Lojas Renner SA

BOVESPA:LREN3

Earnings Call Transcript 2022-Q4

[Carla Sffair, executive]

Good morning, everyone, we're going to begin the 4Q '22 video conference in year of 2022 of Lojas Renner. We have with us Fabio Faccio, CEO, and Daniel dos Santos, CFO.

So before I hand over to them, I have some announcements. This is being recorded and simultaneously translated. [Operator Instructions]

And before we continue, I'd like to clarify then any statements made during this call relating to the business outlook and operating and financial goals are our beliefs and assumptions and are based on information currently available and may or may not occur. About the Q&A session, the questions will be made by audio, so you can click on Q&A and be in line, or in writing in the Q&A button. At the end I'll explain once again.

So now to begin, I'd like to hand over to our speakers.

[Daniel dos Santos, executive]

Thank you, Carla. Good morning, everyone. Thank you for attending our conference call for the year of 2022 and the fourth quarter. So first of all about revenues. In 2022 we presented growth 37% compared to 2019, and 21% year-over-year. That has been 7 percentage points higher according to the apparel index and continuous gain in market share. When we look at 2022, we can see that we have a very specific evolution across the quarters. In the first half year, as of February, we had an increase in mobility, going back to social activities and increasing the sales speed in the following months. And then we had a second quarter of robust growth, which is much higher than the market average. In the second half of the year, we saw colder temperatures than expected, the election, the World Cup and a more challenging macroeconomic environment, lower purchasing power given the high inflation. And delinquency rates not only impacted their flow, the traffic in the points of sale. And that was very clear in the fourth quarter.

Even though the month of December was in line with our expectations because we had good performance in Christmas, the 4Q '22 was similar to the same quarter year-over-year. The performance in the fourth quarter that was very strong where we grew approximately 3x the market. But without a doubt, that shows a tougher economic reality such as our stores in more mainstream places were the ones that made us grow less in the fourth quarter.

We have made one-off adjustments according to the market and in merchandising. So we're expecting the positioning and unique value proposition that is more suitable for our customers. And now in 1Q '23, we've seen the results of those initiatives and sales are in line with what is expected. We're still gaining market share.

About digital GMV, so our growth, continues with relevant growths of 24.5% in 2021 and 33.2% compared to 2019. Our omni strategy was effective, enabling customers to pick the most convenient channel for purchasing. And the share achieved 13.5% in 2022. Our omnichannel base is still growing, achieving 11% and accounts for 30% of our revenues. The marketplace is still evolving with 860 sellers and considering Camicado and Renner, which accounts for 8.5% of the digital GMV. Across 2022 with the consolidated content strategy, Renner has more followers in social media and at the top of Instagram and TikTok.

In the quarter, continuing on our growth path and improvement in profitability of the channel in digital channel grew 6%. In the year-to-date we have 5.8 percentage points with the share of digital sales. And we're gaining efficiency in online sales. We achieved 76% in D+2 in Rio de Janeiro and in Brazil. And as we have many activations with influencers and other initiatives.

In the gross margin, we're on a path of growing the gross margin. We had a 1.1 percentage point increase compared to 2021, making us even closer to the levels pre-pandemic. And like to highlight Camicado's 5.1 percentage points in gross margin compared to 2021. Better inventory and more efficiency in commercial management enabled us to have historically low levels in mark downs in 2022 compared to previous years. At Renner, the fourth quarter margin, we have efficiencies in prices for consumers. But the lower share in the assortment and the new collection beginning of the season, given the temperatures, lower temperatures affected the margin for the quarter. We ended the year with inventory levels a bit higher than expected, but still better than 2021.

So operating expenses. We're still on a path of gaining efficiency, in maintaining a reduction of 1.3 percentage points compared to 2021. When we see the chart on the left where you can see the evolution in the 4 blocks and the same logic that we had for the closing of 2021, you can see that you have gaining scale and efficiency of the operation even though we have a more challenging macroeconomic scenario. And there's the new distribution center in Cabreúva. In digital, you have the spread system with the drop of 19% compared to 2021 and CAC with lower share in that sense.

In the ecosystem we have an effect of the investments made in 2021 and the carryover. On the right, I'd like to highlight the performance of 2022. So we grow 61%, which is much higher than our expectations. We had an increase of 5.2 percentage points in the margin compared to 2021. And we continue with the advances in gross margin and expenses, but they've also benefited by the lower levels of PPR that I'll mention further into the presentation and higher recovery of tax credits. So approximately 2/3 of recurring increases and the other not. So significant to the operation of retail compared to 2021.

Here are the results of Realize, our financial product. So they were pressured in Q4 and were lower than our expectations compared to the performance in December of the retail industry affected the portfolio. So it's half of what we expected. That in addition to the customers that are eligible for approval, meaning they were not blocked, that dropped 5% compared to 2019. And still with an external environment with increase in delinquency, even though we are in that scenario, we still had generated revenue. And the losses were affected by a difficult macroeconomic context and resulting in higher provisioning of losses as well as recovery of credit.

