Vivara Participacoes SA

BOVESPA:VIVA3

Earnings Call Transcript 2021-Q4

[Operator]

Good morning. Welcome to the conference call of Vivara to announce the results of the fourth quarter of 2021. This conference call is being recorded and simultaneously translated. [Operator Instructions]

Also, changing the slides that are available on the platform is not automatic, and each users should do it individually. Then we are going to start a questions-and-answer session.

The questions we receive through the webcast will be answered later by the Investor Relations team. Now we would like to turn the conference over to Mr. Paulo Kruglensky, CEO of Vivara, who's going to start the presentation.

Mr. Kruglensky, please, you may start.

[Paulo Kruglensky, executive]

Good morning, everyone. Thank you very much for attending our conference call to announce the results of the fourth quarter of 2021. We will be available throughout the conference. I, and Otavio Lyra, our CFO and IRO.

Now going to Slide #2. We have celebrated another year of very good results, very much influenced by the resilience and the delivery of our objectives and despite the very challenging times. As part of the highlights of 2021, we started the year very accelerated with the consolidation in a jewelry market.

And this is just the beginning of a very fruitful journey that we are hoping for the next few years. We opened 41 new stores, a historical record of openings in 1 year, 16 new stores in the -- fourth quarter, totaling 288 sales -- points of sale. We had BRL 1.8 billion of gross revenue, a growth of almost 38% as compared to 2020. And we had a onetime record on a single day.

It was on Christmas, BRL 28 million. We had a 32% growth in same-store sales as compared to 2020. Our digital channels are still demonstrating very strong relevance in our omnichannel strategy, reaching 17.5% (sic) [ 17.4% ] of share in total revenue. A number that is very important, and I'm going to give you more detail on next slide. We have reached 16% market share in the last 12 months with an NPS of 93, thereby confirming our commitment with customer service, quality of our channels, where we still have the [ RA mill ], and we also were awarded a prize for the best company in our industry by [ Rick ] [indiscernible].

Our net income is BRL 287 million, a growth of 95.8% as compared to 2020. So we doubled our net income as compared to 2020 with a growth of 32% over 2019, a year without pandemic. We have invested more than BRL 104 million in our company with a growth of 133% higher than 2020. There is a great acceleration in our physical and technological and store expansion and we have reached 40% ROIC, a growth of 14.1% over 2020.

I think that this is the best number ever. The biggest number in our history, we are very proud of it to be able -- to be part of this evolution and growth. On Slide #3, you can see that in 2021, we had a strong acceleration in market share. In the past 24 months, we have grown 4.6% -- percentage points and an acceleration of 2.9 percentage points in the last 12 months. So this is a number that makes us very grateful. And in the last 12 months, we were able to gain market share, grow the market and increase the market more than the second player in our industry. This is an indication of the project that we are delivering that has demonstrated to be very consistent ever since our IPO.

In 2022, we are going to celebrate the 60th anniversary of Vivara and we are still the leaders in the Brazilian jewelry market. On Slide #4, you can see a little bit of Life trajectory. This year Life is 10 years old, and we celebrated our tenth anniversary in great style. With new store layout, relevance in revenue and customer base, more independence, record of store openings in 1 year with 20 openings. And we have also set a record in 2021 with BRL 500 million revenues from Life. And we are very optimistic with the growth of Life, and they are stores that have an accelerated maturation gross margin on average of 85% and an EBITDA for above 50% and aiming ROIC of 50%.

So the maturity of Life stores is very accelerated. This is super positive and makes us optimistic and confident that we can continue growing. I think that another highlight that we have here that confirms this new model and layout of Life was the renovation of our Campinas store. So we changed the layout in Campinas to a new concept. And in the first months, after it's opening in January and February this year, it's been showing more than 80% growth over 2021. So with the same store, same mix, changing the mix, we see that the store can deliver much more.

Now going to Slide #5, talking about the digital channels. So we start seeing a stabilization of the digital share at 17.4% share in the total revenues. We awarded salespersons, more details of customers, our sales management portal for the store teams, much better structure, evolution in payment methods, such as PIX and other, methods of payment, and we have also consolidated our omnichannel model with 176 stores connected in our delivery hub. And many of them were interstate.

So here on the right-hand side, you can see the numbers, almost 1 million items sold through the digital channel, 80 million sessions, 240 million pages accessed. Another important point here is that we had 0.5 million orders that were delivered and made available in these new modalities and a number that gets the attention in our omnichannel model is half of the searches for jewelry and watches on Google go through our site. So 50% of the market goes through our journey. And 40% of the visits and jewelry and watch industry are to Vivara's website, 31 percentage points above the second player in our industry. So today, existing on the online product for 40% of our customers, a product needs to be in Vivara's website.

A number that shows how much we've been growing. And the representation of our model and how effective we are on the digital world are the numbers from Black Friday, when we had 1 order every 29 seconds and more than 51,000 items sold in 24 hours. On the next slide, talking about our factory, this has also been a year of expansion and stability in the operation of our factory. We had 2.6 million parts produced, a growth of 47% over 2020.

