Vivara Participacoes SA

BOVESPA:VIVA3

Earnings Call Transcript 2020-Q4

[Operator]

Good morning. Welcome to the conference call of Vivara to announce the results of the fourth quarter of 2020. This conference call is being recorded and simultaneously translated into English. [Operator Instructions] Now we would like to turn the conference over to Mr. Paulo Kruglensky, who's going to start the conference. Please, Mr. Kruglensky.

[Paulo Kruglensky, executive]

Good morning, everyone. Thank you very much for participating in our conference call for the fourth quarter 2020. We are here working remotely. I and connected with me, I have Otavio Lyra, our CFO; and Melina Rodrigues, our Head of Investor Relations.

So I think it is important before we talk about the results, to take the opportunity for those who do not know me yet. I am Paulo Kruglensky. I was elected CEO of Vivara in February after Márcio Kaufman, the former CEO, decides to become only a Board of the member of directors after 15 years working with Vivara.

Before being elected CEO, I already worked with Vivara as operations VP. I am a member of the controlling group, and I have been close to the company for at least 10 years, making part of Vivara's history. With this change, Márcio will work at a more strategic level, focusing on the long term with a strong focus in the future to consolidate Vivara as a leader in our industry. I, on the other hand, am going to take a deep dive on the operation. And along with the other executive officers, we have a lot of work to do to expand Vivara organically, to consolidate the brand life and to build an agenda structured on digital initiatives that make it possible for us to unify the shopping experience in all channels.

Now let's talk about the year of 2020. It's been an iconic year. To us, 2020 was a year when we could transform Vivara in a scenario of uncertainty of daily challenges and also great opportunities. Still in March, after the temporary closing of our stores, we created a crisis committee where every day, we thought up solutions for our problems, and we focused on security and safety of our community, including employees, stakeholders, customers and partners and even shareholders. And the result that we delivered exceeded all our initial expectations. We have reached many records, a merit of a team that is 100% committed and engaged. In the fourth quarter, we had record sales in a single quarter, record digital sales for a year, record daily sales.

In a typical and uncertain and unknown scenario, we transformed our business with solidity that we built along years and resilience along all this journey. The brand Vivara is closing 2020 even stronger as a reference in online searches. We are the destination brand for customers who try to find the perfect gift for special moments. We have adopted our communication with a much more emotional approach in our campaigns. We sought new ways of interacting with our customers. We spoke of purpose well-being in connection with others, everything in a very subtle way and focusing on meaning, which is what jewels are about. We have advanced a lot on the use of data to communicate, making our customer database into an important sales tool.

And speaking of sales, our sales force has made a difference. They met with excellence our mission of fascinating customers. They were focused on results, even at the most difficult times with our -- when our stores were closed. Through the project, Jewelry in Action, with our direct sales initiative, the business model that is vertical, made it possible for us to protect our margins to work on the product means that was the most suitable for the moment. We have expanded in-sourcing of the production of Life adjusted inventory, very fast expanded coverage of the online channel in order to assure an appropriate mix of products in all category. The year was affected by the closing of stores, but we saw an evolution every month. We closed the year with a drop of 10.2% in revenues. But in the fourth quarter, we grew by 14.4%, even operating with limited flow in stores and reduced working hours. Our digital sales have grown very fast, an expansion of 191.2% as compared to the year before. Our adjusted EBITDA was BRL 216 million with a margin of 20.7 and with a result in profitability and a rigid control of expenses. But most importantly, we gained market share. We exceeded ourselves.

We started 2021 still with challenges related to the pandemic. January and February were very strong with the same performance as December with a positive growth in sales and also positive same-store sales, still a strong contribution from digital sales. The scenario of restrictions started in late February. Today, we have 175 of operations closed, accounting for 64% of our complex. We started the year with very optimistic prospects for our business. And today, naturally, the scenario has become more uncertain and more difficult to predict. On the other hand, I would say that now we are much better prepared than we were back in March 2020. We have better consolidated initiatives and a better structure to overcome this other challenge. And we are paying attention at the developments of the pandemic in order to be able to be just as diligent in making decisions, which made it possible for us to deliver 2020 results.