And it's worth noting the net loss that was positively impacted by the result of the sales of part of our portfolio that was already written off in the amount of BRL 20 million. And it's an older portfolio that had already been written off. It doesn't show any impact to the portfolio.

And on the Realize path, these are some important aspects. So we understand the current situation that Realize is going through, and the evolution of the work that we've been doing during the whole year. The first aspect that I'd like to mention is the migration of Meu Cartão, which was a necessary movement and it was done responsibly. So the first point is competitiveness. A co-branded product is more flexible and appealing to a customer. That's why we decided to launch the co-branded card. So the, our card would play [indiscernible] with our customers.

We began this transition after other market players did so, the profitability and sustainability of the portfolio. The co-branded card offers more options to generate revenues, more share in services. And lifetime value is 20x higher than [indiscernible].

On the left of the slide, in those 2 blocks you can see that 70% of the customer base of Meu Cartão card is because of the migration of the private label. And the 70% accounted for 80% of the limit available of expenses of the customer base or card base. When we move them, we have their entire payment and purchasing history. The customer base remained stable from 2019 through 2022, and we replenished some that were lost to the pandemic. But by expanding Meu Cartão and the changes in the scenario in Brazil in addition to credit leading to high delinquency rates in Brazil that also affected Realize.

Some important information on this other chart here. First of all, on the top of the slide, we see the risk profile that we have from 2021 and beginning of 2022. So we did not have an expansion based on a worsening risk profile. Here, on this chart, that as of Q2 it was clear for Renner and the entire industry that the credit restrictions reducing the exposure of origination to a higher risk group and gradually lowering the number of approvals when we compare that to the previous year. And we've gradually balanced out this in the product mix in private label and Meu Cartão.

The riskier profiles are first part of the private label. So we start off with a private label customer, we understand their purchasing history and then we move them on to Meu Cartão. In addition to the initiatives, we took more action in collection, adjusting the commissions to partners, review discount policies, installments, negotiations as well as the written portfolio that we mentioned before. So when we look at the delinquency levels, so we have 2 things important here. First of all, on the left, we can see that we have high levels, high but stable levels. And as you can see on the left. But then we have a sequential drop of the 60-day overdue. And for the 90 are also a consequence of origination and lower expenditures in the portfolio. And based on what I mentioned in the previous, that the portfolio grew less than the forecast and because we have the stabilization.

So the change in our portfolio has already presented results. So in over 60 and over 90, you can see a significant sequential improvement in delinquency. Even though the results are lower than expected in Q4, the actions in risk management taken in 2022 gives us a better performance in 2023. So in the first quarter, it's still pressured with the delinquency levels. And you'll see that a little, but we're confident in the recovery as of the second half of 2023. We'll continue to work to improve that and bringing in more assertiveness to Realize. We're integrating it to our fashion ecosystem and provide this benefit for our customers. So today we have 18 million customers active and 6 million at Realize. So we still have an opportunity to increase that and when we consider our customers from retail.

Now about total company EBITDA. So for '22 43% higher year-over-year given the better operating performance. However, the performance is under our expectation in increasing that for -- compared to 2019, especially when we consider Realize that we mentioned beforehand. For the total quarter, this is 18%. And with the gross margin, you can see here our operational expenses with better rates of recovery. We had better distribution this year, leading to a forecast under the regression of the fourth quarter. And in 2021, the company distributed the PPR non-concurrently.

And this is the net profit, which was a record for 2022 due to the better performance in retail with BRL 1.3 billion, 52% were distributed in compensation. What's important is the RIC increased in reinforcing the company's commitment to returning capital. This gives us some comfort to continue investing in the value proposition. We have a cash flow position with BRL 3.1 billion. With this new restructuring or reorganization, we recovered the shares and amortized more in increasing opportunities. So we continue anticipating the dividends for 2023.

So now I'd like to pass the floor to Fabio and the other presenters here. Thank you. Thank you, Carla.

[Fabio Faccio, executive]

Just to reinforce here, Daniel, and make it clear that we continue working on developing our lifestyle system. We've done a lot before, but we still have a lot to do. Now we are going to reap the fruits from 2021 and 2022, but we still have to pave the road to where we want to go. We have now a better company, a better structured company, more tools, more possibilities. And the trend is to be even better. We are better. We were better at the end of 2020 than in 2021. And certainly we will do even better in 2023. Our active basis has around 19 million clients with the omnichannel clients in focus, providing our better margins and this is going to be better for us as well.

In addition to the digital events, as Daniel said, we had important evolutions in digitizing our stores as well with the omni proposition and digital channels, but mainly integration without the stores. So we increased participation of these new modalities for payments in the brick-and-mortar stores from the employees' devices or client devices, but mainly highlighting our self-service cashiers or self-service stations. We are the only ones in Brazil working with RFID reading the SKUs of the product. And the same system can also activate the alarms in addition to cashing out the items.

