Guararapes Confeccoes SA

BOVESPA:GUAR3

Earnings Call Transcript 2024-Q1

[Operator]

Hello, everyone. Good afternoon. Thank you all for joining us for our first quarter 2024 Earnings Conference Call. Joining us today are Andre Farber, our CEO, who will provide the opening remarks; then Fred Oldani, our CFO, who will comment on our results and Francisco Santos, the Head of Midway Financeira, who'll join us for the Q&A session after the presentation. [Operator Instructions].

This event is being recorded and simultaneously translated into English. The slides shared are in Portuguese, but the English version is available for download on our IR website.

Before proceeding, let me mention that forward-looking statements that may be made during this conference related to the company's business perspectives, projections and targets are based on the beliefs and assumptions of the company and are no guarantee of performance. These are all the housekeeping remarks.

And now I'll turn the floor over to our CEO, Andre.

[Andre Farber, executive]

Thank you, Issa. I'm very happy to be here with you today. Thank you all for joining us. We are very confident. As you could see, we reached very good results in many different work fronts, both in terms of financial and operational results.

But before I give you a breakdown of the results, I'd like to share a video that shows you what we're doing with our brands so that you can get to know our work a bit better.

[Presentation]

[Andre Farber, executive]

So that's a summary of some of the things that we have done in the first 4 months of the year. Here, you can also see some things that we're doing with our brands.

The first point is that we have started to reinvest in the Paul Jeans brand. This is a brand with an amazing history, and we expect to see more and more investment in this brand. We want to raise brand awareness.

So we have started to invest more in this brand in the first quarter of '24. We're also very proud of our integrated chain and investing in Brazil to generate opportunities here in our country where our country needs the most, which is the Northeast region.

So we are sponsoring the Brazilian Olympic Committee for the Olympic Games, and we're taking Brazilian art through our athletes all the way to Paris, taking our fashion all the way to Paris with our athletes and generating opportunities where opportunities lack here in Brazil. And we're very proud of this.

So now let's get started on Slide #5. So here, you can see some of our strategic priorities. The key word here is consistency and focus. We've been working hard on these 4 pillars to increase our sales by square meter and to generate more return for the investments that have been made in recent years here at Guararapes Riachuelo.

Today, I'm going to talk a bit more about the work fronts in each 1 of our pillars. Our first pillar is product obsession. We have been very intentional in terms of the category where we want to invest. These are our core categories: women's, men's and kid's apparel.

And this is very important for our decision-making process, to make strategic decisions in terms of what to prioritize and what not to prioritize and our teams are fully aligned when it comes to this. We've also been investing a lot to improve the structuring of our collections in many different ways.

Revisiting our teams, revisiting our methodologies, rethinking our collections and also trying to evolve our systems and processes. So this is an ongoing work that is already generating results and will generate even more results, creating better products for our customers.

We have the push and pull logistics model. This investment had already been made in our distribution center in Guarulhos. We have 1 of the most modern distribution centers in Brazil. We're very proud of this. And now we have supply by SKU, which allows us to have the right product at the right time in our network of 410 stores. That decreases inventory levels, decreases the need for markdowns. So that's just 1 of the fronts in our product obsession pillar.

So now let's talk about the democratizing access to fashion pillar. We continue to evolve our store clustering process. We are being more granular here to improve our service level and products in different regions for different types of audiences.

And we have also been working hard to reinforce the strategy of our main entry-level products. We see a lot of competition happening in the market, and we believe that it is a competitive advantage to offer these products with fair prices and high quality.

Historically speaking, we've always done that really well, and we continue to do so. You'll see in our slides that we have reached growth with a lot of volume coming from this strategy. Ever since I joined the company, which was a year ago, I just celebrated a year in the company last week, I was impressed to see all the investments the company made throughout the years with very strong assets in our plants, systems, distribution center.

I told you about the push and pull, logistics model that we have, and we've been working on the pillar to make our assets be worth more. And we've been talking about this, and we will continue to talk about this.

We believe that we can use our industrial plant better. We have one of the largest fashion plants in Brazil, and we know that good utilization will give us a competitive edge in terms of supply and margins.

So we continue evolving in this front. And we also believe in the potential of Midway, Financeira, integrated with retail. So we are putting these 2 closer together and with an efficient management of Midway by granting credit and working together with retail, we believe that we can unlock a lot of value from this.

And finally, throughout the years, the company has also invested a lot in technology, creating a robust e-commerce space. But we're also accelerating our e-commerce and we have already seen some positive results here.