This is a word that I like very much to use, and I think it's very appropriate for the moment that we are facing. In Hebrew, there is a word called nisht-gitt, which means restlessness. This is how I see our team. This is how I see myself. We are restless, and we will continue being so. And this is what transformed us in 2020, and this is what is going to take us even further. Now it is the time to be diligent without losing sight of the opportunities that may appear. We have financial solidity. We have relevant resources for the opportunities of consolidation and to enforce our position of leadership.

Now I would like to turn the conference over to Otavio, who's going to talk about the numbers of the quarter and the year. Otavio, the floor is yours.

[Otavio Chacon Amaral Lyra, executive]

Thank you, Paulo. Good morning, everyone. Welcome to our conference call for the fourth quarter of 2020. As Paulo said, we are all very proud to be here today announcing the results today, and it could not be any different and we could not start in any way other -- in any other way. So we need to understand last year and everything that happened and everything that brought out this restlessness that Paulo has mentioned. And this has made it possible for us to survive and advance in these months with relevant progresses in practically every business line.

So here on the first 2 slides, you're seeing what Paulo put here. So I'm going to start my presentation on Slide #4, where we see the evolution of revenues month-on-month with the results that the company is reporting. So we started doing it this year to get even clearer of all the performance that the company had been presenting and what we are seeing here internally month-on-month.

So starting in March, when our revenues had a drop of almost 28% on the 21st of March 2020, we decided to shut 100% of our stores even before the government determined that. In June, our revenues were still suffering, were down 36% lower than the year before. However, our e-commerce sales were going up and increased and exceeded off-line sales. So we grew 510% in online sales with an increasingly larger contribution of Jewelry in Action. In September, we were growing 7.2% in revenues compared to the same period in the year before and the program during action accounted for 45% of those sales. So it's a completely different mix of sales in the digital as compared to what we used to have before. And we are going to give you more details of how that evolved along quarters, but this was definitely a major contribution both for revenues and for the profitability with more attractive numbers for e-commerce as compared to what we had before the pandemic.

So in November, we had an excellent performance with the Black Friday. So we expanded our portfolio. We worked very hard on that, especially for the Black Week, and in this manner, we are able to anticipate the month of December and Christmas. And in this manner, we grew almost 24% as compared to the same month the year before. All of this contributed.

Now on Slide #5, for the evolution of revenues that we are reporting here. So gross revenue net of the evolutions increased 14.4% in the quarter, reaching BRL 496.5 million (sic) [ BRL 596.5 million ] in the last quarter of 2020. We should highlight the growth. It was due especially to volume, 12.9% due to volume and 1.9% from price, so which demonstrated that we were very assertive in our campaigns and that we implemented the right campaign.

So we had a major mass of sales with jewelry, and I will be talking about that, but jewels grew more than 15% in the quarter, coming especially from pricing, 13.8% in prices and 1.8 in volume. So in spite of the transfers that we had during the year to preserve the profitability of the company, and we see a very interesting price elasticity in talking about the evolution of volume, a major indicator of the gain in share that the company is reporting for this period.

We closed the quarter and the year of 267 points of sale, 28 openings, closing the year 14 closings. So we closed a store in Guarulhos and some kiosks in this movement of turning kiosks into stores, and also increasing the results was part of the mid- and long-term strategy for the company. In the quarter, there were 5 openings, 3 for Vivara, 2 for Vivara and also Life. And in the quarter, we also had a positive evolution of the company's sales mix with 0.5% points in jewelry to 5 point -- to 50.4% of sales, especially in Life. And these 2 categories gained share, watches and accessories, obviously, and they contributed for the evolution of the company's profitability, especially in the year, as we -- as you will see next.

Same-store sales for the quarter, we had 11.3% as total volume with the contribution of e-commerce, or x contribution of e-commerce, slightly negative, minus 2%. In the year, obviously, we suffered the impact in revenues, because our stores were closed in the period -- in the lockdown period, especially in the first half of the year, and it also impacted this whole year. So in gross revenue of the company, we reached BRL 1.13 billion (sic) [ BRL 1.33 billion ], still with a drop of 10.2% year-on-year with a positive impact, 6.6 in prices and a drop in volume of about 15%.

