about retail. Gross sales came to BRL 6.4 billion in Q3. Same-store sales continue to advance, growing by outstandingly strong 7.1%. As you all know, the 8% decrease in overall revenue is largely explained by the reduction of our sales department, thanks to the success of our decision to shut down and convert stores in this business. The gross margin was 158 basis points smaller this year, mirroring the price strategy that we've introduced to increase the competitiveness in this format.

Our SG&A was down nearly 20% year-over-year, a substantial 254 basis points decrease as a percentage of sales. We'll continue to work to streamline our retail operations, increase our efficiency and reduce costs in the following quarters so as to make this format more agile and competitive. As a result, our adjusted EBITDA came to BRL 157 million, a 2.7% margin, which is a 100 basis points increase year-over-year. Now everyone, the results we're presenting here show that by readjusting our assets, our prices and our expenses, we are finally growing -- outgrowing the market and expanding our margins.

Now moving on to Slide 9. We talk about Sam's Club, whose gross sales came to BRL 1.8 billion in the quarter. That's 17% more than the same period 1 year ago, thanks to a combination of a 3.2% increase in like-for-like sales and the expansion of our network with 11 new stores in the last 12 months. Our active member base increased by 22.5%, keeping a strong pace of new memberships. As Stephane mentioned at the beginning of this presentation, Q3 was very much focused on accelerating this club and expanding it as well, in addition to attracting and strengthening our membership base, which are key to keeping the sustainability of this model going into the future.

Gross profit came to BRL 306 million with a 19.6% margin this quarter, down 16 basis points year-over-year, thanks to our promotional efforts, which take place whenever we open a new store. And they were largely offset by the greater penetration of the white label brand Member's Mark. Our SG&A came to BRL 305 million this quarter, up 43% year-over-year. Now it's important to point out that 2/3 of this SG&A increase is connected to the expansion in the number of stores, including preoperational expenses. Note that this quarter was the 1 where we opened the largest number of Sam's Club stores since we've acquired the brand.

The rest of the SG&A increase is largely explained by investments in customer experience, increased expenses in payment processing solutions, thanks to the larger penetration of credit card sales and the higher cost inflation. Lastly, adjusted EBITDA in the quarter was positive and close to breakeven.

Now moving on to Slide 11. Let's talk about the Bank Carrefour performance. Our credit portfolio reached BRL 26.4 billion, up 18% versus Q3 '23, driving our earnings by 13%, largely a result of our successful attraction of new customers to those converted stores. The bank's financial margin dropped 6 percentage points year-over-year. That's explained by the fact that at the end of September, about 90% of our portfolio was already mirroring the effect of loans that were extended in compliance with the new interest rate cap regulation. SG&A, which is one of the main pillars to mitigate the impacts of the change in regulation, was down 4.6% year-over-year, thanks to our cost discipline.

In the quarter, EBITDA came to BRL 237 million, slightly higher than last year's results, which shows our ability to offset the impact of the regulatory change by diversifying our product portfolio and executing cost discipline.

Now on Slide 13, we've recovered the adjusted net profit of BRL 412 million. We had a good quarter, which is 2x higher than what we recorded in the same period of last year. The result of these operations after taxes and depreciation came to BRL 1.1 billion, almost 10% higher than 1 year earlier. Financial expenses added up to BRL 677 million, mirroring in large part, the savings from the new rates that were negotiated for our intercompany loan. The revenue from taxes was BRL 66 million, mirroring, especially the consolidation process from legal -- of our legal entities, which is very close to being finalized.

Now on to Slide 14. It's important to make it clear that this quarter, we had a very specific and one-off event relating to the timing of purchases and sales of merchandise, which affected our working capital metrics. Sales in this quarter in Atacadão were strongly concentrated in September. Just to give you an idea, like-for-like sales increased nearly 4x more than in the 2 previous months, which affected the accounts receivable and supplier lines of our balance sheet.

Inventory levels ended the quarter in 2023 -- in keeping with 2023 because in consolidated terms, sales in the quarter were as expected. As a result, the gross cash in operational activities came to BRL 5.7 billion in the last 12 months, 12% more than the cash generated in Q3 of '23. The impact of working capital was BRL 1 billion negative. And I'd like to reinforce that this was a one-off and should be reversed over the course of Q4.

