Raia Drogasil SA
BOVESPA:RADL3
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Raia Drogasil SA
Earnings Call Analysis
Q2-2024 Analysis
Raia Drogasil SA
In 2Q '24, RD Saude achieved several significant milestones. The company operated 3,076 pharmacies, with 70 new openings and 4 closures. They crossed the BRL 10 billion mark in gross revenue for the quarter, representing a robust 15.4% year-over-year growth. The net promoter score (NPS) remained high at 90, indicating strong customer satisfaction despite the large network. Furthermore, the company boasts 49 million active customers and a workforce close to 60,000, which is anticipated to grow to 68,000 in the next quarter. A noteworthy accomplishment was their digital revenue reaching BRL 1.7 billion, growing by an impressive 44%, showcasing the highest growth rate in Brazil.
RD Saude reported an adjusted EBITDA of BRL 824 million, a 7.4% increase, though there was a slight dip owing to price reduction from the previous year. The net profit stood at BRL 356 million, while earnings before taxes (EBT) were BRL 458 million. In comparison to competitors, RD Saude maintained a significant lead, with their revenue showcasing a substantial BRL 1 billion gap over the next market player. This quarter also saw a notable increase in revenue from brand medications, which grew by 16.6%.
The company has made strategic advances in healthcare services and digital transformation. They expanded their reach to 601 cities across Brazil, with a strong presence in metropolitan areas and lower-income regions alike. The digital strategy, initiated in 2018, has been a strong differentiating factor, with digital earnings contributing significantly to overall revenue. Notably, 17.8% of retail penetration is now via digital channels, with 94% of sales coming through modern channels like the company's app.
The company's gross margin for 2Q '24 was 28.2%, slightly down by 0.2 percentage points due to factors like the CMED pressure and PIS/COFINS tax changes. Despite these challenges, RD Saude managed to offset them through structural gains and efficiencies. Same-store sales growth was 9.2%, with mature stores growing by 6.7%, consistently outpacing inflation which stood at 4.5%.
RD Saude's aggressive expansion strategy remains a pivotal growth driver. The company plans to open between 280 to 300 new stores this year, focusing on regions with higher income levels to maintain strong Internal Rate of Return (IRR). The company's IRR remains robust, supported by the growth of frequent and loyal customers facilitated by their e-commerce platform.
The focus on customer loyalty has borne fruit, with loyal customers making up a significant portion of revenue. Innovations in the pharmaceutical sector, such as the launch of new drugs like Wegovy, reflect the company's commitment to leading market trends and meeting customer needs. RD Saude's convenience strategies, like Click & Collect and fast delivery times, further strengthen customer loyalty and market position.
Looking ahead, RD Saude remains committed to maintaining high growth through digital transformation and strategic market expansion. The company projects to continue leveraging its competitive advantages and operational efficiencies to sustain profitability and market leadership. With a stable tax environment and strong financial health, the company is well-positioned for future growth.
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This presentation will be available on RD Saude's Investor Relations website. at ir.rdsaude.com.br, where the audio for this conference also will be posted later. All participants will be in a listen-only mode during the presentation. Later, we will begin the question-and-answer session.
Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of RD Saude's management and on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Our investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of RD Saude, and also could cause results to differ materially from those expressed in such forward-looking statements.
Today, joining us from RD Saude Studio are Mr. Marcílio Pousada, CEO; and Mr. Flavio de Moraes Correia, Director of Investor Relations and Corporate Affairs. I'd like to turn the conference over to Mr. Marcílio Pousada, Mr. Pousada, please go ahead.
Good morning, everybody, and welcome to our conference call to talk about the 2Q '24 results of RD Saude. And this conference call will be slightly different. We have simultaneous translation, and we are going to have another conference at 11:30 p.m. Brazilian time. And we are going to have the Chairman of the company here to explain the succession process. So this is the earnings call only, all right? I have Flavio here with me. Let's go straight to the presentation and try to be brief so that we are ready to talk to you about succession at 11:30.
Let's talk about the highlights of 2Q '24. We have 3,076 pharmacies, 70 openings and 4 closures. We exceeded 100 million in ticket with an NPS of 90, still very high, and this was a challenge for us to keep an NPS so high with so many pharmacies all around the country. We have 49 million active customers in the last 12 months and almost 60,000 employees, probably we are going to reach 68,000 in the next quarter. We also reached BRL 10 billion in gross revenue, BRL 10 billion in the quarter is a lot. And the total growth was 15.4% and even better, the growth in mature stores came to 6.7%, 2.2 percentage points above CMED.
Our market share growth was of 15.7%, with a growth of 0.5 percentage points. Our digital came to BRL 1.7 billion with a 44% growth is the highest growth rate in Brazil. I saw some presentations by other digital players, and we grew more than almost everybody, and our record-breaking penetration in retail came to 17.8%. And now let's talk about Healthcare Services. We had 1.9 million points of service or service moments and 2,100 [ Saude ] rooms we started to accelerate our strategy that we created in 2018. And I'm sure that Flavio is going to give you more color on that. More color on health care services in terms of revenue everyday activities.
Gross margin came to 28.2%. It is under pressure by CMED. CMED is the drug market regulation chamber. We believe that 0.5% of that came from CMED and also the PIS and COFINS tax but also mix, you're going to see more details about that. Our adjusted EBITDA came to BRL 824 million, with a growth of 7.4%. Our adjusted EBITDA was very good this quarter. There was a slight drop, but that's normal considering the reduction in the price increase from 1 year to the next. Our net profit came to BRL 356 million. Our EBT came to BRL 458 million. Flavio's going to give you more details about that. And our free cash flow was minus BRL 303 million.