There's nothing like it in Brazil. We have already 437 self-service stations in Renner stores. And we want to reach at least 90 more stores this year. And as I said, RFID will be important. And we are the only apparel company in Brazil working fully with RFID codes in our point of sales. And still on the expansion investments, we inaugurated 20 stores in 2022 with all of our brands. And 30 of these were new locations. So it's an important expansion, adding new markets to our portfolio, bringing in more sales outside of the brick-and-mortar stores and also in boosting sales in our digital channel.

We've also increased our digital assortment. We have 250% more assortment with support from our marketplaces in Camicado. Our online service level, as Daniel said, up to 2 days are up to 48%, 70%, 80% in the metropolitan areas of Sao Paulo and Rio. And we expect to reach the same rate around Brazil very soon. And still on logistics, we had a large investment in our Cabreúva DC. And according to our schedule, we have already run all the tests at the end of 2022. And now we have started operations at the beginning of 2023 with our soft entry.

We have Camicado operating from there, and we are going to slowly increase the volumes, which is currently at 10%, and we're going to gradually ramp up in the next few months. This new DC is one of our greatest investments. And this will allow us to gain efficiency, speed, synergy among the businesses. And this is one of the main elements to recover profitability as well. It's the first totally omni DC in Brazil, operating with fully integrated dock and totally available both for digital and brick-and-mortar stores operating at 100% SKU-based. 100% SKU operations from this DC. And in terms of the logistics network, it is a great location for us, providing great synergy to all of our businesses, leveraging Renner's scale for all of the channels and companies. So this brings in a great deal of efficiency.

So this is in line with our strategy to expand, invest, become more attractive for our clients with our products and services. And we've also launched our new soft launch program, and we also have our digital platform. And the combination of these 2 initiatives will reinforce the relationship with our customers, bring more ease and benefits for them and faster the omnichannel clients and the Realize services and cross-branded services from between Camicado, Arujá, Renner, et cetera.

And with that, the services revenue has also gained more relevance and should also increase continuously reduce -- thus reducing the dependence on credit. So we have our strategic priorities here, also seen on the slide. These are the priorities to accelerate our growth and focused on being more references in lifestyle, responsible fashion and also we want to improve the agility, the development and speed of our collections, production until this becomes available to our customers. And with that, we want to mitigate the risk of fashion to be more assertive with our products, increase our margins and sales, improve our efficiency, improve our assortment at lower risks.

So we also do this turning our chain more agile and more efficient. And this becomes a virtuous cycle for our customers. Our results get better and our partnerships get better. We also have an important -- another important investment in our logistic platform in addition to our new DC which is ramping up. As I said, we also have transformational exercises from the operations in our logistics chain, looking at the synergy between the brands to leverage gains of us and operating 100% on SKUs. And all of this provides better margin and gains in efficiency which is also in line with the expansion of the omni experience. We're going to accelerate the conversion of clients from the mono channel to the omni channel and in our brick-and-mortar stores as well. This brings gains frequency with better margins, and we continue gaining scale on digital, but with more profitability, not only improving the services usability and predictability, but with better assortment for our clients.

From the point of view of the value adaptation there is an organic law reducing the dependence of paid flow, reducing the cost of client acquisition, both from the initiatives for speed, assertiveness and content and loyalty generation. We are still advancing the recovery of attractiveness and profitability with our financial operations using up ecosystem with better integration of ROIC as I mentioned previously. This creates benefits not only for the financial services, but for the different interfaces as well.

Well, in the last few years, we have been facing some external challenges, the market has become more challenging, but we continue to evolve. Year-over-year, we continue evolving. And now we are at this point where we tend to be reaping more fruits than investments. We continue to invest. We will probably invest a nominal value similar to what was invested in the previous year but with greater revenue and better results from these previous investments. Today we have BRL 2.5 billion in cash, which provides great comfort to continue accelerating and continue evolving and investing. We see that the client -- this is a more challenging environment for many companies, but we are at ease from our -- with our results to continue advancing with solidity and consistency.

Even in this challenging time, clients are looking for reliable brands. And I think this is also, once again, like we saw this at the beginning of the pandemic, we now see some of the economic effect from these last few years. And the trend is to strengthen our market gain as well. Renner has always been at the top during these challenging times. And once again, this is our trend to continue gaining market share, both from the competence and the brand. And due to all of these different initiatives in the last few years and with some of the examples provided here, we continue working to offer an appropriate value equation to our clients, as Daniel said. Within our strategy, we are value prop, how we can be more assertive to adjust our prices. And we've also seen a very positive trend throughout the year and in the next few months with lower inflation effects on our cost and product.

