Raia Drogasil SA
BOVESPA:RADL3
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Raia Drogasil SA
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Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to RD People, Health and Well-being conference call to discuss its 4Q '19 results. The audio for this conference is being broadcast simultaneously for the Internet in their website, www.rd.com.br/ir. In that address, you can also find a slide show presentation available for download. [Operator Instructions]
Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of Securities Ligation Reform Act of 1996 (sic) [ 1995 ]. Forward-looking statements are based on the beliefs and assumptions of RD management and on information currently available for the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to the future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future annual results of RD and could cause results to differ materially from those expressed in such forward-looking statements.
Today with us are Mr. Marcílio Pousada, CEO; Mr. Eugênio De Zagottis, Chief Investor Relations and Corporate Planning Vice President; and Gabriel Rozenberg, IR and Corporate Planning Director.
Now I'll turn the conference over to Mr. Marcílio Pousada. Sir, you may begin with your conference.
Okay. Thank you very much. Good morning, everyone. Welcome to the fourth quarter 2019 earnings presentation. As always, I will highlight some points before the Q&A and Eugênio will highlight the points for financial statements right now. Eugênio, please?
Hello, everybody. Thank you all for attending our 2019 conference call. I would like to start by saying that for us, 2019 was a great year as we reported a very solid sales recovery with comps ahead of inflation, accelerating through the year. We also delivered on our expansion guidance; we acquired Onofre. And I think we had several milestones achieved in our digital transformation plan that we'll be talking more about during the presentation.
Before talking about the highlights, I would like just to clarify that all the numbers we are discussing here, they are based on the -- oh, sorry, on the IAS 17, which is our previous accounting standard, and not based on IFRS. We believe that this accounting standard is the one that best reflects the economics of the business. These are the numbers we look internally within the company, and these are the numbers upon which we base all decisions we'll take. So this is the best way, in our view, for us to discuss the business. If someone wants any details about IFRS, we have the full reconciliation in our financial statements.
So I'll start by saying that we ended the year with 2,073 drugstores all across Brazil. We delivered our full guidance of 240 organic openings. On top of that, we bought 42 Onofre stores, and we closed 34 stores in the year. We had also great market share gains, 1.3 percentage point on a national basis, with 2.4 percentage point gain in the state of São Paulo, our main market.
Our revenues reached BRL 18.4 billion, 18.5% growth in the year, with 5.2% mature store sales growth for the year and 7.3% for the quarter, which means 300 bps ahead of inflation in the 4Q '19.
Our gross margin totaled 28.2%, a 40 bps margin pressure because of the price investments undertaken.
Our EBITDA total were BRL 1,344 million, an increase of 12.4% in the year, corresponding to a margin of 7.3%.
Our net income totaled BRL 587 million, 3.2% net margin, an increase of 7% over the previous year.
And finally, we had a positive free cash flow generation of BRL 1.5 million in the year and a total cash consumption after paying interest on capital, financial expenses and others of BRL 188 million.
On Page 4, it's interesting to take a longer-term perspective to you look at our growth. So if you consider the period between the merger, which happened in 2011, and 2019, our store base increased by 2.7x; our revenues, they increased by 3.8x; and our EBITDA in the same period increased by 4.6x. I think that the margin gains with the EBITDA growth that we've had is the main evidence to the quality of the expansion. The company that we have today, it's -- was 2/3 built since the merger. So this is the main evidence of the quality of the stores, of the returns we have achieved, of the fact that we have been able to grow nationally with the same returns we have always enjoyed in our core market of São Paulo directly, the margin increase, the EBITDA growth we have had through that expansion. And this year alone, it's important to mention that we had BRL 2.9 billion in revenues. This is a very significant scale gained, both absolute and relative, in a single year, which basically means the revenue of the fourth largest player in Brazil which we had in a single year.
