Guararapes Confeccoes SA

BOVESPA:GUAR3

[Presentation]

Good afternoon, everyone and thank you all for joining us for our fourth quarter 2024 Earnings Conference call. Joining us are Andre Farber, our CEO, who will provide the opening remarks and talk about our strategy then Miguel Cafruni, our CFO, will comment on our results and Francisco Santos, the Head of Midway Finance data will also join us for the Q&A session after the presentation.

[Operator Instructions] Before I turn the floor over to Andre. I'd like to let you know that 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 beliefs and assumptions of the company and are no guarantee of performance.

Now I turn the floor over to our CEO, Andre.

Thank you, Isa, for your opening remarks. Thank you, Miguel, Fran and everyone who has joined us here today. This is a special day. We are going to share the 2024 results with you. We had a strong year, and we're very proud. We reached an all-time record EBITDA. We closed the year at a high pace with significant same-store sales growth. And before I give you details of the numbers, I'd like to share with you a bit of the history.

In May, I will celebrate 2 years at the company as the CEO. So I'd like to talk about the landmarks that have brought us to such significant results at the end of 2024. As I said earlier, I joined the company in May 2023. At that point in time, I got a clear mission from the Board to focus on our core business, improve our operating results with discipline and consistency. And so we defined our strategic priorities at the beginning of my work here. And we've been sharing that with you for some time now. We have 4 strategic priorities.

The first is product obsession. We are focusing on improving our fashion content, working with the right and left sides of the brain that is inspiration, but also a data-driven culture with technology. And our second pillar was the democratization of fashion. We were looking at our value proposition and pricing with significant adjustments being made.

And the third strategic priority was that our assets should be worth more. Looking at all the investments the company had been making over the years, we realized we had to extract more value from them. So we did that. We worked really hard. We looked at Midway to accelerate its business. We looked at e-commerce and all of the investments. We made in technology. We looked at our plant, a strategic asset that only we have, and we wanted to do all that with operational leverage and efficiency. So that has been the strategy. The strategy that we wrote down on paper May, June and July 2023. And there are some remarkable facts in our journey that help us understand the transformation of our company and how we reached such significant results.

In August '23, we made an important organizational change to strengthen fashion. We created an executive department that reported to me directly. It used to be at a lower level of the organization. So we strengthened the product pillar by doing so. And we also created a marketing executive department to care for the brand and then looking at the future of fashion, and consumer habits, we also created an executive department for e-commerce. That was a major organizational change at the time, and we saw that the results were achieved, better brand perception, accelerated e-commerce growth and increased volumes.

Since we went through that major transformation also at that time, back in September '23, we also created a transformation office here. This is my right arm here to coordinate all the execution strategies of the company. We started operating with OKR methodology. So we have a clear vision of what we need to do, what measures need to be taken, what initiatives should be implemented, and that's how we've been operating, and that's how we will continue to operate. As I said earlier, one of the pillars was our assets and the plant is a strategic asset that can offer us competitive advantage.

And so at the end of 2023, we started to increase the occupancy of our plant. And in 2024, the plant had significant growth in volume, over 30% growth in volume that improved our reactivity and improved our brand. We were able to offer great prices to consumers with top quality.

So back in 2023, we had a significant reduction in inventory levels, and that led to a great cash generation, cash release of BRL 1 billion in the year, and that's where the deleverage process of the company started. And we continued working consistently throughout 2024, taking good care of our cash flow. We had another significant year in terms of cash generation. So paying attention to our inventory levels, increasing the occupancy of our plant, and we realized how important it was to better operate with our value chain, which is a competitive advantage.

In September, we had another major change, creating a supply executive department to integrate the purchasing of raw material all the way to the delivery of items in stores, which helped us plan better. And that will give us better inventory levels. We'll be able to react faster. And at the end, this will become sales and margins.

We closed the year of 2024 on a high note with a significant reduction in leverage. I'm going to talk more about that later, and that's fruit of all this hard work. And as I said earlier, we were also careful with Midway. We reached an all-time record of EBITDA, both at the company overall and at Midway, one of the best results of a financial company in Brazil. We more than doubled Midway's EBITDA. And since I joined the company in May '23, I've been working here for a year and 7 months. And I joined the company being very optimistic, seeing all the opportunities we had ahead of us and all we could do.

And now looking back at this time, I'm very happy. I see that the company has a great execution capacity when it has clear plans. And so we delivered great results, but I want to share with you that I'm even more optimistic now. I feel this is only the beginning. We're only just getting started, and there is a lot for us to do. We'll continue growing and expanding, and I hope I can come back with you and deliver consistent results quarter after quarter.