We had an increase in our manufacturing capacity in Manaus, manufacturing almost 1 million items more than in 2020. We have created more than 250 new job vacancies ending our operation with almost 700 employees in our plant in Manaus with investments amounting to BRL 11 million. In in-sourcing, our production and improvement in technology and machinery thereby also consolidating investments of over BRL 21 million in the last 3 years.

And we still have plans. We have more investments to make this year to increase and support the growth of Life that we are expecting for '22, '23, '24. So we are going to invest more than BRL 13 million in our factory, continuing with our in-sourcing plan to increase our manufacturing capacity to support our expansion and the growth of our stores.

On the next slide, on Slide 7, you can see perspectives for 2022. So this is a year that will be very strong. That was very strong in the beginning. We started on the right foot, on the accelerator very strong. So on the first 2 months, of the year, we have had a growth of 25% in revenue compared to the year before in terms of same-store sales also with a 2-digit growth. So we have a commitment of opening 50 to 60 new stores, one of the main highlights of the year. This is our expansion plan for Life as part of our model that has demonstrated to be very profitable and ready to be scaled up.

We are changing our platform with more functionality, increased shopping experience, better excellence in service is something that will happen next month. And major work investing in marketing for the 60th anniversary of Vivara, focusing on branding, and we have invested more than BRL 60 million in marketing. So -- this is much bigger than the revenues of other competitors. It's almost 50% of the revenues of the second competitor. And this is how much we're going to invest in marketing.

So this strengthens us and makes us confident to continue the path of leadership and expansion. Here on the right-hand side, you can see a little bit of our [ ONYX ] project, our strategic plan and how we see the company and how we're going to work this year. So this year, we have a clear objective that is to fascinate our customers by offering the best experience when choosing the perfect gift. And this goal is based on 4 main pillars: digital transformation, when we have an expedited agile experience, omnichannel, so growth and brand working on brand awareness, market leadership and empowerment of the Life as a brand, we believe that Life is the second leading brand of jewelry in Brazil, and it's going to consolidate this year's going to grow a lot on -- over the next few years.

So in terms of product and customer, building loyalty, optimizing our portfolio and thereby assuring quality and also the business support with a very clear agenda, enabling manufacturing capacity, improving operational efficiency and engaging our teams. We see 2022 as a year of opportunity, opportunity for us to continue growing in a very accelerated manner and also of making our operations even more profitable with more and more leadership for Life, we are very optimistic, and we are sure that we are building a history that is really great.

Now I'm going to give the conference over to Otavio, who's going to talk about our financial numbers for 2021. Otavio, floor is yours.

[Otavio Chacon Amaral Lyra, executive]

Good morning, everyone. Thank you very much for being here. I'm going to start on Slide #8, complementing what Paulo told you. We opened 41 stores in 2021, 21 Vivara and 20 Life and we closed the year 288 points of sales, 229 Vivara stores, 33 Life stores, 21 according to the new model, and another 26 kiosks.

We opened 16 stores plus 1 kiosk in the quarter, 2 Vivara's and 14 Life's, in addition to 4 conversions of kiosks into stores and a closing of existing operations. Now going to Slide #9. Here, you can see the breakdown of the company's growth and gross revenue. We have BRL 701 million, 17.7% higher than last year or 34.5% above 2019. In net revenue, we had BRL 449.4 million, 19.2% above last year or 34.9% versus 2019.

So here you have the effect of the increase of presumed credit of ICMS in Brazil as a result of more activity in the factory throughout the year of 2021 as compared to the year before, in addition to the benefit extended to 100% of ICMS for the Watch category. So that's why in deductions is growing less than the revenue and is benefiting us throughout the year.

For the year, we have BRL 1.800 billion in revenue, a growth of 37.7% as compared to 2020 and 23% as compared to 2019. It's BRL 1.5 billion of net revenue, a growth of 40% as compared to 2020 and 25% as compared to 2019. As part of the stores that have grown 21.4% in a period. So this is a relevance that Life has gained in our business is BRL 36.8 million sales with a threefold increase in sales. And also for the year, almost BRL 63 million in revenues in contrast with BRL 18.4 million in 2020. So as I said, we have started to gain critical mass to effectively. Have the conclusions on the business model that we have in Life that which has provided this growth in most shopping malls where we have been opening new stores, the revenue has been quite good.

There are very few Vivara stores. So Vivara stores are not losing revenue, although we opened Life stores. We are seeing same-store sales growth, a growth in revenue in the same shopping mall, which is very significant in the year of 2021 also compared to 2019 pre-pandemic time. So these stores are not just significant additional revenue, but also 40% new customers as new customers find this new type of store, more experience a wider range of products and more sophisticated products. Another highlight for e-commerce, so which remain -- retained its share in 2021 with almost BRL 110 million in the last quarter with a 15.6% of the revenues in 4Q '21. And once again stabilizing at this level for the same reasons that we have been seeing over the past few quarters with better design addition to other alternatives and many initiatives that I'm going to mention next.

