Edited Transcript of VIVA3.SA earnings conference call or presentation 27-Aug-20 1:00pm GMT

The quarter that we’re asserting in the present day has exceeded our preliminary expectations. However in wanting again, we see that it couldn’t be any totally different. Our groups labored very arduous in executing initiatives with nice capability of adapting to new situations and to search out the very best options for us to maneuver ahead. We’re an organization with deeply rooted values, and we’re very outcome centered. Our vertical mannequin has made it potential to guard our margins to work on probably the most applicable product combine.

On the finish of March, we quickly suspended the operation of our manufacturing unit in Manaus once we had already a ok stock that was simply to be — that might be simply tailored. We resumed manufacturing in early July to supply the Life wristlets. After which shortly after, resumed the manufacturing of our jewellery, in order that we might have the appropriate stock composition. Nicely educated and engaged gross sales power carried out with masterly the mission of participating prospects.

We have now direct gross sales with Joias em Acao or Jewellery in Motion mission. We have now a powerful model worth proposition. We concerned our salesperson with probably the most frequent prospects. Now prospects can request a web-based consulting by means of WhatsApp, in order that new prospects can also have entry to assisted gross sales that’s so effectively accepted in our bodily shops. Within the quarter, the gross sales on this format reached 17%.

Our model administration and the way in which we tailored the communication of modifications that had been so apparent within the conduct of shoppers throughout social isolation additionally deserve a spotlight. We adopted a extra emotional method in our campaigns, searching for new methods of interacting with our prospects. We talked about objective whereas being in reference to others, every thing in a really refined means and specializing in which means, which is what jewellery is about.

We’re centered on the usage of knowledge to speak, and we made our buyer database an essential instrument to maximise gross sales within the on-line channel. Consequence gross sales had been materially affected by the closing of our shops, however we’re seeing an incredible evolution within the tempo of gross sales because the gradual reopening of our bodily shops, and e-commerce has saved the acceleration of three digits. In July, we reached 90% of our whole gross sales in 2019 with a higher share of shops that had been already totaling 214 shops reopened. Till August 24, we’re very near 100% of the gross sales of 2019 with 261 shops open, nonetheless with numerous limitation of legislation and restricted had been opening occasions.

With reference to operational breakeven, by defending our development, profitability and expense management, our on-line channel was the spotlight within the quarter rising 387%. In reality, we have no idea but how massive will e-commerce be in future years. However we’re certain that our technique will come out from the disaster strengthened with stronger and stronger channels, which can be customer-centered, and in order that prospects could resolve the place and find out how to purchase. On August 5, we delivered the 23 new operations, 21 shops: 16 Vivara shops and 5 Life shops, along with 2 kiosks. At first of the pandemic, we reviewed our growth plan for the pandemic, reviewing the plan for the opening from 50 to 21 shops contemplating the unsure state of affairs.

Within the brief time period, we’re ready to grab alternatives which may come up, reminiscent of having relationships with malls which can be mature and different new procuring malls. We need to strengthen our presence in the principle procuring malls of the nation with Vivara and Life channels.

We have now centered on preserving money. And we ended the quarter with a strengthened backside line in order that we now have a long-term technique within the firm that is nonetheless very promising. We’re proud of the work that we did. The definitive restoration or resumption will come again, and we’re able to take advantage of the reopening to consolidate our management available in the market.

Now I want to give the ground to Otavio.

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Otavio Chacon do Amaral Lyra, Vivara Participações S.A. – Chief Monetary & IR Officer and Member of Government Board [3]

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Thanks, Marcio. I’ll begin on Slide #3, the place we briefly return or recap every thing that we did this quarter and the timing. After which I’ll go over the influence of every one in all these methods and the way they translated by way of efficient actions and outcomes. And likewise I will be speaking just a little bit concerning the months of July and August.