On Page 5, we had in the fourth quarter 79 openings, totaling 240 in the year, the guidance that we have established, and we closed 1 store in the quarter. If we look today our store portfolio, 34.7% of our stores are still undergoing maturation, which means that they haven't reached their sales or profitability potential. And we also reiterate the guidance of 240 new stores for this year.
On Page 6, I'd like to show here the national platform that we have built through the years. We are today in 23 Brazilian states. Last year, we entered the state of Amazonas, where -- again, the very end of the year, where we have 3 stores. Probably with the exception of Amazonas that we just entered, it's fair to assume that we have our brand already established in 22 states across Brazil. We invest with the same return expectations all across these 22 states. We have mature store revenues or projected mature store revenues, in the markets in which the stores haven't 3 years yet, of BRL 800,000 or more in every single market in which we compete. So we are the only company that can truly grow on a national basis the same returns with the same profitability.
In our view, I mean, the market today is a very crowded market. I don't believe that any company today will be able to promise significant expansion outside of their major markets. This is also true for us. The problem is that our major market is Brazil given the fact that the brand is already established. So while we have a truly national platform where -- to base our future growth, most of the players only -- can only grow profitably in their native regions and then they suffer when they go beyond it.
I'd like also to highlight that here in the bottom of the page, we opened in São Paulo last year only 76 stores, which is the -- this means 32% of our expansion happened in São Paulo. The other 70% happened in other states. So this is another evidence of the robustness of this national expansion platform.
Another interesting number to note, and by -- as a coincidence the same number, we had 76 stores which were popular stores built through the year. We already have more than 400 popular stores all over Brazil. So this is an evidence that as our expansion has diversified in terms of regional profile and in terms of income profile, the returns have been the same. The company has been able to adapt its expansion as the market has evolved.
Finally, we gained significant market share last year. So we reached 13.7% of national market share with a significant increase in São Paulo, where we reached 26.3%, so more than 200 bps of increase. We gained share in every market. And also, I like to mention that we already have close to 9% of share in the Northeast and 3.6% of share in the North, where we have just started.
On Page 7, we see that the gap between RD and our main competitors, who are members of Abrafarma, has significantly increased through last year. So while we posted in the year 18% revenue growth, the other large chains together they grew only 8%. So it's a 10 percentage point growth gap over the average of the other chains. If you look on the fourth quarter alone, we did 20.5% revenue growth versus 9.2% of the other chains.
But for me, the main message here is in the bottom chart. We work currently from a huge peak of store addition for the whole market in '17 and also in 2019. In -- last year, we saw a major correction of this trend. This is something we already expected to happen because we -- in our view, this huge expansion cycle was not sustainable. The quality of the stores were not there, a lot of companies opening stores outside of their niche markets where no one knows their brand, just like this was an easy thing to do. So obviously, as we ended 2019 with a lot of players struggling, we saw a huge cleanup taking place. So several players in the market, they stopped growing or reduced significantly the openings, and they accelerated a lot the net -- their closures. So we expected this to happen. But obviously, the magnitude of the cleanup was bigger than we anticipated.
So when we look over last year, we added 248 stores, including 42 Onofre acquired stores. So this means 206 organic net store addition versus only 106 net store additions for the -- every other player of Abrafarma. So we opened almost more than twice the sum of what the other players opened through the year.
Just as we had a peak in 2017 and '18, we have to know that what we saw in '19 was a valley. Obviously, we expect already for 2020 a bigger activity than this. But we expect still sustainable growth, still moderate growth. So I think the outlook for the year is very good.
On Page 8, we have the revenue growth. So we posted consolidated revenues of BRL 18.4 billion. This is 18.5% growth in the year. We ended the fourth quarter with more than BRL 5 billion in revenues. So annualized, we are hoping -- already doing more than BRL 20 billion. This was 20.4% revenue growth.
So our retail operations grew 18.2% in the year and 20.6% in the quarter. 4Bio grew 24.6% in the year, which is a good number, but only 16% in the quarter. We're already seeing 4Bio in the beginning of the year accelerating growth. So obviously, given the high comp base 4Bio has, we don't expect any more 40% growth like we saw in the past but something between 20% and 25%, I think, is doable. And 4Bio, we expect it to grow ahead of the rest of RaiaDrogasil.