Now I'm going to give you some more details about the strategy and Flavio will address more details about the financials. This is a number to be celebrated. We reached 601 cities in Brazil. In 3 years, we opened stores in 165 new cities. It's crazy to think how we are present all around Brazil. Brazil is bigger than everybody, and this is the only company in the country that can expand in all Brazilian states with such strength. Out of these cities with more than 100,000 population, 390 cities in Brazil, we are present in many of them. And this is very important for us. We take a lot of pride in the fact that we are present in 600 cities in Brazil. And we are very proud also of the expansion process itself.
I read a lot when I'm on vacations, and I just read a book by Warren Buffett. And he talks in that book about how we have to deal with the competition in our market. And I am sure that that's exactly what we are doing. We have the moat. It's very difficult to do what we are doing. We have 3,076 pharmacies. We closed 14 and some were still in the maturation process, and they might have been open due to an error in our expansion process. And about the 11 stores that we had to shut down that were mature, we decided to do that to better adjust the network of pharmacies. We have some pharmacies still in maturation. 75% of the stores are already mature. We still keep our guidance of having 280 to 300 new openings this year. And we believe that we are going to be very accurate in our decisions to open new stores.
Our IRR is very high. And we can see that the process has been stable. Things are going well. Now let's take a look at where the pharmacies are located. I mentioned that we are present in 601 new municipalities. And they are located all around Brazil. We are going to resume our growth in Sao Paulo. That happens in cycles, right? We saw opportunities to grow in Sao Paulo, especially, in the metropolitan region of Sao Paulo, not necessarily in the high-income neighborhoods. That growth was very sharp. Today, we are at 29%. It might reach 34% to 35%. And then we are going to reach other regions. The pharmacy profile is still the same. We are growing a lot in hybrid and low-income pharmacies. And usually, the new stores are hybrid. They serve the high income population of the region and the entire population in that region actually.
And our market share is still growing strongly. The biggest growth driver for the company is still expansion. We gained 0.5% market share in Brazil. We gained share in all regions in Brazil, and there is no reason why that should change, why we shouldn't continue to grow our market share. We are expanding, as I said, and we are doing that well. We haven't changed that strategy over the past years. And another highlight that I would like to address here in our strategy. And I think that we are creating a differentiating factor here in the market. And we started operating in this department in 2018, and that is the digital strategy.
We reached BRL 1.7 billion in earnings with a 43.9% growth, this is a business that will give us BRL 6 billion in revenue in the year, with 17.8% of retail penetration. In 2018, when we started, it used to be 1.5% to 2%, and we didn't know if COVID would be short-lived thing. But what's most important here is the share coming from the apps is still growing. It exceeded 62% in 2Q, and it went to 60 -- 73% of orders coming from the app. And the pie chart that you see here is very important. 94% of the channels are modern ones. Only 1% of our sales come from a call center. It is important. It's going to continue to be there, but more and more, customers will use the app to make purchases.
And we also have proprietary channels. Of course, we respect the super apps market and whatever they're doing with [ Meli ] and iFood. But we are certain that we need to dominate that technology. We need to be the ones in charge of delivering to customers. And you can see that on our deliveries, we delivered in up to 60 minutes in 94% of the cases. Part of that is collect -- Click & Collect. So the customers place an order and then they pick the product up at the stores on their way home, for example, they want to go to the pharmacies and have an experience with our team and also significant share of our deliveries are up to 60 minutes.
And last year, we had 1.4 million deliveries in up to 60 minutes. That's a very strong movement. We have a marketing campaign now to explain to customers how important this is to us, that we want to deliver things that they need as fast as we can. So this is the new mode for us. This is the next frontier for us. It is going to put us in a completely different level. We are going to be prepared to serve the new customers, the customers that are more and more digital. And I'm sure that this is helping the company a great deal in terms of maturing the stores and market share and curb the growth of competitors.
Now Flavio is going to talk about the financial aspects. I'll try not to interrupt him too much, and he's going to give you the financial details. And then I would like to mention 2 points that I would like to stress, which is building customer loyalty and then we have the Q&A session.
Good morning, everyone. Just to complement that point around digital and that moat is that, that activity alone would be the fifth largest pharmacy network or chain in the market, with a 45% growth, which is quite powerful, and there's a lot of potential there.
Now let's delve into the financial details. Our revenue -- our gross revenue grew 15.4% and retail grew 14.5% and [indiscernible] 27%. As Marcílio mentioned, we have BRL 10.4 billion in revenue. That's a record we're breaking with 100 million in ticket and an average ticket at BRL 100. These are also new records we're breaking. This amount is quite important because if we think about the second player in the market, it accounts for 1/3 of our size of our share in sales. So this quarter alone, we had over BRL 1 billion real difference in comparison to the other players in growth. So that's quite important to us.
We have been striding forward. When we look at the categories in detail, we have a growth of brand medication with 16.6%. That's a very strong growth. When we look at generic medication and HPC, we have 14% growth. That's also quite good. And OTC, about 11%, a bit shyer but we have winter being a bit warmer than normal, so that brings OTC down a bit. And we also have a strong comparison basis in OTC with self-tests with auto-tests that we had last year, we no longer have this year.