And probably throughout the year, this might even bring this positive trend to us, which should provide a gross margin and evolution. And Realize, although this is a very challenging environment as well, we see positive signs from all of these different actions, as Daniel showed. And this should also reflect an improvement, especially in the second half of the year. We continue to evolve in the digital channel, but with profitability to improve freight cost, to improve efficiency in digital and our omni efficiency as well. We have several opportunities for 2023 to see these constant improvements for our efficiency in SG&A and revenue. And lastly, we are prepared and ready to enchant our clients even further with continued evolution as well.

Well, now we go into our Q&A. But before, let me ask Carla to tell you something.

[Carla Sffair, executive]

Well, before we begin the Q&A session, I'd like to invite you all to our Investor Day. It will take place on May 4. And we're going to give you more details and information as we advance here. So the idea is that we have our call and then have the Investor Day to talk about growth and the projects that we've been focusing on a lot. So we'll provide further information when the time comes.

[Carla Sffair, executive]

[Operator Instructions] So for the first is from Vinicius Pretto from Bank of America.

[Vinicius Pretto de Souza, analyst]

Congratulations on your results. So could you give us more information about the tax credit recovery in the fourth quarter? How can we think of that looking forward? And you've been doing great work on that. So what else can we expect in opportunities moving forward if they're relevant and how relevant they are? And second question is, we see a lower share of your own cards in this quarter. You also managed less origination than expected because that's a reflection of these customers that have been blocked. So how do you see your own card in sales in 2023? And have you seen any movement of the blocked customers to other payment methods? Or is it directly impacting your sales?

[Daniel dos Santos, executive]

Thank you, Vinicius. Well, first of all about the tax credits. This year we had 2 tax credits, and you can see that in the explanatory notes, that happened this year. So their tax credit recoveries, be it through case law or court decision, so some are one-off. And to be honest, we -- it's really hard to predict what's going to happen for the upcoming year. We imagine it being more normal. So we believe that, that would be normalized in 2023, in line with the historical average that we've had in the past. About the lower share of Meu Cartão. Well, with more restrictive policies that affects the share. But as you saw on the chart that I showed, the entire market is feeling more pressure. Everybody is talking about stricter criteria in providing credit.

And Realize follows the same logic. And what you saw on the chart is that we have a possibility of working on that mix of Meu Cartão and private label. And in the past 3 or 4 years mainly, we have more origination in private label. And that should continue in the upcoming months. And that will help us to recover the share of Meu Cartão. And the restriction in a way exists for many people. It exists in the market. But when you have the private label card, it becomes an interesting option for customers considering the advantages that it has. We see this as something that's like a one-off, and we should see slight recovery in upcoming quarters.

[Vinicius Pretto de Souza, analyst]

Perfect. Very clear. I have a follow-up on that. You mentioned improvement of the new batches, and that's very clear in the chart. When you see current scenarios? Do you think we're closer to a moment of going back to providing more credit? Or are you still being cautious?

[Daniel dos Santos, executive]

I'd say a moment of caution because when we see economic indicators, the curve of worsening delinquency is better, but it's still there. So we're monitoring that. We do believe that as of the second quarter, that curve will show a dropping trend and then we can reassess and decide the strategy that we're going to use. So right now we remain cautious. We're monitoring. And as I mentioned, we're favoring origination through private label. But across the first and second quarter, if we see an evolution of the indicator and of the industry, then we can go back to origination maybe with a different strategy.

[Carla Sffair, executive]

Next question is from Dannie from XP.

[Danniela Eiger, analyst]

I have a couple. First of all, is a better explanation about the first quarter dynamics. Daniel mentioned that it's in line with the forecast. So can you give us more visibility about what that means and also connect that to the adjustments in price architecture. So not only in your keys, but in general, there was a strong transfer price given the raw material prices. But now with the macro scenario, that's an important challenge to see consumption happening. So what can we expect in terms of these adjustments or maybe even drop prices to faster volume. So give us some visibility about what you're doing in the first quarter and the impact of sales.

And second, to Fabio's point about the ecosystem and reaping the results that we should see in 2023. So on the chart you showed us, it's you see '24 and '25. So maybe '23 is the beginning of that movement of capturing efficiencies, but also I'd like to see this here about the main levers that you see in games in gross margin and EBITDA. And if you could comment, I know it's harder to be accurate on this. We've had many discussions in the tax discussion about potential changes and adjustments that would impact the retail industry in a relevant manner. So I'd like to know which discussion is on your radar as a potential risk.

[Fabio Faccio, executive]

Thank you for your question. About the performance not only for the quarter and the year, I'm going to talk about the macro scenario. So we've been seeing and there are different scenarios, right? Daniel well explained in the beginning of the call that in 2022 was a very volatile year. So sometimes you look in the short term. And then you have a different expectation of the normalized idea. So in the beginning we thought, well, is this a trend because we had a very good quarter. No, that's an outlier because there were some nonrecurring that were positive. So about winter and recovery of traffic in the stores, and that helped us in the second quarter.