Now going to the next slide, you can see the details of the evolution of our physical stores. We see a drop of their share along the year, especially in the second quarter with the main geographies closed and then with reopening. We recovered very fast along the third and fourth quarters and the share of those stores in our revenues. So we were down by 16.5% in the third quarter and down in -- a growth of 2.2% in Q4 with 81.2%. So you can see the growth trends in the country in the different states where we have stores. You can see on this map, on the right-hand side, we saw an excellent performance of recovery in the fourth quarter in the regions in the center, west, north and northeast of Brazil with fewer restrictions for the opening and operation of shopping malls. In the Southeast and in the south of the country, in December, we had a few additional restrictions, which had an impact on the evolution of revenues, as you can see here in orange and in red on the map.

The sales mix of stores didn't change much. So there was a stability in Q4 with all markets already open, and it was very similar to what we saw a year before.

Now moving to Slide #7, and here, showing the evolution of digital sales and its share and its growth along the periods. And so before the pandemic, the digital platform represented 8.4% of the company's gross revenue. We saw it getting to as much as 64% in Q2 and then accommodating at a lower level as geographies and its share in the revenue of sales grew. We still are growing at 3 digits, very strong growth, especially in Q3 and Q4. As a result, especially of the continuous contribution of Jewelry in Action, direct sales by our salespeople in this program that was so appropriate. So in the year, we grew more than 195% and still growing the good performance and good share of our sales in line with what you're seeing in this slide in the beginning of 2021.

Obviously, considering all restriction now in March, we have a few other trends that are similar to periods of more limited operation of our stores. And of course, at these periods, digital sales gained share in our revenues. This is a reflex of the maturity of our initiatives of the omnichannel strategy. This is related to the full experience of our customers in different channels and also very specific project in terms of diversifying our transportation companies. This was very positive for us. We tried to reduce our dependence on the Brazil's mail because, sometimes, they take longer to deliver goods in specific regions of the country. So in this manner, we could reduce delivery times and, obviously, also, as a consequence, improve customer satisfaction during the pandemic.

Still about the digital channel on Slide #8. You can see the breakdown of the mix of sales in the digital channel during the quarter, and you -- we still see the trend that we saw in previous quarters. So jewelry is still winning a lot of space in digital sales, 13.4%. Life has also gained share at the same magnitude, 1.4% of share and apart from -- taking out watches that lost almost 15% share in the digital -- which was very positive for the company's profitability in this period. And obviously, as I said, there was a major contribution of Jewelry in Action, which accounted for 31.6% of e-commerce sales. However, with a share that is much more supported on the sale of jewelry, almost 67% of the sales of this program comes from jewelry and Life, 22% almost and less from watches, 8.8 and 2.6 from accessories, respectively.

Now moving to Slide #9. You can see the evolution of the company's gross profit and gross margin. In 2020, we had BRL 318.2 million of gross profit in Q4 with a margin of 69% with a shrinking of 7.9%. So we had been -- and also, the margin went down by 3.4 percent points. So we had a very appropriate, very assertive campaign in very well-balanced launches as we did in Q4 '19 in an environment that was still before the pandemic already and would transfer and thinking that the escalation of gold prices started in late 2019, and we reacted to these higher costs of our raw materials in price transfers. We advanced this gain in profitability, which contributed not just in 2019 but also in 2020 for us to see a significant progress of the company's profitability level. Well, still in the same quarter, I believe, that we consider that this level of profitability is a good level of profitability considering historical levels, regardless of the comparison with the previous quarter. And this has brought us stability for the company's profitability. In the year, we had BRL 717.5 million of gross profit, a drop of 10% as compared to the year of 2019. However, preserving our profitability with an expansion of 0.4 percent points in our margin. This reflects especially of the adaptation of our inventory, the assertiveness in our sales strategies and the right product mix in different channels as you could see in the previous slides. I think that we have retained a good combination between profitability and growth, especially in the fourth quarter of 2020, something that we're still trying to balance for 2021.