Still talking about sales in this quarter, I would like to talk about Rio Grande do Sul and the situation we had there, in spite of the tragedy that had a small impact on our results. So the stores that remained open had an unusual increase that basically offset the stores that had been closed. But that's the least important item. The important thing is that we look after our staff and our clients and customers.
Next slide. Let's look at the store growth. We have 9.2% growth in same-store growth, and the mature store growth was 6.7% in the quarter. That is consistently above inflation rates. So in the quarter, the CMED was 4.5% and real growth was 2.2%. In this -- we have a calendar effect that's 0.9 percentage points because of an impact that we had from Easter this year. It went to the first quarter and it burdened the performance there a bit, but it was offset in the second quarter. But even if you exclude that Easter effect, we have a very healthy growth level above inflation in this period. So we're doing fine.
Let's look at gross margin. Gross margin was 28.2% in the period, and there was a decrease of 0.2 percentage points. This is an important pressure point in this quarter, but it is a pressure point that had been anticipated since the end of 2023 when we saw that inflation was dropping. We always say that when inflation is dropping, the only thing you can be sure about is that the gross margin of the second quarter is going to drop, too. So in this context this year, CMED was 4.5% in comparison to 5.5% last year. This clearly lower. And the CMED pressure has an impact on gross margin, that is minus 0.5% percentage points, rather. And that adds to another unusual but more recurring in fact, from now on which is the PIS/COFINS subsidies, right, the tax subsidies that we have that has an impact in the period, too.
There are other impacts on the gross margin which is the [ 4-Bio ] growth being higher than retail that brings margin down a bit, but it brings the whole company forward when it comes to value. And we think about brand name medications, that's also stronger than other retail categories, and there is a gross margin that's slightly lower. But all of these situations have been offset one way or another through negotiations, pricing and other initiatives. So we have basically these effects from the taxes and we can offset these with structural gains that are quite relevant. The gross margin in the first half of the year dropped 40 bps but we see that the EBITDA has a difference, and I'm going to clarify that in a moment.
Sorry, I didn't talk about the cash cycle. We had 66.9 days. There is a seasonal pressure there, and that's natural for the second quarter. The inventory is 180 days, and the payables is 79.9 days. So payables is rather full. And as the quarter goes forward, that decreases quite abruptly. So we go from 79 to 66 days, and that is what puts pressure on the cash in the second quarter, but that's a seasonal effect. It's quite natural, and we expect it every year. So that's just the point of the curve. We had a 6-day increase from 1 quarter to the next. But that's not important. We have to have a year-on-year comparison, and we had a 1-day decrease and that's quite positive.
In details aside, we have a very strong balance sheet, and the balance is to be used when the opportunities appear. We see more pressure in gross margin and there is an impact on cash cycle, but nothing that changes the direction we're headed. As for sales expenses, we have 17.2% in the second quarter, and there is a 10 bps increase. And the 17.1% that we had in the second quarter last year was the lowest that we ever had. It was an outlier. So we're comparing to quite strong basis from last year. But when you look at the first half year-to-date, we're capturing these 10 percentage points, and that's quite positive. The negative pressure on selling expenses this quarter is that we have 0.1 percentage point pressure because of personnel and distribution centers connected to the operations. And we have 1.1 in licenses in IT and in card payments.
But this was basically well offset by 0.2 to in rent and in marketing savings that we had. And in this group of expenses, we see our increase in the personnel by [ 1,700 ] member of staff. We had 7 -- or rather 57,000 that was stable in the past 3 quarters. And now we had a slight increase without causing it to be burdened. So that's a positive effect that we'll make sure we have the right NPS values. And that was because of the distribution centers. We had 2 -- we had fewer people in DCs at the start of the year, and then we had to reorganize this pace throughout the first half of the year.
The contribution margin has been explained already, and we have 11.1% in the first half and 0.7 percentage points down year-on-year. Now let's look at G&A. That's the message that the market is always looking forward to listening. We have a dilution of 0.10 percentage points in G&A in this half of the year and also in the year-to-date. [indiscernible] in the past conference calls, you used to say that this was the battle that we have. On the one side, we have to make sure that we are investing enough to make progress on digital front and customer engagement, but we also have to pull back the reins when it comes to efficiency in curbing costs and personnel and renegotiations and what not. So there is a strong management effort for us to get to these figures without having a negative impact on productivity.
And there's an important point here, Flavio. We have to understand G&A better. And we have the long-term effects of the company. We have 74% of digital that is carried out through the apps. And a lot of that stems from this investment. So these moats can be seen here. We're very happy about this figure. It can be stable for the future. And if we need to invest heavily, again, the Board is going to be supporting that investment for us to really to allow this company to -- our company to stand out. We're very happy about the figures.
All right. So everything we have experienced so far has our EBITDA of BRL 824 million in the second quarter and a 7.4% margin. But the EBITDA in the second quarter is always a bit more complicated because you have the CMED issue between the first and the second quarters of the year. So historically, the first quarter is the weakest quarter that we have. And this year, it was less weak, so it was more positive. And that is due to the decreasing inflation. And the second quarter is really the strongest quarter when you have decreasing inflation, it's also a bit more modest.
So in one way, we're able to offset this decreasing inflation effect, the impact in the first and second quarter because of the performance we had in the first quarter as well. So all in all, we have an EBITDA effect that is 0.10 percentage points in the first half of the year, and that's quite positive. And almost simplistically could be translated into this PIS/COFINS tax subventions.