So beginning, speaking concerning the starting of the pandemic in March and the primary 2 weeks of March or on March 20 once we all went dwelling. On March 21, we decided of shutting 21 — 100% of our bodily shops, solely holding e-commerce gross sales. On March 25 we made the choice of shutting down our manufacturing unit in Manaus. With a fairly sturdy stock, we had time to do this in a scheduled and mix means, and we in a short time structured our disaster committee as we communicated to you. We made fast selections that had been very efficient that made it potential for us to maintain profitability throughout the quarter. When we now have reached — we’re very near the operational breakeven, we now have carried out company restructuring and laying the foundations for a cycle of development that was very sturdy.

We in a short time compliant to Regulation 14.020, initially (MP) 936, make use of decreased labor hours and shifts and work contracts renegotiated with 100% of our suppliers, utilizing the alternatives to have the ability to match every thing that we had with occasions, not simply occasions, however we additionally bought vital reductions in our lease contracts or totally different different contracts for the companies supplied. Together with the actions we took, we labored on retail as an entire, after which we felt the impact of that in an operation that was very quick. After which we piloted initiatives to maximise portfolio, as we’re going to see shortly.

On the finish of the month, we began, as of April 29, with a reopening of 9 factors of sale that is once we began the reopening. After which we reopened or resumed revenues from the bodily channel. So we intensified the gross sales leverage initiatives. We carried out actions price BRL 1 million for Brazil Basis, and we had different smaller actions. And we closed the month with 26 shops reopened. In June, we recovered or reopened our manufacturing unit with entry to the shops, the place extra markets open, we might end the shops we had been already engaged on. And we closed the month with 186 operations reopened, with far more vital offline revenues.

Now on Slide #4, you may see the important thing initiatives. Marcio has gone over a couple of of them briefly. And I want to emphasize the details that helped us to navigate with barely extra confidence in — by means of the troubled waters of this quarter. So we had acceleration of stock integration with OMS with 18 markets within the nation, including comfort to our prospects and the supply of — that was very fast in key areas. So we now have drive via in the principle procuring malls, it is comfort and security for patrons. We bolstered and intensified the usage of knowledge, particularly CRM knowledge, in order that we might get nearer to our prospects throughout this era, utilizing a really sturdy relationship foundation. And we might do this with extra accuracy. So we intensified and expanded our digital presence, acceleration of market. We expanded our buyer base on this interval. Jewellery in Motion, probably the most related of our initiatives, had the participation of greater than 1,600 gross sales ladies, which is direct gross sales by means of our gross sales ladies. And to start with of the quarter, they had been dwelling, and so they progressively resumed actions and so they had time of interacting extra instantly with our prospects by WhatsApp or phone, utilizing an app that we developed, and this made it potential to have a really fascinating leverage for our on-line channel.

We additionally began a web-based consulting service, bringing even nearer the net expertise to the bodily expertise. We additionally carried out help our prospects. We made vital funding within the digital channel to hunt new channels of gross sales. So we invested 30% extra within the channel. We tailored our communication on this channel.

On Slide #5, you may see the evolution of our working revenues. And so in Q2 2020, we constructed BRL 167.7 million (sic) [BRL 169.7 million], retraction of 56% as in comparison with the identical interval within the yr earlier than, with the highlights to bodily shops that had a discount of 83.2% as a result of they had been closed throughout a part of the interval. And after they opened with very intense limitations in its operations and a really constructive spotlight for e-commerce, which throughout this era, constructed BRL 108.Four million greater than we had the final yr as an entire on this channel, which represented a development of 387% within the interval. Web income, adopted very related developments. We had BRL 137.7 million within the interval, a shrinking of 54.6%. Similar-store gross sales of the corporate on this interval, contemplating e-commerce operations was similar to our income development and closed the quarter at 55%. E-commerce, as Marcio mentioned, accounted for 64% of our gross sales roughly on this interval, that has supplied a fairly vital change in combine within the interval if we examine to the identical interval final yr. The gold jewellery accounted — the gross sales of gold jewellery accounted for 46% share within the interval, a drop of 4.9 proportion factors that had been absorbed by watches, which gained 3.Three proportion factors, by Life, which gained 1.1 proportion factors, and accent that gained 3.8. So this variation in our combine was very a lot pushed by our intensification of e-commerce. And it is extra just like the shares we had in gross sales in e-commerce.