Finally, when we break our growth by category, overall I think it's very consistent growth all across. OTC and Generics have seen the main growth. So Generics, we grew 19.9% in the year, 24.5% in the quarter. This is a direct result from the price investments pursued last year. So initially, we saw big volume increases, but the average prices went down by double digit. Then through '19, as we started looking at a similar comp base in terms of prices, their volume growth translated in revenue growth and now we see Generics as the fastest category. And we still expect Generics to keep on growing the mix, which is a good thing.
OTC was another brilliant category for us, growing 20 -- 21.9% in the year, 26% in the quarter. There are several factors here. One is we are starting to see switches from branded to OTC. We had also a very strong flu season. We have seen more innovation in the recent year in OTC with more product launches, so OTC has been a thriving a category for us.
I think Branded was also very consistent, 17.2% growth in the year, 19.3% in the quarter. And HPC, I think, was the lowest-performing category. Over the year, it was 16.5%; in the fourth quarter, it was 17%. What happened in the quarter is that we had a weak seasonal sales, especially like sunscreen, skincare and other stuff that are very much driven by weather. So the weather, especially in the end of the year, didn't help us that much. So I think unfavorable weather translated in lower sales than otherwise expected. But we're still talking 17% in the quarter. So this is hardly a problem.
In Page 9, here we discuss our comps. So we see that same-store sales growth amounted to 9.2% for the year, 11.3% in the quarter. But the main figure here is mature store sales growth, 5.2% in the year, which means 90 bps ahead of inflation; and 7.3% in the quarter, which means 300 bps ahead of inflation. This also means that we are entering 2020 with amazing momentum. Obviously, we'll start seeing progressively tougher comp bases as the year unfolds. And obviously, this figure is poised to go down. But we still expect for the whole year, for every quarter, to have mature stores ahead of inflation. This is a result of the more competitive price point we have today as well as of the additional investments we have made. Marcílio will talk about digital later, but even though digital is only 2.3% of total sales, the revenue growth produced by digital helped mature store comps increase by 0.6%. So it's already a meaningful impact in terms of comp improvement even though the absolute figure is still not high.
On Page 10, we had a gross margin decline of 40 bps for the year and of 60 bps for the quarter. As you know, we had very significant price investments last year, but we also had a lot of trade allowances gained because we increased our inventories. So these gains last year, they masked the pressure that we saw. So this year, as we normalize our volume purchases, this margin pressure appeared. But the investment on itself didn't happen this year. We believe now that we have -- that 28% should be a sustainable margin going forward. Obviously, we're always looking at the market. If we have to invest on prices, we will invest on prices. For us, long term, value creation comes way ahead of any quarter or any annual targets we may have. If we believe that value creation will be higher with lower prices, we will reduce prices. Having said that, we don't see the need right now, and we don't expect that to happen in the short time.
Finally, we had a pressure of 1.5 days in cash cycle basically driven by the fact that we opened 2 new DCs, including our largest DC, by year-end. So we had a lot of inventory redundancy in the end of the year. This should be normalized in the coming quarters.
Page 11. So when you talk about expenses, the great news was in sales expenses. We saw annual dilution of 30 bps, a quarterly dilution of 50 bps. This was basically driven by operating leverage. I'm not going into details line-by-line here. But when you -- when we see comps ahead of inflation, we also see expense dilution. Yes, they are Siamese twins here. But we saw a pressure in G&A of 40 bps. It's important to mention that this whole pressure was due to one-off effects even though they haven't been adjusted from our figures. We have a 30 bp pressure from labor contingencies. We will see higher claims in more recent lawsuits, so we decided to adjust the full provision, including previous months' and previous quarters', for the recent trend. So this is a 30 bp pressure that we don't expect to repeat again.