On the -- on investments, our CapEx was BRL 2.5 billion, BRL 1.8 billion less than the same period last year, reflecting the end of investments in integration and less costly growth via conversions. It's important to note that in the last 12 months, we had less cash entries relating to asset sales. Cash outflows relating to our debt and dividends was BRL 2.4 billion, similar to last year. As a result, our free cash flow in the last 12 months came to BRL 272 million.

Now on Slide 15, we talk about our leverage. We ended the quarter with a net debt, including discounted receivables of BRL 17 billion. That's BRL 4 billion more than in September '23. This is basically because of the increased need for working capital because of the one-off event that we reported this quarter, as explained in the previous slide.

In addition to the more concentrated receivables that were generated at the end of the quarter, because of the strong sales performance in September, the level of accounts receivable has increased with the increased sales, as well as the mix of payment means other than money or debit. We'd like to underscore that the level of penetration in sales of 3x in Atacadão remained steady over the last quarter. Our leverage index ended at 2.64x our net debt to EBITDA.

That concludes my part of the presentation. I'd like to turn the conference back to Stephane. Stephane, please?

[Stephane Maquaire, executive]

Thank you, Eric. Well, in closing, everyone, I'd like to reinforce that we continue to do our work, always committed to our society and to the environment, focusing on our customer satisfaction and on delivering our strategic priorities. Our converted stores have continued to mature, realizing synergies, which are well on track to meeting the revised target of BRL 3 billion by the end of 2025.

This October, we've also announced that we'll be monetizing selected real estate assets via a sales leaseback agreement worth BRL 725 million. This move is in line with our strategy of optimizing our capital allocation and solidifying the value of our real estate portfolio.

We're stepping into Q4, which is the most significant quarter in the year for any retailer. And we are ready to feed into this virtuous cycle of customer satisfaction, as we said earlier, revenue growth, margin expansion and investments in future growth.

Thank you so much for your participation and your support, all of you. Let's now move on to your questions.

[Operator]

[Operator Instructions]

Our first question comes from Danni Eiger, sell-side analyst with XP.

[Danniela Eiger, analyst]

First of all, I just wanted to understand a little bit better, what's your take on your performance in this third quarter? I understand that the season effects come up more than intensely now, but there might have been an increase in food inflation as well, but we're still seeing surprises coming from that. So I just wanted to understand how do you see that dynamic, especially in October, seeing as the month is already over?

Now I also wanted to know, you talked about the dynamics in Atacadão with a larger traffic in B2C, your end customers, not so much B2B customers, but you also talked about that impacting your margins with Atacadão. So I just wanted to understand how should we think about this evolution in your gross margins considering that you have more B2C traffic and also more services?

Now my second question is about services, we also saw a decrease by close to BRL 1 billion in advanced receivables versus Q2. But I just wanted to understand what's on your mind with regards to your strategy here? We feel that you were less active, and you yourselves talked about removing self-checkouts -- checkout counters. But at the same time, penetration remains steady, and you seem to be seeing value in that strategy. So I just wanted to understand how you see that moving forward? Is the idea to stay on that level or maybe even accelerate, considering the holidays? Those would be my questions.

[Stephane Maquaire, executive]

Thank you, Danni, for your questions. Well, with regards to food inflation, in September, we are going into this new scenario when it comes to food inflation. In fact, in May and June, we saw a higher drive in food inflation given the tragedy that we had in the state of Rio Grande do Sul. So we saw a spike in food inflation. And then we had food deflation in July and August, which was a response to those 2 previous months. And we even recorded a little bit of food inflation in September. And now analysts predict even something slightly higher until the end of the year when it comes to food inflation.

Obviously, that supports our sales dynamics, especially in B2B with Atacadão, which accounts for close to 2x our sales. And we saw in Q2, July and August, some food deflation. So merchants held back their prices in our digital and brick-and-mortar channels. So when inflation comes back, that also will impact sales. So that gives us a feeling that Q4 will be a positive one with a little bit more food inflation. That, according to analysts, should be between 6% and 7% a year.

We can't talk about any details or any figures for October yet. But what we can tell you is that it's following the same trend that we saw in September, again, as a consequence of this trend in food inflation.

Now between B2B and B2C, your second question, we know that Atacadão has always been very strong in the B2B, but we now want to strengthen our B2C side with Atacadão. So we work to recover a more dynamic sales results in B2C. We're also seeing slightly larger gross margins in B2C than in B2B. Of course, there's the share issue, but we are now starting to invest a little bit more in B2C and investing more in customer services. So we're making a little bit of a greater effort on the B2B side with Atacadão.