On Slide #10, here, you can see the evolution of our sales expenses, where we recorded BRL 121.9 million, BRL 122 million in sales expenses in Q4. This was almost 5% greater than the number that we had in Q4 '19, and this number represented 26.5% of revenues, which meant a reduction of 2.1 percent points in this period. So this was a result especially of recovery of the opening of stores and also with a smaller level of benefits and also regarding the Law 14,020, which was related to personnel expenses of the company both in sales and in SG&A, too.

We also see this more digital profile in the company's sales. And this line, specifically, put certain pressure in its share, especially with freight and taxes and [indiscernible]. And obviously, with this differentiated share as compared to the year before, it becomes slightly more relevant in this environment.

Looking into 2020, we had BRL 331.7 million in sales expenses. This was a drop of 7.9% as compared to the year before, accounting for 31.7% of the gross revenue, a drop of 0 point -- a loss in profitability of 0.9 percent points for that period. So the last quarters were not enough to reduce it, especially the second quarter of the year when we had almost 0 in operational numbers.

Now going to general and administrative expenses, G&A. So here in the fourth quarter, we had BRL 47 million in G&A in contrast with BRL 57.2 million in the same period of the year before, a drop of almost 18% quarter-on-quarter. And this accounted for 10.2% of our net revenues, a dilution of 3.9 percent points.

So here to -- for better comparison in the fourth quarter, we had nonrecurring expenses, BRL 14.9 million, and these expenses were related to our IPO in Q4 '19, as I am going to detail next to you. And obviously, as I said in the previous slide, we also had the benefit in 2020, both in the quarter and the year as a whole, a reduction of the commercial expenses regarding Law 14,020. In the year, we recorded BRL 131 million in sales expenses, a drop of 4.7% as compared to the same period in the year before, representing 12.6% of net revenue, down by 0.8 percent points in margin in this period.

Now going to the reflex of all of this in the adjusted EBITDA and the EBITDA margin for the company in the fourth quarter and the year 2020. We reported BRL 137.4 million EBITDA, up by 15.6% as compared to the same quarter the year before, an expansion of 0.6 percent points in the margin to 29.8% of the net revenue. For the year, we have BRL 216.3 million, a drop of 20.5% as compared to BRL 272 million that we reported in 2019 with a margin of 23.2% in contrast with 20.7% in 2020 with a reduction of 2.6 percent points, a result which is relatively very interesting when we look at retail performance as a whole.

So this is the highlight. So the expenses regarding the IPO in Q4 2019. And so we made the same adjusted -- adjustment for Q4 '20 and excluding the positive effect of the PIS/COFINS lawsuit for the full year, which had an impact in the second quarter to 2019 rather, and adding the accumulated effect with a BRL 14.9 million of BRL 88 million that were nonrecurring in the result of 2019.

Now on Slide #13, you can see the evolution of net income and the net margin. The company recorded BRL 93.2 million and the margin was at 20.2% in Q4 in contrast with BRL 92.6 million with BRL 22.7 million (sic) [ 22.7% ] margin in Q4 '19, down by 2.5 percent points in the quarter. Or if we exclude the effects of the net income that are highlighted on the table below, we would have BRL 93.2 million in the period, however, BRL 107 million in adjusted income. And then we have 6.2% lower than the year before. This is the adjusted margin. And the evolution of profitability in this quarter of the operations as a whole, both in retail and the industry here for us, has provided a different balance in our tax rate, an effective tax rate which explains part of the difference in the evolution of EBITDA versus the net income that you're seeing here.

For 2020, for the year, we report BRL 146 million of profit, 14% of net margin, 13.2 percent points lower than the 27.2% that we had for the year of 2019 in terms of net margin. So adjusted to the effects that we highlight before, as I did for the quarter, this would be BRL 101.2 million, a drop of 32% in the adjusted net income, a retraction in margin of 4.5 percent points.

Now looking at our investments, our CapEx, on Slide #14. We invested in the period in the fourth quarter almost BRL 7 million, especially concentrated in new stores and renovations and maintenance totaling more than BRL 5 million. There are some investments in systems and IT. For the year, we invested BRL 44.7 million, very much concentrated not just in new stores and renovations but also in IT systems, providing support to the business and especially for the development of our digital platform that we had in this period.