This is a very strong figure. We show stability in our business, and it shows that there is no trend for us to change. We should end this year on the levels, nothing pointing to a different direction. There is stability in our performance indicators. And we continue to grow strongly and continue to capture market share and improve our NPS and to go more and more digital. So we continue to have a very solid balance. So there is a lot of positive consequences there.
All right. So net income taxes is something we'd like to highlight and the tax bracket, that is some information we're sharing now. So taxes this year were BRL 101 million, with 22.2% tax bracket. So if we take into account that there are nonrecurring effects here that are 4.8 percentage points. And these are actions we had concerning previous periods, and that's why they're nonrecurring. But if it excludes this nonrecurring effects, but me, we're going to have 27% tax bracket. And this tax bracket is clean. What we're using here is basically the tax shield concerning the IOC. So excluding that, we have full taxation.
So this point is very important because not carrying over with subventions is not a pressure to us. It's a systemic pressure. We have talked about that a number of times already. You must have -- you can't have different approaches. The whole market should have the same approach. Of course, we're taking to court whatever issues need to be taken to court as everyone does. And we see ourselves in a situation that if the court results are positive, we're going to have better results. If the core results yield nothing, then the effect is here for everyone. We know that the pharma chain is one with incentives. So it's important that we remember this.
And we're not only looking at the pharma chain. We're also looking at the others. Some have this more conservative approach like us and some aren't having this approach. So the analysts have to have the best perspective on it. We always joke that we're the only company in Brazil that has nonrecurring revenue. So this is going to come back sooner or later. But what is the right thing to do according to us is that there's no major problem here. The injections haven't gone to the higher levels of court, but the -- well, the news isn't great at this point, but we're healthy in our results.
An important point is that we have always had our network based on streamlining and optimizing our logistics, thinking about miles run. So this makes the whole difference. And this is also a moat that we have here. I really like this word, moat. Now let's take a look at our cash flow. We had a cyclical seasonal pressure in the second quarter due to the pre-peak season. And the total consumption was 580 in the quarter, which is better than last year. The cash cycle is better addressed when we look at the entire year and on the quarterly comparisons. But to do that, you have to put together the resource generation and deduct the expenses. And by doing so, you can see that we had cash generation that allows us to be self-sufficient. So that doesn't affect our leverage level or anything like that.
So it's important to observe that the cash cycle is better now, is going to be better now because the second quarter is not a typical quarter. And here, you can see our leverage level, which is 1.3x. It is the highest level in the year considering the natural cycle, but it is in line with last year if you consider the additional effects like taxes. So you can see that this is going to be in the next -- in the normal levels in the next quarter. Yes, this is all related to the lower CMED rate in the second quarter. And this chart here, we always like to show it, but I think this snapshot is old. There was a spike in our stock price over the past few days after we finished the second quarter. We finished the second quarter with BRL 25.7 in our stock price. And now we are about at about BRL 29 to BRL 30.
At that moment, had a drop in the second quarter of 6.5% in comparison with IBOVESPA, which dropped by 3.3% rather. But year-to-date, you can see that our price increased by 2.3%, and the IBOVESPA dropped by 6% or 7%. So our return on share is about 21% per year since the IPO. So you can see that we have been delivering consistent coherent results with share gain and efficiency.
Thank you very much, Flavio. Now I'm going to give you some more details before the Q&A session, about 2 very important points that are going on right now, so that you have more clarity about what we are doing in our strategy, which is centered on making customers more and more loyal. It is important to us to make them as loyal as possible. In the meetings that I have with you, I always ask you to create your models, considering the number of stores that we opened, the number of stores that we shut down and also to look at the growth of the mature stores, and that is the right way assess our business.
Now I would like to explain to you what is causing our mature stores to grow so much for such a long time. In the past, it wasn't like that. We were happy with 0.5% growth in the past. So I would like to stress and highlight this first chart here, which is the annual purchase frequency. For example, when you look at a report from the big digital players, they usually talk about the number of customers and not the number of branches or units. They always talk about the purchasing frequency. We were talking to a digital player the other day, and that's the metric that they always mention. And we are trying to do the same.
In 2022, we had an average frequency of 6.8. And now that number has increased to 7.8. And the last part of the chart is the most important ones. The loyal, the regular customers, the ones that buy the most that are stores, they give us -- they are actually about 7 million in our customer base. They used to buy 25.5x, and that number has increased to 29.4%, a 12% growth. And the digital loyal customers are very important. In 2022, we had 25.5 purchases, and that number is now 29.4, and that's up 15% more in their frequency. And that changes everything for the future because customers realize that they buy once using the app, but that doesn't mean that the customers will be fully digital. That happens over time. The customer behavior changes over time. They use the pharmacy, then the digital channels, Click & Collect and so on and so forth. That's a multimodal approach. And that is very important for us. We need to understand how the different platforms are doing that. And it's very nice to show you those details. That's very important whenever we talk about making customers loyal.
Another point that I would like to highlight and this is also important when it comes to building loyalty and building recurrence. And that is the launch of Wegovy. And this is a new launch. We are working with the revolution that is happening around the world right now with the new drugs, and we are launching Wegovy here in Brazil. We have 40% of share in semaglutide, which is the active ingredient in Ozempic and other drugs. And we are doing that because we invested over BRL 20 million to be able to receive these drugs, and we know how to do that. We have the entire equipment to do that. We have the cold chambers, the cold rooms and our pharmacies are closer to the first users of this type of drug. This is more expensive drug. And of course, the high income population will be the first to use it. And that changes the behavior the consumers, of course, that changes the way the market sees a health issue, which is obesity. We have been doing the same thing for 100 years, and we are very proud to do that correctly.