On the other hand, in the fourth quarter, we also had some nonrecurring impacts. So an extension of that in the beginning of the spring and summer. And then the World Cup took away that traffic, and that's not recurring. So some people are thinking, well, what's it like moving forward? I would say that the second quarter was not a reference nor was the fourth quarter. They're nonrecurring. So our expectation for the year is positive. It's about growth, growth in sales with a reduction on expenses over revenue and gaining margin and profitability. That's the expectation for the year. During the year, we expect better gains. So the first quarter is better than the fourth quarter and so on and so forth. So we have a positive outlook for the year.

I don't just want to talk about the short term because it's really early to talk about that. And when you ask about the price adjustments that Daniel mentioned in his talk, it's part of our strategy. This is not a change in strategy. We feel that the customers' purchasing power is suffering from pressure, especially low and middle income. They feel more pressure. So we see clusters in stores, like Daniel mentioned, that have a target B and C+, mainly they usually suffer more. And we don't feel that problem in the stores where people have a higher purchasing power. And we have joint efforts with our suppliers so we can have a more appealing price or more quality at the same price level, so to improve the equation of value for our customers.

And at the same time, solutions and products that these customers are demanding according to that specific store and value proposition. And what we've currently been seeing in prospecting and looking at the market is that the pressure is lessening. So in the past years, we had raw materials going up, freight, international freight going up. And now it's the opposite. Freights are dropping. Raw material prices are going down as well. And the industry with higher production capacity compared to the demand that we see in retail in general. So that's a positive outlook in our opinion.

We've been providing better equations of value for our customers within our value proposition. So especially now, in the upcoming months, we should see lower pressure and having margin growth and consequently increasing sales because if price is increasingly more important to our customers, when we get better prices with the same product or even a better product, we can have not only gains in margin but also in sales during the year. Would you like to comment?

[Daniel dos Santos, executive]

I'd like to add to your answer. There's also a question from Andrew, and I think we can also answer that. So as Fabio mentioned, we're talking about working fashion, right? So consumers are tied on cash. But the interesting thing about fashion is that you can execute fashion in a way where you can bring in trends and specific things that are unique, but also take -- be careful with the price. And there's also visual merchandising. What does that mean? So when you realize what you put in the store window, or somewhere else. So the product that you're offering and the execution in the point of sale, we try to respect those specific customer moments. And that's the type of changes that we're making. It's not so much about lowering margin because then the price would be lower.

It's actually executing fashion as a product. So one of the principles that uses the market pyramid and price pyramid and execution in stores, that's what -- actually what we're doing. And about the ecosystem and the tax credits, I'd like to say that without a doubt, as of 2023, we're going to reap the results. But actually, we're going to reap more results in '24 and '25, like our distribution center. We're going to have all of fashion in the beginning of the third quarter in there. And we know that, that distribution center, as Fabio mentioned, is a big lever for a lot of things like productivity and efficiency in our logistics chain.

So when we have supply, part of it is from the brick-and-mortar stores and part of it is digital. We want to protect the fourth quarter because it's the strongest one. And -- that's -- we may have a weaker base for comparison. So we want to be sure that things will be smooth in the fourth quarter. That's one lever. The other lever is that we'll increase our efficiency gains in the digital operation in our expansion plan, for instance, that we've always been reiterating that we have an expansion plan in new places. So we want to gain scale in those places in an incremental manner. And as we've explained before, the expansion plan needs to have scalability. And the way the volume is going to grow is much stronger than it would grow in a city where we already have a number of stores. So those 3 elements. So we will collect some or reap some of the results now.

But in '24 and '25, we're going to scale up those benefits, be it through the distribution center or the investments that we're making in digital. So in the marketplace, for instance, that's been gaining more share. It will continue to become important. And it's a driver of profitability for us. So for fiscal and tax, we can say that there's a lot going on, not one specific theme. We've been following all these different changes in the market. And our trust, our confidence is that whatever happens is going to affect all of the players. Everybody is going to work in the same way, gaining more efficiency to try to get through it. And depending on the -- on what happens, we might have to make some changes, but there is no specific concern for us.

And in apparel, we might see some different distribution and tax burdens, and there might be something that affects the price scenario. But we're careful, we are aware, we are looking at everything that is happening so that we can plan some kind of necessary adjustment. And just to add, there's nothing that really concerns from previous judgment. Just to answer some of these questions. We are not seeing any impact to our operations from any of the judicial decisions.

[Carla Sffair, executive]

Next question is from Luiz Guanais from BTG.

[Luiz Guanais, analyst]

I have 2 questions here. My first question, going back to this discussion of the margins in 2023. If you could maybe explain the acceleration of credit concession and what you see in terms of the price adjustments and what -- and any initiative that you might want to use to leverage the top line. And second question is if you could talk about the performances between shopping center stores and the stores from the street.