12 months-to-date numbers, our gross income was BRL 433 million, down by 34.3%. Our internet income was BRL 343.Eight million, down by 34.3%. Despite the numerous drop within the quarter, we noticed an acceleration between the months of the quarter. So in the event you have a look at the subsequent slide, in April, we had a drop in income of 75.2%. In June, we had many extra shops opened, from 9 to 186 operations, after which we had been down by 36%. And now we now have many extra shops open with extra time open throughout the months of July and August, we had significantly better gross sales developments contemplating, not simply the character of our product, but additionally the truth that operation hours limitations are nonetheless vital in July. We had been down by 10%. And in August, till 24, we’re down by solely 0.6% within the month with 261 operations in operation.

On the subsequent slide, you may see the evolution by means of the weeks of those months. In order we open the brand new operations, you may see — same-store gross sales, an essential development, as you may see right here in newer intervals. From — within the week from — in April — final week of April and the start of the reopening, we had minus 74%. In order that on the finish of July, once we already had 72% of our shops open, and the same-store gross sales had been at about 36%. So we had been dropping just a little bit one thing like 1/Three of our gross sales in that interval. And now in July and August, that is similar to our income developments that we had within the earlier gross sales with same-store gross sales at 11.5%, and in August, very near — the retraction will probably be decrease than 1% of revenues within the interval.

On the subsequent slide, you may have just a little bit extra element concerning the firm’s on-line channel, which has taken our prospects from the offline channel a major means. So to start with, they had been probably not migrating from offline to on-line. And now extra just lately, they’ve migrated extra to the net channel and shopping for increasingly more on the net channel. So this restoration was extra vital in Could and June, July, which is typical of the seasonality of our gross sales with Mom’s Day, Valentine’s. And so this actually drove the expansion of our channel, in order that its share in whole gross sales grew to become very vital. So this channel accounted for greater than 98% of our gross sales in April, 75% in Could, greater than 45% in June. And now as many extra bodily shops are open, as we mentioned, it stabilized, nonetheless with a really sturdy development in extra of 200% within the month of July and August however with a smaller share of whole income, barely extra stabilized as in comparison with what we had been seeing in earlier months. In July, it accounted for nearly 34% of gross sales; in August, barely greater than 21% of our whole gross sales. It is also fascinating to see the — our gross sales combine if we examine this Q2 to final yr. So jewellery once more elevated its share, and now it accounts for 39.2% of our gross sales. After which consuming — or taking share from watches that misplaced 8.9 proportion factors within the interval; and equipment, which misplaced 0.7 PP within the interval in Life, and this channel stays steady, with roughly 1/Three of the gross sales within the quarter. And this share got here, particularly due to the Jewellery in Motion initiative which we’re going to describe higher on subsequent slide.

So it began in April, accounting for under 5.4% of our on-line gross sales to 25% of our on-line gross sales alongside the month of June, in the direction of the tip of the quarter. Now in August, as Marcio mentioned, it accounts for about 30% of our gross sales. These gross sales had a a lot larger ticket than the typical on-line ticket that we used to have earlier than, of about BRL 500, however it additionally contributed with a a lot higher mixture of golden objects. So this quarter, 70% of our gross sales of knickknack in Motion with gold objects, 19% Life, 9% watches and a couple of% equipment, which has contributed significantly for the evolution of the combo, as I confirmed to you within the earlier slide.

On subsequent slide, you may see the gross revenue and gross margin in that interval effectively by means of an applicable pricing coverage, effectively composed stock, good compliance in all classes. And particularly in our personal collections with our personal design, we had been in a position to reverse the development of margin that we noticed within the first quarter when there was a slight strain on gross margin as in comparison with the identical interval within the yr earlier than, particularly once we thought of our bills within the manufacturing unit. However on this interval, we recorded BRL 93 million roughly, with a drop of 51.3% due to the decrease gross sales. Nevertheless, with extra Four factors — greater than Four proportion factors within the margin, which now accounts for 67.5% within the interval. So we had BRL 229 million within the first half of the yr of gross revenue within the interval with 66.9% margin, growth of two proportion factors as in comparison with the identical interval final yr regardless of the 32.3% drop within the interval. We nonetheless suffered the strain as a result of we now have bills in our manufacturing unit that have an effect on our prices. We had 1.Three proportion factors of strain within the first half as an entire.