So we have inventory available in all of our pharmacies. And we have 4 months of treatment to get to the maximum dose. And of course, we need doctors or physicians guidance to do that. And this market in the United States is estimated to reach $100 billion by 2030. So we are participating in the market as well. We are going to start receiving this medication and the other players will start producing the same drugs in a year, Novo Nordisk, and we believe that this is going to help us in our journey to make our customers healthy.
Now let's begin the Q&A session. And then I will give you my closing remarks after the Q&A session. And this was trialed by -- the trial by fire for Flavio, right, the first conference call. So now we are ready to take your questions. And remember, we do have simultaneous translation if you need it. And then we are going to have another call with Antonio Carlos and myself, and we are going to talk to the sell-side analysts about the succession process. Thank you.
Thank you very much, Marcílio and Flavio. We will now begin the Q&A session. The first question comes from Thiago Macruz with Itaú BBA.
I have 3 questions. The first one is about the top line. I agree with you, Marcílio, about the real growth and how much it should be stressed and how digital is important. But can you mention any other additional factor, any change in the competition? Any weakness that you didn't have before? And that's my first question. The second question is about have you noticed any change in the behavior of drug distributors. For example, when it comes to income tax and [indiscernible] tax. Is there anything different related to that?
And the last point is about selling expenses. If I understood you correctly, I believe that there is going to be a step up on the next quarter, and that might continue in the coming quarters. Is that correct?
Thank you very much for your questions. I'm going to be very polite with the competitors here. I think there is still strong we haven't seen any major change. And of course, people are adapting to the tax changes that happened in December. December 27, actually. So everybody is now trying to understand what to do about that. And those changes remove some cash from companies, and they are struggling in their balance sheet.
But what I have to stress here to you is that competitors are still struggling to scale up their expansion efforts. So that is a competitive edge that we have. We are present all around Brazil. We can work all around the country in a very strong way. So we try to move to markets where we are strong and that gives us an edge. And there's a trend, an overall trend in the market right now in terms of creating digital skills, for example, how to relate to customers digitally. Some are successful in that effort. Some are not, but they work together with the big platforms. And those platforms cost a lot. There's a takeaway in that. But I don't see any major changes happening right now. I believe there is no attack coming from the competitors right now, but all companies are trying to expand, and they are struggling because of that.
But to address your question in a straightforward way, the answer is no. I don't see any changes in the market. Now when it comes to income tax for distributors, well, I think people are working on a different planet it seems like people don't think anything changed. They are still placing the same bets after the administration changes, the federal government changes and then the legislation changes. And people will continue to do the same thing over and over and analysts don't notice that. But we see that the cycle happening. There hasn't been any change with distributors. I have not noticed any significant change there.
But yes, we do see some problems in markets where they're struggling. For example, the smaller chains are weaker but that's not related to income tax or the ICMS tax, nothing has changed so far. Now selling expenses. It's interesting. There is a one-off effect here. The situation in Rio Grande do Sul with the distribution centers and logistics there, with 0.1 percentage point effect. And we are trying to understand how we can dilute that effect faster. And if you look at the people dilution chart, what we did over the past 7 years was tremendous. We have been able to decrease personnel expenses significantly. I think there is more to be diluted still, but I wouldn't change our guidance. We are still working to have a strong NPS, and I think that's the number that should stick to your mind, 17.2%, 17.3%.
Yes. What's important here, Marcílio, is that our strength is the same-store growth, our mature store growth, which is above the inflation rate. The unit economics of this activity is the individual stores, right? So the more you sell within the same store, the more you can dilute all types of expenses. You can reduce personnel expenses on percentage terms, but our NPS grows and that's what we are focusing on. So that's very important.
Our NPS is going to ensure frequency at 26, 28 of visits per year. So that's what we want to focus on. I just would like to add a point to the competition. And also to what you said about the digital efforts, I believe that we are way ahead of the competition. On the digital front, our market share is above 40% but we are growing by 45% per year in this activity. And we have a lot of clarity about the functionalities that need to change, and we have a very well-designed pipeline. We know the benchmark. We are pursuing the benchmark, not in the overall activity, but in each part of the customer's journey, and that makes a huge difference. And it is going to continue to capture good results for the digital front.
And it is also going to help us in terms of growing in our mature stores. That is going to help us dilute selling expenses. That's what we work for. It's nice to look at the past and see what selling expenses were like, and to look at the competitors because 17.2% or 17.3% is good. There's room to improve, but our numbers are very good.
Next question from Luiz Guanais from BTG Pactual.
Talking about unit economics, right, and you talked about the stores. There are 2 questions I'd like to ask. First is how is their IRR developing, especially the more national aspect of it and the e-commerce expansion with the multichannel and the frequent customers, how has that been contributing to unit economics, as Marcílio said, there is an operating effect to be captured in the course of the years, I think.
Historical growth, I mean every Monday, we sit together with Antonio Carlos and [indiscernible] and everyone, that has been yielding fantastic IIR rates. Our IRR has been going up I mean, it went up 2, 3 points and it sustain that growth. So it's still quite strong. Brazil is a very large country. We mentioned 601 cities. 310 with over 100,000 inhabitants. We're tapping into towns with 25,000 inhabitants. So can you imagine how much growth is ahead of us with very good IRR rates? Because we're going to be tapping into South and Southeast cities where there's better income levels.