On Slide 15, you can see the evolution of our debt. So here are some important comments, this increase in debt between September and December of BRL 330 million to BRL 390 million. And so this anticipated, in the third quarter, we had talked about that we would opportunilly use the long exemption of IOF, which is worth of for future rolling for the contracts that we have.

In the first quarter of 2020, we are going to adjust it back for the company's debt level for this quarter. So we have already done that, and we finished the last movement. Today, our debt is about BRL 290 million, however, with a cost that is very appropriate for the company and a time that is much longer. As compared to December, we went from 12 to 20 months in the average time for the company spend, keeping the cost at very reasonable levels. We closed the period with BRL 702 million in cash and leading to a net cash of BRL 300.6 million.

On Slide 16, you can see the evolution of operational cash generation. There are a few highlights here, a few things to mention. So even though we had some limitation in our operations that affected our operational results, we are able to see an evolution of progress of operational results, as you saw in previous slides, and we got 2 relevant generation of operational cash of BRL 63.3 million. So we took almost BRL 36 million last year in contrast with BRL 21 million of investments of BRL 56.9 million after the payment of the settlement of those investments.

We should highlight, as we said, during the year of 2019, we started a movement of no longer advancing funds for credit card sales during the entire year of 2019, but especially in the fourth quarter. So this movement had a negative impact in the table above of BRL 120 million, almost demonstrated here in the line accounts receivable evolving to almost BRL 240 million that we booked for the fourth quarter of 2019. So if we exclude this effect for a fairer comparison, even so, we have BRL 63 million. It's an excellent number, but it was smaller than the BRL 94 million that we booked in Q4 '19.

However, for the year as a whole, even considering all these adjustments that we are mentioning in terms of operating cash and generation of operating cash that we are booking here, we have very good numbers. We are booking almost BRL 240 million in 2020 against BRL 186 million, already taking out the negative effect of those advances that we didn't make in 2019.

So this year, again, ladies and gentlemen, has been a very good year for us, a year in which we exceeded our highest expectations. And so we focused on early March and April with our employees, our Board of Directors who sat down and analyzed all the scenarios. No matter how pessimistic or optimistic it was, we were able to deliver yesterday, and I'm going to show you results that, in fact, exceeded in every line our best expectations for that moment. So we continue in 2021 with major challenges in a scenario that there is a lot of instability keeping important trends of accelerating. But for the time being, in this scenario, we're keeping our target in terms of store openings, 40 to 50 points of sales. This year, we advanced -- we are advancing in the negotiations, especially for Vivara, and some of them for Life. We are going -- we are seeking a better balance. And as we told you, we are going to continue making significant investments to develop our omnichannel strategy. And last, and very importantly, we want to empower our brand of Life. We see a lot of opportunity to develop this brand even further, as we've been doing since the company's IPO, but especially right now, when there is more difficulty and we see the competition as we've been monitoring over the past few quarters.

I thank you all very much for your participation, and now we are open for questions and answers.

[Operator]

[Operator Instructions] Our first question comes from Helena Villares from Itaú.

[Helena Villares, analyst]

The 2 things that we would like to understand regard how you're seeing the dynamics in store opening. So the fourth quarter had a positive impact. If you could comment on whether your expenses with rental is sustainable.

And the second, how do you see the competition scenario? How do you see the dynamics? Are players still suffering a lot? Or are you still gaining share? How do you see the competition scenario?

[Otavio Chacon Amaral Lyra, executive]

Thank you, Helena, for your question, and thank you for the congratulations that you gave. Starting from the expansion, we are seeing a very positive dynamic in the short-term negotiations. As I said before, we have advanced very much in negotiations today. We already have 33 POS already in advanced stages of negotiation so along the next few months. And now in the very short term, we had the impact of the temporary closing of some of the main markets. But the dynamics, especially for Vivara, and the highlight that I'm giving is still very positive in terms of us going to smaller cities, and this is contributing for us to keep our profitability and return at interest levels in spite of the environment where revenues are still compressed, either due to operation and flow restrictions and once these markets are open or because of the marginality of shrinking return in some point -- as we migrate to smaller cities. So we still see quite significant opportunities for this spread of our stores, maybe with a lower density as compared to the pre-pandemic reality.