On Slide #10, here, you see the breakdown of revenue per product category. The main highlight here. It is an accomplishment in the year for the first year, we had BRL 1 billion sales of gold jewelry, a growth of 45% as compared to last year with BRL 365 million sold in the fourth quarter of 2021, a growth of 21%. So in fact, this was the category that really drove the company's growth, not just in the fourth quarter but along the year, gaining share in the quarter, especially in the category of watches.

For the year, we see the same trend even more accelerated in terms of how much share it gained. It gained 2.7% for 24% of our sales, taking share from categories that have also grown, 2 points for watches, 0.2 percentage points for accessories. The highlight and something Paulo mentioned, and I would like to emphasize, Life has had almost BRL 550 million revenue in 2021. And alone as a product, it's the second jewelry store in the country.

So we have gained relevance as products, and this has something that happened quite a while ago. Since the launch of Life as a collection back in 2011. And now we are gaining relevance as a sales channel with almost BRL [ 16 ] million revenues, as you saw in the previous slide.

Now on Slide 11. Here, you can see the physical stores with a 21.4% growth in the last quarter or 15.3% in terms of same-store sales in the same quarter. So it's stronger than 11%, considering e-commerce here. Obviously, in comparison with the period when we still had a more intense effect of the pandemic.

So in the year, it was BRL 1.5 billion with [indiscernible] points to in terms of same-store sales for obvious reasons, especially considering the more restrictions for the operation of stores that we had last year thereby favoring this comparison. And so here to the left, below, you can see the evolution of the sales area. We closed 21 with 23.2000 square meters of sales growth of 16.5% as compared to the same period in the year before. The channel mix changed a little bit. It's very similar to what we see in the consolidated jewelry accounts for 54.5%, gaining 2 percentage points, especially from watches, which accounted for 12.2% of the sales.

Life is quite stable, gained 0.5% -- point of share in the period as compared to last year to 30.9% of our sales in physical stores. Now going to Slide #12. Here again, digital sales remained its relevance in share in the year with the effect of the pandemic. Its share in jewelry remains relevant with more than 20%, a little bit lower than the year, 31.7% because of seasonality. So stores have been working with a much higher flow, especially in November and December. And for this reason, stores are fuller and digital naturally loses relevance but doesn't become any less important, making sure that digital will gain -- become much more relevant than the 7% that we had in pre-pandemic.

Ship from store sales have gained relevance. We have created convenience from the beginning of the pandemic, accelerating the development on this front. So both ship from store that we did before and delivery from stores or store pick up, these have been initiatives that also provide greater convenience and increase the relevance of the digital channel along the years.

As to the sales mix, we had an acceleration in the sale of watches in this channel in Q4. So watches went up 4 percentage points in its share in this quarter with 18.5%. Jewelry accounted for 38.3% of our sales, a reduction of 3 percentage points in the share in this period, and we continue having the project to provide a better balance with a higher share of jewelry and higher tickets in jewelry and watches that will be higher. As to gross profit on Slide #13, you can see the gross profit of BRL 374.1 million, with 68.1% margin. This number represented a pressure of 0.9 percentage points as compared to the same period in the year before, a pressure that is similar to what we see for the full year, where we had BRL 991.5 million of gross profit.

With 67.6% margin for the whole year. And here, there are some important events for us to mention in 2021 as a whole, and also along Q4, we had a higher volume of melting with reduction of the silver and gold week, especially if we compare to 2020, when we still had some restrictions in the region of Manaus. In this manner, when we had higher losses that are influencing this number in terms of buying input, raw materials and product, which accounted for 29.6% of net revenue with a 0.4 percentage points pressure.

If we isolate losses that we recorded in the period, the company has gained an efficiency in the unit cost of products because Life is -- represents a higher share of our businesses. And we have been evolving in terms of in-sourcing the production and this trajectory has been quite relevant in 2021, reaching something like 80% of in-sourcing of these products in our Manaus plant.

In addition to this effect, so along this year and temporary because of the acceleration of production in Manaus and the main effect comes from the inclusion of people, more than 250 new jobs were created in the region in a factory along 2021. So the biggest pressure comes from the payroll of the factory of 0.4 percentage points and 0.5 percentage points for the factory, thereby comprising the 0.9 points of pressure.

Here, our expectation is that this pressure will dissipate along the next year. We are expecting and we see room to expand gross margin along 2022, especially because of the effect of the mix of Life not only will mature and it will become more relevant and has been getting more and more relevant over the past few years and especially in 2021 and also a volume of new live stores that will comprise our mix in 2022 with 15 additional points of profitability.

Also for the whole year, we will be at a higher level of in-sourcing of Life products, as I said. So this increase is something that took place along 2021, and now we are going to go to 2022 at a higher level, and this will benefit the unit cost of products and also the growth in revenue of the company along the year. We expect a growth of between 25% and 30% in revenues, which will also help us to see a higher dilution of those expenses of the manufacturing plant as we produce more and more.