And finally, because our numbers were ahead of budget, we have a pressure of 10 bps because of higher provisioning of variable compensation, which we believe is great news. But the structural level of G&A right now, I would say, is around 2.4%. This is already a higher number than we saw before because of the digital investments we're doing in the company. We already have 7 agile teams. We are bringing our infrastructure to the cloud, which means also more OpEx. So when we look forward to 2020 figures, I think it will be a race between sales expenses dilution based on operating leverage and G&A increase based on digital investments.
In the end, we still expect margin gains for 2020. We believe the dilution will be higher than the G&A pressure, but there will be a G&A pressure. This is a choice, and this has to do with the long-term investments in digital in the stores.
On Page 12, so when we put it all together, we had an EBITDA growth of 12.6%. We reached an EBITDA of BRL 350 million in the quarter, of BRL 1.343 billion in the year, with a margin pressure of 40 bps for the year.
Page 13. Here, we have the nonrecurring revenues and expenses. I'll start with Onofre. So we had at Onofre BRL 258 million of nonrecurring gains. It's based off BRL 350 million of what we call negative goodwill because we got for very cheap a company with a high -- with a higher book value than obviously what we paid. So this generates the -- this is a noncash gain, but it's a taxable gain over several years.
Finally, when we look at RaiaDrogasil, at the -- we had around BRL 50 million in nonrecurring expenses. So around BRL 17 million of asset write-offs. This is related to store closures. We always have some level of store closures. We had restructuring expenses of BRL 16 million. This is related to changes in structure we pursued. This is also related to the fact that our executives used to have a car as part of their competition package. We're eliminating that. So we had a onetime compensatory allowance to offset that. We had also BRL 15 million of consulting expenses. This is related to the launch of the digital, which was very important. We may have consulting in the future, but I don't think at this level. Also, the relocation of the Rio distribution center generated BRL 13 million in write-offs and other expenses. And we also have BRL 13 million in nonrecurring gains, mostly due to tax recoveries related to other prior years.
On Page 14, our net income totaled BRL 587 million for the year and BRL 169 million for the quarter, which amounts to 3.4%.
On Page 15, we have our cash generation. I think the great news of the year is that even though we invested BRL 650 million in our operations, including the opening of 2 DCs, 1 of which is our largest and most automated and therefore most expensive DC, and also relocation, which means the new DC being built in Rio, so with 3 DCs being absorbed in the year -- actually, part of the largest was half last year, half this year. But even with all this logistic investment, we had BRL 56 million in Capex, which was more than fully absorbed by our cash from operations. So free cash flow was a positive BRL 1.5 million in the year, and total cash flow after interest on equity payments, financial expenses and et cetera was BRL 189 million in the year.
See on Page 16, we talk about the total value-added of the company. It's the first time we bring this information. So the total value addition that the company had was BRL 5.6 billion, up 22% from last year. And then here on the right, we saw how this value was distributed across society. So we paid BRL 2.2 million (sic) [ billion ] in taxes at the municipal, state and federal levels. So 39% of the whole value created went back to the Brazilian state. We also had BRL 1.8 billion generated for employees, 32% of the total. BRL 0.8 billion in third-party payment, services provided and et cetera. And finally, BRL 0.8 million in value created for shareholders -- BRL 0.8 billion, sorry.
Finally, in Page 17, our share price nearly doubled in the year, 97.5% versus 31.9% of the IBOVESPA. We posted an average trading volume north of BRL 100 million through the year. And if you consider the fact the average annual returns generated since the Drogasil IPO, it was 29% per year and 26.5% since the Raia IPO in 2010.
So these were my prepared remarks. Marcílio will summarize, I think, the main achievements on the year and what we expect for next year's strategic priorities. And finally, we'll be brought back to answer your questions. Thank you very much.
Thank you, Eugênio. Let's go to Page 18, please.
We're going to talk about -- a little bit about 2019.
