Sendas Distribuidora - Earnings Call - Q1 2025

Transcript

Moderator (participant)

Aside first quarter results.

Para os que precisarem de tradução.

For those of you who need simultaneous translation, we have this tool available on our platform.

Clicar no botão "Interpretation" através do.

Select the icon, the globe icon in the bottom part, and choose "Interpretation," where you may select English or Portuguese. Please note that this earnings call has been recorded and will be provided on the company's IR website online, where you can also already find the earnings release. During the presentation, all participants will have their mics off. Soon after, we will begin the Q&A session. To submit a question, please select the Q&A icon on the bottom part of your screen, write your name, company, and language to enter the queue. As you are announced, a request to activate your mic will appear on the screen. You must activate your mic to submit questions. We would like to instruct you that you please send all of your questions at once.

Information in this presentation, as well as possible statements that could be made during the earnings call, related to future perspectives on the business, forecasts, and operational targets, represent beliefs and assumptions of the company's management, as well as information that is currently available. Future statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions, as they refer to future events relying on circumstances that could or not occur. Investors must comprehend that economic general conditions, market conditions, and other operational factors may affect the future performance in Assaí and lead to results that differ materially from those listed in such statements. Now, I would like to pass the floor on to Gabrielle Helu, our Investor Relations Director.

Gabrielle Helu (Investors Relations Director)

Hello, good morning, ladies and gentlemen. Thank you for your participation during our earnings call in the first quarter of 2025. I'm going to present the executives that are present today: our CEO, Belmiro Gomes, Admar, our interim CFO, Anderson Castilho, our VP for Operations, Vlamir dos Anjos, VP for Commerce and Logistics, and Sandra Vicali for People and Sustainability. Now, I'll pass the word on to Belmiro to begin our presentation.

Belmiro Gomes (CEO)

Thank you, Gabi. First of all, I want to thank all of you for being present today. Our objective today, as you already saw our numbers, is to quickly present these results. We have more time for Q&A as well. First of all, we would like to share some information we received this week. Assaí was listed by Deloitte as the 100 biggest retailers in the world.

Considerada com capital brasileiro, entra entre as 100 maiores varejistas do mundo.

The first time a Brazilian company enters this ranking.

É a primeira vez que uma empresa brasileira.

This ranking has been done for over 30 years. It is the first time a Brazilian company is part of the 100 greatest world retailers. Moving on to the numbers of the first quarter, we have a calendar effect that is important because we have February 29, and it shifted also in Easter, which affects the total base and the same store base.

Com sua marca de BRL 20.3 billion, o crescimento.

Reached BRL 20.3 billion in revenue, growth of 7.8%, and the sales in the same store sales was at a level of 5.5%, below the inflation rate. This is mainly due to a strong trade-down effect we've already talked about and these trends towards the reduction due to the inflation. Sorry, I think our presentation just went off, but also because of consumer choices. This trend we've observed strongly among lower-income customers, especially in the Northeast region of Brazil.

Tanto que quando olha para volume.

What we've observed is that when you look at the volume in the first quarter in the same store base, the volume is positive. So, positive volume without trade-down would represent the same store sales that should be in line with the inflation, which is at about 7.5%-8%. But with the trade-down effect and this switch of some brands and reductions in sizes of packaging, this has not been kept. It is not a standard trend for all regions of Brazil. It is really connected to CDE social levels. And besides this, Assaí has been expanding with 4.4%. This quarter is really set by the consistency and continuity of our performance, our discipline to generate cash, and have really good balance between growth and also discipline for cash generation, considering the focus on deleveraging.

The EBITDA is above BRL 1 billion, and it reaches 5.5%, which is the level in 2021, which is prior to a big expansion project we had with a conversion in the Extra stores. What do we attribute this to? Mainly because of maturity. We have a store network that we are going to see in the next quarter that is still under maturity, and the rigorous control on expenses and discipline, as well as the evolution that our team has been implementing. I want to thank my team for the results. Cash generation, as we mentioned, reached BRL 1.6 billion. This detail, the EBITDA is also going to get—we are going to get some more details on this from Admar, but there is a factor that we should mention. When we look at the pre-IFRS EBITDA, it is double our financial expense.