So we had omnichannel initiatives that were not so well developed. So with all of this, we increased the potentiality of these new points of sale significantly. And maybe for this reason, a long time, there is a need of lower density, especially for Vivara stores. As to Life stores, the movement is focused on the leading and biggest shopping malls of the country. They are more expensive negotiations and everything as part of what we expected for this first wave of expansion of Life. We have been able to have good negotiations of points of sales in good shopping malls, and we are going to start negotiating points of sales for Life in a differentiated model. And everything is going to be different with more product diversity, a wider portfolio so that we can capture even better times in the market.

As to competition, I believe that we've been seeing the competition, especially with some of the largest players, are more active in the part of jewels or gold. They're even more active in promotion, especially one of them participating more significantly in campaigns, increasing the availability of products, increasing some specific products. I think that our product availability and the size of our inventory has contributed greatly for us to continue in spite of the circumstances to capture markets, as when I pointed out the development of the category of jewelry for us, especially this quarter for Life.

I think that we need to make the most of the time this year not just in the quarter but, in this year, in the next few years, of more unfavorable circumstances for our main competitors. And then we take advantage of the competitive advantage of the vertical strategy of our company, transferring to our business quite interesting profitability. So we see these competitors increasing prices all during last year especially. And this year, we're still monitoring them closely. And this has contributed to give us increasingly larger advantages in points of sales, especially in terms of pricing. So this explains the acceleration of sales of Life and our excitement with the opportunities that lie in the future, reinforcing our brand, the marketing, our products and points of sales for the future periods in order to capture the market that is still shrinking. The jewel market had a drop of 13.4% in Q4 '19, where Vivara grew 14% strong in jewels, strong in Life, and we need to continue investing in this trend, increasing even further our capability in the basis for the future of our business.

[Paulo Kruglensky, executive]

Just complementing what Otavio said, we have a very good opportunity in terms of the expansion of life as compared to our competitors in silver. And last year, we worked very intensely in planning and developing life to open a new front of Life stores, a new 2.0 concept starting next month and in the beginning of May, which is going to provide us a competitive differential, both in terms of experience, communication or display. So it's a very good timing in terms of the opportunity for Life.

[Operator]

Our next question comes from Danniela Eiger from XP Investments.

[Danniela Eiger, analyst]

And congratulations on your results, really excellent during such turbulent times. My question regards 2021 initiative that you mentioned regarding a positive performance in January and February, which is really noteworthy because there was still uncertainty with more cases and higher restrictions. How do you see the performance in Q1 '21 in terms of same-store sales and revenue in contrast with Q4? Do you think there will be a slowdown because there's no Black Friday or Christmas to contribute? But again, if you think year-on-year, there was an adjustment in base.

And the other question regards gross margin. So you been very successful in managing this increase in prices of your raw materials, gold and silver. So you've been able to mitigate that very well, considering the demands, as you said, in terms of jewelry and in production. So how do you see the trajectory in gross margin during the year?

[Otavio Chacon Amaral Lyra, executive]

Thank you, Danniela. I think that Paulo highlighted the performance in the beginning of the year, especially in January and February, when we still saw growth trends similar to the ones that we saw in December. So we were very happy with the evolution in those months compared to pre-pandemic month, still with more points of sales open but with a positive evolution, same-store sales for the company. Of course, the restrictions in March, it started in March. They have an impact on this development and this growth in revenue. And depending on how long this lasts, obviously, this may have an impact even in the growth trend for the quarter. This is a little bit of -- we're still monitoring, and we are activating our strengths. We have 175 POS closed. However and wherever we can, we are still operating and selling with the channels that we are allowed to work with. In this manner, we are seeing a migration to the digital channel that now is much more better prepared for that. But obviously, this cannot completely offset the impact of our closed stores.