When you talk about price, it's not just the reduced price. We did have very good investment in the end of 2018 in -- and [ with this we assist our ] price and doing much more data right now and we're much more using intelligence to do the pricing. These helped us a lot to grow our sales, as you will view, even in average ticket and in customer last year.
We started this year with 30 million active customers. We're closing with 36 million active customers. All this achieved in mature stores growing above inflation helped us to bring more customers in the store, in the business house.
We opened 240 stores. And of course, it was the main driver here. We had the same system, the same process to open a store, and we still had 100 people working just in this process to find locations, to build the store, to train people, to transfer the people who are going to be specifically the actors for the stores and pricing and promote the active stores. This is the main process to capture new customers for us, okay?
We also concluded distribution centers, this is very difficult to do, in Fortaleza and Guarulhos. And we relocated another distribution center city in Janeiro. We did all these things together to produce [ these results ]. I'm very proud about these numbers, okay. This is also -- a lot is new for us, is that -- our first acquisition in our lives, okay? We integrated all the 42 stores for our portfolio. But what's important here, we retained and we hired 100 new employees for us. We're learning with employees how to make the future for our company. We'll learn how to shape the process inside the company. This is amazing how we could do this very quickly and be able to see this guidance working in our company right now, okay?
If we go to the next page, I will highlight some points in our digital transformation in the company. The sales in digital is growing a lot. Today, 2.3% of total sales is digital. But better than this, we have 5.6% of the customers that -- in this are sales made for the customers use digital to make the relationship work. It doesn't matter if it's buy with the digital or buy in the stores, but they use digital to make relationship with us. These customers spending more than 40% will place -- will go through digital, okay? It's better. It's a more loyal customer and our digital business in Raia and Drogasil brands is growing more than 60% month by month.
The best thing on digital transformation are done here in the company. We have right now 27 cities in Brazil that we deliver goods in 1 to 4 hour. We have 131 stores that you're working at a distribution center to deliver the goods for the customers and 67% of the total sales is digital orders served by stores. We started trying it in 2018, and we believe to use the -- our store base to deliver the goods for the customers is the best path for integrating both businesses of physical and digital, and the customer is loving it, okay?
The function for the stores is to bring new customers. If you look for digital, the main task for the digital is to improve the relationship with the customers.
Let's go to the -- another page, Page 20, and let's talk about the challenges through 2020. We still opened 240 stores. And again, we know opening stores is the best way to achieve new customers. We have popular stores, 424 stores. And so far, these fast bringing new customers, new portfolio of customers. And we opened 76 only in 2019, okay? So we increased the customer acquisition mainly through the merger with Univers and used also the RD brands. We started to work with our Raia team in this quest in 2019. The main task for this team is building customer loyalty/engagement. These guys are working in mobile technology, analytics and client experience and looking for the joy for the customers and try to eliminate all the pain points of the customer in all channels, okay? We know this can help us to improve the loyalty of the customer. Together, we can fix the new loyalty program launched with the GPA this year, okay? We know we can drive the -- in our mature store better, bigger than inflation, help us to leverage to increase the EBITDA margin in this year. But if you need to use this money to invest more in digital, to invest more in people, you do that this year. We know our -- our view is a long-term view, and you know how important to build a very modern technology, modern, digital way to make relationship with the customers.
In this year also, we started a very modern agenda and talk about sustainability. And you have 3 main focus in sustainability: how you can work with the house, not all about our employees but with the customers; how this company can work how to understand how we're impacting the environment; and how we can change the economy instead of the people that work with us and we work within our portfolio also. I think, these 3 are key that is very, very modern, and we are planning to do these for the next few years and try to plan it to keep the customer -- to take the business strongly for the future also.
Now we're ready for the Q&A, Eugênio and myself, and thank you very much.
[Operator Instructions] Right now our first question is from Joseph Giordano from JPMorgan.