So let's get started with our numbers. We'll talk now about the highlights of Q4 2024. We had a very strong quarter. We closed our retail segment with an increase of almost 14% and an even more significant number in apparel. We now have more adjusted inventory levels with a strong collection and the right pricing strategy for the consumer wishes. And that's what led to the significant growth. We were able to achieve this growth also by increasing margins.

Our margin expanded by 1.3 percentage points, which is a strong growth. I always tell the team that it's important to continue growing, but keeping margin expansions, and that's not always easy to balance, but we've been able to do that in an amazing way, and I'm very proud of the work we did here internally. And as a result of this growth with margin expansion and a great retail EBITDA, we closed the year with BRL 438 million in retail adjusted EBITDA and BRL 250 million in net profit. We're very proud of this result. And we closed the year on a high note, as I said earlier.

Now let's look at the full year results. We had solid results in 2024. We had an EBITDA of BRL 1.5 billion with significant reduction in debt. We had growth in retail of 11.3% in terms of same-store sales and an expansion of gross margins of 2 percentage points for the full year. We've been working hard on this to use our plant better to establish the perfect prices with a better management of markdowns and better inventory management. So it was a combination of factors that led to these results. We closed the year with a retail EBITDA of almost BRL 1 billion, up 33%, almost due to our growth and margin expansion, but also discipline in management of expenses.

Midway closed the year with BRL 404 million in EBITDA. We more than doubled Midway's EBITDA. This is a significant result for Midway. We're looking at Midway as a financial company that works closely with our retail, but with discipline and semi-independent management. So we take very good care of the results and make the most of all the opportunities we have to generate value with financial products.

So we had an impressive year. And when we add up these 2 factors, we reached a record EBITDA of BRL 1.5 billion for the company, up almost 45%. We also reverted the scenario of loss we had in '23, and we closed the year with profit. We had almost BRL 90 million to BRL 100 million in loss in '23. And in '24, we reached BRL 235 million in net income. And we have made good investment management. So we had strong cash generation for the full year of 2024, reaching BRL 910 million.

And this enabled us to reduce our net debt by over 50%. So we're very happy about these results. And as I said, we still have a long way to go. We've been on this transformation process for a year and 7 months only, but there is a lot yet to come.

Now next slide shows the impressive results in charts. Operationally speaking, on the left-hand side with our EBITDA chart and on the right-hand side, our net debt and deleveraging. Our EBITDA makes us really proud. We reached almost BRL 1.5 billion in adjusted EBITDA. And our debt was at BRL 1.7 billion in '22, and it now has dropped to less than BRL 500 million by the end of '24. So amazing results.

We're very proud of them, and we're now happy about focusing on building our future and defining the next steps. We no longer have this burden to take on our shoulders, especially considering we now have high interest rates in the landscape. So we look ahead, and we know that we'll be able to continue amortizing our debt to generate more profit for the company.

And to wrap up, I'd like to tell you about our vision for the future. We feel we're now starting a new phase. After these first 2 years in which we focused on operational improvement and an amazing turnaround of the scenario, decreasing our debt, we're now focusing on these 3 pillars: first, experience; second, management and efficiency; and third, return on capital.

So looking ahead, I'd say we're still far from offering the experience that we can offer to Riachuelo's consumers. There are many improvements to be made so that our value proposition can be increasingly stronger and so that we can all consumers more and more. So the work that we started will continue from now on.

And when it comes to experience, we sell products and fashion products is our core business. We'll continue investing heavily in this pillar, improving our collections and our products, investing in our fashion teams, but also investing in systems, processes and intelligence to make this happen. So we see great opportunities to have a more responsive chain. And we see opportunities to work on fashion as a whole, focusing on the two sides of the brain with creativity and analytics. And we know that if we do so, we can generate great results.

The Riachuelo brand is going to celebrate 78 years of operations this year now in 2025. This is a traditional brand in Brazil, and we see a great opportunity to evolve the brand. So we're going to focus on the rebranding of the Riachuelo brand. We see great opportunities to take this brand to more and more consumers and to dialogue with our audience in a differentiated way.

And finally, and the same happens when consumers are buying on our channels. We have brick-and-mortar stores and e-commerce. So we want to improve the experience throughout the year. We're going to make investments so that can happen and so that we can offer an increasingly better customer experience. We're going to keep on talking about that, and we know that if we do that, we can increase the sales by square meter.