[Fabio Faccio, executive]

So about the margin, right now I think there is some inflation in the industry that's been very relevant in the last few years, not only in apparel. And this certainly pressures the markdowns, but we do see some inflation, but I believe that gradually this will tend to reduce until it's -- so this is what is playing in our favor because we can see more products. So we want to have more appropriate prices for the clients. And we also want to get into better -- provide better margins, of course. So right now we see the same scenario as in the last few months with a tendency to have a little bit more strength, not because of price increase, but because of the resources that we tend to be able to provide better products at good prices to our customers.

I think this should have a positive impact as well. So this has a positive impact throughout the year. So about the -- what Daniel mentioned, the biggest difference for us is the public profile, right, regardless if it's going to be a shopping mall store or a store on the street, this is basically for our audience. We see that they suffer a little bit more when they are more concentrated in B and C classes and less in A regardless if the store is on the street are in a mall. These shopping malls have a certain -- have a different curve, but now we have to talk a little bit about this and what we say might be -- might cause some confusion. But this is focused on new markets especially.

These new markets and in some cities are stores on the street, they're popular stores. The truth is that in some cities, those streets are "the mall of the city". But we also have intermediate stores. And I would also say that we have another opportunity that we don't mention a lot, but the portfolio of stores adding new stores within our best clusters, and this is still a good potential for us with online -- additional online sales. And we also see some one-off opportunities. We've been doing this, closing this or that store and converting the sales from the store to another store in that same area. So there is no trend of performance in terms of region or if a store is in the mall or on the street, but for social classes.

[Carla Sffair, executive]

Now we have a question from Santander from Ruben Couto.

[Ruben Couto, analyst]

You mentioned a share gain for 2022. Can you share with us how much you estimate the company's share was for this year? And I wanted to understand your view of the consolidation in the industry. And now I think it's happening even with large or small competitors closing down stores. I want to understand what opportunities you see in this current scenario or with the different channels? And even with this discussion that you just mentioned, Fabio, the exposure to different types of public profile of the audience profile that you didn't foresee or didn't imagine.

[Fabio Faccio, executive]

When we look at the market, depending on what we look and where we look, we always have gains. Sometimes we have periods that are a little stronger than -- we had a 7-point gain. The growth is above the average of the market according to official IBGE data. But what we understand is that we should continue gaining market share even with new competitors. But as you mentioned, there are several of them that are just stepping out or exiting. And we saw this a little bit more enhanced during the beginning of the pandemic. And now we see a second wave of competitors closing down and because during the pandemic there was more restriction, affecting our flow.

But now companies have reorganized. And we've seen a second wave of companies, not only small companies but also medium and large struggling. So the competition has reorganized in this market. Some have reduced a lot, their collections, their assortment. And others have just closed the doors and left the market. So I think we are still on a good trend. And with good expectations to grow in this market due to what we have already invested, the new tools and this new organization of the market and confidence in the brand as we've always had. So the opportunity that we have to continue growing in the market is very important. And this second wave that we see in the market is going to reorganize the market.

[Ruben Couto, analyst]

Let me see if I understand correctly. But due to the context of this consolidation, for other reasons, does not change your strategy. Is that correct?

[Fabio Faccio, executive]

No, we are not going to change our position. We continue with our investment priorities. What we have done is one-off adjustments, providing more value to our customers within our proposition where we can have a better value equation for our customers. These are our efforts to provide the same product at the best price or even better product at the same price. So our expansion plan for Youcom and the omni revenue leaves us in a very good position for consolidation. We are gaining share. So we can continue growing share. And you mentioned that the industry is weak, but I think we are very well established, and this allows us to gain share and gain more relevance in the market.

[Carla Sffair, executive]

Our next question is from João Soares from Citi.

[Joao Pedro Soares, analyst]

I have 2 very quick questions. First, just revisiting the medium-term expectation for the company. We had an expectation of 15% top line growth. I want to understand if this is still part of the company's plans and the view of margin recomposition So how long do you expect to wait until you can recover your EBITDA margin? I understand that there were one-offs. The third quarter was a bit more challenging, but the pre-RFS EBITDA result was a little bit below the expectation. So I want to understand if this impacts your medium-term expectations. And secondly, about the investments you mentioned that this year's investment should be similar to the investment levels in 2022. So I want to understand a little bit more about this CapEx.

[Daniel dos Santos, executive]

Well, about the vision of growth. We were talking about that for the year, that would go back to that vision that we had in the past, 13%, 15%. So I'd say that our growth moving forward for upcoming years is still around the same number. In 2023, we also have a challenge of the economy recovery. So I still think that 2023 is going to be more about price. And we have carried -- price carryover from 2022 is still strong. And what's going to make a difference is our ability to recover scale and pieces and volume. So on one hand, we have the -- all the work that we've already done in terms of the value proposition, our expansion in new places. So that could be -- make us a little under or over that long-term vision.