Now going to Page #14. Here, you can see BRL 159.4 million of sales expenses in Q4 2021. This represents a growth of 30.7% as compared to the same period in the year before, 29% growth of the net revenue of the period. This represents a pressure on margin of 2.5% as compared to 2020, which deserves mentioning a few highlights. Number one, comparing to the period when we still had significant benefits in 2020, especially coming from MP from the Brazilian law -- Law 14.020, in terms of labor and payroll and also as a result of the rental negotiations during the periods when we were closed with our stores closed in 2020, booked in the last quarter of 2020 until we had the negotiations with the shopping malls.

Moreover, still have the effect of the expansion of the company, which over the past 2 years has opened almost 70 new points of sales. And obviously, all these stores are still in the phase of maturation, which put some pressure on our bottom line and helps explain the short-term pressure. For the year, we had BRL 457.6 million in sales expenses, a growth of 38% as compared to the year before, and this represents 31.7%. And for the year, we see a reduction of 0.5 percentage points, thereby contributing to the margin in a period.

Now going to Slide 15, you can see that the G&A expenses in the period, we had BRL 55.8 million expenses, a growth of almost 19% compared to the same period in the year before. And 10.2% of the net revenue, very much in line with what we had in the same period in the year before. We should mention that in 2020, we still have the benefit of the law related to the exemptions in the payroll, and we had a higher growth in third parties especially to support the strategic fronts of the company, but also regarding successful and some tax litigations that we had amounting to approximately BRL 3 million in Q4 '21.

On Page 16, you can see the evolution of the company's adjusted EBITDA. So here, we had a one-off effect non recurring, and we adjusted this number in addition to the normal effect of adjustment of IFRS 16. In a booking of rental, we have excluded from BRL 135.8 million in adjusted EBITDA that we recorded in Q4 '21 with 24.7% margin related to the write-off of PIS/COFINS credits, amounting to BRL 7.5 million. And this number represented a shrinking of 1.1% in our EBITDA or 5% as compared to the same period last -- in the year before, for the reasons we have already explained.

So the expenses in 2020 as a comparison basis, it's not really the same because of the benefits and incentives that we were still seeing and that were impacting our business. In the year, we had BRL 31.4 million of adjusted EBITDA with 20.6% margin, a shrinking of 0.1 percentage points in the period, also adjusting the same BRL 7.5 million that impacted Q4 of this year.

On the next slide, you can see the evolution of net income also adjusted to the BRL 7.5 million. BRL 134.6 million or 24.5% net margin in the period. And here, the opposite trend of the company operating profit with an expansion of 4.3 percentage points as compared to the same period in the year before, especially because of the positive effect, not just in the financial performance of the company, but also in the line of income tax with a contribution of more activity in our Manaus manufacturing plant, so more tax benefit in the line of income tax, which affected our bottom line. In the year, we had BRL 287 million of profit.

As Paulo mentioned, this is almost twice as much as compared to what we had in 2020. It's a super good result, so BRL 11.4 million in the full year of 2020, of which we excluded the BRL 7.5 million of expenses we had in the period and also took out the profit of almost BRL 19 million regarding the unconstitutionality of the taxation of the Selic correction on tax undue payments that we booked in 2019.

So this number also represented a growth of 32.3% as compared to 2019, an expansion in a margin of 1.1 percentage points as compared to 2 years before, also a quite good result. On the next page, you can see our record investments, as Paulo said, BRL 104 million for the year and also record for a single quarter for almost BRL 46 million were invested in Q4 '21, especially because of the acceleration of the company's organic expansion and 17 points of sales, 16 stores with BRL 22.6 million invested in new stores and also the systems and IT was BRL 16 million invested for the year, almost BRL 61 million were invested in new stores and almost BRL 11 million invested in the factory to support all this increase in manufacturing and also to support future increase in manufacturing that we are expecting for 2022, future years.

[ This ] is a landmark. This is the beginning of a more accelerated cycle of investments. We are expecting more than BRL 170 million to be invested in '22 because of the acceleration of the expansion plan.

As Paulo mentioned, we want to open 50 to 60 new stores in 2022, also in renovation and repositioning of stores and also in a factory to support, as I said before to you and as I mentioned, we are investing in systems in the turnaround of e-commerce and also in moving our offices to centralize logistic and technical assistance services and our inventory in a single location and we'll be moving in the second half of this year. And so we are also going to have investments and during this business year. On Slide 19, here, you can see the debt, not too many changes as compared to the previous quarter. We have BRL 291 million in the period, and we ended with net cash of BRL 362.5 million.

In Q4 or in December, this is a reduction as compared to the third quarter of that same year because we use operating cash in a period, and we are going to describe it next. As to the same period in the year before December, the year before here, there is a reduction of almost BRL 100 million. Regarding the adjustment that we had earlier in the year in the first quarter we had raised. But at the end of 2020, for us, to use the benefit of IOF exemption, not just in contracting, but also enrolling the contracts. So we adjusted the debt.

