Quarterly Information
Empreendimentos Pague Menos S.A.
March 31, 2024
With Independent Auditor's Report on Review of Quarterly Information
Empreendimentos Pague Menos S.A. | |
Quarterly information - ITR | |
March 31, 2024 and 2023 | |
Table of Contents | |
Earnings release | 3 |
Balance sheet | 26 |
Income statement | 28 |
Cash flow statement | 29 |
Statements of chance in shareholders' equity | 30 |
Statements of added value | 31 |
Accompanying explanatory notes to the quarterly information | 32 |
Comment on the behavior of business projections | 65 |
Independent Auditor's Report on the financial statements | 67 |
Declaration Company's Officers to the quarterly information | 70 |
Declaration Company's Officers to the quarterly review report | 71 |
EARNINGS
RELEASE
1Q24
Fortaleza, Ceará, May 6, 2024.
Empreendimentos Pague Menos S.A. ("Company"), the main Health Hub for the Brazilian expanded middle class, present in every state in Brazil and more than 400 municipalities, announces its results for the 1st quarter of 2024.
1Q24 HIGHLIGHTS
SAME STORE SALES | GROSS REVENUE |
9.6% consolidated (8.5% in Pague Menos and 15.1% in Extrafarma)
R$ 3.1 billion (+10.0% vs 1Q23) with acceleration in both brands
EXTRAFARMA SYNERGIES
R$ 153 million on an annualized basis (+18% vs 4Q23)
ADJUSTED EBITDA
R$ 96.9 million (+77.4% vs 1Q23) with
1.2 p.p. in margin expansion
INDEBTEDNESS
2.6x Net debt / EBITDA (0.4x reduction vs 1Q23)
OMNICHANNEL PLATFORM
CASH CYCLE
60 days (-5 days vs 1Q23), with partial receivables recomposition
HEALTH HUB
13.4% of total sales via digital channels | 1.9 million consultations provided |
(+2.2 p.p. vs 1Q23) | in Clinic Farma |
Note:The figures in this earnings release are presented under the IAS 17 accounting standard. The reconciliation to the IFRS 16 accounting standard can be found in Appendix 1.
02
EARNINGS RELEASE 1Q24
DISCLOSING CRITERIA
On August 01, 2022, the acquisition process of Imifarma Produtos Farmacêuticos e Cosméticos S.A. (Extrafarma) with Ultrapar Participações S.A. (Ultrapar) was completed. With the completion of the precedent conditions and merger of equity balances, Extrafarma was consolidated and became part of the consolidated financial statements of Empreendimentos Pague Menos S.A. (Company) that same month.
In order to facilitate the analysis of the results, we will present the financial data in this release with an emphasis on consolidated numbers. Nevertheless, Annex 1 of this document presents the individual statements of income for the year (ex-Extrafarma), aiming to allow the comparison with periods prior to the acquisition.
Since 2019, our financial statements have been prepared in accordance with IFRS 16, which changed the criteria for recognition of rental contracts. To better demonstrate the economic reality of the business, the numbers in this report are presented under the old standard, IAS 17. The reconciliation with IFRS 16 can be found in a dedicated chapter in this document.
CONSOLIDATED FINANCIAL HIGHLIGHTS
in R$ million and % of Gross Revenue | 1Q23 | 1Q24 | Δ |
Gross Revenue | 2,813.2 | 3,095.1 | 10.0% |
Gross Profit | 817.5 | 903.6 | 10.5% |
% Gross Margin | 29.1% | 29.2% | 0.1 p.p |
Contribution Margin | 142.6 | 185.9 | 30.3% |
% Contribution Margin | 5.1% | 6.0% | 0.9 p.p |
Adjusted EBITDA | 54.6 | 96.9 | 77.4% |
% Adjusted EBITDA Margin | 1.9% | 3.1% | 1.2 p.p |
Adjusted Net Profit | (55.3) | (29.6) | (46.5%) |
% Adjusted Net Margin | (2.0%) | (1.0%) | 1.0 p.p |
OPERATING HIGHLIGHTS
OPERATING HIGHLIGHTS
KPI
1Q23
1Q24
Δ
# of Stores | 1,647 | 1,654 | 0.4% |
Average Sale/store/month (R$ thousand) | 570 | 628 | 10.3% |
Average ticket (R$) | 76.66 | 81.96 | 6.9% |
Same store sales (%) | 4.4% | 9.6% | 5.2 p.p. |
Digital channels (% of Gross Revenue) | 11.2% | 13.4% | 2.2 p.p. |
Private label (% of Gross Revenue) | 6.3% | 6.7% | 0.4 p.p |
# of Clinics | 1,059 | 1,077 | 1.7% |
Active customers (million) | 19.9 | 20.9 | 4.9% |
Total employees | 25,373 | 25,819 | 1.8% |
Store Employees | 20,503 | 21,139 | 3.1% |
Employees/store | 12.4 | 12.8 | 2.7% |
Operating cash cycle (days) | 65 | 60 | (5) |
Net Debt / Adjusted EBITDA | 3.0x | 2.6x | (0.4x) |
03
EARNINGS RELEASE 1Q24
OPERATIONAL DATA
STORE PORTFOLIO
We ended 1Q24 with 1,654 stores, 29 of which were opened and 7 closed in the quarter (5 of which related to Extrafarma's footprint optimization process). With the opening of 29 stores in 1Q24, we practically completed the projection of openings for 2024.