On Slide #11, you could have our gross sales bills, the place we had 51.9% (sic) [BRL 51.9 million] gross sales bills, down by 42.7% as in comparison with the identical interval final yr. Nevertheless, as a result of there’s decrease operational dilution, it had nearly Eight proportion factors greater than final yr, with 37.7%. The primary drivers for this discount had been our compliance to legislation, 14.020/2020, when — which we adopted since early April, the suspension of our workers in our shops and alongside the quarter, the discount within the shift and we negotiated strongly our lease, the lease of our shops. And we had been in a position to acquire vital reductions throughout the quarter and extra allocation of digital advertising, which had been — which partially offset or partially affected this discount that we had in personnel bills and lease and condominium. 12 months-to-date numbers, we had BRL 130.7 million gross sales — or bills, a drop of 20.5% as in comparison with the identical interval final yr, which accounts for 38% of the web income of the interval, up by 6.6 proportion factors, nonetheless with strain on the profitability of the interval.

Subsequent web page, you may see extra particulars concerning the evolution of G&A. So in addition they had a constructive influence of our adherence to Regulation 14.020. With shift discount for 100%, nearly 100% of our workers in administrative areas. We had BRL 28.6 million, down by 13% as in comparison with final yr, nonetheless due to operational dilution additionally pressuring operational outcomes, accounting for 20.8% of internet revenues, nearly 10% higher than we had in the identical interval final yr. 12 months-to-date numbers, we now have nearly BRL 60 million SG — sorry, G&A, accounting for 17.4% of the income, 6 proportion factors higher than the identical interval final yr, nonetheless, displaying stability by way of the quantity within the quarter, not simply we had a constructive influence by our adherence to the Regulation, as I mentioned earlier than, but additionally with extra bills of the investments that we now have made for digital acceleration, technological enhancements and in addition lawyer charges within the interval.

As a consequence of all of this, on the subsequent slide, in operational profitability, the place we are able to see adjusted EBIT and EBITDA margin. Now it is translated on what you see within the slide. We had been in a position to nearly attain not breakeven, however we nearly bought there contemplating solely adjustment of bills — of rental bills with discounting IFRS 16 results. And in 2019, eliminating the constructive impact of the tax credit of ISMS on the PIS/COFINS foundation, in order that they’re extra comparable. So we had BRL 421 million within the interval down — destructive EBITDA, a powerful discount as in comparison with the yr earlier than, accounting for 0.3% of internet gross sales, retraction of 20 proportion factors within the margin. 12 months-to-date numbers, we now have BRL 29.Four million, accounting for 8.5% of the income, down by 10.5 proportion factors as in comparison with the identical interval final yr. It is also essential to spotlight that this quarter was affected by BRL 2.2 million bills solely associated to COVID-19, and BRL Four million bills associated to terminations.

On the subsequent slide, you may see the evolution of internet revenue and internet margin. You’ll be able to see the adjusted internet revenue that we had BRL 1.7 million loss within the second quarter of 2020, down by 1.2% in internet margin as in comparison with BRL 41 million roughly final yr with 13.4% margin. And right here, we’re excluding the BRL 116 million of results of accounting tax credit of ISMS over PIS/COFINS foundation in operational outcomes, additionally in monetary income of just about BRL 50 million, and in addition the impact of all of this revenue tax and social contribution of 116%, down by 20 proportion factors in adjusted EBITDA, to a retraction of 14.7% in adjusted EBITDA. We had a major contribution to our monetary outcomes, that was extra engaging due to the capital construction of the corporate with extra internet money stability and in addition decrease rates of interest contributing to the quantity of curiosity that we paid. So the numbers you may see right here, the EBITDA, so there’s depreciation that’s extra related due to extra investments in acceleration of natural development of the corporate over the previous few quarters. And we even have a destructive influence of the monetary outcomes right here, not excluding the constructive impact of BRL 50 million in monetary revenues due to the financial correction of our tax credit score money stability. And we additionally had revenue tax and social contribution. We have now deferred tax that was booked within the interval as a result of our operational outcomes had been affected throughout the quarter.