And here, we see space along into 2022 to also make additional adjustments to our indebtedness because we see a quite intense increase in our interest rates and this may have an impact on the total debt of the company. Now moving to Slide 20. Here, you can see cash generation. And here, the use of cash in the period, but also strong cash generation along the entire year of 2021. Starting in the quarter, we used almost EUR 5 million cash operating cash pre-investment here in Q4 2021.

And the main effect was the investment in accounts receivable. So to fund the growth of sales along the year, but an effect that is very similar to Q4 last year, but also the new cycle of maturity of operations in our purchases of inputs. So the almost BRL 5 million of use in operational activities as compared to and generation of operating cash of BRL 63 million last year. Our main impact is the line of suppliers in a period when we didn't use these operations and we didn't have the maturity cycle of these operations in the fourth quarter when we bought much less raw material. So we used -- so the transaction here in terms of operations, the financial operations, more than BRL 100 million in the second and third quarters, as announced in previous quarters.

And here, in the fourth quarter of 2021. In the closing of December, this balance was BRL 69 million, as you can see on this slide. In using cash after investment was BRL 50.5 million as compared to a generation of free cash in Q4 2020 of BRL 63.3 million, and here, added up to the effect that we have almost BRL 40 million additional of investment in this period. For the year of 2021, we have recorded operational generation BRL 190 million in a period of BRL 85.9 million after investments, showing the main effect here of the lower generation as compared to the year before is because of the more inventory that the company made to make use when the competition has less products when it's more expensive to comprise inventory, we invested an additional 64 -- BRL 65 million to build inventory and also to fund the recovery of sales.

We invested another BRL 122 million in accounts receivable and partially offset by a longer time in the purchase of input, BRL 64 million. We had the benefit of conducting the operations to relief that period at very interesting cost.

And that's it, ladies and gentlemen, this is the end of our presentation, once again, reinforcing the excitement of all executives of our company and the company as a whole for a year of opportunity lying ahead of us and we cautiously observe that for the macroeconomic scenario requires caution.

We have high interest rates, high inflation, this is [indiscernible] for all consumption. Also in the beginning of the year, we still are not seeing the longer effects of these variables for consumption of our products, and we continue to capture opportunities to gain share at times such as this with a very strong brand with robust investments, with vertical integration that is very good in Manaus and also a product assortment that is very wide. We are prepared to another year of market consolidation to gain even more space in the jewelry market in Brazil. Thank you all very much. And now we are open for questions and answers.

[Operator]

[Operator Instructions] First question coming from Thiago Macruz from Itau.

[Thiago Macruz, analyst]

My question is basically about the competition. You see in journey of gaining share that is very relevant. And it's very relevant as gold prices go up, it's difficult to build inventory for the competition. I would like to understand the dynamics. Do you think this is something that is going to continue in 2022? Do you see a similar dynamic in the margin? When the scenario is clearer, some competitors can already have a more competitive product dynamic and maybe link the discussion to the possibility of inorganic expansion, which is something that a very fragmented industry such as yours is something quite feasible and possible to imagine. And I would like to understand if you still see smaller players with a more constructive approach, thinking of the possibility of a merger or acquisitions. These are my 2 questions.

[Paulo Kruglensky, executive]

Thank you, Macruz, for your question. I'm going to start answering, and I think Otavio can complement afterwards. Well, Vivara's positioning towards the market and in terms of market share is a major competitive advantage as compared to the second, third or fourth players in the market because we can invest in market, and marketing and generate return.

When we say we are going to invest 4% to 5% of our revenues in marketing. We are saying that this BRL 100 million here in the market that sometimes it's -- it's the whole revenues or 50% of the revenues of player #2. Now when we have -- see opportunities, these players have great difficulty to be able to compete with Vivara because of ROIC and also because of the expansion that we have. So as an example here, when you go into Google or any structure, we dilute online media to 284 points of sales and the player #2 is going to dilute it by 50 or 60 stores.

So when we had a more structured -- better structure for Life and now Life is player #2 that is as powerful or even greater than some of those players. So it gets more and more difficult for the competition. Thinking in terms of inventory and capacity to generate an operational flow of customers and a healthy flow of attraction to work with and this is going to be much lower than other players because of the size and scale that we have. So this market changes and it's different from usual retail. So in retail, one player has 5%, 4% and the other has 4%, the other has 6%. But here, we have 16% and a others have 2.5%, 2%.

And so this is quite different. -- our expansion here talking about organic growth. So this is very much related to Life, drawing the attention to the stores that we are opening in a year, we have revenues of BRL 5 million. So these are plans that we are seeking. Things that we were expecting in year 2 or 3 with a margin mix that is better than Life selling in Vivara. So if we look at Life stores in Life, in Vivara, so due to exposure, the journey for the mix that we can show. So we are even more excited. So according to our plan, we are looking at inorganic growth. This will complement our mix in segments and customer profiles that Vivara doesn't have today and that neither Vivara nor Life are -- have included today, so we want to open new growth fronts. And it makes sense. Otavio, would you like to complement?