Now we are headed towards the end of March, where, obviously, we'll see the beginning -- the impact of last year in terms of comparison. So on March 21 last year, we closed all stores and now our stores are not all closed yet. So maybe in the last week, we have better terms of comparison, especially regarding the last weeks of the month.

Now as to your second question, in terms of our expectations for the company's gross profitability, I believe that most of this increase in costs has already arrived at our inventories. But in the last 12 months, we had increases of 27% and 28% of the last 12 months for gold. So this is a recurring challenge and still major for us. Again, in a year when the curve of that increase is steeper, our pricing strategy provides this extra profitability as compared to the short term. In a year, the development of this line is flatter. So this anticipation is smaller and may even provide -- slightly more challenged in terms of profitability. And this challenge we had been sharing with you in terms of the results that we reported in 2020. And the idea and the company's strategy is to always have stability for this year -- for this line year after year, as we have been doing. So I think that, in Q4, the additional revenues already -- that we already have in this line, so we have a lower dilution of operational expenses of the factory, but we can already see an impact because there is more product turnover regarding the cost of products. And even so, we were able to have interesting trends for the year as a whole. And once again, this is the objective that we have for the year, but it's reasonable for us to expect some pressure in those lines along 2021.

[Melina Afonso Rodrigues, executive]

And just complementing, we have an interesting space. We're in-sourcing for Life, and this is going to help us. So there's work that we have been conducting along the year, and we did that in 2020. We got close to 75% in-sourcing of Life for the year. As a reminder, in 2019, we had approximately 60%. So we have increased a lot the in-sourcing movement. And now in 2021, we should exceed 80% in-sourcing, which provides a production cost reduction, which helps us to offset partly this increase in raw material prices. And this is one of the factors that may benefit us along the year.

[Operator]

Our next question comes from Bob Ford from the Bank of America.

[Robert Ford, analyst]

Paulo, Otavio, Melina, congratulations on your results. I was surprised with the growth of volume in the quarter. Is this because you have more silver, lighter items? Why did you have such an increase in volume? How can you explain that?

[Otavio Chacon Amaral Lyra, executive]

Thank you, Bob, for your question. In fact, it reverses the trend that we've been seeing for the year and in the quarter. It's due especially for the -- especially due to the development of Life, especially in the Black Friday week and during promotions. We had an additional volume. So we had more products to take part in that campaign. We attained a good balance in terms of additional sales growth in contrast with the better balanced profitability of the business, and Life has 15 additional points in terms of profitability and sales. So once it gains shares, it balances the whole. What happens to Life in terms of volume determines what happens to the company because it's 30% of our sales, but it accounts about 73% of the volumes sold in the quarter even more than 70% of the volume that it represented in Q4 '19.

So when we look at the balance tends towards Life, but it's different between categories, as I talked to you in the evolution of revenues, the growth in jewelry, which is the most relevant in terms of sales but especially because of price and not volume, but this is due to the relevance of Life volumes. This is what happens.

[Melina Afonso Rodrigues, executive]

I think that there's another positive highlight, Bob, in volume, which is the category of accessories, which accounts for a smaller share in terms of revenue, but there is an interesting indication in terms of changing the profile. So there are items that we didn't operate before within the line of accessories. So it accounts for the gain in volume. So in accessories, it's helping us to attain this balance in volume, and that's why the growth in volume is much bigger than it is in price.

[Paulo Kruglensky, executive]

And Bob, just complementing what Mel said, a very important point in jewelry was our good timing in the launching of the collections for Christmas and our price positioning. We were able to be resilient with gold in spite of the pressure for higher prices in gold with repricing, and we had a very good performance.

[Robert Ford, analyst]

Paulo, can you tell us a little bit about your digital sales tools? How are you using CRM? And how is this evolving this year?

[Paulo Kruglensky, executive]

Of course, we -- today, Jewelry in Action is a reality as part of our digital tools, and we've been increasing its share in our total sales. And I think that main pillars -- one of the main drivers for growth, we have structuring of databases and different customer clusters, defining better all communication channels and having more personalized and thinking of personas in order to have much more focused actions in our one to one.