Considering that our conversion rate of EBITDA into cash is very strong and the company is generating double the amount of cash, then the cost of carrying over the debt, even in this scenario with high interest rates we have. With this movement, the net income has been under recovery, obviously, but there is an important advance in regards to the first quarter of last year with an increase of 74% and 95% when you look at the pre- and post-vision. Another highlight in the first quarter is, as we all know, the company is really focused on the reduction of leverage. We have been keeping at the same level of drop that we had in the first quarter from 2024 to 2023 to 0.60.

A correlação de dívida líquida ajustada.

When you consider the net debt to EBITDA ratio as discounting the receivables versus the EBITDA accumulated with the last 12 months. The last central bank report considered another increase of interest rates. The company had already provided some pre-signs for this, but now we officially consider the new guidance for store openings in 2026 with the postponing of some developments and projects to be able to handle the cost of capital we have and this increase. The expansion plan in 2026 will be just as 2025, with the target of opening up 10 new units, simulating the same results as 2025. We can move on to the next slide, please. Here, we share a bit of the vision on the store conversions with the Extra Hipermercados and hypermarkets.

Of course, that's one of the biggest projects we've ever done in Brazil, so it requires a lot of our attention. When we look at the EBITDA, especially in the pre-IFRS vision and the network of the stores in 2022, which are the first 47 stores we converted.

IFRS do EBITDA total da companhia.

We're already above the total EBITDA with a 6% milestone. The stores from 2023 that are still advancing into their second year of operation, they're already at 3%, leading to an average of 5.3 and an increase of 1.3 compared to last year, which explains the increase of 0.3 that we had in our total base. Here, it's worth mentioning that due to the profile of the stores, especially the hypermarket stores, it is a profile when you consider the cost of occupation and location of the stores, operational costs and expenses. These stores sometimes have escalators and more elevators. There is some natural skepticism in the market about if this store network will be able to operate within a cash and carry standard of expenses.

Similar ao parque orgânico do Atacarejo.

An EBITDA level that was similar to the other stores. This is what allowed us to enter regions which would be almost impossible to reach if we had an organic expansion only, as well as expanding our penetration and share within AB customers. I think that's what I had to share. Now, I'll pass the floor on to Admar, who gives us more details on the financials. I'll get back to discuss the last slides. Thank you, everyone. You're on mute, Admar.

Aymar Giglio Jr. (Interim CFO)

Thank you for watching our conference. Giving a bit more details. The cash generation and reduction of our debt.

We had operational cash generation of BRL 3.1 billion in the CapEx, which was BRL 1.5 billion in the last 12 months, in a way where we consider the free cash flow generation of BRL 1.6 billion, cost of debt of BRL 1.9 billion, and BRL 0.3 billion in cash generation total. I want to remind you that we discounted BRL 700 million less in receivables, which makes the net debt drop from BRL 13.8 billion to BRL 13.4 billion. When you look at this differently, on the right side of the screen, you see a gross debt that's almost stable despite all of the evolution in the interest rates, BRL 15.9 billion compared to BRL 15.7 billion, a gross cash position that's very stable, BRL 4.5 billion compared to BRL 4.4 billion in this quarter, and the total amount of discounted receivables of BRL 2.6 billion last year versus BRL 1.9 billion this year.

The adjusted cash position goes up from BRL 1.9 billion to BRL 2.5 billion, and therefore, the net debt drops from BRL 13.8 billion to BRL 13.4 billion. This is a shift that will be accentuated as the quarters move along, where a CapEx in 12 months will get closer to BRL 1 billion, from BRL 1.5 billion to BRL 1.2 billion. The cost of debt will remain on a downtrend, most likely at a level that's still very similar, and in compensation of the operational cash generation that continues to grow due to the store maturity and operational gains, etc. On the next slide, we'll also see that this trend with the net debt made our net debt ratio on adjusted EBITDA drop from 3.75 times last year to 3.15 times a year ago, demonstrating a reduction of 0.6 times, almost BRL 500 million.

That also demonstrates that the company in the last 12 months was already anticipating everything that had been going on before, as well as the.