We're still far from our full potential, and we see opportunities for gains here and the experience will lead to good sales per square meter and also to better margins. So we count on the evolution of Riachuelo and growth, and we'll see margin expansion throughout the quarters from now on. But that's a long-term vision. That's what we want in the next 2, 3 or 4 years, not only the coming quarters.

Now let's talk about the second pillar, the pillar of efficiency or management. We see a great opportunity to strengthen our plant. We have already strengthened the production at our plant, significantly improving or increasing volumes last year and the year before, but the work is not yet done. We still have a great opportunity here to create more fashion, to be more reactive. And the next chapter in our book is about that. We want to have a more reactive plant with more fashion content, and we believe that this can help us serve our customers better and to add value to both consumers and shareholders with lower inventory levels and higher margins and great results potential.

Now another topic I'd like to mention is store clustering. We see new possibilities of creating clusters and working on stores in order to have a more appropriate value proposition. We have already been working on that with collections, price differentiation or commercial policies differentiation, and we'll continue to do that.

Midway is a jewel in terms of results for us, and it also offers a great value proposition to the consumers in our ecosystem. Midway has grown its results, but we still see great growth potential for Midway. And this is a significant value generation lever or Riachuelo. So we're very optimistic about Midway as well.

And finally, we know about the impact of our fashion business. It's busy with collections, it's competitive. So we need to have a good pricing and markdown management. So we are investing more and more here with artificial intelligence, machine learning and so on and so forth. There is a lot that can be improved. We're already doing a lot, but with all this technological evolution that we see happening all around the world, I can say that we're going to do this increasingly better.

And the efficiency pillar will bring us a more efficient business with a greater turnover, more profitability and increase in gross margins. And we have to sustain growth for several years to come, and we'll do that by improving experience. And we also want to increase margins with intelligent management, technology and clear levers.

And last but not least, we are trying to do all of that with less capital allocation. We are very aware and diligent when it comes to ROI and also to our capital structure. We've been through this great deleverage process that will continue, but we also see other opportunities to improve capital structure that can unlock great value.

So this concludes my initial remarks. And once again, I would like to tell you that we're very optimistic about our results last year and even more optimistic about what is yet to come. We are starting a new phase in this game and Riachuelo still has great opportunities for improvement. So we hope we can come back in the coming quarters, showing solid results, great growth and exceeding our results every time.

Now I turn the floor over to Miguel, who will give you further details about our numbers, and I'll be back for the Q&A session later.

Thank you, Andre. Good afternoon, everyone. It's a pleasure to be here with you once again to share the results of yet another quarter that led us to a spectacular 2024 for us. We're very proud of what we achieved. We're very proud of what we delivered and we're even more motivated and excited to continue on this path in 2025.

So now let's talk about the retail performance. As Andre mentioned, we had yet another quarter of significant and consistent growth on our top line. In retail, our net revenue increased by almost 14%. And in apparel, that number was even higher, which makes us very excited and happy, of course. And on the right-hand side of the chart, you can see the annual evolution of our growth, more than 11% growth in same-store sales in 2024 compared to 2023, robust and consistent growth and the strategy that we have been implementing and that was defined a bit over two years ago is delivering great value.

So if you're not used to going to stores, please do come to our stores, to our channels. The new collections look amazing. The new collections have been very well accepted. Entry-level products are very consistent. And when it comes to fashion, and value creation products, the collections have been very well received. The team has been doing an amazing job, and we think that we'll continue to ramp up the business in a healthy way.

Now on Slide 11, you can see our margins, retail margins, another quarter of gross margin expansion. Retail gross margins increased by 1.3 percentage points, 2 percentage points of growth for the full year. That's a great driver for us. We'll continue evolving our margins, and that shows the strength of the synergies in our chain. We're very proud of having been born in the Northeast of the country, having our plant there generating opportunities. The plant has been very important in our business. And in Q4, we had almost 55% of retail margins and for the year, 54.9% in retail. So that shows the strong consistency in everything we've been doing.

Now on the next slide, you can see our retail adjusted EBITDA, another consistent quarter of growth, almost 1 percentage point in EBITDA margin reaching 18.3% in the quarter. And we have had consistent growth year-over-year. We closed the year with a third growth in retail EBITDA and an expansion of 2.2 percentage points in our EBITDA margins. So we are focused on extracting value from our retail chain, which is integrated and this consistency makes us really excited.