So my question is more like on the digital front. So you mentioned about 5.6% of the clients are already engaging with the company on a digital way. And the pocket share gains here have been materially high, particularly from a frequency and ticket standpoint. So looking at like this client base that significantly grew over past year, how should we see this evolution? So basically, I'm trying to understand like if you guys work with a target of active clients and then a target of digital clients to try to gauge what would be the potential impact from those initiatives in the short term. And as Eugênio mentioned at the beginning of his speech concerning the expansion plan now that it's been harder and harder to add new stores but still, like, you see plenty of room to grow. How are you seeing like a eventual purchase like Onofre into new regions, particularly the less competitive ones? Because I understand that there are some good assets and good competitors around there. And lastly, on the labor lawsuit side, how should we see this evolving over time? And if like you expect anything arising in the near future from the integration of Onofre.
Okay, Joseph, thank you for the questions. I mean digital is a very strategic project for us. So more important than what percentage the digital transaction represents, it's what percent that the digitalized customers represent. And what we are seeing is that the main benefit from a digitalizing customers is not only on the digital transaction itself, but it's the lifetime. It's an increasing lifetime value across all channels. So we are gaining more purchasing in the stores than we're gaining through the digital transaction itself. So this is very important. This is a number that we certainly expect to increase in the future.
We are not committing to any targets. We don't have the history of this number. This is a number we just started tracking. Maybe in the future, if we have more -- a better understanding, a better grasp of what the number means, we can start having more explicit targets. But right now, obviously, we expect the digital part -- the percentage of digital customers to increase.
What we're capturing here are customers who either brought (sic) [ bought ] through click-and-collect or a pure e-commerce transaction with home delivery. We're not even counting, in fact, in this number a customer who bought in-store with a digital coupon or who used digital in any other way within the store. We're just counting here for the time being the click-and-collect and e-commerce. It's possible that even the definition changes if we can understand what are the things the customer does in-store in addition to those 2. But it's great to see that the customers who adopted digital, they increased their spending 40%, and this is a result both of frequency increases and average ticket increases.
For me, the best way to think about this, I mean, obviously, in the future, we want digitalized customers to account for 10, 20, 30, 40 even more percent of our revenues. I think this is the future. We have nowadays 1.2 million downloaded apps, but this was growing by 300,000 per month in the end of the year -- as we started in the end of the year. And the exercise, it's not a guidance, it's just an exercise is to see that if the revenues from digital customers would be 20% of our total and if spend increase would be 20%, this means another 4% of revenue increase and a huge operating leverage and value creation for the company.
I don't know what the digital contribution will be. I don't know what the digital spell -- is an incremental spending from digital will be, but this is the way to think about the business. So we expect to see mature stores growing ahead of inflation next -- this year, next year and the year after that and more and more in the future. So this is something very important and very strategic. One year is not a long period. But if you see where we are today, we're already a completely different company than we were last year.
And I think that the huge goal for the year is really increasing downloads, increasing app usage because with the app comes a higher capacity to engage with the customer, comes a better experience and comes better spending, better loyalty. So this is the first question.
In terms of expansion, I mean, we keep doing 240 stores a year. I think, obviously, when we look at the end market, the way the end market is already very well occupied by us, one number that we mentioned, I mean, in the earnings last year is that we have already 88% of A customers within a 1.5 kilometer radius. So obviously, we can still do some more A-class stores. But if our expansion were only A-class stores, this would mean we'll be very close to the end. So the company has adapted way before this year. So we started diversifying geographies, and we started opening way more popular stores and way more hybrid stores. So if you look today, upper-class stores is a small proportion of what we do. Upper-class stores in São Paulo, it's an even tinier proportion of everything.
Onofre was a successful M&A opportunity. Obviously, we have the financial means with M&A. We have the capacity to integrate fast and create value. But in the end, doing M&A is a matter of opportunity. It's a matter of having the right asset at the right time at the right price and a doable antitrust transaction and things like that. So if an opportunity arises, obviously we are open for that. But this is not something we can guide.