And last but not least, our fourth pillar is operational efficiency. In recent quarters, you've seen the maintenance of investments, great CapEx control, investing in the future of the company, but with great discipline and also working with lower inventory levels, even though we're selling much more in terms of volume.

So we've been able to get much better returns here. Our revenues are growing more than our expenses, so that is decreasing our operating expenses. And finally, we're very happy with this major deleveraging of the company. That's also fruit of many strategies that have been implemented in recent quarters to have a robust cash generation. We have had yet another quarter of robust cash generation, and we deleverage even faster than we were expecting. So I'm very proud of this. This puts us in a very solid position to build the path ahead of us.

Now let me give you the highlights of our results. Let's start by talking about our revenue. When it comes to retail net revenue, we grew by 11.4%, with a robust same-store sales in apparel of plus 10.5%. We started the year with inventory disruption because of the SAP deployment in our plants last year.

If it hadn't been for that, we would have reached even better numbers. But our January was impacted by that disruption.

Nevertheless, we did all that while we also increased margins. On one hand, we have margin pressure because of lower added value products. But on the other hand, we have many leverages at the company with a better use of our plant, which gives us growth in terms of margins and other initiatives such as markdown processes and pricing processes that will help us expand our margins.

We also have a good expense management. We more than doubled our retail EBITDA, BRL 85 million against BRL 38 million in Q1 '23, and our EBITDA margin went from 3 percentage points to 6 percentage points. So a major increase here in EBITDA.

Midway results were even more impressive. We were able to grow our EBITDA in 3.5x, we had a bit less than BRL 30 million in Q1 '23, and we reached now BRL 104 million this quarter. And our EBITDA margins also increased from 13% to 18.3%. And we did all that while reducing inventory.

This is, of course, an endless process, but we closed Q3 with almost 30 days less of inventory year-over-year. So we're not accumulating old inventory, and we're working hard to improve our processes and systems in our first pillar, which is that of product obsession.

As a result of all this work, we have generated almost BRL 200 million in cash flow against BRL 40 million in Q1 '23. This is a significant improvement. And we have also been working hard to reduce leverage. So our gross debt was reduced by BRL 1.1 billion in 12 months.

We settled almost BRL 600 million in debt, and we had a significant reduction in the company's leverage, reaching 0.8x our EBITDA in Q1 '24 against 1.7x in March 2023.

So in all fronts, you can see that we have quite balanced and robust results. And we're very confident that our transformation process is running well. It's not over yet, we know. But we have a lot of fruits to come from this. And the quality of the results we have achieved make us confident that we are on the right track.

Now to wrap up my part, I'd like to share with you our restructuring. We have had many changes at the company and some recent changes that I want to highlight to you.

Let me tell you about the main changes that happened since I joined the company. As I told you earlier, I've been at the company for a year now. And ever since I joined, I brought 3 new members to the Executive Board: Carolina Guimaraes, our e-com and Transformation Executive Officer; Ney, who joined a month after I joined, he is our CTO; and Graziella who started in November last year as our new People and Sustainability Executive Officer.

So at the closing of this quarter, she had been with us for 4 months, but these people have been relevant for our transformation process. And we have our old members here, Joao, Jairo, Fran, all these people who have helped us greatly in this transformation process as well as Silvana, who has been with us for 3 years now.

And finally, this last month, we have had another 3 changes. We are nominating a new CMO. She used to be our Marketing Director, Cathyelle, she is now joining the Executive Board, and we are nominating a new CFO and IRO, Miguel Cafruni. He's coming from Fast Shop and a new Board member, Ivo. He is very experienced in finances. He has worked in different banks, and he has joined the Board now last April.

And Fred who is leaving the company. He's saying goodbye, but he was also key in our transformation and deleveraging process. So I would like to thank Fred for his dedication and hard work throughout the 2 years that he stayed with us.

So this concludes my part of the presentation. I just want to tell you once again that we're very happy and very confident about our results. You have heard us talking about our pillars for many quarters now. I believe that the company has assets, stores, DCs, brands, plants and financial company that are all very powerful.

And whatever we do, we can bring more value, more productivity and grow more than our expenses, too. So we believe that there is a lot of value to be unlocked from all of our businesses.

Now I'd like to turn the floor over to Fred, thanking him once again for all his hard work. And I'll be back for the Q&A session.