Now let's talk about the operational performance of Midway. As Andre said, this is the best financial company in the market, the most solid one. We're very proud of what we've been doing at Midway. Consistent results, once again, a spectacular year. When it comes to PDD, the quarter has been very well controlled, 5.3% PDD, continuous evolution, showing consistency in the way we offer credit.

But the most important message here is that we're going back to a healthy growth level. The portfolio has grown again, reaching BRL 5.7 billion at the end of Q4, almost 10% growth year-over-year. So we've been working responsibly and diligently to resume this healthy growth in Midway portfolio.

Now you can see our delinquency rates. We're very happy to share these excellent levels of delinquency with lowering rates, both for short term and long term in credit cards and personal loans. We know that in the short term, sometimes one quarter or another may show some volatility, as you can see on the left side here, looking at Q4, but still very well controlled and another quarter of great consistency. This makes us really excited and protected in terms of credit to continue strengthening our retail sales and protecting the business as a whole.

Next slide please. Now let's look at Midway's results. We had a drop compared to the fourth quarter of '23, and that is due to two main reasons. We had a strong comparison basis back in Q4 '23, but also because we took over two important and strategic movements this quarter that go hand-in-hand with what we want to do.

The first is strengthening the integration of our chain and the synergy with the financial company stimulating consumption, not only in credit, but also other financial products. We have a close relationship with our customers. So we've been investing in marketing for the financial company in Q4. And we also added almost BRL 40 million or BRL 50 million in terms of coverage in the quarter.

In the last two quarters, we were recomposing our coverage. We went from 93% to 102% coverage, an increase in 8.1 percentage points. So we're very confident that we are protecting the portfolio and creating this buffer. If some headwinds hit us, we are prepared, and we know that we'll continue to deliver results, not only in the financial products but also in retail with consistent growth. And the company's EBITDA almost doubled. Last year, we had BRL 195 million and now we have had BRL 404 million so we more than doubled the EBITDA for Midway Financeira this quarter.

Now let's look at the consolidated operational performance for the company as a whole. Once again, net revenue has been growing quarter after quarter, up 11%, reaching over BRL 3 billion in revenue. And for the full year, we have reached over BRL 9.5 million, up 9.5%. So we're sure they're on the right track.

Now on the next slide, you can see our operational leverage. We're very transparent, and we're confident that we have accelerated expenses in Q4. We saw a demand and we saw space to accelerate the business. So we reinforced our store teams. We invested more in marketing. So this 0.4 percentage points of loss in leverage in the quarter was very conscious and responsible. And for the year, improving our operating leverage once again with a decrease in 0.2 percentage points, reaching SG&A of 35.5% over net revenue.

Now let's look at the consolidated adjusted EBITDA. As Andre mentioned, we had a great full year of '24, but also a great Q4. Our EBITDA margins had a retraction because of the expenses that we mentioned earlier. That was a conscious decision to accelerate expenses in the quarter. But when we look at the full year, we had a 45% growth, almost BRL 1.5 billion of consolidated EBITDA and EBITDA evolution in all of our verticals and EBITDA margins also expanded. So we're very confident about these results.

Next slide. Now let's look at free cash flow generation. Once again, a year of almost BRL 1 billion of cash generation. In 2023, we had a record year, but we continue to challenge ourselves. And once again, we delivered almost BRL 1 billion in free cash flow generation. And it's been quite pleasant because this is all due to the operational efficiency that we had. There is no effect of assets that we had at the end of '23 when we sold our factory, for example. So we continue delivering strong cash generation, and we're very excited with all of these movements. We continue with our deleverage process. I'll talk more about that later. We still have some things to share with you.

And when it comes to working capital, when we compare to last year, we had a consumption because we wanted to capture efficiencies fast back in 2023. But in '24, we had a better inventory levels. So there was a slight cash consumption, working capital consumption -- but still within our strategy.

Now let's talk about the financial leverage. As Andre mentioned, we've been reducing our financial leverage quarter after quarter. Our debt reduced by 53% for the full year compared to December '23. This is our focus to make our company lighter and leaner. Two years ago, we had a relevant share of our EBITDA focused on debt cost. But we worked hard on this, and this number dropped to less than 1/3 at the end of '24. We've been paying out our debt. And yesterday, we had a confirmation of a new time in terms of interest rates.

So we'll continue to work to make the company lighter and more profitable. This morning, we made an announcement that we're going to make a payment of BRL 350 million in the coming month, and we're very excited. We closed the year with less than BRL 0.5 billion in debt. This shows how the company is sound when it comes to financial leverage.