12 months-to-date numbers, we now have BRL 17.Three million internet revenue, 5% margin in comparison with 69.9% (sic) [BRL 69.9 million] within the first half of final yr with 13.3% internet margin, down by 8.Three proportion factors.

On the subsequent slide, you may see the evolution of our investments, so the corporate’s CapEx. So we now have the BRL 12.2 million within the interval, with acceleration of investments as in comparison with final yr, particularly in new shops, renovations and upkeep, a development that we had began final yr. We had accelerated the growth in relation to earlier quarters and years and so they accounted for nearly whole investments on this interval. Whereas in different traces, we slowed down investments within the brief time period in our manufacturing unit or IT methods and others.

On the subsequent slide, you may see our debt and the corporate’s internet money, which has grown within the interval, nearly 52% to BRL 264.2 million, damaged down by internet — gross debt of BRL 320.5 million, BRL 50 million roughly bigger than we had in December final yr. And right here, particularly BRL 23 million extra of debt in — as a result of we rolled over within the quarter, we had the greenback dash within the interval and BRL 1 million of rate of interest that weren’t paid. The corporate could be very a lot deleveraged and sturdy money place to take care of the tip of the yr and to speed up the operation taking a part of this extra funds that we now have constituted within the yr.

On the subsequent slide, you may see working money technology in interval, BRL 111.1 million pre-CapEx in distinction with BRL 9.2 million in the identical interval final yr. And right here, particularly, clearly, due to divestment of working capital that we had on this interval of decrease revenues, particularly coming from decrease accounts receivable, so installment gross sales from different intervals and alongside this quarter of 2020. And likewise, we had divestment in stock due to the environment friendly balancing of our stock on this interval with the best match with a money circulate was barely greater than BRL 24 million in interval, including BRL 94 million for these 2 traces. As free money technology within the interval, we’re nearly BRL 100 million, nearly BRL 99 million in distinction with BRL 2.6 million in Q2 final yr, in fact, with a very totally different development in our companies. So after this quarter, 2019, we’re beginning an acceleration of income with funding, not simply in stock, with accounts receivable due to the sturdy seasonality within the month of June. And because of this, we see this very vital influence that was totally different within the quarters that we’re describing.

12 months-to-date numbers. We had free money technology, BRL 117 million in distinction with money funding of BRL 22 million final yr, as soon as once more affected by the totally different trajectory of the corporate and a distinct development of development within the firm, if we examine the two intervals, particularly this quarter. So in the event you see the underside of the desk, we at all times alter and we remove the impact of the non-advancement of receivables, no prepayment of receivables, in order that we now have extra comparable outcomes displaying — as a reminder, the corporate modified its prepayment of receivables coverage alongside this yr. And this impacts this accounts receivable line that you just’re seeing right here with BRL 43 million within the interval, BRL 9 million in final yr. So within the interval, this BRL 111 million in distinction with BRL 16 million within the quarter or BRL 144 million working money in contract with nearly BRL 53 million within the interval, even so a major development of 173.4% within the quarter by way of money from administration of working actions.

In order that’s it. Thanks very a lot on your participation. I hope all results and developments are crystal clear to you. And we at the moment are accessible to reply any questions you might have.

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Questions and Solutions

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Operator [1]

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(Operator Directions) Our first query comes from Helena Villares, Itaú.

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Helena Villares, Itaú Corretora de Valores S.A., Analysis Division – Analyst [2]

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So simply query that we’re having right here concerning your channel dynamics. On one hand, you could have procuring malls with higher emptiness, as you mentioned, within the launch, which is able to present higher situations for the opening of shops, however alternatively, your e-commerce confirmed to be a lot stronger than we initially imagined, promoting jewellery. So we need to perceive how these 2 dynamics relate to your growth plan, considering of the long run.