[Frederico de Oldani, executive]

Thank you, Andre. Good afternoon, everyone. I will start by talking about our operational performance on Slide 9. Our consolidated net revenue reached almost BRL 2 billion this quarter, a 9.1% growth year-over-year.

I would like to highlight the retail performance that had a 2-digit growth of 11.4%. Now looking at the chart on the right-hand side, we can see our consolidated gross profit. Consolidated gross profit grew by 8.7% with stable consolidated gross margins. But I'd like to highlight retail gross margins that expanded 1.7 percentage points quarter-on-quarter.

So when we look at retail, we had a very good performance in revenue and margin expansion. So this has been a quarter that was quite positive in all of our business fronts.

Now moving on to Slide 10. Here, you can see our EBITDA that reached BRL 212 million this quarter, up 5.8 percentage points in our EBITDA margin. So once again, significant growth in all segments.

This is important because once again, we've seen consistent results and growth in all of our business segments. Midway has been improving quarter after quarter. When it comes to retail, we started growing starting the second half of '23, but we had moments of pressured margins last year. But now in the first quarter of '24, you can see consistent performance with robust sales growth and margin expansion.

And that's something we can see in all of our businesses, which reinforces the positive results that we have been achieving now because of all the hard work done in recent quarters.

Now moving on to Slide 12, to talk about retail performance. This chart shows us clearly the turning point in the retail performance starting in the second half of '23.

In the first half of '23, we had stagnant revenue. But starting in the second half of the year, we saw results improving substantially, both in terms of revenue growth and same-store sales growth.

We had a fourth quarter that could have been better. But now in the first quarter of '24, we go back to very robust growth levels at 2 digits with apparel same-store sales growing by 10%.

So once again, a robust performance that reinforces all of the benefits that we were aiming to capture by extracting or unlocking the value from the company's core businesses.

Now on Slide 13, we can see retail gross profit expanding 1.7 percentage points. Retail gross margins is usually much greater than our retail gross profit or retail gross margin because our product mix pulls down our consolidated gross margin. But here, we can see that we're going back to 2022 levels. And we've been telling you that 2023 was a year of major adjustments. We made adjustments in inventory. We had a lot of leftovers from the winter season. So there were many issues that put pressure on the margins throughout 2023.

But now in 2024, we start to see some recovery because we had one-off issues in 2023 that no longer apply now. Our inventory is okay now. For the winter season, excess product, we have a more conservative strategy in place now. And these are all factors that will put our retail gross margins back at the levels that we had in 2022.

Now on Slide 14, you can see our finished goods inventory evolution. As Andre said, we have decreased our inventory levels by 28 days year-over-year, but when you look at a longer horizon, you can see that our inventory level was running at much higher levels.

But we made adjustments last year, and we started to operate at a new inventory level. So the year of 2024, we'll go back to pre-pandemic inventory levels, and we still see room for improvement in this indicator by integrating retail and plant, by improving our supply model and other initiatives. Of course, we're not expecting the same magnitude of adjustments that we had in 2023, but we still see some opportunity for improvement in inventory levels in the coming quarters.

Now on Slide 15, our retail EBITDA. We see a significant increase in our retail EBITDA this first quarter. Our EBITDA was virtually 0 last year, and we have reached now BRL 85 million, a 120% growth and 3 percentage points increase in the retail EBITDA.

And this result comes from a combination of revenue growth, margin expansion and expenses dilution. So we've been able to improve the retail performance in all of the fronts where we operate. So growth with margin recovery and discipline in expense management.

Now moving on to Slide 17. We're now going to give you a breakdown of Midway Financeiras' performance. Midway has a portfolio that is decreasing marginally speaking, as compared to the end of last year. The portfolio reached BRL 5.1 billion, but it's still decreasing.

And that's basically because we are still operating in a conservative manner, more conservative than usual because of some of the challenges that we still see in the credit scenario. But we see here that our losses have stabilized and they have started to drop. In Q1, we had a loss on the portfolio of 5.5%.

Now on the next slide, you can see the performance of our main businesses at Midway, cards and personal loans. For cards, the delinquency rate was stabilized. When we look at the over 90 indicator, we have been stable at around 18.4% in spite of this portfolio break. So here, we are confident that we've been able to stop this bleeding of delinquency in our card business.

But in the personal loans business, we have seen a consistent drop in the over 90 indicators for several quarters in a row, but we still see higher delinquency levels, which makes us even more conservative when granted credit.