Again, for me, the gross margin for Atacadão has been very resilient across every quarter, sometimes more or less, but we are still investing. We invested a little bit more in Q3, as Eric said, and these services take about 6 months to mature. So by the end of the year, we expect to see these gross margins coming back to the expected level.

Again, we continue to keep up with the market month by month, week by week, and we see resilient gross margins in Atacadão consistently. I think that we talked about that we launched in month, and this was a strong month of the Atacadão anniversary promotions in June and July, we came back to a level that we felt was consolidated already. And Q3, it stayed steady versus May and June. So to us, this is a level that, again, corresponds to our customers' needs, and it has to be monitored at a time when interest rates are really high in the country and when we should also see food inflation a bit higher.

Do you have anything to add, Eric?

[Eric Alencar, executive]

No, that's perfect.

[Operator]

The next question comes from Rodrigo Gastim, sell side analyst with Itau.

[Rodrigo Gastim, analyst]

I have 2 questions. First of all, about working capital. I'm going to ask you to help me so that we can better model moving forward. We saw from about 3% of revenue to now close to 6%. But my question now is how much more do you need in sales to offset that working capital requirement that we're seeing? And even more than that, when we look at your incentives within the company, where does it make sense to offset that working capital requirement with higher sales? So how much room do you see that working capital needs to increase, still seeing marginal returns? That's my first question.

And the second has to do with the bank. I already felt that the impact of revolving credit was a little bit bad, but there was also an impact that was larger than expected. And you also talked about your EBITDA that's a bit higher than last year. And I feel like that's more conservative after the first 6 months. So I just wanted to understand what's coming in better and should we expect such a significant decrease in the bank's EBITDA in Q4 to explain the speech of a much better EBITDA than last year? Or if you really are being able to offset and you expect a much better EBITDA for the bank moving forward?

[Stephane Maquaire, executive]

Thank you so much. I'll allow Eric to take this one.

[Eric Alencar, executive]

Well, let's talk a little bit about working capital first. This is an important question because the increased working capital was not structural. When we calculate how much we can increase moving forward to have additional sales. This was a very specific quarter in the sense that we came from a very strong month of June, and we felt that by our sales initiatives have another very strong quarter in Q3. So we decided to do this -- make this one-off investment because we were convinced about this in our operations.

Now what you saw this quarter was something that was more linear. And what happened was in July and August with that lower inflation in sales that were really strong, we had a weaker like-for-like sales. And in September, what happened was the opposite. We confirmed our prospects or prospects were confirmed. Like-for-like sales were 4x higher. So it was a very strong quarter in B2C and B2B, and that led to more receivables regardless of what they are because the maturities for each 1 is different.

So that was because of very strong sales. And those supplier payments, there was no payment that was different because our policy has changed. We moved from 62 days accounts receivable to 57 because we did purchase it in advance because we believed we could have a strong quarter, which actually proved right.

Now for you to model moving forward, well, the company is working to be more efficient when it comes to working capital.

And your question about accounts payable, they should normalize and move back to the levels we had last year. And we had already provided some sort of guidance that we would maintain the same levels there. So we're not expecting a deterioration in working capital because of sales. This was really because of a one-off phenomenon that occurred during that quarter. Was that okay?

[Rodrigo Gastim, analyst]

Yes, that was clear.

[Eric Alencar, executive]

All right. So let's move on to your question about the bank. We agree with you. Our bank is outdoing itself, especially when it comes to efficiency. Last year, we had BRL 441 million EBITDA. We expected it to be better. I can say it's unlikely that we'll get to BRL 100 million this year. I don't believe we'll do better this fourth quarter than we did last fourth quarter because of our prospects.

Our prospects are very positive, and we were very conservative. So at least BRL 50 million more than last year is more likely, so you can add that to your models. We're also increasing the credit limit for a few good paying clients. So we're already planting the seed for next year also so that we can improve the bank's ROI even more. So I think you can maybe tweak your projections, thinking about that.

[Rodrigo Gastim, analyst]

Eric, when I look at the yield trend in your portfolio and considering the portfolio of 90 days in arrears has slightly decreased year-over-year and quarter-over-quarter, I think it's an impact of revolving credit. But my question to you is when you look at the pros and cons, negatives and positives, considering the marginal yields of the portfolio, do you have a level that you can consider the regular yield for you? Or considering the impact of revolving credit, considering your recurring yield in the past, what would that be so that you can help us run those numbers?