[Otavio Chacon Amaral Lyra, executive]

I think that focusing more on margin, which I know is an issue that everyone is paying attention to. I think that we have recorded a quarter with a growth of almost 1 percentage point in gross margin and operational margins, which, in theory, have a significant pressure as compared to the years before, but we should consider the comments that I have made along the presentation, in which Q4 last year or the year of 2020 had the benefit of very relevant effects of the law that we had, amounting to BRL 30 million, another BRL 25 million discount in rental that helped us and helped us to have an operational level in 2020 at very relevant levels in the last quarter, leading to higher margins when we had already recovered sales in a very strong way towards the end of the year.

The year of 2019, we should remember, we were accelerating sales and it was a year of expansion and gold had changed price levels and following the dynamics of launches of products in different combinations. And then everything that we saw in the sales of new collections of the company, and we adjusted prices in a faster way and more in line with the market. So this dynamic brings an advance of margins to the company in periods when we see a stronger curve -- price curve. So in the years before, we had some benefit towards the end of the year. So when we look at operational margins as a whole with a longer period of time, I think that there is space for us from now on to start making the company more profitable as of 2022 already.

And we can't consider the level -- the margin of the last quarter of the year, neither in gross margin or operational margin because this is a very seasonal quarter also in terms of mix of sales, but if we think of profitability of our sales and margins that we try to have stability along the years.

So quarters 2 and 3 with stronger numbers, quarters 1 and 4 with weaker numbers. But when you look at the year as a whole, we understand this year with the increase of sales of Life, we see that the gross margin has become more profitable along the period. I think that we had a much more comfortable level in the year, with growth of BRL 305, BRL 307. Now with all the disruptions caused by the war in Ukraine, the FX changed, but also the gold -- using gold as the reserves.

So gold prices have gone up again above BRL 320. So the short-term trends, it's a challenge for us and the market as a whole may have this year in managing costs. On the whole, -- and here providing visibility to operational margins, I think that we do have space to show a little bit more leverage.

The company has countless strategic projects this year when we are making significant investments, especially in technology and e-commerce, as we say, we have a relevant growth in expense base. But if we are growing at 25%, 30%, as I said, we can see some additional level of expenses. So starting in '22, you're going to see the company's profit going back to levels that we have seen in the past along years and Life has the potential of gaining much more share in our businesses than its current 30%. We believe that in 4, 5 years, this channel or this product, may account to as much as 40% of our sales and thereby providing more benefit. Thank you.

[Operator]

Now we have a question from Robert Ford from the Bank of America.

[Robert Ford, analyst]

Congratulations on your results. I have another question about the growth of Life. The accessibility for customers with pandora in your inventory, how has this changing the way you think in terms of units that you sell for this brand?

[Paulo Kruglensky, executive]

Bob, thank you for your question. What we see happening with our new stores is an increase of new stores in our customer base here and customers that were not yet our customers, increasing their shopping frequency. The channel is positioning itself with 0 cannibalization. So we don't see a migration from Vivara stores to Life stores. We've been following up the growth of the 2 channels. And with the new store, what we see is a growth in quantities, number of items, items per ticket and also a growth in margin, and we can perform much better for collections and not just with charms.

It's been growing all over the world. And whether we questioned this in the past, when we see what that pandora has been doing in U.S. and in Europe. And I can see a much higher growth when we implement customization. That's something that we want to implement solutions to the customer. And then we are going to work much more on something that is giftable in special moments.

Today, the customer purchase journey in Vivara is slower, [ consultative ] sales, people need to sit down if you want to buy a birthday gift to a friend, it's much faster for you to go to Life. There is a very good acceptance here. So the trend that we see is a growth in terms of number of items and also a growth in average ticket and number of items per ticket.

[Robert Ford, analyst]

How does it affect or change your plans for the opening of Life?

[Paulo Kruglensky, executive]

Well, this is accelerating the plan. This has been accelerating the plan for Life openings. The acceptance that we had is really fantastic. The stores that we have renovated has really changed our sales level. So for example, [indiscernible] Campinas store with new generation of Life for the store, we had retrofitting -- and then our stores like [indiscernible] that grew 3 digits, and the acceptance with major carriers has been very good. So the current market in terms of prices and the trend of accelerating and seeking to occupy the space. And we are very excited about this. We are prepared to this. We have increased or enlarged our factory to do that. So here on the team, we are seeking that, and we are very confident that we can do it faster.

[Robert Ford, analyst]

And your expansion of your Manaus factory is it a one-off, there's -- ramp-up are going to increase the sales of Life. What about tax benefits? How should we think about that?