Now on Slide 19, you can see Midway's EBITDA. The results here are quite significant. We have grown 3.5x more than the first quarter of '23, BRL 105 million in EBITDA with 18.3% margins, which are quite robust margins.

So here, we can clearly see that we have changed the performance of Midway taking it to a whole new level. And this is related to the policies that we have adopted in the last 5 to 6 quarters. We have been much more conservative when managing our portfolio here. And we're being very careful with the risk return equation in all of the actions that we take. And we can see that this has been reflected in a significant improvement in Midway's EBITDA in spite of the portfolio reduction that we had this quarter.

Now on Slide 21, you can see another very relevant indicator, which is free cash flow generation. Since I joined the company, I've been saying over and over again that the quickest change to be implemented was in cash generation. Last year, we had a very robust year in cash generation and this continues now in the first quarter of 2024. We continue generating a lot of cash flow. We generated BRL 150 million more in cash than last year with our continuity of cash generation, reaching almost BRL 200 million this quarter.

So we have seen improvements in working capital. When it comes to receivables, I mean there is no relevant result here. So the cash generation reflects the changes that we have made to operate in a more efficient manner. And even in the first quarter of the year, which is usually a quarter in which you increase your working capital levels to recompose the inventory levels at the end of the year, but we have already achieved a robust free cash flow generation, which is expected to last throughout the whole year of 2024.

Now the next slide shows you the effects of cash generation in reducing leverage. So here, we can clearly see how our net debt and leverage indicators have evolved in recent quarters. We went from almost 3x in September '23 to about 1.1x only now in March '24, excluding rentals, which is something that has a high effect. Our debt is below 0.8 with net debt of BRL 940 million, which is much lower than we had last year. So the company leverage in my perspective, as an issue that has already been addressed and solved.

On the right-hand side, you can see our debt amortization schedule. We have a robust cash position. We have about 700 million, actually BRL 760 million in debt to mature until the end of the year. Looking at '25, we have another BRL 770 million, but our current cash position can cover more than 2 years, almost 3 years of debt maturing. So that's a very comfortable cash position, which reassures us and puts us at ease when it comes to our debt profile and appropriateness of our cash capital structure.

Now on Slide 23, you can see our investments. In Q1, we invested around BRL 90 million, 14% less than we invested in Q1 '23. Investments were made mainly in technology. So we continue investing strongly in the technology front to improve many operational aspects.

And we have also been investing in other fronts such as plants and DCs. We expect a higher investment this year in this area than we had in previous years. And we are also investing in maintenance, new stores and remodeling of older stores. Okay, that concludes our presentation.

And now I would like to open for questions. Thank you very much.

[Operator]

Thank you, Fred. Okay. So let's start the Q&A session now. The first question is by Maria Clara, Infantozzi, an analyst at Itau BBA.

[Maria Infantozzi, analyst]

Congratulations on your results, and thank you for this opportunity. First, I'd like to explore a bit the perspectives of retail. We see a recovery in volume this quarter. And do you see a similar trend in all store clusters? Or do you see some mismatches, depending on the location and revenue? So that's my first question. If you could comment on that, I would appreciate.

Now my second question is, well, Andre, you talked about how you're focusing on boosting cross-selling between Midway and retail. Can you give us further details about the actions you're taking in that area?

[Andre Farber, executive]

Sure, I can answer both your questions. In terms of sales evolution, we have seen improvements in volumes at entry-level products, so stores that have an audience with a lower purchasing power have been performing better as a result. We don't know how much this is due to portfolio adjustments and how much this is due to a more macroeconomic improvement.

Maybe you can help me answer this question with time, but this is what we've been seeing. And it's been very hot here in Brazil, so we've been facing the challenges of the hot weather. And we think that we're going to have warmer weather in the coming years, but we are still hoping that the cold weather will come to help us sell winter season items. We have had some challenging winter seasons, but we've been able to maintain good sales levels in spite of that.

Now about the integration and cross-selling between Midway and retail. We're looking at this possibility very carefully, and we see that we have a competitive advantage compared to other financial companies because we can make offers considering our chain as a whole. So to give you further details, historically speaking, I'd say that Midway and retail have been managed and -- separately. Midway as a separate vertical offering only financial products. But now we've been inserting Midway in our businesses more and more. Fran here took over our loyalty area this year and the loyalty area has CRM and it looks at customer data, and it serves both retail and Midway.

