Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grupo Casas Bahia SA (BSP:BHIA3, Financial) reported a sequential improvement in operational margins, indicating effective execution of their transformation plan.
- The company experienced growth in physical store sales, with a 6.5% increase in same-store sales, highlighting a positive trend in their core business.
- There was a significant increase in liquidity, with the company accessing the credit market to improve its financial position.
- The company launched new services such as 'full cross' logistics, which is expected to transform the retail industry in Brazil by improving stock management and delivery efficiency.
- Retail media and three P (third-party) solutions showed strong growth, contributing to the company's gross margin and overall profitability.
Negative Points
- Despite improvements, the company still faces challenges with a negative free cash flow of 70 million, impacted by temporary events and seasonality.
- The macroeconomic environment remains challenging, with high interest rates affecting the cost of capital and funding costs.
- The company had to discontinue 36 categories and close 16 stores, leading to a planned reduction in revenue.
- There is a risk associated with the expansion of the 'buy now, pay later' program, which could impact profitability if not managed carefully.
- The potential impact of labor law changes (six days work, one day rest) in Brazil could affect operational costs and require structural adjustments.
Q & A Highlights
Q: Can you confirm the acceleration in same-store sales for physical stores and whether this is due to market conditions or share gains? Also, how is the performance of financial revenues, particularly the buy now, pay later program?
A: The acceleration in same-store sales is as planned and continues to grow, with the fourth quarter expected to be better than the previous one. October was strong, and we are recovering market share. The financial results, especially from the buy now, pay later program, are significant, with profitability improving as we grow more in better-rated customers. We are not taking on additional credit risks and are focusing on customers with known payment conditions.
Q: How do you envision the growth dynamics for online sales in 2025, and what are your expectations for cash generation?
A: Our priority is physical stores, but e-commerce, especially 3P, will continue to grow and contribute to margin gains. We expect to reach a positive cash flow by the end of 2025, with EBITDA reaching double digits, positioning the company for sustainable operations in 2026.
Q: What investments are necessary to capture additional market share, and can you provide more details on the retail media growth?
A: We plan to maintain similar CapEx and marketing investments as this year, focusing on efficiency. Retail media is primarily performance-related, supporting growth in 3P and online sales. We have structured teams and are working on joint business funds to drive growth without increasing the structure.
Q: Can you elaborate on the credit provisions policy and the potential of the banking segment?
A: Our provisioning is conservative, impacting the bottom line initially but providing significant profitability over time. The banking segment has major potential, with discussions on personal loans and partnerships underway. This could transform the company’s financial leverage and service offerings.
Q: How do you see the macroeconomic environment affecting your strategy for 2025, and what are your expectations for EBITDA expansion?
A: The macro environment, with higher interest rates, requires us to focus on increasing gross margins through pricing, stock optimization, and service additions. We expect EBITDA expansion to come from operational leverage and efficiency gains, maintaining a focus on profitability.
Q: What is the growth potential for the buy now, pay later program, and how does it differ between digital and physical channels?
A: The buy now, pay later program has strong demand, with potential growth of 100 million per month. Digital and physical channels have similar profitability and delinquency rates, and we expect gradual growth in penetration, aiming for high single-digit to low double-digit levels.
Q: How do you plan to manage the potential impact of the six-by-one labor law change on your operations?
A: We are monitoring the situation and will adjust our structure as needed. Our commitment is to improve operational efficiency and maintain a sustainable company, regardless of macroeconomic changes.
Q: What are your final thoughts on the company's current position and future outlook?
A: We are confident in our operational efficiency and debt reprofiling efforts. The macro environment remains challenging, but we are well-prepared to navigate it. By the end of 2025, we aim to have a stronger capital structure and be ready for an expansion cycle.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