And finally, I think labor contingencies. In our view, the current provisioning is enough to absorb the claims we have. Obviously, there is in our -- when you think about 2.4% as the current G&A level, there is already a somewhat higher labor expenses built on into that. But we don't expect any more surprises here.
If I may make an additional question here still on the digital front and on the new loyalty program that you guys are creating with CBD (sic) [ GPA ]. So I'm not sure if you can share like what are the next steps here and if you are like already having the interest of incremental partners aside from CBD (sic) [ GPA ] and Itaù.
Sure. So as you know, we closed the transaction with GPA this week. So Stix is now a company in which we are partners. So I think that the main priority now is getting ready to launch. Launch will take -- will happen at some point in the second semester, probably around September, but still depending on how fast we both are, maybe slightly before or maybe slightly after. But certainly in the second semester of this year. We are launching the whole IT capability, both inside Stix and RaiaDrogasil and GPA, to get ready to do it. In our case, I mean, we have a huge focus on taking a larger -- having a larger role in terms of helping our customers take care of their health. So we will revamp our loyalty program to focus more on health care, on having [ additional ] treatment, on healthy habits and so on. So we can do a lot of gamification by having a currency like Stix. And so I think Stix is a very strategic project for us.
Obviously, we are -- well, I think we have a very initial set of partners in [ Pon Azuca ], RaiaDrogasil and Itaù. We have the largest direct retailer in Brazil, the largest food retailer in Brazil and probably the largest bank, probably the 3 companies with the largest tradition in terms of loyalty, CRM and et cetera. And yes, we are open to have more partners. We cannot talk about conversations. I mean, the day we have more -- another partners another strategic partners, obviously everybody will know. But I think if we're successful, the trend is to have more partners. But we don't depend on having more partners to be successful. This is something very important.
Our next question is from Irma Sgarz from Goldman Sachs.
And a lot of my questions have already been answered. But just one final question on the CapEx side. Could you just sort of lay out how you're thinking about CapEx for this year and maybe even sort of a medium-term plan given the growth expansions at -- the expansion plans that you still have and taking into account that there is obviously the lower income format within the expansion plan that is gaining more traction and also taking into account anything additional that you might need to do on logistics or IT?
Thanks for the question. I think the best reference that I can provide, it will be a similar CapEx to this year. So obviously, the store rollout is the same. You could think about inflation, but then we are gaining efficiency in terms of our engineering. So our expectation is to lower CapEx per store. But you could offset that. And I don't know if it's ahead of inflation, below inflation, but maybe a similar spending on a per-store basis. Probably similar also store renovations.
I think the main difference is that obviously, we spend way lower on logistics. We had 3 DCs last year, one of which is our largest and most automated and most expensive one. Obviously, only 50% of the spending happened last year. We had already started in 2018. And this year, we'll very likely have only one DC, which should be able to open soon. But it's small DC. It's a business-as-usual kind of thing. Having said that, we are accelerating a lot investments in digital. Part is OpEx, part is CapEx.
So I think maybe what we'll say on logistics versus last year, we may expand in digital. But having said that, it's not that we have absolute visibility on how much we'll spend in digital. We have like the blueprint set out. But then, as we move through the year, we can have a better understanding. So a similar number will be the best guidance I could provide.
[Operator Instructions] There appears to be no further questions. Now I'll turn the conference back to the company for their final remarks.
Well, thank you all for attending our conference call. I just would like to summarize some of the points we discussed through last hour.
So first, I mean, our understanding that 2019 was a great year for the company. We had a very strong comp recovery. We're posting mature store growth ahead of inflation, accelerating through the year and allowing to start 2020 with great sales momentum.
We had also a very consistent expansion, 240 store. Same expected economics of 20% internal rate of return on a real basis and net of cannibalization despite huge diversification in geographic and income profile. We only opened 76 stores in the state of São Paulo. That's 32% of the plan. And when we look at a national level, but -- for instance, the number is the same, but it doesn't mean it's the same stores.