And that's on purpose because we want to create strategies that includes consumers in all different ways, not looking at retail and Midway separately. I think that historically, we've been doing that, looking at both separately, but now we're putting them both together. So we want to redesign customers' journey and product journey so that these journeys can be fully integrated.

[Maria Infantozzi, analyst]

So do you expect to see results from this work by the end of the year? This year?

[Andre Farber, executive]

Yes. I believe so.

[Operator]

Okay. Our next question is by Gustavo Senday, an analyst at XP.

[Gustavo Senday, analyst]

My first question is related to the previous answer you gave. The temperatures are much higher than last year than the average of previous year. Can you tell us about the impact that this has had on sales in '24?

Have you been implementing mitigating actions at the stores? And do you expect more impacts for Q2? And you've been talking about better utilization of your plants. What do you mean by that? What processes do you plan to enhance?

[Andre Farber, executive]

Well, about your first question, the impact of the winter season. We have had 1 month in Q2 already, and it was a very warm month. There has been no cold temperatures here and we've had a major impact in the south of Brazil, which is a colder territory. But winter items gives us give us better margins usually.

So this is a challenge for us, but we have many other margin expansion initiatives. And those initiatives can partially offset these impacts of warmer temperatures. And of course, that's starting the second half of May, we expect the temperature to drop, and we have Mother's Day coming this weekend.

So I think it's still early to say. But yes, we've been feeling margin pressures because of the underperformance of winter items.

Now your second question was about the plant. Well, we should schedule a tour of the plant so that you can get to know it better. But we have a very large plant with an amazing productive capacity. And we weren't looking at it in a careful way.

But since I joined, we've been trying to look at the plant from a different perspective, and we believe that the plant allow us to react to certain changes. It allows us to have a more sustainable chain, and it also allows us to have margin integrations and to become more competitive. But operating a plant like that is also quite complex. So we see all of these advantages on one hand. But on the other hand, we're also improving our processes so that we can operate better.

So I think I talked about this in our last call, but we started a project to integrate the SAP from our plant with our sales area, and we are starting to see the first results of that now with a better integration of the chain and a bit of that margin expansion that you saw here in Q1 is related to that better utilization of our plant, but also due to other factors, of course.

So don't know how much value we can unlock there from our plant. I would love to be able to give you a number. But I think that with better utilization and by increasing volumes and managing costs better, we'll be able to unlock even more value in the coming quarters.

[Operator]

Our next question is by Eric Huang, an analyst at Santander.

[Eric Huang, analyst]

My question is more about leverage. You are on a journey of leverage reduction. We've seen relevant reductions quarter after quarter. What is the ideal capital structure in your perspective?

And now talking about opening new stores, do you see the possibility of opening new stores later after you conclude this leverage reduction journey? That's all on our side.

[Frederico de Oldani, executive]

Well, I don't think these 2 things are necessarily related. We're not opening stores now because we're focusing on making the most from our current footage. That's our focus now and not on increasing the number of stores.

So when it comes to opening new stores, if we find stores with a potentially high ROI, we could think about that. But we are now doing some remodeling in our current stores or changing categories within existing stores. So we're working really hard to make the most of the current footage we already have.

Now when we look at the consolidated capital structure, we have evolved a lot, and we expect the leverage to drop even further because there are some factors here on our side. Investment levels for the year have been defined. We have investments of up to BRL 430 million approved for the year.

So when you look at how much we believe it makes sense to invest and how much cash generation we have in our operations, considering the improvements that we have already made, we expect to have another year of strong cash generation. Probably not at the same levels that we had last year because we don't have the same inventory level to reduce, but we have other things to be done. But we still believe that this year is going to have a significant cash generation, and we believe that we'll be able to reduce leverage even further, especially in Q4.

So looking ahead, I'd say that at Riachuelo, we should have 0 debt. But we have BRL 300 million in debt at Riachuelo and we have just planned a payment of BRL 350 million. So we're going to pay out all of Riachuelo's debt.

And at Guararapes, we could have some debt, but we believe that ideally, the levels of debt would be substantially lower than they are now because we have some tax benefits there. We have SUDENE, JCP. So the tax situation at Guararapes would indicate that we should have a low level of debt.

At Midway, however, we could have a higher debt, but Midway's capital structure is always limited by regulatory issues. So on the one hand, you want to optimize your tax issues there, but you have to respect liquidity and [ basel ] rate limitations. So you cannot leverage the company that much.

So summing up, I believe that the leverage level is going to be even lower. But of course, that depends on the investments. And the investments today are not being held artificially to generate cash generation. We're investing what we believe makes sense in the current scenario.