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Márcio Monteiro Kaufman, Vivara Participações S.A. – CEO, Member of Government Board & Director [3]

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Helena, thanks on your query. We have been considering so much about that. And in our opinion, the expansion of e-commerce gave us a lot higher visibility of how massive this channel might be. Its development was actually vital. We do not know the place that is going to stabilize, whether or not it may be 20% or 25% or much more. The actual fact is that it has grown, and we do not suppose it may go down in its significance. Then again, we’re pleasantly shocked to see the reopening of our shops. And the truth that in a really brief time, we had been ready to return to gross sales ranges that had been very near what we used to have earlier than. I’ve not imagined that when shops had been closed. And as they had been closed more often than not and e-commerce was doing so effectively, I did not count on shops — bodily shops to promote as a lot as they’re promoting in the present day. I consider that as shops reopen and they’re open for longer hours, I feel that shops are going to return to very favorable gross sales ranges. As to the growth potentialities, in my view, we nonetheless see a a lot larger development in malls in cities the place we’re not current. So smaller cities, at any time when we open a retailer, as a result of our model could be very well-known, we in a short time can breakeven in a really brief time. And I see that pandemic accelerated the development that was going to happen in any means in a couple of years, and it has made the omnichannel technique to change into one thing that I had by no means imagined. So the circulate of consumers going from one channel to the opposite, intensified prospects that by no means purchased on the positioning, began shopping for and prospects that used to purchase on the web site, go the shops to choose up their merchandise. What I’m seeing that I did not actually consider that e-commerce will attain such excessive ranges and so quickly. So the principle change was this.

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Operator [4]

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Our subsequent query from Robert Ford from the Financial institution of America.

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Robert Erick Ford Aguilar, BofA Merrill Lynch, Analysis Division – MD in Fairness Analysis [5]

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Contemplating the challenges that you’re coping with that could be very a lot associated to your success, what proportion of gross sales will probably be in Life? And the way a lot has the pandemic goes on, do you see a normalization of your charges?

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Márcio Monteiro Kaufman, Vivara Participações S.A. – CEO, Member of Government Board & Director [6]

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Thanks on your query, Bob. As to money from marriages, we nonetheless would not have a visibility what is going to occur. I consider that with the pandemic, relationships grew to become extra essential. {Couples} that had been doing effectively or higher and {couples} that weren’t supposed to remain collectively, might finish their relationship. And we’re seeing the sale of rings or marriage ceremony bands extra steady with none vital modifications. So I do not see something that might justify a discount or improve within the variety of marriages. However this can be a good reflection as a result of I feel that if there’s a structural change that’s greater, there could be some modifications. Then what was your first query? I am sorry, I could not get it.

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Robert Erick Ford Aguilar, BofA Merrill Lynch, Analysis Division – MD in Fairness Analysis [7]

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What proportion of your gross sales are associated to lifetime occasions?

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Márcio Monteiro Kaufman, Vivara Participações S.A. – CEO, Member of Government Board & Director [8]

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So lifetime occasion gross sales when comparatively low elasticity. Nicely, I can see that the elasticity of the sort of product would not actually change. What I see that has extra elasticity in the present day in our product is expounded to watches. So at any time when there are any value modifications or any promotions, watch modifications change — or watch gross sales change. We had a promotion in July of watches, and we had very excessive gross sales, effectively above the anticipated. And in case of Life, the elasticity is intermediate. Within the case of Life, once we change the worth or there’s any Life occasion, it would not actually change. What modifications in Life extra when there’s a like Christmas or Black Friday, the Life sells extra — gross sales go up. So this can be a product that in commemorative dates, it will increase its share. Gold is the place we now have a extra steady gross sales all year long with a decrease elasticity each in promotional occasions and in celebration dates. I do not know if I’ve answered your query, have I? Or would you want me so as to add one thing?