[Eric Alencar, executive]

Well, we can't really break it down to that level because of our regulations. But I can help you with that a little bit. Granted, there will be that loss and that will be structural. So you saw that improved NPL. But on the other hand, what we see is, this will be offset in large part by other fronts.

And there are several points. One of them has to do with our efficiency index, which is our cost, which was 32%. It's going down to 29% and even less next year. So personal credit, insurance and others. So in order for you to better model that, I think we should get together later and talk about all the variables that will play into that result.

[Operator]

Our next question comes from Luiz Felipe Poli Guanais, sell-side analyst with BTG.

[Luiz Guanais, analyst]

My question has to do with your SG&A trend, which has stood out in the last 3 quarters. You've been able not only to optimize your cost, but also make the most of your leverage. So thinking about this trend with inflation, which Stephane touched upon, seeing September as the strongest month so far and seeing the -- considering the food inflation in Brazil in the next few months, how could we look at SG&A, both in your retail and in Atacadão as well?

[Stephane Maquaire, executive]

Thank you so much for your question. Well, in addition to food inflation, which we talked about, we once again have a slightly higher food inflation than general inflation in the country, which is the regular scenario for Brazil. That was not the scenario in 2023. So that's how we started 2024.

Now with this return of slightly higher food inflation than overall inflation, that leads to larger leverage in our P&L. We sell with food inflation, and we have costs with general inflation. This should help us in our search for ways to decrease our expenses, which we have been doing for a few quarters, I would say. So we'll continue to streamline our organization and transform our organization for more agility and lower costs and make the most of this time when food inflation is a bit higher so that the percentage of our sales allow us to decrease even more our SG&A.

In Atacadão, retail and Sam's Club, the infrastructure also involves a process that we are all working to support. And we believe there's even more of that to come moving forward.

So there's another question about Q4, which is how Q1 of next year will be. So we will make -- take advantage of these lower expenses to invest a little bit more in the support to our sales.

[Luiz Guanais, analyst]

If I could just quickly follow up, your question -- your comment about September sales. How much of that do you -- would you say came from volume and how much of that came from your pricing strategy so that we understand this dynamic and understand your volumes and consider what we expect from inflation in the next few quarters?

[Stephane Maquaire, executive]

Well, in September, obviously, we had positive volumes in our Cash & Carry and Retail brands. It's important to remember that we are closely monitoring this increase, which is more than just an increase in sales, what we saw in September. And we also monitor that in October. So there's been a positive trend in our volumes, both in Atacadão and in Retail.

Eric, is there anything you'd like to add?

[Eric Alencar, executive]

No, that's precisely right. Well, there are 2 things I'd like to say here. Food inflation goes up and down all the time. This year alone, we've had 3 different news -- pieces of news that affected that. But I just wanted to give you a little bit of how our mindset works. We do not look at inflation when we think about SG&A. What's allowed us to maintain that level as a structural policy and it has to do with our mindset so that we can grow no more than what inflation requires us to get there.

And despite everything, we have a record NPS level when it comes to customer satisfaction. So what we're doing is not to the detriment of customer satisfaction. And just adding to what Stephane said earlier, this little bit of inflation that we had more in a month where we saw such an increasing like-for-like, well, we are not increasing prices just like that. We are just making the most of a situation where 2 months earlier, we saw prices stay down, and we saw very positive volume dynamics -- volume trend in the following months.

[Operator]

Our next question comes from Joseph Giordano, sell-side analyst with JPMorgan.

[Joseph Giordano, analyst]

I just wanted to move away from operational work for a little bit and talk a little bit about the work you're doing on the tech side. There were a few moves that the company made in recent times. So I just wanted to understand how should we look at the tax rate. And I just wanted to separate what's the goodwill that you see for the cash flow and what should be NOL in addition to those credits that you're seeing, what would be the impact of the cash flow that you're expecting in the next few years?

And on top of that, of course, your negotiations are very recent. Your average debt cost is actually below CDI. So looking forward, how could this impact the new contract renewals? Is there any trigger? Or should we just assume that this debt cost should stay slightly below CDI in the short term or in the next 12 months, something like that?

[Stephane Maquaire, executive]

Thank you. As Eric said -- I think -- we've been working on that. I'll let him take the question.

[Eric Alencar, executive]

Thank you so much for your question. And I understand how difficult it must be to model for that considering all this volatility. So I'll split the answer in 3 parts so as to make your life and all the other investors' lives easier. So this quarter had 3 pieces of good news that affected it at the same time. 3 of them were structural, and 1 of them was one-off.