[Andre Farber, executive]

Just to reinforce what Fred said, we have not opened stores because of our capital structures. We are not opening stores because of our laser focus on making the most of our current asset park. So looking at a medium-term horizon, I'd say we're now at a phase that will extract more value from our assets, boosting sales by square meter and we believe that the second phase of this transformation will, yes, increase the number of stores but after the implementation of strategies that are being devised now.

So we want those stores to be opened in a more ideal situation. So we have consistent focuses on these levers that we have mapped now, and we've been able to see a lot of value here. So we want to avoid any distractions.

[Operator]

Our next question is by [ Pedro Tinio ], an analyst at [ Safra ].

[Unknown Analyst]

My question is about Midway. Something that drew my attention was the 10% reduction in the overall portfolio, but an increase in revenue of 3.3% year-over-year. Can you tell us about pricing or interest rates, products and services?

Do you think that this can improve this conversion of portfolio into revenue even more?

And the other question is about capital structure. Today, the company is anticipating receivables. Do you expect to decrease this level because of the strong cash generation that you have had at the company?

[Frederico de Oldani, executive]

Thank you for your questions, Pedro. Starting with Midway. We believe that this reduction in portfolio is due to the seasonality effects that we expect in Q1 but this should stabilize from now on.

And in recent quarters, we've been working to improve product penetration. And we've been offering payments, installment to make the most of these possibilities, and this has generated good results.

And we also have an insurance business that sets us aside from the rest of the market. This business is growing by 15%, and we expect it to continue to grow. And we also had the issue of loans. This was still a quarter that had impacts of the digital work that we did, but this is now being cleaned up.

So we're very optimistic from now on. We believe that we have been able to change the performance levels of the company, even with a smaller portfolio. And what we see in the last 2 quarters make us optimistic. We believe that this process is going to improve even further.

About anticipating receivables or advancing the payment of receivables. This is done at Riachuelo. Our cash is large, but not necessarily balanced among the companies. So we are doing that today through Riachuelo. And this allowed us to settle all -- almost all of Riachuelo's debt. So we are repurchasing more expensive debt that we're at 30 to 40 of the CDI. Now with 103, 104 of the CDI.

So it's still very beneficial to use this tool. It's still one of the cheapest alternatives we have to raise resources. But once we settle all of Riachuelo's debt, of course, there will be a point in time when it won't make sense to do that anymore. But we do that with a purpose now to have -- this is actually a cheaper debt than other alternatives to raise funds. So we'll continue to do so while it makes sense.

[Operator]

Our next question is by [ Jean Paul Andraje ], an analyst at Bradesco.

[Unknown Analyst]

Congratulation on your results. I have 2 questions. One is about cross-border. We've been seeing a lot of discussions about implementing an import tariff. This is still under discussion at the Congress, but if this happens in the short or medium term, what do you see here in terms of opportunities? Are you prepared to make the most of that opportunity?

And now I'd like to talk about stock out as well. What is the situation today? And can you give us some color about the possible impact on Q1?

[Andre Farber, executive]

Sure. About the cross-border tariffs and tax isonomy. We have talked about this in other opportunities. We see that the tax situation is very unfair right now. And in spite of that, you've seen a very robust performance in recent quarters. So I think that the authorities are aware of the problem and they're trying to find a way to address this problem.

Of course, ideally, we would have total isonomy. We don't know if that's going to happen or not, but I think that anything that is done aims to improve isonomy. So if we have total or full isonomy, if the tariff goes towards isonomy, it won't affect the model. And if it stops along the way, will improve our competitive situation and depending on where it goes. We can adapt our model, of course.

So that's how I see the issue. I think that the situation can only improve from now on. I'm optimistic when it comes to that. You have to be an optimist to work in Brazil, as usual.

Now about disruption. I think that we left a time of crisis back in December and January, and we saw great improvement, but all of the work fronts that we have in our product obsession pillar have helped us to improve our planning. So we are now purchasing better, being more accurate in our purchasing decisions and working better with the whole chain. So I think that this major crisis was left behind us, and we now have a period of continuous improvement. And we see a lot of opportunity there in the short and medium terms.

[Operator]

We also received some questions in writing, but they are about the winter season and about Midway and these questions have already been answered. So we are now closing the Q&A session. Thank you all for joining once again, and our IR team is available should you have any other questions. Thank you, and have a great afternoon.

[Andre Farber, executive]

Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]