Com o estratégia de lojas do projeto Extra, principalmente.

CapEx modulation decision.

Com o passar dos trimestres mais maduro, de forma que a.

The store network that's more mature. In a year that was so complex, the company was able to have this deleveraging effect.

Relativamente sazonal do primeiro.

Which is a seasonal position, which would be a seasonal impact that's negative compared to the other quarters, should achieve, according to our guidance previously disclosed, 2.6 times the EBITDA by the end of 2025. I think that when it comes to detailing this, that's pretty much it. I'll pass the floor back to Sandra and Belmiro.

Belmiro Gomes (CEO)

All right. Thank you, Admar. As you saw, the company is really focused on deleveraging at Assaí. And we've been. Assaí is really well known for its strong cash generation.

Na 22ª posição, sempre com geração de caixa própria. O último investimento.

We've been growing with our own cash generation. Last investment we.

Foi feito sempre com capacidade de geração de caixa. É o que sustentou a expansão, é o que está sustentando o projeto do Extra, outros eventos que nós tivemos ao longo do caminho. Então, a companhia é conhecida muito pela geração de caixa, então a desalavancagem vai ocorrer mesmo nesse cenário agora de taxa de juro.

Even in this scenario with higher interest rates. To wrap up the presentation, of course, we also want to get into ESG endpoints, where Assaí is also a market reference. An important acknowledgment, considering that the company starts off in São Paulo, is that we were elected for the 10th consecutive time to receive an award from Datafolha, from Folha de S.Paulo, as the best cash and carry operator in São Paulo. That includes, of course, Brazil, and we operate differently in each region, of course, but recognizing this as the biggest market in the country really makes us proud.

Admar, você coloca no mudo o seu.

As well as some other acknowledgments as well. Besides this, we also have the company's maintenance within B3's index for sustainability, with integrating our new annual sustainability report now in the first quarter of 2025. I want to invite you all to please access this report. The material is exceptional, very good, with excellent information. Besides this, the company has 87,000 employees, so we have the biggest flow of stores and customers and physical stores, 38 million Brazilians that visit our stores. Of course, this is also the development of our role as social responsibility and inclusion players are really easy to view in all of the results in the company, with over 48% Black people in leadership positions, 25% of women in leadership, 33.5% of employees that are 50 or more years old.

We will have the 8th edition also of the Assaí Academy Award, with over 2,100 entrepreneurs being awarded. We already have over 70,000 small entrepreneurs signing up already, and that is something we have been able to do, promoting prosperity for everyone and really being recognized for our actions and measures within social responsibility. I think that is it. Now we can get straight into Q&A.

Moderator (participant)

Perfect. Thank you. Now we are going to start with the Q&A session. If you have a question, please select the Q&A icon on the bottom part of the screen. Write your name, language, and company to enter the queue. As you are announced, I request you activate your mic while you are on the screen. You must select your microphone and activate it to submit your question. Please send in your questions all at once. We are going to begin.

Our first question comes from Rodrigo Gastim, Itaú BBA. Rodrigo, you may proceed, please.

Rodrigo Gastim (Analyst)

Hey, guys, good morning. Two questions here on my side. The first is about the sales dynamic now for the second quarter. I want to understand how you're noticing this capture of the favorable calendar effect. If you look at the data, Easter helps, of course, but how does this dynamic and the acceleration of sales in your perception, how is it happening, and how can this help the dynamic for working capital throughout the second quarter? The second is about the gross margin. That was a highlight in the quarter.

Quais foram os principais promotores e detratores de margem bruta? A gente vê o consolidado.

I'd like to know what are the main detractors and promoters of the gross margin, and how much do you think this is structural or recurring for the rest of the year? Those are my two questions. Thank you. Thank you, Rodrigo. About sales in the second quarter, we have this Easter effect with sales a lot higher from a growth in the same stores perspective. It was a lot higher than what we've seen in the first quarter, but that's also because you have this Easter effect. I think the main thermometer for the second quarter is going to be now in May, because in April we're going to finish the calendar effect.

Observado do segundo trimestre é que ele deve ser retratado, obviamente, o efeito calendário, uma continuidade do primeiro tri.