Well, structural is about BRL 70 million of goodwill from this cash impact in the adjusted result. And you can rely on that in a structural way and consider a very similar amount for the next quarters for the company. The second was the NOL, an impact of BRL 80 million. That's 30% of the offset that we had with all our restructuring. So you can also add those BRL 80 million in a structural way moving forward or even slightly more than that because we are working to improve the company's operations. And as a result, you should be able to capture even more, understanding that's close to BRL 10 million that have come to the -- from the acquisition of BIG and which we are now using starting in the second half of the year.

The point is, these restructuring projects had such a strong impact where there's a standard that says that we need to -- if you consider that for the -- for taxes for the entire year, so we had to make an adjustment of about BRL 100 million. So I believe that it should be the case for next year. And last year, that was really small because in the second half of this year, it was applied. And from now on, these would be recurring and very long-term impact.

So if you think about this year, and we came from a year of 1,000%. We started with 60%, and it should go as low as 40% to 30%, more close to 30%. And for next year, it's difficult to say we should go to 30% because it should be lower than that. So your model should begin to consider a slightly smaller tax burden than those 30%. And as we evolve in the future and understand that a little bit more, we will share that information with you and whoever needs it.

Okay. So your second question was about the debt restructuring. Well, those are part of the next chapter in our story, but many of those are being renewed, and they will be valid for at least a year, so they stay unchanged for the next year. Now if there will be any change for 2026, we're still in negotiations. So we don't really have anything to report at this point.

[Operator]

Our next question comes from Irma Sgarz, sell-side analyst with Goldman Sachs.

[Irma Sgarz, analyst]

I'm sorry for doing this, but I'd like to go back to the same-store sales trend. Now looking from a different perspective. If we look at the converted big stores that have grown at a higher rate, same-store sales was between 4% and 4.5% this quarter. So in spite of food inflation this quarter, you now mentioned volume growth was positive. So I think that means that you were not able to pass along your increased cost with inflation. So we are monitoring that via the CPI or ICPA in Brazil.

Do you feel that there's a competition environment that allows you any inflation pressure on costs pass-through? Or do you think that maybe you could decide to invest a little bit more in keeping prices lower to defend yourselves in the market? That would be our first question.

[Stephane Maquaire, executive]

Thank you, Irma. I'll answer that in a more general way, and then Eric will add with more details. But in a general way, or generally speaking, all of us and all -- both we and competitions may pass along the cost with food inflation. This was the picture in Brazil for several years. Month by month, we could see maybe something in a little bit more B2B and less B2C and vice versa. We do not see a trend in the market that would prevent us from passing along the increased inflation in our negotiations with suppliers, for example. So we also need to look at how we negotiate and not directly what inflation of the country is. I mean, there are other factors that might allow us to have a slightly lower general inflation in a one-off basis.

Eric?

[Eric Alencar, executive]

Stephane is absolutely right. And another thing is you've already answered your own question. When we talked about a positive trend in volume, yes, we were considering the Group at large and all our like-for-like sales, both converted stores and not and otherwise, but it's important to think that even though food inflation is a good proxy, it does not account for the entire basket of goods with Atacadão. And considering everything that's happened with Atacadão, there has been a positive trend in volumes. So nothing changes. It's all as expected.

[Irma Sgarz, analyst]

Perfect. And if I may, I have a second question. If you could please talk a little bit about your margin -- your prospects for your retail margins. As I understand, you've already moved when it comes to price to a level where we should expect you guys to remain moving forward with a new pricing policy being introduced since the beginning of the year. So I just wanted to understand and confirm your gross margin trend, and I believe you expect the operational margins to continue to help you and to materialize moving forward and allow you to move your margins to an even wider state than it is right now?

[Eric Alencar, executive]

Yes, it's absolutely what you say, and I can also share with you a little bit of our mindset here. We are not satisfied. We've grown from 1.7% to 2.7% in retail. So we started on the right path. Even though absolute sales were going down because of that restructuring in our store park that we want. It's easy to lower prices. The hard thing is to lower prices in a structural way, allowing your margins to increase at the same time. So you gain competitiveness and you create a virtual circle.

So the work there isn't done yet. Our work there isn't done yet. We are, if not at the beginning, at a second step maybe. So there's a lot of streamlining in our operations to do. There's a lot more competitiveness for us to gain. So we've grown 7.1% on average. We want to do a lot more here. And with a more efficient SG&A, we want to work to have an ROIC or EBITDA, as you said, that's even higher than what we've presented so far, which is an evolution, but it's definitely not the endpoint for us.