[Otavio Chacon Amaral Lyra, executive]

Well, Bob, let me think to complement a little bit of my initial question. And then I will touch on the theme. So we've been seeing a changing in the growth and dynamics in pricing. So there has been a pricing increase and higher raw material prices, we do here. So we see elasticity in terms of quantities. And over the last few years, were negatives, but with a good catch-up of quantities along the second quarter. And Paulo mentioned, the number of 2.6 million of units manufactured in Manaus along 2021. And this number is a lot higher than the 3 million units for 2022. So this movement of in-sourcing and expansion of Life's mix, aligns to our marketing strategy and the creation, which is tropical. And this is the main advantage that we have as compared to our main competitor, this is going to reverse growth expectations for the future, much more based on quantity than on price.

And today, we don't have any material price adjustments to make in the company for the recomposition of margins or for costs. So I think that for this dynamic, this is something that we are going to see in the future. So in spite of the growth in Q4 was still very much related to price. We saw a volume dynamics already with very positive numbers of Life already growing in sales, but also in the category of jewelry on when look at -- with attention in terms of our greater and greater dependence and especially in terms of less quantity being sold in stores.

So this shows [ now ] the health of our points of sales. We have seen a growth in a number of times in same stores related to gold. And I think this is an opportunity for us to continue over the next few years as we go -- continue our expansion. We have material investments to make in a factory along 2022. We have planned to add something like more than 150 people along this year to really back up the higher production of Life.

We are not just expanding very intensely -- the channel of stores with organic growth, and this is very intense, but also the volume of items that we need and also the in-sourcing also is a challenge that is twice as big for our Manaus team. So in 2022, there is a challenge lying ahead of us, which is additional complexity of mix that we have brought, which is very good in terms of sales. We have seen very good consequences in sales with the new model of sales of stores and products that we have created. So at the same time, I think that we have specific pressures that we see. We can see more clearly along this year with a higher benefit of the higher share of Life in our bottom line.

As to the in-sourcing and tax benefits. This is an excellent point because the benefit of manufacturing and things internally in our company is not just related to the reduction of the unit cost of the products that we sell. This is also related to the growth of benefits that are booked at different lines, the main one in the line of deductions, which is the ICMS benefit. And the other one that is most relevant in income tax in the line after operational results.

So if we adopt the evolution of those benefits along the year, versus the trend, the profit trend and the profitability in the short term. We are expanding margins in a significant way, as you can see in the bottom line and margin composition, which captures all the effects that are consolidated. I hope I have answered your question.

[Robert Ford, analyst]

It's super clear, Otavio. Congratulations.

[Paulo Kruglensky, executive]

Just complementing what Otavio said. So the growth in investments is thinking in the mid and long term. Our production capacity meets our needs that we are -- for the next year in terms of new technologies to develop new products to having more competitive products with market innovation, different products, different combination of materials, also trying to address the addressable markets for Vivara and Life. There are foreign technologies that we are already testing, prototyping. So those are investments and the support in the short term, and this supports for the short-term investments that we made last year, and this is going on in a very good way. Yes, we do see a pressure like Otavio said, for the end of the year, but with the growth of the share of Life, this is likely to be reduced.

[Operator]

Our next question comes from Danniela Eiger from XP.

[I'm sorry. I think we can't hear what you're saying. You're chopping.]

[Danniela Eiger, analyst]

So a follow-up regarding Life. So last year, a store would sell about BRL 4 million a year with a 50% margin. And also considering your comment that you were positively surprised with performance. Are you going to revisit this number? And also, how long does this store take to mature? I think that you're saying that you had quite significant maturity already in month 2. Could you give us an update on that and also to complement how is your brand loyalty program going on? And the second question to Otavio is to understand how we can think of the evolution of margin because gross margin, we see a positive contribution of the dynamics.

And maybe there is an increase of investment in marketing and the expansion plan, which are positive thinking in the long term, but might have some pressure in the short term. But just to understand how we can comprise this evolution of margin and EBITDA over the next quarter and also going back to normal levels of tax, looking at the quarter as a reference.

[Paulo Kruglensky, executive]

Danny, thank you for your question. I think that in terms of the growth dynamics of stores, I think we have good indications in showing us that probably we are going to have a scenario considering our expansion in the top malls in the country, and we are going to have a scenario when stores are maturing faster than the standard curve of 24-month curve and also with potentially higher revenues sometimes. For these malls are usually the outlying shopping malls in terms of revenues as compared to the average mode for Vivara.

And as they are going -- the same is going to apply to Life. Yes, we have been opening points of sales that indicate performance well above the BRL 4 million sales per year. But I think that these are one-off opportunities based on an expansion cycle on the best points of sales in the countries. So on average, we may work with the opening of opening points of sales with the potential revenues, around BRL 4 million. And what we will see is a faster maturity curve.

But I think it's still too early for us to give you a more definitive answer. The number of sales that we are opening, of the 33 we opened, 14 in the last quarter. So I think that we need to wait a little bit longer so that we have a better understanding of how revenues and profit is going to behave. So in principle, we have a good benefit in terms of additional profitability and occupation costs in these shopping malls. And so if we think that this is very much in line with our numbers that you have mentioned for this model of store.