Moderator (participant)

Now, in the second quarter, we'll see.

O efeito de troca de marcas.

The continuity of the first quarter. The trade down of brands.

O monitoramento que ele é feito de forma constante, ele ocorre em períodos.

Belmiro Gomes (CEO)

Has been a lot more intense than what we expect. It's not the first time Brazil is going through an inflationary cycle. We attribute this trade-down effect, especially in the lower-income customers and the shift in behaviors that are going on in society.

When we look at the numbers for the macroeconomic scenario, like unemployment, credit in the market, social programs, and other efforts to add more income, there was an expectation for this level of trade-down. Yes, we had high increases in prices, but it is definitely above what we expected.

A tendência é seguir a tendência que nós, pelo menos o que nós sinalizamos do primeiro tri, seja do ponto de vista de capital de giro, seja de.

From a working capital perspective and performance as well. We've been searching for advancements in this, and especially with delivering the evolution of the EBITDA. When we look at the gross margins, of course, we have a series of components. There is the effect of the actual trade-down. Someone could be looking at the numbers and say, "Oh, if the margin improved, then how come there's not more sales?" Because the volumes are dropping. What has actually led to not making the sale reach this is not a drop in volumes. We had an increase in volumes. In this scenario, reducing the prices more will not bring in more volume. On the other side, a positive aspect is that we already had an expansion in the EBITDA margin or the EBIT that was higher, which was the store network ramping up.

Of course, you have a store-by-store assessment. Not necessarily does the entire network, is it promoted or scaled up on prices, but you have the trade down that's impacting.

Algumas mais acentuadas que as outras.

You have the competitive advantages.

Também a parte de serviço, ela tem uma colaboração.

You also have initiatives and projects that impact the increases of margins. The new stores also lead to an increase in other projects that the company's been working on to add more sales and also more margin volumes. I hope to have answered.

Belmiro, acho que o Rodrigo perguntou também sobre o capital de giro, né?

Aymar Giglio Jr. (Interim CFO)

Belmiro, I think Rodrigo asked about the working capital. All right, Belmiro. You asked about working capital, right? Yeah, exactly. Actually, to make it clear here, we have been talking about for many quarters, we kind of kept the same discourse in practical terms. We kept discipline in our working capital. That is very strong. We plan to keep this up, up ahead, and we should not have an improvement in the working capital. Just as the interest rate impacts our business, it also impacts it for suppliers.

Só que a gente deve have an improvement in the working capital.

We have to look at this from now on, right? We have discipline also. Also, we can keep good levels of stocks and payment terms so that we can consider these during the year. We should not have variations. Of course, we have points that are seasonal, such as the increase in stock in our Easter, as well as in our anniversary campaign during the third quarter. Every quarter closes with some form of variation. What I want to make very clear to everyone is that even with our leverage and our debt, this does not impact the commercial dynamic. We do not reduce the stock or block sales and purchases to the detriment of this. We have a level of stock and coverage that is adequate for our format and model and the way we supply the stores.

Rodrigo Gastim (Analyst)

We're very comfortable to keep up what we've been delivering in the last quarter. Perfect. Thank you, Belmiro. Thank you, Belmiro, as well. Thank you for the answers.

Nossa próxima pergunta vem da Danniela Eiger.

Belmiro Gomes (CEO)

This question comes from Danniela Eiger at XP. Dani, we'll enable your audio, so you may proceed.

Danniela Eiger (Equity Research Director)

Good morning, everyone, and thanks for taking my question. Congrats on the results. I have two. It's kind of like a follow-up of the first, but the first is about accelerating sales. You mentioned, for example, Belmiro, that you still have a bit of pressure from trade-down, and you talked about a slight recovery in volumes. What are you considering to be levers to accelerate these sales? What's in your hands? What have you been working on already? My second question is about the gross margin dynamic. As you mentioned, you presented this breakdown for a batch of stores that were converted, and there's a margin that's still coming. Wouldn't it make sense if this is reinvested in competitive advantages to try to promote an increase in sales?

Se traduz em margem e flua ali até o fim. Então, acho que seriam essas duas.

You want to increase your margins and just flow it into the margins. Those are the two questions.