[Irma Sgarz, analyst]

So in terms of gross margin, there might be a need to invest a little bit more in competitiveness.

[Eric Alencar, executive]

I don't know if the need to invest more in competitiveness is the right way to put it. It's about making sure that we are lean enough and competitive enough so that we can have more room to grow our margins. So we have to be more competitiveness to lower our price and not simply bring prices down per se because that would be bad for everyone.

[Operator]

Our next question comes from Andrew Ruben, sell-side analyst with Andrew Ruben (sic) [ Morgan Stanley ].

[Andrew Ruben, analyst]

Two items, if I may. The first on Sam's Club, trying to better understand the length of the investment cycle given the lower margins in the quarter.

And then second, you've spoken about 4Q and the holiday set up. Mostly for food, I'm curious if you could discuss what you're expecting in terms of non-food and e-commerce, what type of inventory or industry positioning you're preparing for?

[Stephane Maquaire, executive]

Andrew, I'll answer your second question and let Eric take your first one. Obviously, this was -- this is a very strong period for nonfood because of Black Friday and the Christmas season. Especially in -- on the e-commerce side, where as you said, there's been significant increase, about 1% in September, which is a very positive figure. And we are now poised to outpace the very strong sales in e-commerce, especially on the nonfood side in Q4 2023. So outgrowing our -- or outpacing our figures reported then. And it seems that we should have a positive trend there moving into the end of the year. Eric?

[Eric Alencar, executive]

Well, about Sam's Club, that's part of our long-term projections. We remain very positive about our model. And this really is the heart of the expansion and consolidation cycle of that model here in Brazil. We increased the number of stores significantly, 7 stores this year. And 4 of those 7 opened in the second half of this year. And when you increase -- when you expand like that, you need new -- to bring in new partners, new members. You need, at the same time, promotional activities and preoperational expenses that become recurrent in your balance sheet. And you also need investment in marketing to bring people in because this is a format that people need to learn about.

So as soon as we have, considering that we have the strength in our balance to do that, the sooner we can do that, the better. So in the very short term, there will be that impact, but we believe that will be the impact of our investments on the OpEx side. So we do believe that there should be some impact in the next few quarters from that but we do not have any prospect for the long term.

And this impact on SG&A. And if you look at it, the major impact comes from SG&A. More than 2/3 of that comes from these new launches. Part of that is from improvements that we offer our clients, and a lot of that comes from this conversation that we're having right now.

[Operator]

Our next question comes from Gustavo Fratini, sell-side analyst with Bank of America.

[Gustavo Fratini, analyst]

A few questions from our side. First of all, how are you guys thinking about your plan for store openings in '25 and '26? How do you see the split between new organic openings and the split between hypermarkets, supermarkets and -- now that you see some stores where those new services are maturing, what has been the gap between EBITDA versus these stores and those with none of those services?

And lastly, how should we think about your leverage moving forward? I understand there was this one-off impact that Eric explained really well, but I just wanted to pick your brain about that.

[Stephane Maquaire, executive]

Thank you for your questions. They were very much connected. Well, our priority is to lower the company's leverage, as we've said before. And of course, we see as operational opportunities, also the focus on our CapEx and other opportunities as we saw in October on the real estate side. It's still too soon to talk about our expansion in '25 and '26. We see perhaps fewer store openings next year, looking to preserve our leverage once again. We still see store conversion opportunities. We know that whenever it makes sense for the customer, store conversions bring a lower CapEx, 2x lower than organically opening a new store.

We also talked last year that we should convert about 40 stores from Carrefour to other Atacadão and Sam's Club formats by the end of 2026. We are halfway through that plan. And as potential store movements for Atacadão and Sam's Club are those. So I should say that we should maybe expect fewer new stores in '25 considering the company's leverage.

Now with regard to services in Atacadão, what we see now are much larger tickets in those mature stores. So the first wave of introduction of these new services, stores where we offer these new services, what we showed was we are responding to a request from our B2C customers. We talked about sales in a few additional sales points and sales in these stores. Now what we expect moving forward in the second wave from what we had this year and what we had especially in June and July this year and that should reinforce our sales even more than we had last year in Q4.

Is there anything you'd like to add, Eric?

[Eric Alencar, executive]

Well, there's just a specific point I'd like to add here. Gustavo, our CEO of the Atacadão increases 3% and 15% to 20% leave with a ticket on the bakery, butcher and deli services. So initially, you have costs because you invest and then you recover that. But as Stephane said, our wave 1 already shows an operation with no gaps versus the original nature of Atacadão.