We had 76 popular stores added this year alone. We now have more than 400 popular stores. And we're starting to advance in the super popular format, which is a step down. But it's important to mention that the success of this popular initiative has to do with the whole journey we had with the super popular format, [ namely ] Farmasil. There were a lot of learnings from Farmasil in terms of mix, in terms of operations of the store that we brought into this popular store format that allows it to flourish. And now we want also to flourish with the super popular format, and we have a number of stores that we will not name yet, but as part of the base as well for the plan.
Finally, we also acquired Onofre. It was a great transaction for us. We integrated the stores in one month. We integrated e-commerce in 4 months. Already in the initial month of integration, the stores were at breakeven. When we look at store EBITDA in December, it's higher than the consolidated EBITDA for our geographies, and of course EBITDA for the -- includes G&A, in the case of Onofres, of the stores. But the addition of Onofre on top of the base is the -- in December starts becoming accretive in terms of margins.
This was also a year of good profitability as well. Obviously, we have some gross margin pressure, but we have a great absolute growth. So in the end, we generated a nice EBITDA increase in terms of absolute terms. We generated operating leverage that helped us take care of the gross margin pressure. So I think it was a successful year margin-wise.
And finally, I think this was a year that we had very significant advancements in terms of digital. Obviously, it's just a full year of a long journey ahead, but it's a year that I think made -- it's a year that counts. It's a year in which we had a lot of successes here.
We significantly increased the capillarity of our delivery services. So -- and we keep adding more and more stores to do ship-from-store, to have 4-hour deliveries. We want to have it all across the network. We are also advancing with 1-hour delivery. This is a factor in which people don't expect to buy online and receive in 1 day or 2 days. This is a factor people expect to receive in 1 hour or 2 hours, and we are fastly adapting to that.
I think we are seeing a lot of app improvements through the agile teams. I think this is -- the 2020 would be a critical year in terms of adoption of our app. So we have a running rate of 300,000 downloads a month. We have sustained this running rate. We have to drive usage. We use promotions to do that. We want to allow the customer to see that life is easier with digital, both in-store and outside of the store. We want to provide an absolutely unmatched experience with digital in terms of convenience, in terms of helping consumers save and especially helping taking care of consumers' health, improving the health, promotion, prevention and a lot of things we can achieve.
And the organization is also changing to cope with digital. So we are revamping our structure. We have 7 squads up and running. We're going to 20.
We'll finally have a data lake in the cloud. We're bringing systems to the cloud. We're changing our culture to become much more fluid, much less theoretical. And I think this is a year that won't forgotten.
Finally, when we think about what we want to do in 2020, I think one of the main issues is really duty as a company, an obsession for understanding customer behavior and driving customer acquisition, customer activation, frequency increase, spending increase, monetization.
Every retailer is very proficient at explaining revenue growth in terms of store addition, in terms of comp increase, in terms of category breakdown, where we want to be. We want to be able to explain, growth and hopefully good growth based on behavior change. We grew this much because we had an acquisition of these many customers. We have an average increase by expanding of this much. Then the segments that did better were these, these and these. The segment that did well was that and that. So this is where we want to go as a company. So we see store addition as a way to acquire customers and increase share of wallet of our existing customers. So the whole way we think and we act more and more is around the customers. And if we do that, if we're successful, I'm absolutely sure we will drive long-term and sustainable comp growth ahead of inflation.
The name of the game for us is not gross margin increases. The name of the game for us is real comp increases driven by customer acquisition and customer activation. And this will drive EBITDA growth. This will drive operating leverage. This will likely offset any investments that will be required. And this will create value for the company.
So before closing, I would like just to make an announcement. Gabriel Rozenberg, our Investment Relations Director, he's taking a sabbatical year. So he'll be with us until March. We will have a new person already hired coming after he leaves. Gabriel will still be connected to the company in his sabbatical. So I would like to thank him a lot for all this time with us in Investor Relations for his contribution and wish him good luck in his sabbatical. Thank you very much.
Thank you, everyone, for participating. You may disconnect your phone right now.