Now to wrap up, let's look at the discipline of cash allocation and cash protection in our CapEx. We worked with an identical percentage to that we had in 2023. But nominally speaking, there has been an increase, BRL 419 million in CapEx with solid and persistent percentages. We will reinforce some investments. So this percentage will probably be closer to 5% or 6%, which we consider very healthy. We continue generating cash. And with this operating cash generation, we can unlock some investments to continue protecting the company and continue with our long-term vision with consistent top line.

So this concludes my part of the presentation. We're very happy to share these results with you. And now we can open for questions.

Thank you, Andre and Miguel. Okay. Let's get started with our Q&A session. [Operator Instructions] The first question is by [ Calvin ] from Itau.

I have two questions actually. You had strong retail results. You outperformed the market with gross margins expansion in spite of the FX headwinds. So what are you expecting for 2025? Can you tell us about your retail sales performance in the beginning of '25 and also gross margins? Will it continue to grow?

And my second question is about Midway. You had strong results, just a slight decrease when we look at the average of the portfolio in the last quarter. So can you tell us a bit more about that, considering the macro scenario we have ahead of us?

Well, Calvin, thank you for your question. I will talk about retail sales and gross margins first. And then Francisco will answer your second question. We've been working on several leverages to continue with our retail sales growth and gross margin expansion. And these leverages are not over yet. We'll continue to work on them. We are planning to grow in 2025. And we've been working hard and regardless of the conditions of the market, we have been achieving significant results. So as I said in my introduction, our plan is to grow our sales and grow our margins.

Now I turn the floor over to Francisco to talk about midway.

Calvin, thank you for your question. When we look at the NPL formation in Q4, I think there is a math effect because we had a Q3 '24 with a very low NPL. August and September were low. And when we look at historic levels, we had an NPL at pre-pandemic levels. So we made some adjustments and we continue evolving the portfolio. And we see the NPL of Q4, not as a trend. We see that Q1 '25 has a similar behavior. So in Q4, we were going back to a healthier level.

There is no red flag for us here when we look at the indicators rollover, we don't see a trend of growth. And when we look at Q4 '24 compared to Q4 '23, it was better. I think this was a combination of a great Q3 and this risk return equation adjustment that we made in order to extract more revenue.

Our next question is by Ruben Couto from Santander.

I actually have two questions here on my side. Andre talked about the strategy in his introduction and the strengthening of fashion in your own plant is a highlight for this new cycle. And you had 33% growth in production. Can you tell us about the representativeness of your own products in Riachuelo sales today And should we see benefits in apparel margins because of this?

Now another related question to that new cycle that Andre talked about. You talked about rebranding. That's a new element. Is that different from previous efforts you made? What are you planning to achieve? And do you have relevant investments to be made in marketing, store renovation or what?

Thank you, Ruben, for your question. Talking about our plant, we see the plant as a relevant strategic asset that can offer us a competitive advantage. Last year, the plant accounted for 50% of our fashion volume. And then we have other origins, imported products and other national suppliers. Looking ahead, we don't see major changes to be made in this matrix.

We want to continue with this sourcing from different sources because we learn from those different sources, and there are different types of technology that we take ownership of, but we see a continuous evolution of our plant. We want to continue improving the day-to-day management with process efficiency, the use of technologies so that we can improve occupancy, efficiency and management.

But another element, which is even more important, in my view, is the opportunity for the plant to work more with fashion. Last year, the plant had 80% of its flow focused on jeans and basic items. And we see an opportunity to bring more fashion items in a different way of operating with smaller sales and greater speed. And that will enable us to create processes and capabilities, and that will give us speed for replenishment of fashion items that generates more sales and more margins because we have fewer markdowns.

We have more in-season replenishments with that. If we do nothing different, we operate with a plan of 4.5 months. That's the time lapse between planning and delivering. And now with better responsiveness, we see that we can use our plant in our favor, and we can do that in up to 45 days or even 40 days. That's the time lapse we can have now between planning and delivering. This still accounts for a small volume that we do, but we see an opportunity to scale that up.

So I just want to conclude saying that if we do that well, we can have great impact with the right collections in hands. And that can attract more consumers. That's going to be reverted into sales, and that will impact our margins, and that's a key pillar of our future being more responsive.

Now talking about the brand. We haven't commented on this yet. And that's because we believe that strong brands deliver more value in the long run. So we saw our process up until now. In August '23, we created the CMO position at the company and the person joined the company in May '24. So we have had this new CMO at the company for almost a year now, and we see a great potential to communicate our brand better to develop the attributes of the Riachuelo brand and to create differentials.