[Operator]

Our next question comes from Joao Soares, sell-side analyst with Citi.

[Joao Pedro Soares, analyst]

I have just 2 very quick ones. First, just following up on the bank issue. I just wanted to dig a little bit deeper in the fact that it's important to think about the sustainable profitability. This year was one where you obviously would reduce and it makes sense to reduce your SG&A considering the regulatory changes in the industry. But moving forward, considering the consolidation of products and working more on the personal credit side, do you expect to invest again now that you understand a little bit better the impact of revolving credit? I just wanted to drill down on that.

And then you have the 8% cap in interest rates, and you mentioned in an interview that in 2025, you should go back and go into even larger projects. I just wanted to understand where we are on the developer side, if there's any piece of news there?

[Stephane Maquaire, executive]

Well, thank you for your questions. On the bank side, no, we didn't do anything crazy to overcome that moment. Felipe Gomes' team, Felipe Gomes is the CEO of our bank, developed a great work to understand how we could be more efficient in our bank, and that's a completely sustainable operation. So we should expect this new level since January in the bank. All the work we've done to reduce our expenses in Atacadão, in Carrefour, Sam's Club, the bank, the entire ecosystem of Group Carrefour Brasil is sustainable. So we believe that, especially with the work that we've done to reduce the SG&A in the bank, is thanks to a very good work developed by Felipe and their team, and it's very, very sustainable.

Eric, is there anything you'd like to add?

[Eric Alencar, executive]

Well, with regard to the stakes, we had this -- with real estate, we had that operation lately of over BRL [indiscernible] million. We could have 20 operations like that. And at no event, will we have an operation like that on a whim, but it's important to understand that this is part of the company's toolkit when it comes to the opportunities and the value of our real estate and the ability to use that in terms of capital allocation whenever it is suitable to the company. We do not expect to have any new operation like that because internally, what we're working is to ensure the conclusion of that operation that we've just announced.

Now what pleased us particularly was that, that showed the quality of the assets we enjoy here at Carrefour. And investors realize that these are high-quality assets with potential higher valuation, which was remarkable for us and really pleasing as well. When it comes to development, no news to report. So we're still working. And as soon as we have anything to report, we will. There is a potential of a few millions in development because many of our assets are underused, so you could develop either commercial or housing units. And as soon as we have news to share with you, we will, because the pipeline is a positive one.

[Operator]

Our next question comes from Vinicius Strano, sell-side analyst with UBS.

[Vinicius Strano, analyst]

Could you guys please talk a little bit about what you're seeing in terms of price elasticity on the Atacadão side? And if you plan to maintain the pricing gap that you have versus the competition? Or is there any opportunity to expand or close that gap in the future?

And a second question in financial provisions. If you could talk a little bit about what you're seeing in terms of labor disputes. And we're seeing a few reversals in some of the existing litigation. So if you could please address that, that would be great.

[Stephane Maquaire, executive]

All right. Let me take the first question and I'll allow Eric to take the second one. What we're very happy with Atacadão's pricing strategy versus the competition. So I don't think there will be any change in the trend, seeing as it working. And again, the Atacadão NPC is increasing significantly, both versus 1 year ago and versus the previous quarter, which shows we are on the right path. And when we look at the many KPIs, the pricing positioning seems very positive.

So our sales initiatives, whether in services or in prices to the end consumer, our strategy is working, so we do not plan to make any changes in that price dynamics. I think being able to lower prices is not what we're looking for. We believe we are at the right level right now.

[Eric Alencar, executive]

Vinicius, when it comes to provisions, I think it's important to share them -- to split them in 2 sides, as you did, labor and taxes. On the labor side, we have a group within Carrefour at an unusual time because we are at a transformation time in the company. So whenever you're closing stores or opening stores, that leads to a temporary peak in disputes. And now that we are shifting to second gear in this process, we expect this to normalize in this process. Of course, there is a legal period that's mandatory to return to that level. But we see that our operations are steady, but the shutting down of stores and conversion of stores lead to that peak.

Now on the tax side, we are reducing our tax provisions, and that's for 2 reasons. First of all, because of amnesties. We were part of some -- a couple of amnesty programs. And we are seeing -- we're looking at that as nonrecurring, which is why you can see that in the lower lines because they are either connected to old BIG lawsuits or because of new Atacadão lawsuits. And as they -- those programs come along, we tend to join them and as a result, improve those results even more. And on the other hand, there were old lawsuits where we won. And once you do, those become nonrecurrent. Now we have to wait for these new lawsuits to go to trial so that we can transfer all of that to our documents.