And when you look at Midwest, for example, it was difficult to tap into smaller towns in [indiscernible] states, but we're doing that well. So the IRR is very strong with the stores. We have a very fun company. We like to find problems and really zoom in on them. And we always try and find if there's anything else that can be done. But we're -- we have got very strong store IRRs. And e-commerce is starting to help because the frequent customer or the loyal customer appears more quickly or the customer becomes loyal more quickly. And when I look at the e-commerce platform that we have had since 2018, it's 100% focused on the pharmacy. There's nothing that we're going to be doing in this company in the next 20 to 30 years, that's not pharmacy-oriented or focused.
We have the pharma services that can't be done digitally in the future, right? You need a pharmacist servicing these people. So that also compounds to the IRR. The frequent customer figures I've given to you show that the changes in customer behavior are not immediate. They take place over time. So the customer buys digital first and Click & Collect. And then he has a delivered home, and then he sees that shipping was cheap. And this is what's changing behavior, and behavior changes over the course of time. And that's what happened to us when we started going digital. I love going to the movies. And I remember when you started buying your movie tickets online, does anyone go to the movie ticket, buying their ticket nowadays? Everyone buys it online in there. So it is a shift in behavior that digital is bringing in.
Just to complement what you're saying, Marcílio, just picking up on your moat. I love that word. And I think 1 strength is this thriving growth that we have but the twist that we may have there and strength is our ability to sustain growth and operations of these stores and all those short flights that we may have. When you think about unit economics and you look at it period, we have had for a while in the recent history, at least, we're looking at IRR that is consistently above 20%. So this is a value generation with each new store.
If you look at the revenue breakdown per store, we're going to have stores selling over BRL 1.1 billion a month. That's a lot. And when you look at the IRR about 20%, that's net of cannibalization, we calculate cannibalization effects. So this is actual increase. And on the upside, we have the closing rate of about 1% when we look at the total number of stores that we open. So very, very accurate openings. We would say we have been opening new stores very accurately. We don't see that in our market or in retail, in general, levels of accuracy that are so good as ours. So of course, the ramp-up is going to be a bit faster with digital for stores, and we don't have the exact figure here, but we have stores with digital accounting for about 30% of their sales. And some shares go from 15 to 30, but digital is really allowing for IRR to grow.
That really changes unit economics. If you think about the functionality you have for customers, fast deliveries, we have quick deliveries that are 95% on the same day, 94% in up to 60 minutes and half of that in up to 30 minutes. So it's not like we're scratching 60. We're scratching 30, right? We're almost fully there. But expansion is definitely a good reason for us to be happy. And I'm using the word moat because I like the choice of Warren Buffett's word.
Now, Vinicius Strano from UBS.
Can you talk a little bit about your commercial initiatives and the 30 bps impact that we had in the gross margin in CMED PIS/COFIN taxes? And if you could talk a little bit more about that, that would be great. And also give more color on the own brand contribution. And another question, can you talk a little bit about the apps rollout? And how the suppliers have been welcoming that?
Good questions, Vinicius. We talk about the margin, right? And there's a lot of internal discussion with Marcílio who was trying to find the exact cities. We knew there was going to be a decrease because of CMED. And every year, we try and find where we could have more productivity on the commercial front. So pricing is an important point. We see that in the year. The market allows us to make changes to pricing, and we have been doing that well. Our market power has been used more and more. Into molecules, you have 40% of the market share. So that gives you a competitive edge. You're working closely with the industry. You can launch a product more quickly or earlier, we're having exclusive offers. So that really helps you build these margins and have better trading.
And all of that has really been helping us offset these changes in the gross margin caused by inflation seasonality. This was a rather intense year. I look at the CMED historical rates up and down. There were years in the past where we had the same gross margin with a commercial team getting the whole offset. So there's a lot of commercial activity, but it's more connected to pricing and negotiations. So when you have a company with 14 DCs all over the country, a company that can launch a project in the 319 cities with over 100,000 inhabitants, 310 of which were present in, we are really taking advantage of all that. On brand, that also helps, right, our own brand.
We have changed the structure that was sitting under [ Eugenio's ] structure. We had that compared and contrast with our own branch and normal supplier category, and now it's all sitting with Marcílio and their own brand has been growing. In our next meeting, we can maybe give you a better -- more detailed breakdown. And that also pays a very important or gives a very important contribution in customer loyalty because the customer goes to buy [ Next ], right, they go to that pharmacy by Next. So that really helps.
And just picking up on what you're saying, on our own brand and just to do some advertising here because Next is a brand that stands out. But we're also starting with BE Wealth, the strong brand, we have [indiscernible], famous Brazilian model, who's being our poster person for this brand. And we have [indiscernible] brand is also well known. And will the ads is going well. I'm looking at it, every month. I don't think there will be -- something that's going to be moving the needle this year yet. But in 2026, we're likely to see it. The industry is buying it and liking it. NRI is different to the market.
There is the same way to -- Amazon is the same way to compare to Google, right? Our possibility to work with customers a lot more sophisticated, a lot more broader, I'd say. We have over 1,300 pharmacies with screens, right, with digital panels and that really improved the customer experience in the pharmacy, we can also offer the social media. And another -- there's another point that's going to prove to be very good. At the end of 2025, '26 was just building it right now. And thinking about ads and commercial, our relationship with suppliers with visibility positive aspects.
So in R&D, we see that being positive for our DRE and also for our suppliers who are more present with the right customer. So that's very nice.
So next question. Ruben Couto from Santander.