If I might add it is actually troublesome to isolate particular lifetime occasions. However I feel that the gross sales development that we’re seeing which can be supporting the corporate’s gross sales proper now when everyone is staying dwelling and gross sales are tougher is proof that our product is nice present, the great current. So folks had been shopping for extra for others than for themselves. And this exhibits the sturdy function with much less elasticity in intervals reminiscent of those that you’ve got talked about, Bob.

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Robert Erick Ford Aguilar, BofA Merrill Lynch, Analysis Division – MD in Fairness Analysis [9]

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Contemplating how weak the BRL is and in addition treasured metals, are you witnessing jewellery being purchased as funding?

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Márcio Monteiro Kaufman, Vivara Participações S.A. – CEO, Member of Government Board & Director [10]

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Nicely, Bob, I do not actually know. I feel that this is among the explanation why we’re seeing gross sales above what we had anticipated when the pandemic began. I often say when gold costs go up, as now, prospects actually worth jewellery extra. They begin valuing a product, which is able to final eternally. Even due to the round economic system, folks don’t need disposable merchandise. They need long-lasting product. Individuals don’t purchase jewellery to promote it later, however they know that, that gold merchandise will final eternally. It should go from different to the opposite. So in the event that they purchase a 3-gram jewellery, they’re paying greater than they’d have paid prior to now, it is as a result of it is price extra. It is a extra — it is a product with worth. The fascinating factor is that regardless of how a lot we really feel the strain in margins, as costs go up, so value transfers is a actuality. So prospects assign extra worth to our merchandise. So prospects purchase gold as a price reserve, however not as a result of they’re considering of promoting it sometime, however as a result of they know that jewellery has an intrinsic worth and which means.

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Operator [11]

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Our subsequent query comes from Marco Nardini from XP Investments.

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Marco Nardini, [12]

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Might you give us extra particulars about your buyer base? So how a lot of your buyer base had been present prospects or new prospects? The opposite query concerning market. Might you inform us extra about your imaginative and prescient of that and the product combine and circulate prior to now few months?

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Márcio Monteiro Kaufman, Vivara Participações S.A. – CEO, Member of Government Board & Director [13]

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We have now seen that one thing crucial for us is that in Q2, we had a rise of 30% in new prospects. So to me, this can be a quantity that could be very revealing of our capability of attracting prospects. And now, I’ll give the ground to Otavio and Melina.

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Otavio Chacon do Amaral Lyra, Vivara Participações S.A. – Chief Monetary & IR Officer and Member of Government Board [14]

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So including to the 30% new prospects, utterly new prospects for Vivara, extra asset. Along with new prospects, what supported this development in on-line, as we mentioned throughout the presentation, was the purchasers who had been Vivara shops prospects, however they weren’t e-commerce prospects. There was one other 30% that alongside the quarter, migrated to the digital atmosphere. And that is what drove development. After which barely lower than 40% had been present prospects that had been already digital and bodily retailer prospects that additionally purchased throughout the interval. However we now have seen this consumption profile going down.

After which your second level, market is a cloth technique. As a result of it is a means for us to achieve floor and recognition with our merchandise, however we have to be very cautious by way of the model. Vivara has a fairly sturdy model with our prospects. And the event of those channels observe a really sturdy precept of us having the appropriate product in the appropriate channel. We have now been very cautious with SKUs that we activate in every one of many channels we’re getting into. After which we now have the chance of being extra related in these channels. They nonetheless account for a really small share of our revenues, nearly nothing, and we’re integrating totally different channels, some are extra basic. And this can be a trajectory that’s going to be the idea for our development within the particular channel. Simply so as to add one thing concerning prospects. I feel that one environment friendly work that was executed to deliver new prospects to the e-commerce platform, particularly individuals who had been at Vivara shops, prospects that had by no means purchased on the web site was work that was leveraged by Jewellery in Motion that — however prospects to finish their shopping for transactions within the web site and as soon as that they had the primary contact with the platform. By some means, we break a barrier by way of their shopping for on-line, which is essential for them to return again to guarantee some recurrence for the net platform.

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Operator [15]

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Our subsequent query comes from Olivia Petronilho from JPMorgan.