Belmiro Gomes (CEO)

e discussed this, and we actually had some tests in certain regions. The fact that we're in 25 states makes this easier to analyze the dynamics. What we observed is that there's not much elasticity. The investments you place into margin would not reach much of a difference in the sales. It would actually be pretty much the same or even smaller. Due to a sum of factors that we have when it comes to the population's income and food inflation as well, this movement, and according to the tests we worked on, would not really make sense when it comes to the levers.

We also have always been searching for ways to improve the current operation and supply. There is always an area in Assaí that's really focused on innovation, right? Since we have the biggest flow of customers in our stores, among all the players, we are the ones with the biggest diversity of social levels of customers and sizes of stores, etc., which allows us to explore many new categories. If you were at the investor day, you saw the highlights for the air fryers and the tires. Of course, there are other initiatives underway to really transform and increase the share of wallet, reduce expenses, and move along with an increase in margins. Besides, the part that was hired from the expansion. I hope to have answered your question. You did answer. Thank you, and congrats on the results.

Nossa próxima pergunta vem do Eric.

Moderator (participant)

Next question comes from Eric Huang. Something there. Eric, you may proceed.

Thanks, guys, for taking our questions, and congrats on the results. Two questions here. The first, if you guys could talk about how you're looking at the same-store dynamic per region. You even mentioned that the Northeast had a more complex reality. How are you looking at this around the country?

São é Sudeste, São Paulo. E a segunda é com relação aí.

Give us a better view, especially here in the Southeast in São Paulo. The second question is about the reduction.

A gente deve ver uma redução disso ao longo do ano. Então, só entender pouco aí.

The anticipation of receivables. We just want to understand and direct us a bit more to what we should expect for improvements.

Isso tem conversado com essa evolução.

How this has interacted with the average cash position you guys have reported throughout the period. I'll start off, and then I and Mari will talk about the reduction of receivables. There is a difference in the regions in Brazil. Maybe it's a lot less regional-based, but a lot more social-level-based.

Da composição da população de classes.

Aymar Giglio Jr. (Interim CFO)

Where you have a bigger amount of CDE classes is where you have more trade-down in the Northeast and the North of Brazil. When you see most of this movement for a shift in brands, we monitor this very closely, region by region. This is a lot more connected to social levels, and consequently, Brazil was not a standard process.

Também para cada região do Brasil.

This also impacts the result. Hi, Mari, can you talk about the receivables? Belmiro, about the receivables, the volume of receivables that have been discounted, we should keep a similar level as what we've done in these last quarters. The gross receivables have been kept in line, quarter over quarter, year over year. The sales structure with the different sales on cards, etc., has been very stable in the last quarters. We understand that the volume of receivables will continue, and also the level of receivables discounted will continue in the levels we've seen in the first quarter. About the average cash position.

Na verdade, a gente tem mantido.

Belmiro Gomes (CEO)

We've been keeping this level at a minimum cash level of about BRL 1.4 billion-BRL 1.5 billion applied and invested daily. Of course, due to our behavior of cash flows, we have some situations where it's a little higher or a little lower. Throughout the periods, it's normally a bit higher, close to BRL 1.7 billion-BRL 1.8 billion. We should also not see much of a change in behaviors in this sense. We'll continue to keep the same level throughout the next periods. Perfect. Thank you for the answers, Belmiro and Admar. Moving on to our next question from Tales. We get another from Safra. Tales, we'll open up your mic, so you may proceed, please. Good morning, Belmiro and Gabi and Admar. I want to explore a little bit of the performance of the stores that were opened and converted in 2023.

When we look at their performance now in the first quarter of 2025 and the performance of the stores that were converted in 2022 in the first quarter of 2024, we see a gap in the average sales per store and the EBITDA margin. I want to understand why there's this gap. Is it about location, competition, or other factors involved? Maybe because you converted the best stores first.

Obrigado. Perfeito, Thales. Acho que tem dois fatores.