In terms of the recovery, it's pretty much what I already answered to Danny. So the results of our investments. In 2023 we already see some recovery. And then 2024 and '25, that picking up momentum. And we believe that we'll see sequential recovery of the EBITDA margin in the upcoming years, bringing us closer to that base of comparison that we had from the past. In investment, we invested BRL 1 billion, to invest approximately BRL 1 billion in 2023 this or this year. So we're going to open approximately 40 stores. And we're going to have a bit more investment in performance with remodeling the stores actually. So we're going to invest more in 2023 in that to ensure that our stores look beautiful and modern and offer a great journey for our customers. So we'll still have investments in digital. So those are the 3 areas where we will invest 90% of the funds.

[Carla Sffair, executive]

Next question is from Vinicius Strano from UBS.

[Vinicius Strano, analyst]

So we see some news from your competitor in the cross-border side trying to produce an outsourced plans here in the country. I'd like to know your strategy to mitigate competitive risks coming from that expansion. And the second question about the ramp-up costs of the distribution center in Cabreúva. Can you give us an idea about how much that contributed in the growth of your G&A? And what do you expect -- or how do you expect that will evolve moving forward, the cost of the rollout of the distribution center?

[Daniel dos Santos, executive]

I can talk about the competition. So first of all, competition is always healthy. It drives the industry, it adds more value for consumers. In 2022, we collected EUR 3 billion in taxes. In Brazil, we operate with approximately 25,000. And we understand that they're international platform and it's more difficult to tax imported items. And the difficulty in taxing that is unloyal competition, right, because paying -- they're paying less taxes. So that's an important thing that we have to bear in mind. Operating in Brazil and operating in the same conditions that everybody else does, that's great. We see that as a very positive thing, if that happens. We'd be on the same page. It would be equal. And the price differential that's huge today will no longer exist without a doubt.

About the distribution center, I'd say that in 2022 we had approximately BRL 70 million, BRL 80 million that was an additional cost in 2022 to ramp up the distribution center. And we still have 20 to 30 to grow in 2023. And the costs would be able to recover that and the potential benefits that will come from that, meaning the benefits related to storage efficiency and handling and all the others related to how we're going to operate. We'll have more efficient replenishment, markdown levels would be even lower. We believe with the new DC model operation, we'll be able to operate our inventories in a more efficient manner. And that benefits will be felt in -- as of 2024.

[Carla Sffair, executive]

Next question, Thiago from Itaú.

[Thiago Macruz, analyst]

My question is about the co-branded portfolio. We've heard about a very conservative stance in the past 6 months regarding that portfolio given the impact that we had to the portfolio. But still, we see a growth of almost 10% in that portfolio sequentially, which is one of the biggest ones in all the -- compared to all the companies that we cover and all banks that we cover, except for new bank. So I'd like to create a bridge actually, between the more conservative discourse and what I see in the figures. The figures still suggest that Realize is expanding. And I can't see this in the very short term, any signs of changing that.

[Daniel dos Santos, executive]

Macruz, what's interesting to mention is that, first of all, if you compare a portfolio from before and what we have now, the late payments that were 18 are now 28. So part of that portfolio is overdue. So we have to see that vision. The second thing is there's also part of that portfolio that's the migration. So when we compare that to 2019, you can see that the customer base is still the same, it didn't expand. So 5.8 active, million, 1.8 million. And when you see the 5.8 million, the ones that are approved, we have actually less than 2019. So yes, the numbers do show a growth of 10%. But when we also look at the customers and the limits available, that number is not that high.

Moving forward, what we see is that -- and we can see that in the figures, is that we're being cautious in granting credit, obviously, because of the macroeconomic environment. We've been or we believe that the best way to know our customers is through their purchasing history. And then we can move them to co-branded. We believe that in 2023, we'll see an expansion. We see that end-to-end. But it's based on the expectation that across 2023 we'll see a recovery, especially in the second half, enabling us to grow our customer base again. Somehow, like the 18 million retail active customer base, we can still bring a part of that into the card, and a drop in delinquency rates so that we can move customers from private label to co-branded?

[Carla Sffair, executive]

We still have some people in line for questions and other questions that we received in the chat. Given the time, we won't be able to cover all of them. So now I'll open to the last question by audio. [Operator Instructions] Last question is from Joseph Giordano from JPMorgan.

[Joseph Giordano, analyst]

Actually, I have 2. The first one is about the strategy of the brands that we don't really talk much about. So there's Camicado, Youcom that's doing very well. We don't really talk about it. And the other brands like Ashua that has a huge market potential. The first question is about Camicado. How should we think about that brand moving forward? And when you see a drop in revenues as big as it was in the fourth quarter, that's kind of scary. So I'd like to hear your diagnosis on that.