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Olivia B. Petronilho, JPMorgan Chase & Co, Analysis Division – Analyst [16]

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There are two questions. The primary is your efficiency, particularly in Q3, however between value and quantity and the worth transfers that we’re seeing. And the second query is the retail presents of — we have been seeing the retail of style and equipment going higher — or higher efficiency and going up. However what are you seeing within the jewellery sector?

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Márcio Monteiro Kaufman, Vivara Participações S.A. – CEO, Member of Government Board & Director [17]

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Thanks on your query, Olivia. I feel that we’re in truth seeing fairly totally different developments. And we’re nonetheless — and clearly, we’re closing the hole each month with increasingly more of our shops operational. And by way of value, barely destructive, however we’re nearly there. Nevertheless, we now have a value impact that’s near about 20% within the common ticket as an entire. And there’s a combine impact. After we isolate the worth impact. When you could have barely greater than 10% and extra, contributions will probably be based mostly on the combo as we introduced with totally different tickets between classes. So in the present day, we might have this distribution with nearly offsetting nearly 100% of this impact. As to the rivals, we are able to see value will increase throughout the board at nationwide stage for the gamers and the lowers with sooner transfers as common. After which we now have a better improve than we noticed to start with of the yr and alongside the yr of ’19. And as a reminder, we adjusted costs in late June and July, and we’re nonetheless making particular changes for the classes the place we now have much less elasticity. And even so we’re seeing an adherence by way of pricing that’s actually nice and as Bob mentioned, by way of worth reserve. And so our weeks are being very sturdy. We’re getting gold at a value — market costs, and this has additionally supported a part of our gross sales. We have now a couple of particular gamers in smaller market niches, reminiscent of Life, making extra — making stronger value changes and particularly concentrated with imported merchandise. And we’re additionally utilizing alternatives in order that it — we are able to take advantage of it. We have now our model positioning as in comparison with our rivals in essential markets. So we’re additionally transferring costs progressively in additional conventional traces with the transfers concentrated within the extra unique traces.

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Otavio Chacon do Amaral Lyra, Vivara Participações S.A. – Chief Monetary & IR Officer and Member of Government Board [18]

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Olivia, as to the state of affairs as an entire, we nonetheless would not have an correct variety of the modifications in market share. I consider that our market share has gone up on this interval for a couple of causes. Primary, due to the advertising investments that we now have made that we now have elevated on this interval due to the net — relevance of the net channel. This was crucial for us to get to the degrees that we bought and the extra sturdy web site that we now have with extra selection with superior on-line expertise. And I consider that it has supplied us a rise in market share, particularly for the net channel, and that is additionally mirrored in retailer. I feel that the omnichannel technique that we now have that’s superior as in comparison with the market, has made us be capable to navigate by means of the disaster with extra power or extra — or higher than the remainder of the competitors. I want to spotlight the truth that in state of affairs, regardless of a major improve in value — in metallic costs, the gold has gone up by greater than 80%, silver greater than 120% up. And so there’s intense market volatility. And as a reminder, we now have this stock reserve, in order that we are able to do it progressively. And likewise the truth that we’re vertically built-in, makes it potential for us to adapt the product somewhat effectively. And that is being demonstrated in our outcomes. I consider once we isolate the price of merchandise and the unit price of merchandise, whether or not silver or gold, we now have managed to be extra environment friendly. And the rise in unit prices is best, which has translated in larger profitability for us within the brief time period.

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Operator [19]

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(Operator Directions)

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Márcio Monteiro Kaufman, Vivara Participações S.A. – CEO, Member of Government Board & Director [20]

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Nice. It has been a pleasure to speak to you in the present day. We at the moment are ending on our convention name. Thanks very a lot on your questions and good well being for all of you and good luck.

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Otavio Chacon do Amaral Lyra, Vivara Participações S.A. – Chief Monetary & IR Officer and Member of Government Board [21]

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Thanks all very a lot.

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Operator [22]

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Vivara convention name has now ended. Please disconnect your telephones, and have an excellent afternoon. Thanks.

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