And once you have that clear idea of your brand, you can invest more in brand, in media or in your point of sales. But you have to know how you can stand out from the competition and what only Riachuelo can do. And we've been working on understanding the differentials of the Riachuelo brand. I have worked on that at different companies, and I firmly believe in the value of doing that. This is a long-term process, but you will hear more and more about that from now on, and I'm sure that this can generate great results. Thanks again for your question, Ruben.

Our next question is by Gustavo Senday from XP.

My first question is about the price versus volume balance in '25, considering the increase in raw materials we had recently. And the other question is about Midway. What can you expect for portfolio growth this year? And can you break it down in terms of new customers or existing customers and about your credit card portfolio breakdown, your own brand or branded cards?

Thank you. Gustavo. I'll talk about price, volume and expansion, and then I will ask Francisco to answer your question about Midway. As we work more on fashion and invest more in improving experience, after 1.5 years of strong volume growth, we start to see a better balance between those two dimensions. And our plan for '25 is to grow price and volume. Last year, we had an increase in volumes mainly. And we have strategies to sustain that, as I said, more fashion items at the plant, investments in the brand, improving experience, better management of our portfolio and investment in key categories.

Now about expansion, which is related to what I just said. We feel that we are going through a major transformation right now, and we are making the adjustments needed in our value proposition, product and brand, and that demands great effort. We have already seen results, but we expect even more results to come. And we will be more prepared for expansion starting in 2026.

This year, we're focusing on making adjustments on our value proposition, product, brand, stores so that we can accelerate the growth opportunities in store expansion starting in 2026. We have balance sheet for store expansion, but it's all about the order of execution. We are going to have a year of growth with store openings at the same level we had in recent years. But if all goes well, we expect to accelerate this growth starting in 2026.

Now over to you for Francisco.

Thank you for your question, Gustavo. We expect to keep the private label and co-branded mix that we have today, which is about 80-20. We use private label to get to know the customers, start this relationship and then we understand in what customers we should bet, and we intend to keep that this way. So the portfolio should evolve with new customers coming in. This happened last quarter.

We also increased the expenses at Midway, and that's related to this process of attracting new customers and our card value proposition. So we expect this to continue this year. We're aiming for 5% to 10%. That's our appetite considering the conditions we expect for the year. So the card is already a bit above that for loans in Q1, we will reach this appetite level. And that's what's going to help us deliver the results we want. We're very optimistic, and this is the appropriate risk level in our view. Thank for your question.

Our next question is by [indiscernible].

I have two questions. The first is about Carter's. I'd like to hear a bit more about Carter's slowdown this quarter. You were growing above 20%, but this quarter, you grew only 13%. So what happened? You had a weak November, but then things improved by the end of December. What can we expect for the first quarter of '24 for Carter's? Was Q4 an outlier? Or can we expect lower growth in Q1 '25 as well?

Now about absenteeism and how hard it is to find labor. Some competitors now have higher costs because of this. So I'd like to hear from you. Do you see any difficulties in hiring new talent?

Thank you for your questions, [indiscernible]. About Carter's, we had many stores opening and the new stores have a negative impact on the same-store sales of older stores. That's natural. And we think that now we have reached the ideal number of stores for Carter's. Unless we change our positioning, we believe that Carter's has reached the right size and ideal distribution. So the same-store sales will have a slowdown because of the opening of new stores.

And also in '23, we had openings of points of sales in outlets. They had strong growth at the beginning and then things slowed down as well. And that's a natural trend. Whenever you have new stores opening, they can start really strong. And since this business is not that big, the growth level can feel the impact. But we see great opportunities to continue growing Carter's, but the focus now is not on opening stores, but actually having efficient management, improving collections, day-to-day management, pricing management, and fashion management as a whole.

Now about absenteeism and labor issues, yes, Brazil is going through a period of very low unemployment rates that increases the dispute for talent for labor and that happened in '23 and also '24, it's now harder to hire new people but we've been doing well. We have strategies to attract employees with variable compensation being offered.

But when you're growing, I think that it helps if you can compensate people for what they are producing. So I don't see a worsening of this situation at the end of '24 and beginning of '25. I think the challenges are the same, and we have been balancing sales and store profitability well in spite of all that difficulty.

Okay. This concludes our Q&A session. I would like to thank you all once again for joining us. And our IR team and our management is available should you have any other questions. Have a great afternoon.

Bye, everyone. Thank you.

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