Another thing that we are evolving is the display of our websites in terms of navigation appropriate to the customers' purchases. And I see a major opportunity of us evolving in the website as a tool and then stop being just as a sales platform but also content and inspiration. The increase in the basis as part of Jewelry in Action is very important for us. Today, we have 1,600 saleswomen plugged in Jewelry in Action. This provides an opportunity for us to have almost up to 25,000 sales on a single day. How can we increase sales, can inspire this team to have proactive sales? So scalability is a challenge for us, and we are working very much on that.

[Operator]

Our next question comes from Olivia Petronilho from JPMorgan.

[Olivia Petronilho, analyst]

I have 2 questions. First, looking at gross margin and you make it very clear in terms of commodity prices, and then we have the in-sourcing of gold. How do you see the trends in the first quarter where your base is slightly more challenging? And can we take the levels of Q4 and think that is applicable for 2021? And so I would like you to talk a little bit more about the expansion of your line channels. You have said a lot about that. But anyway, I would like to have some more color on that and in expansions but not just thinking for 2021 but almost in the medium and long term and strategy for the malls and everything.

[Otavio Chacon Amaral Lyra, executive]

Olivia, thank you for your question. I think, again, in reinforcing the message is that, in fact, the challenge was really great for 2020. In 2019, it was more towards the end of the year because we had price increases that started affecting us and affecting our gross margin. So the challenge was concentrated on our expectations for 2020 and 2021 while, obviously, this curve was still very steep. And we saw some challenge in the first quarter, and there is no major volatility, not for the quarter or for the year. So you're keeping quite close trends, but I believe that more and more -- in terms of having more relevant sales for the entire retail. And it's no different for us for the year. And once again, it's reasonable in terms of margin along those lines, around 100 basis points for the year of 2020 with all the challenges that we have. It's a little bit more or less.

[Paulo Kruglensky, executive]

I think that with the challenge of expansion, we see that's very much related to our omnichannel strategy. So we have a good share for Jewelry in Action. And what we see very much in POS, customers go to the stores with the decision already made. Sometimes, they made a decision way before or not so -- more directly rather.

So as part of their journey, we believe that 90% of our customers go through the website, go to the store, go to the store and then the website, and this is a joint experience. It's a combination, so during the pandemic. And now customers are taking less time in the mall. They arrive at the stores with a decision already made. So I still believe in the opening of stores and in customer experience of having ready-to-deliver products, of having a contract trying on, this still makes a difference in our segment.

Maybe would like to complement Otavio.

[Otavio Chacon Amaral Lyra, executive]

So I'm trying to find in the long term, we're still gaining. It's still performing that. In the beginning of the year, it's still strong and much bigger and then the pre-pandemic and then the initiatives that have come to stay. So this number, about 17% or 18% of our revenues, is well superior to our wildest dreams in our initial plan for Vivara's strategy. So this makes sense. And a portion -- a significant portion of our investments is allocated for us to continue developing that channel. So the idea is for it to expand more and more, even more slowly in terms of its share in our total sales. But as we increase our stores, it's going to develop even further because people are more compliant with the platform and the improvements that we've been implementing in the operation. I think it's still early for us, a new target level for the future as we gain a more granular idea of the possibilities. And so we have -- we want to increase more and more the share in that channel.

[Paulo Kruglensky, executive]

Just complementing what Otavio said. The store P&L will start looking, but the cost of inventory allocated to that sale, it's reducing for online sales. It helps online sales. So for some stores, P&L is even more productive than it was before we implemented our omnichannel model.

[Operator]

If there are no more questions, we now close our questions-and-answer session. I would like to turn the conference over to Mr. Kruglensky for his closing remarks. Please, Mr. Kruglensky.

[Paulo Kruglensky, executive]

Thank you very much, everyone. I would like to thank you all for your trust. Once again, thank you very much for your participation in our conference call. Have a good day, and see you next quarter. Thank you.

[Melina Afonso Rodrigues, executive]

Have a good day. Have a good day. See you next quarter.

[Operator]

The conference call of Vivara has now ended. We thank you all for your participation, and have a good day.

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