Gross margin is back, but the revenue is kind of weak. Second question is from Youcom, very healthy brand, healthy gross margin for a while now. So today, I'd like to understand how do you see the potential to expand that brand and even potential revenues looking forward to 4, 5 years. And to the last question about Realize. When we talk about the provision, IFRS provision, it shows less adherence than it had in the past. So I believe that, that statistical provision policy was based on the private label history. So I'd like to know if there's a conversation going on to change that. But in terms of the IFRS to have more adherence of Meu Cartão in the portfolio.

[Fabio Faccio, executive]

To summarize Camicado. Like you well said, we had significant growth, and that shows that there was a moment in the past where we had too many sales. And in the comparable base, you have an unhealthy growth compared to the previous year. So we did adjust that to our products, to our strategy. And in comparative terms, there's a loss in sales but healthier sales. So we've been gaining efficiency in Camicado. We should still have room to -- for margin improvements. And that's mainly based on the improvement of our assortment with products and strategy that's similar to Renner where we're increasing the share of our own products. That has a better equation for our customers and for us. And part of that comparison is affected because even in unhealthy sales, it was -- especially in digital channel we're getting that right. We're growing, we have room to grow, but we'll grow with efficiency. We'll grow with profitability and good margins, not only in digital, but also in brick-and-mortar.

And in Camicado, we have more opportunities than the other brands in portfolio management efficiency. They're significant changes that we can make that will really increase Camicado efficiency. We're going to have profitability gains in the operation, but not necessarily in this specific moment, right, in the top line. It's an operation that's been improving a lot and will bring in increasingly more efficiency as well as bottom line growth and top line growth. Youcom is just taking off. We have a lot of opportunities not only to continue to grow but also increase assortment and expansion. So Youcom has huge potential. You mentioned 4, 5 years. I imagine that in 4, 5 years from now, we could maybe triple the Youcom top line with very significant profitability and getting close to Renner maybe even so very significant expectations for Youcom as well.

[Daniel dos Santos, executive]

As for Realize and for the criteria of the forecast, something we have already addressed during other calls. First of all, there's a history of recovery here. We follow this criteria, and this is obviously going to be updated from time to time. We have not changed this criteria. But what's interesting here is that we have a different way of looking at this portfolio. When we look at the total portfolio, we had a historically high coverage of the provision portfolio. But now, we are stabilizing the 90 and we're going to see a downward trend because we have new selections and this coverage is going to start increasing. And the total portfolio coverage is going to start going down. So what I can say is that we have no planned changes because we follow statistic criteria which is audited and check. And we are at ease. We don't think that the current coverage levels will be enough for the loss expectation in the future, okay?

[Carla Sffair, executive]

So just a quick correction. Now we'll go into the last question, [indiscernible] from Goldman Sachs.

[Unknown Analyst]

I actually have a couple of follow-ups. It's become very clear that the sales in the fourth quarter have suffered. But I wanted to understand the behavior per category. If you could tell us where -- which categories are high and low performers, just to better understand if sales could also be suffering any impact from the advances of [indiscernible] in Brazil. And the -- your own parts, can you understand how much is private label, how much is not? And if you have a target for 2023?

[Fabio Faccio, executive]

We still don't have a very -- a big difference in categories as I -- as we mentioned. The biggest difference is in the profile of the audiences where we've seen these clear differences not per category or region or size of the store or if it's a mall store or street store, but basically due to the audience, the public, the people who shop there.

[Daniel dos Santos, executive]

If we look at this, we don't usually look at the product level, but we can see more or less the basis, which is around 80, 75-25 which is basically the same for available digital portfolio. But honestly, we are a bit in different here between these. We don't have a specific target for this or that product. What we do know is that, as we said, one product may be more versatile, so it could provide more revenue.

And of course, if we can evolve with Meu Cartão, the trend is still. Look at this, but we have the CCR basis because it's important, because some clients, customers want private label. They want those benefits for those -- from that part, and we also have the risk profile. So these 2 products will coexist. And the strategy is to use these 2 products to offer better options to the customer or what makes sense for those risk profiles and what doesn't. Some want Meu Cartão, some want some other benefits.

[Fabio Faccio, executive]

So I think this is the answer to your question about our own brand part. But the private brand card or Renner card is an entry way. You start getting to know the customer. Of course, you get to know how the customer uses the card, you know a little bit more about the clients. And then possibly migrating this customer to the other cards that provide better profitability. But you have to -- you establish the relationship with the client. And as you get to know the customers better, we can expand into the co-branded part.

[Carla Sffair, executive]

All right. So with that, we close our Q&A session. And would you like to say any closing remarks?

[Daniel dos Santos, executive]

Well just thanks, everyone, for joining, and I'd like to see you all during our Investor Day in May. Thank you, everyone. And we expect to see you all during our Investor Day in May, and we are very confident that we are going to gradually recover our efficiency and EBITDA throughout the year. Thank you. Have a good weekend.