I like your comment there and -- about GLP-1, you have a very substantial share in Ozempic, right? And Wegovy and other products should they lead to incremental earnings sustaining the margins above inflation? Or is this category already becoming more stable in comparison to our revenue percentage?
Thank you for your question, Ruben. We cannot break down the percentage that this business has, but it's about 3% to 4%, not only this product, but the entire category, the loss -- the weight loss category. But it's important to consider the growth of this market as a whole. It started 7 or 8 years ago with Victoza and a lot of technology has been added to the sector to help the people who need this type of drug. This is a revolution. I wanted to highlight that in the presentation because this is a revolution that is happening in the sector, and we are participating in it to help the entire population. And this has been happening all around the world.
The pharma companies, including the Brazilian ones are getting ready for a new cycle coming in the future. This is a drug that is very expensive but addresses a huge condition, and the price should drop in the future. So we are getting ready for that when there is a generic, for example. The takeaway message here is we are going on this journey together with the customers for this revolution. And we are proud to participate in this revolution, helping our consumers, respecting, of course, prescriptions and doing things in the best way possible. This is a revolution for the entire sector. And you can look at the numbers in the United States and Europe.
And that's why I decided to highlight that in the presentation. We are going to receive other similar drugs, and it is going to allow us to further participate in the well-being of our customers.
The next question comes from Joseph Giordano with JPMorgan.
I would like to talk about the results of the subsidiaries. In the first half of the year, the contribution from [indiscernible] to the company, especially considering the parent company, the contribution was lower than last year. It contributed last year with 50 million and this year was 14 million. I would like to understand if that's only related to the pre peak season? Or is that related to any other change in the market dynamic or product mix or anything like that?
And now my second question, maybe this question is for you, Marcílio and it's about the long term. What do you think? And what is your perspective about the results for this operation? Is it going to be a strategy to make customers loyal and get more customers and maybe we shouldn't expect a lot of contribution to profit? And that's it.
Thank you. And those are great questions. You mentioned the subsidiaries, and we usually don't use that term to refer to [indiscernible]. What happened with [indiscernible] is that the tax change affected the 2 companies differently. For RD, of course, we are under pressure because of that. And with pricing strategies, it's easier to overcome that challenge. But for [indiscernible] is different because we have contracts with the operators and all that. So this quarter, for [indiscernible] is struggling. Actually for the first half of the year, is the case, especially when it comes to profitability, not so much when it comes to sales. The first quarter was difficult in terms of sales. The second quarter was good.
So the answer is yes, things are tougher for [indiscernible] in the first half of the year, but the gross margin is a lot. It is more difficult to pass on that tax increase to the contracts that we have with the operators. There is indeed a pressure from the operators, but many of them have understood the situation, and they understand that [indiscernible] generates savings. And for cancer treatments, those are the most expensive ones for the operators. And that's why this business is going to continue to grow. I'm sure that this quarter, we were impacted by the mix effect from [indiscernible].
Now the health care platform, I mentioned the frequency numbers, right, during the presentation, and that's where the results are going to come from building customer loyalty, as Flavio said. About 2 years ago, we decided to highlight the active customers number so that you see the importance of customers in our business. Of course, part of what we did in the platform is going to bring profitability to help the core business. I'm sure of that. But is it going to be significant? We think so if we increase the frequency, it's going to be significant because it is going to allow us to increase the number of loyal customers. we have 7.1 million or 7.2 million loyal customers, and they bring 60% to 64% of our revenues. So everything that we do is centered on making customers loyal because that's where the growth for mature stores above the inflation will come from.
I remember in the past, we were happy to see a 0.5% or 0.3% growth above the inflation. But now this quarter, we grew 2.2%. That's a lot, and that's where we are going to see the results for the platform coming from. Yes, pharmacies exist for a reason, of course, and we have been maximizing that reason as the market becomes more and more flexible. For example, we couldn't conduct lab tests in pharmacies. Today, the laws allow us to do that. For example, if a person needs to go to the ER, it will take them 3 hours to see a physician, but we can do that faster. So we are stepping into that market. And for vaccination, for example, we are already doing it. If you look at our vaccination share, considering the private markets, we have 40% of the market share. So it's not that much since we are BRL 40 billion, but it is taking strides forward. And we are going to bring you more numbers about that, but everything is related to frequency here.
We have another question we are going to take just another question because we're going to have another call and I'm going to have the Chairman of the company here. So we need to start the other call at 11:30.
So the next question comes from Mauricio Cepeda with Morgan Stanley.
I know you're short on time, so I'll be brief. I have 2 questions. The first one is about the numbers that we have seen in the market showing that generics are accelerating, and that includes probably the similar drugs as well. And we know that you have positive results related to that. You mentioned GLP-1, you have a larger exposure now to patented drugs. But since it seems to be a system-wide change, are you getting ready now for a reduction in your average ticket, which is in your case related to your operating leverage? Are you getting ready for that at all?
And you mentioned that semaglutide patent is going to end now. So how are you dealing with that? And the second question is about marketplace. About 3P players. Are you measuring the effect of curatorship? Does that make a difference in comparison with other marketplaces? And do you see any possibility of going from 3P to 1P, or bringing some products from 3P to 1P?
Those are great questions. We have not seen an abrupt change in generics. Generics have grown less than the brand name drugs, but it's still growing. I don't think that the market is going generic. I think that most top-selling molecules for chronic diseases, there are generic drugs for them already, and we are working with all of them. That is a movement. That is happening in the market as a whole, and we are adapting. But this is not an abrupt change because the industry is always bringing new technologies. When I talked about semaglutide, that is a new movement, something new will emerge.