Perfect, Thales. We have both factors. One is, of course, the location of the stores. Although there was also a licensing factor. Like in São Paulo, we had bigger stores open first, but most of the EBITDA has a difference from the opening year. A store network that is going to have maybe achieving three or two years, one year makes a huge difference, right? Also, the store network in 2022, a year before, was a lot more painful, confiscating margins. These are stores that have different sizes, and our expectation is that throughout 2025, we will have a better view of the first quarter in 2026. It is just a year difference, but it is very relevant. Okay, thank you, Belmiro. Very clear.

Nossa próxima pergunta vem do Joseph Giordano. Joseph, enviaremos comando para habilitar seu áudio. Pode prosseguir, por favor.

Moderator (participant)

Our next question comes from Joseph Giordano.

A gente teve a revisão do número de lojas, talvez não.

I wanted to explore about this.

Os targets de alavancagem. Eu queria explorar com vocês pouquinho.

I wanted to explore how you guys are considering CapEx for next year.

Do volume de aberturas.

Due to the volume of openings and how you're looking at the costs.

E nesse contexto, dentre.

For the openings per store, you have these 10 stores you're going to be opening and what is already mapped out within the pipeline. On the second question, maybe a low hanging fruit as an opportunity.

A oportunidade de alavancar pouquinho o atacado.

How do you see the opportunity to leverage your distribution wholesale operation a bit more? Thank you.

Obrigado, Joseph.

Belmiro Gomes (CEO)

Thank you, Joseph.

Por enquanto, ainda não dá para nós termos uma visão de CapEx. Nós temos.

The store network in 2026, we still can't.

A forecast exactly, we had an expectation for 20 stores. Mas a escolha depende muito do parque.

Of course, it depends a lot on the stores. You have a store considering the size, the location, the model. If it is a store that is completely leased, if it is a sales lease back agreement or a BTS agreement. We still do not have visibility. We still have to get the licenses. We should get this information probably a little more clear throughout the second and third quarter of 2026. The company is focused on deleveraging, and the idea is that we should balance this out with the ramp-up time. They are not going to necessarily be the stores with the least investment, but the stores with the biggest ROI can tier.

Mas ainda não conseguimos dar essa visão nesse momento.

We still cannot give you a clear vision on this yet. Distribution wholesale is always an opportunity. When you look at the cash and carry first store SAEs, we still have our competitor that operates with both formats, right? With cash and carry stores, but they also have distribution wholesale. This is a format that, to be very honest, has opportunities. The company has interest in this, but there is a market that is really focused on price and logistics. There is not a good window of opportunity at this moment because we still have a lot of challenges with store maturity, maturity of the new store formats we implemented with services. Anderson can talk about the self-checkout. We had 100 self-checkouts already being deployed. Now we have another 100. This could, in some way, make us lose a bit of our focus on the recurring sales.

It is always an opportunity that the company can explore, of course. I hope to have answered.

Perfect. Thank you, Belmiro.

Moderator (participant)

Our next question comes from Felipe Hussein at Citigroup. Felipe, we will open your mic so you may proceed.

Obrigado. Bom dia a todos.

Felipe Husein (Analyst)

Thank you, and good morning, everyone. Belmiro, we always kind of look into the net revenue minus the sales area to understand the productivity and the same-store sales and differently than the other quarters. If we're calculating this correctly, we saw a slight improvement in productivity.

Melhora que explica.

It's a very dynamic that improves or explains this. Maybe locations with less competition or a more aggressive dynamic. Thank you.

Belmiro Gomes (CEO)

I would have to look at this later on. We have the analysis we can perform, but there was an improvement in this first quarter, but it's really coming from store productivity issues. You can remember that we're at the end of the project. We still have a lot of stores to receive butcheries and bakeries. Maybe you could be a little more explicit on this. You have some different theses on what would be the objective for this improvement, if there would be stores with better locations, etc. Of course, this is maybe more connected to the services company, etc. Yeah, probably yes.

If you look at productivity effects, no, undeniably so, because we already had occupation costs in a lot of the stores, the organics in 2021 and the conversions in 2022 and 2023. Initially, the focus was to open up the store. After we got into services and licensing, which is a little different. As you mentioned, when you consider the RAM, the RAM is not only about a preference and if the company's in it, if the customers can get back to that store, but within that, we also have our work to adjust the mix, include products and services. All of this is what's going to guarantee this ramp-up. You can't have an improvement in the EBITDA if you don't have an improvement in productivity as well. It is not only about price.