The profile of new stores continues to be geographically concentrated in the Northeast region (76% of openings in the last 12 months), but with a gradual relevance gain in the Center-West region, which is already the second region in terms of number of new stores.
Regarding Extrafarma's operational integration, we made a relevant adjustment to the acquired store portfolio. Since August 2022, 41 stores have been closed. Moreover, we converted 55 stores to the Pague Menos brand and another 54 stores are currently in the pipeline for conversion, with expected conclusion in June 2024.
EVOLUTION OF STORE BASE | AGE PROFILE OF STORES | ||||||||||||||||||||||||||
1,647 | 1,652 | 1,648 | 1,632 | 1,654 | New | 01-02 Years | 02-03 Years | Mature | |||||||||||||||||||
7.2% | 7.4% | 5.7% | 3.2% | 2.8% | |||||||||||||||||||||||
6.4% | 7.0% | ||||||||||||||||||||||||||
5.0% | 5.4% | 5.9% | |||||||||||||||||||||||||
3.5% | 4.8% | ||||||||||||||||||||||||||
0.1% | |||||||||||||||||||||||||||
0.4% | 1.5% | ||||||||||||||||||||||||||
87.6% | 86.9% | 86.8% | 86.9% | 85.3% | |||||||||||||||||||||||
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | ||||||||||||||||||
STORE BASE | ORGANIC | STORE CLOSINGS | |||||||||||||||||||||||||
BY REGION | (1Q24) | EXPANSION | (LTM) | ||||||||||||||||||||||||
(LTM) | |||||||||||||||||||||||||||
N | 15% | 9% | |||||||||||||||||||||||||
NE | 14% | 18% | |||||||||||||||||||||||||
CO | 7% | 3% | 11% | 34% | |||||||||||||||||||||||
1,654 | 45 | 38 | |||||||||||||||||||||||||
SE | |||||||||||||||||||||||||||
S | 62% | 76% | 3% | 45% | |||||||||||||||||||||||
BY INCOME CLASS¹ | |||||||||||||||||||||||||||
A | 5% | 9% | 15% | ||||||||||||||||||||||||
B1 | 18% | ||||||||||||||||||||||||||
34% | |||||||||||||||||||||||||||
B2 | 28% | 45 | 38 | ||||||||||||||||||||||||
1,654 | 31% | ||||||||||||||||||||||||||
C/D | 60% | 24% | |||||||||||||||||||||||||
44% | |||||||||||||||||||||||||||
33% |
¹ Predominant social class in the vicinity of each store (isochronous for 5 minutes travelling by car). Segmentation follows the IBGE criteria.
04
EARNINGS RELEASE 1Q24
OPERATIONAL DATA
SALES PERFORMANCE
We observed an acceleration in sales growth in 1Q24, with a good mix between brands and store age profiles. Total growth reached 10.0% in the period, comprised of 8.3p.p. growth in mature stores and contributions of 1.2 p.p. of maturing stores, 1.5 p.p. in new stores and a negative effect of 1.0 p.p. caused by closed stores.
Consolidated same-store growth was 9.6% in the quarter, 8.5% in the Pague Menos store portfolio, and a significant 15.1% in Extrafarma. The good Pague Menos performance reflects the positive maturation of stores opened in 2021 and 2022, in addition to a favorable market environment marked by the reacceleration of growth, after a weaker fourth quarter. In Extrafarma, the strong growth level, substantially above the market average, reflects the operational improvement obtained over the last year, a weak basis for comparison (harmed by the more acute period of logistics and technological integrations in 1Q23), as well as brand conversions carried out in 2023.
The results obtained through brand conversions continue exceeding expectations, with a fast ramp-up in sales. In 1Q24, converted stores recorded growth of 32.1% compared to the same period of the previous year, while the remaining Extrafarma stores grew 12.5%. This performance highlights the strength of Pague Menos' brand in our core regions, thus supporting the strategy of continuing conversion projects in the coming quarters, which will contribute to maximizing the capture of synergies.