The investment that these companies make is huge. And you can see that [indiscernible] has been growing because of that. So this is something that is going to cause generics to grow more than the brand name drugs in the future, but it is not going to cause a number of change in our mix. If semaglutide will become a generic drug well, that's a good message for us because our sector will be able to provide more access to this market. And that is the natural cycle of this business, and we are going to be there for our customers.
Now you asked a question about marketplace, right? This business has been growing. We are not showing you the exact numbers, but we realized that what matters most in terms of growth here is working on our curatorship. The customers need to understand that in anything related to personal care, beauty and health care, we can deliver all of those things to the customers. And we can do that well. When I talk about doing it well, we need to think about convenience and curatorship, right? I need to have the product that the customer needs. But if the delivery cost is too high or if the delivery time is too long, it's pointless. So we are focusing on that. It is a holistic approach. It's not just about having the product. It's about having the product at the right place at the right time.
So I think that Flavio, we will need to bring more color on marketplace in our next presentations. And this is also part of our strategy to build loyalty. The more items the customers buy, the more they will come to our business. The more they will see our company as a one-stop shop for every need health care, beauty and personal care. And I think that now we need to get ready to the next call that I'm going to have with the Chairman of the company. I cannot finish our call at 11:30 and start the next one right away.
So thank you very much for being here with us. And now I have my closing remarks to you, and I would like to talk about what we think about the results and how we are seeing the company right now, and our perspective until the end of the year. The results have been very strong, with consolidated growth that was very strong, with 15% for a long time, and it's really impressive. When you look at the charts at the graphs and you see the ability that this company has to grow month-over-month, it's incredible. It amazes me. And what brings us joy is to see the growth of mature stores. They're growing above the inflation. The frequency is higher as well, and that builds loyalty. It is going to increase the number of loyal customers for us.
In all presentations, I usually tell you that we treat customers better than the competitors. And our NPS at 90 bears witness to that. It shows why the mature stores are growing more than the inflation. In the past, we were worried about whether or not the stores were going to grow more than the inflation because that could impact profitability, but that's not happening. So we can tell you for sure that in the future, we are going to grow, and we are going to slightly grow our margins as well.
I think that we had one-off issues with our distribution center and logistics in the state of Rio Grande do Sul. And we did everything we could to serve the customers there well. We don't think that, that focus is going to change and the selling expenses will be maintained with a slight dilution going forward as we start growing our mature stores even more above the inflation rate. It's really good to see the consistent dilution and decrease of G&A expenses. G&A had a spike 4 years ago because we decided to invest in new verticals. We decided to invest and making our business per annual and ensuring the future of the company. We decided to make those investments back then, and we knew that those costs would go down. And if we think we have to make investments again, we are going to do so.
We have a long-term view, and I have the controlling group and the Chairman putting pressure on me so that we keep focusing on the customers to make sure that all profitability factors and drivers for this company, they aim at the long run. In the long term, we want to continue to grow, and the launch of new molecules will help us with that and addressing the customers' needs and making customers closer to the business, we are focusing on that. It's really impressive to see the expansion numbers. 15% to 16% market share, that's what we have and we can still grow more. I think that we said at some point that such strong expansion would drive IRR down, but that hasn't happened so far.
We are present in over 600 cities in Brazil. It brings us such joy to have our silver bullet here, a company that's been in the company for 48 years and no expansion so well. And we are always there traveling and going to different places. So I don't think expansion is going to slow down at all on the contrary. We want to open new stores every quarter. And I hope that in our R&D Day, we can talk more about expansion. Now multichannel, these numbers are very impressive, and those are the 2 moats for our company, right? In the beginning of the year, we thought that the growth cycle would be shorter, but it's still strong.
We grew by 45%, right, [indiscernible] 44%. And another big player grew by 36%. So we are growing more than the rest of the market. And we really got it right when we decided to use fixed delivery costs. The platforms will bring opportunities to increase our profit, our gross profit. And customers need the product, right? They don't know how much they're going to pay to get the product to where they need it. So we decided to use a fixed price. And 40% of our deliveries are delivered to a distance that's shorter than 2 kilometers. And those are the customers that we have to serve quickly. Our service level is improving every single day. Our NPS on the website is 72%, it used to be 40% 2 years ago. So you can see that the experience, the customer experience is improving consistently.
And we also conducted a survey to look at the app scores for iOS and Android. And considering the number of releases, we are very close to the big players, the titans. And why is it important to look at the number of releases? Because those are the new things that improve the customer experience. So we are very happy about that. We're very happy to see how those 2 moats are going so well. The digital business and the expansion, especially when it comes to the apps.
So with that, I'd like to wrap up our conference call. I'm very excited for the next call about the succession and what we are thinking for the long-term. I believe that Antonio Carlos is going to convey a great message to you, and you are all invited. You can ask questions. We're going to be here to take your questions. And I know that Antonio Carlos only comes talk to you on our R&D Day, but we wanted to do it now because he's always here with us in our everyday activity. So thank you, everybody, and thank you, Flavio. We finished in 1 hour, 15 minutes, and we are going to be back in 15 minutes, okay? Thank you so much.
Thank you, Mr. Marcílio and Mr. Flavio. Thank you, everybody, for your participation, for your time, and that concludes RD Saude's conference call for today. Our Investor Relations team is at your disposal to take any questions you still might have. Have a great day. Bye-bye.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]