And also as to your second question, and you mentioned the loyalty in our program, our loyalty program, this is still going on. We are developing. So we are trying to understand the frequency and higher tickets for the specific customers and this group of users now, we are diving into a trajectory in terms of breaking down the numbers to smaller groups, in order to communicate better with these customers. So there is a trend, and it is the focus of our digital not just in 2022, but also in the future and not just for Life, but also for the entire base of more than 6 million customers that we have at Vivara or 1.4 million active customers that the company has.

So I think that now we are going to start to have a much better understanding with our platform as of April or May, that is going to provide us the opportunity of developing things in a much faster way and also tests in parallel that will be much more frequent and much faster. And we are also going to have a differentiated experience in digital as compared to what we have today, both in terms of the site and its transactions. And then we are going to define more customized interaction programs.

For different groups for now, the existing program goes on and continued it's still small, but it's also going to serve the wave of Life's growth in our business, especially as of on 2022. We are expecting in advance in the share of total number of customers of the company joining this program. So the area we can get involved in the journey of these customers in terms of what we can capture in terms of opportunity.

[Operator]

Our next question comes from Joseph Giordano from JPMorgan.

[Joseph Giordano, analyst]

[ This is for Paulo ]. There are 2 points that I would like to explore [ still with ] Life. So this is a very productive store. It's a kind of a surprise. But what I would like to understand from you when we look in a more broader way. What is the return you're expecting for your investments?

Number two regards manufacturing improvements, new machinery and in terms of lowering costs, in terms of price And I would like to explore [ you ] in terms of addressable market and what you can deliver in terms of the value proposition even using gold or something. And we need to think not just in terms of inorganic movement, but also organic movement in terms of a new brand to address this market.

[Otavio Chacon Amaral Lyra, executive]

Thank you, Joseph. I'm going to start from Life. Well, in fact, one of our main avenues of growth and profitability. And I think that it explores what we see for Vivara. I think that on our 2 fronts of expansion in terms of return in answering your question, I think that we still have long years of potential expansion to increase our capillarity in the country, both for Vivara and Life, which are relevant at a very good level of return.

So last year, we had a significant revalidation of our expansion program for [indiscernible] in the long term, very much because of the change that the new level of digital business has provided to our business, a need that maybe is lower in terms of density with Vivara in cities that are smaller and smaller, and which reduced the opportunities because we still have more than 100 stores in Vivara to open in the next 5 years with a minimal return on investment of 20% ROIC, minimum ROIC of 20%.

So well above the company's capital cost. And depending on where the capital cost of the company is, we see more opportunities of adding value to our shareholders. For Life, on the other hand, I think we should raise the bar of return. And obviously, because it's much less present in the country, we have much bigger opportunities around 220, 230 Life stores replicating Vivara's experience in the country with minimal returns, with minimal ROIC of 25% along the next few years. So I think that we still have opportunity, the opportunity of hundreds of new stores and our opportunities for growth and return in the avenues is -- we still have opportunities for the organic growth of the company.

Can you repeat your second question, please, about the factory?

[Operator]

[Operator Instructions]

[Paulo Kruglensky, executive]

Well, Otavio, maybe I can answer. Joseph asked about the technology in the factory and how we see the addressable market both for Life and the evolution of [ increase ]. Well, we've been working with a growth of products in the rings, bracelets, [ slave rings ] and all the chains and plates, so we can grow -- working in a better structured way in our production. And as I see the addressable market, we can work.

And today, we are working in the silver factory. So we have silver products that are slightly heavier and more complex in terms of manufacturing. Today, we have products that are 1 block, for example, 1 ring or 1 ear ring so we can work on items with slightly more movement with rings or ear rings with 2, 3 or 4 different items or blocks connected. So it's heavier silver. The better example -- the best example, the value of silver is 1% to 2% of the gram of the gold and we don't need to make such light silver jewelry.

There is a major market in Brazil and outside Brazil, to have heavier silver, which is a very interesting markup. It's something that we are developing, and we see as an opportunity. In spite of the growth. Yes, we do want to have an additional brand above or below and as part of the strategic plan with organic growth or inorganic growth. So it may be part of our strategic plan to create a male brand that will permeate a complementary class of Vivara slightly below. We are not going to change on Vivara's positioning. And this would make sense to us. We have an active agenda, thinking of complementing or having complementary brands.

[Operator]

If there are no further questions, I would like to turn the conference back over to Mr. Paulo for his closing remarks.

[Paulo Kruglensky, executive]

I would like to thank you all for your presence here today. I would like to take the opportunity to thank Vivara's team for the fantastic year that we have had for this beginning of the year that is even better, and I am very optimistic. And I can tell you that the best is yet to come. We -- we still have a lot of growth to go through, and it's a challenge for our team of executives, our leadership and our entire team. Thank you all very much, and see you next quarter.

[Operator]

Thank you. Vivara's conference call has now ended. Have a nice day. Thank you.

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