Moderator (participant)

Moving on, our next question is in English. It comes from Andrew Ruben. Andrew, we are going to enable your mic, so you may proceed. Andrew from Morgan Stanley.

Andrew Ruben (Analyst)

Potential for consolidation in the cash and carry sector. When you think about the 10 stores for next year, is that only organic openings, or would you consider any type of M&A, and what do you think would be needed industry macro or otherwise to open up more of the consolidation opportunity? Thank you.

Obrigado, Andrew.

Belmiro Gomes (CEO)

Thank you, Andrew. All of the stores are organic, and our expectation for 2025 and 2026, obviously, the company has been looking at possibilities because M&A processes have a long period between planning and execution. The organic stores take an average of two to three years between the decision and when you're actually able to open up the store. Initially, the focus is deleveraging, right? There was some uncertainty from an interest perspective. We just got back like a year ago to what the interest expectation is. If you consider the focus is on deleveraging, and not that the company is not looking at this, the focus is still organic growth.

If there's not a reduction in the interest rates and a bit more balance in the entire market when it comes to purchase power for food, as well as the absorption of the amount of stores that were open, you would avoid the market consolidation that would end up happening eventually when the possible companies and buyers are more leveraged or even a merger between companies. When you consider the macroeconomic scenario in Brazil today and the cost of capital, this, in my vision, just kind of gets in the way or hinders this process. I hope to have answered your question.

Felipe Husein (Analyst)

Thank you.

Dando continuidade, nossa próxima pergunta.

Moderator (participant)

Our next question is from Irma. At Goldman Sachs, Irma, we'll ask you to open up your mic, please. You may proceed.

Hey, good morning, and thanks for the opportunity. Just want to go back to the point on trade down and understand if you guys are seeing this as a potential movement in a more structural manner, or is this more of a cyclical issue connected to the moment of the leverage and the current inflation environment? Certain categories, that's still pretty high. Maybe considering this, if you think it's more of a structural matter, or if you can maybe switch some brands to more regional brands or explore the topic also of private label. The second question is just quickly about understanding this new partnership you guys signed with iFood.

Belmiro Gomes (CEO)

Also, of course, that brought in a lot of growth, but I wanted to understand more about the economics there and the profile of the consumer that this is attracting to the platform. Thank you. All right, so we'll split this into three phases. Anderson will talk about iFood, Vlamir will talk about the regional brands. Private labels are still not a project that we're focused on in the company. Of course, we've been assessing some possibilities, but it's not what we're focusing 100% on now because at this moment, you have a big trade-down actually impact. When it comes to the trade-down, yes, there is also a shift that's structural within the country. This inflation we've always had in Brazil, there's one side that's a response to this, but especially lower income classes.

Brazil became one of the biggest countries with activities on sports bets websites, and that represents about over BRL 400 billion per year. This has impacted people's available income. This is one of the factors besides the inflation, of course, and the income not really keeping up with the food consumption. There is something else that is structural happening, especially with the lower social levels that have been contributing to the trade-down effect. They are very quick in adjusting brand choices. Anderson will talk about iFood's partnership. I will come back at the end. If you have any other questions, it will be a pleasure to answer them. Anderson, do you want to talk about iFood?

Perfeito. Irma, obrigado pela pergunta. O iFood é uma parceria.

Aymar Giglio Jr. (Interim CFO)

Thank you for the question, Irma. The partnership comes into the last miles.

A gente tem praticamente 60 lojas aí.

We started last year. We have about 60 stores working with this platform. They're very strong. That leads to very positive results. Believe it or not, due to the purchase power of the stores, we have stores in regions that have lower purchase power that have excellent results and stores with lower purchase power that also have strong results. It has been servicing pretty well, but it's another opportunity also with our customers. We have some adaptations we're constantly searching for, but generally, it's had pretty good acceptance. We assess each store and region, and we can, of course, service the customer and understand our radius of operation. We have been very well serviced. Within the last mile public, I think it's another service we can share with our customers. Now, Vlamir. Hey, Irma, thanks for the question.