[Operator]

Our next question comes from Eric Huang, sell-side analyst with Santander.

[Eric Huang, analyst]

We just wanted to go back a little bit to the Atacadão stores. On the slide, you broke down your EBITDA margin by season in the last quarter, and we saw that 40 basis point pressure when we look at the stores that were open since 2019. So we just wanted to go back and understand a little bit better what the impacts came from. Were that essentially the introduction of bakery, butcher and deli services? Or was there any impact on gross margins as well? What's the legacy operation working from? And how should we look at that moving forward? We believe that in the next few months, the operations with those new services will go back to normal.

[Stephane Maquaire, executive]

Well, in many of our stores, you're right, have been received additional investment to introduce those services, as Eric well mentioned in his presentation. That leads to additional pressure for a few months on the stores' profitability levels. So that has to be said. Every quarter, we saw strong resilience in Atacadão stores. I would say total resilience in Atacadão stores. So we added new services and had some investments made that should mature in as long as 6 months. And that should impact those stores. And this was the largest amount of stores that receive these additional services.

[Operator]

Today's last question comes from [ Yago Sousa ], sell-side analyst with [indiscernible].

[Unknown Analyst]

I have 2, actually. First of all, about Sam's Club. And I wanted to go back to the issue because this steep decline in EBITDA really caught our eye. And we're seeing the decline in Sam's, but not such a spike in expenses as we did this quarter. We noticed that for the first time, we saw investments in new store services. We wanted to understand what services are these which are being added to Sam's Club. And what's their potential with the 4-wall moving forward? Could you give us a more granular information about that?

And again, going back to the sales leaseback agreement that you had, what is the impact of such an agreement at a time when you talk about doing the cap out -- the carve-out from the real estate company? Is that something that you are moving into the future?

[Stephane Maquaire, executive]

All right. I'll allow Eric to take your questions.

[Eric Alencar, executive]

Well, let's start with Sam's Club. We did see a more substantial increase this quarter. And much of that at the end of this quarter, during this preoperational expenses period. And we decided to invest more heavily in the education about these new Sam's Club stores so that we could attract customers more quickly and see results more quickly in these. And these are, therefore, investments in preoperational activities. And if you break down, you see that they're mostly in SG&A. And if you break down even further, strong investments in marketing and preoperational services.

And we did invest in media, on the other hand, and we actually exaggerated a little bit because we are working now to take a step back a little bit from the initial investment. And these are natural adjustments in retail whenever you're working on ways to leverage the formats you work with. So nothing new there. Again, long term, our prospects for Sam's remain unchanged. We are launching a lot of new things. So in the near term, those types of moves are very common.

[Unknown Analyst]

About your carve out, is there anything that you have to report? Has that moved to the back burner?

[Stephane Maquaire, executive]

Well, let me tell you this. As the market evolves, we evaluate what's the best format. So carving out is not our priority right now, and we will go forward with that when we believe is extremely accurate for our stakeholders. What you have to consider is these options are all on the table for us to move forward with whenever we feel is most appropriate.

[Operator]

This concludes our question-and-answer session. I will now turn over to the company for their final remarks. Please, Mr. Maquaire.

[Stephane Maquaire, executive]

Thank you. I'd like to thank everyone for joining us and for all your questions and for the time we've spent together. I think that we are reaping the rewards of the work that we did at the beginning of the year when we really put the house in order. For example, adjusting our prices in retail, with new services in Atacadão and growing our active membership base in Sam's Club and continue to strengthen our digital arm and adjusted to the change in revolving credit regulation.

And what we showed is that we are actually growing in our sales dynamic and actually outpacing the market, gaining market share and like-for-like, we know that the top line is always the most important thing in our business. And we are now stepping into the fourth quarter, which is the strongest quarter of the year to end 2024 when we're showing very different trends than what we had throughout 2023, when we are still integrating the BIG group. So there are even more results to reap from the work that we've done.

So I'd like to thank our entire Carrefour Brasil for this result and which continues to work to deliver even better results in Q4. So once again, thank you very much. And we'll see each other soon.

[Operator]

Group Carrefour Brasil's Q3 2024 earnings conference is now closed. The Investor Relations department is available to answer any additional questions. Thank you very much for joining us, and have a great day.

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