Na realidade, do trade-down. Na verdade, assim, a companhia tem uma capacidade.

That's the regionality in the trade down. The company normally has the capacity to adjust the volumes purchased, right? Not necessarily the assortment, because even in the regional brands, Assaí, for example, grew our operation and our business model really strengthened by the national brands and regional brands. That was always something that was really concerning. We had to keep an eye open on this matter constantly. If you look at the average assortment that comes from stores, when I look at the items that I work with from regional brands, I basically double the amount of SKUs sold on average per store because of the regionality. What's the concern? This speed that Belmiro mentioned with really being able to reallocate the volumes purchased to service the trade down, stop buying brand A to buy brand B.

You have to migrate the supply and purchase volumes. Besides the inclusion of these new categories, this is something that's already on our radar. We did not have to register suppliers or do something very new. We just have to balance out the stocks and how we supply the stores. This is already pretty much set forth. We are just maybe having an occasional market situation. We saw this strongly in the pandemic, but then it kind of adjusted. Now we have strong trade down. What makes us a little more at ease is that we do not lose volume. We gain volumes. The trend is that this should be kept for the future. I hope to have answered.

Perfect. Thank you so much.

Moderator (participant)

Now we are going to head to our last question that comes from Iago Souza. You can open your mic, please.

Good morning, Belmiro and team. Thanks for the opportunity of two questions here on our side. The first is about the store expansion that should be if you should consider the participation in another region and understanding if it's another region where you see the biggest opportunities in the Northeast and Midwest. The second question is about how the plans will be for the financial services after Faga's exit. Do we have any postponing in these plans?

Belmiro Gomes (CEO)

All right, Iago. No, we are not postponing our plan. Faga's exit, after his exit, me and Aymar have been keeping up with all of the projects, and we should provide more information on the second quarter.

It obviously didn't happen at the same speed we had mentioned initially, but we're not in any way impacted when it comes to the execution of the company's projects, when it comes to discipline or capital, considering that the support team is very experienced and very.

Temos expansão ainda de 26, não tem como.

Not too much capacity to keep up with all of this. We have other regions under analysis, but yes, we can concentrate in the Southeast and Midwest, and where you have agribusiness activities, which is where we have important projects for expansion. Of course, if we have to choose the reduction in stores due to the increase in cost of capital, we are always going to value the projects that you look at and have. Of course, you have a bunch of components in the decision-making. The only one that is not in our power is licensing, right? What we always look at and analyze is the break-even, the returns on investment capital, and the paybacks, etc. Naturally, we will have a bigger focus in the Southeast and Midwest of Brazil. I hope to have answered your question.

Thank you, Belmiro. Congratulations on the results.

Moderator (participant)

The Q&A session has officially ended. Now we would like to pass the floor on to the company for their final remarks. Thank you, everyone, for participating. First quarter in our vision has results that demonstrate solidity and consistency, and this is visible in our operations.

Belmiro Gomes (CEO)

Not only this period, but if you look at the last 10 years, you'll see discipline, cash generation, adjusting to market changes. The company always tries to be a benchmark and a reference for innovation in the sector. We also obviously have to adapt to changes in the economic reality. We're continuing to be strong in this process. We went through this period with a strong level of project execution. We're experiencing a scenario with challenges involving labor and expectations also of the purchase power of the population that has not been responding as we expected. On the other hand, this brings even more volumes for cash and carry, which is the channel that is the cheapest for the population to buy from and more penetration in the Brazilian households as well, which makes us continue to evolve.

Rodrigo Gastim (Analyst)

We hope to present results that are positive and consistent. This expansion project gave us very relevant points, interest there. The cost of debt is here. We have stores like Moca and Congonhas that are going to continue. Ten years from now, they'll still be contributing and generating positive results for the company. Once again, I want to thank my team, and we keep on strongly on the consistency of our results, cash generation, and cutting down on our debt. Thank you so much to everyone for participating. The earnings call for the first quarter of 2025 at Assaí has officially ended. The investor relations department will be available to clarify any other questions or doubts you may have. Thank you for participating and have an excellent day, everyone.