It is important highlighting that Extrafarma stores converted to the Pague Menos brand continue to be considered part of the Extrafarma portfolio, both for management (calculation of KPIs) and accounting (individual financial statements) purposes, as the stores retain their original EIN (CNPJ).
TOTAL GROWTH² | SAME STORES | MATURE STORES | ||||||
(change %) | (change %) | (change %) | ||||||
9.3 | 10.0 | 9.6 | 8.3 | |||||
9.0 | ||||||||
8.0 | 7.7 | |||||||
5.6 | 5.9 | 5.6 | 5.0 | 5.1 | 4.6 | |||
4.4 | 3.8 |
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 |
We estimate a neutral calendar effect on sales performance for the quarter. Despite the leap year contributing to one more day of sales than the previous year, the holiday calendar and greater number of weekends fully offset this effect. On the other hand, we estimate a positive calendar effect for the second quarter of the year.
The Center-West region continues standing out in the regional analysis, with same-store growth (SSS) of 15.5% in the quarter, well above the North and Northeast (SSS of 9.5%) and South and Southeast (SSS of 8.2%) regions. Considering also the new stores, the region recorded growth of 18.3% in the quarter, well above the market average.
² Pro forma growth data, considering Extrafarma's historical base and disregarding the wholesale operation, discontinued in October 2022.
05
EARNINGS RELEASE 1Q24
OPERATIONAL DATA
Average monthly sales per store reached R$ 628 thousand (R$ 657 thousand in the Pague Menos portfolio and R$ 522 thousand in Extrafarma). In a short time, the integration plan quickly resulted in strong operational convergence, with metrics such as stockouts, assortment and share of digital channels across both brands. The effect of this operational convergence on sales is gradual and has been reflected in a progressive decrease in the sales gap between the two operations, which dropped from 30% before the acquisition to 20% in 1Q24.
AVERAGE SALE/STORE/MONTH
(R$'000)
+10.3%
570 607 622 622 628
1Q23 2Q23 3Q23 4Q23 1Q24
The consolidated growth for the quarter can be broken down into a growth of 3.3% in the volume of services and 6.5% in the average ticket.
Volume growth was similar in both brands, although presenting a different behavior in the evolution of the store base in the last 12 months (net growth of 33 stores in Pague Menos and reduction of 26 stores in Extrafarma). In the same store concept, which excludes the effect of openings and closings, volume growth was 2.8%, with 1.9% in Pague Menos and a significant 7.0% in Extrafarma.
The 6.5% growth in the average ticket recorded in the quarter mainly reflects the inflation accumulated in the period. It is worth highlighting that the average ticket gap between the brands continues to reduce, reflecting the equalization of the commercial strategy and product assortment, thus contributing to the reduction in the average sales gap per store. The average ticket gap between brands is currently 10.9%, vs. 12.5% recorded before the integration started.
SERVICES | AVERAGE TICKET | ||||||||||
(in millions) | (in reais) | ||||||||||
38.3 | +3.3% | +6.5% | 81.67 | ||||||||
38.0 | 38.0 | 37.9 | 78.37 | 81.07 | 80.46 | ||||||
36.7 | 76.65 |
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 |
Our active customer base totaled 20.9 million customers, accounting for a 4.9% growth compared to the same period of the previous year, even with a reduction in the volume of marketing investments for the quarter. Our CRM strategy continues to be increasingly focused on improving loyalty and average spending among the customer base through actions to customize the purchasing journey, improvements in the customer experience and prioritization of the Cliente Ouro (our top loyalty program tier).
06
EARNINGS RELEASE 1Q24
OPERATIONAL DATA
CATEGORY AND SUPPLY MANAGEMENT
With a well-balanced growth in the main categories, the sales mix remained relatively stable in 1Q24 when compared to the same period of the previous year. The major highlight continues to be generic drugs, reaching 11.5% of sales in the quarter. We continue observing a great growth potential in this category, which should contribute to structural margin gains in our business.
Among the levers for increasing sales in the Extrafarma brand, we continue to see a great opportunity in the sales mix convergence. Despite the efforts to expand the assortment, reduce stock out rates and reposition prices, the share of prescription medicines is significantly lower under this brand, which contributes negatively to the average ticket and customer loyalty. In this context, it is important to observe the effectiveness of brand conversions, which have already boosted this category of medicines in a short time.
SALES MIX
(% of gross revenue)
0.3% 0.4%
11.3% 11.7%
27.1% | 25.9% |
22.0% | 22.8% |
11.7%0.2%
26.7%
21.9%
11.4%0.3%
27.6%
21.6%
11.5%0.3%
27.0%
21.9%
Branded
OTC
Health & Beauty
Generics
Services
39.3%
39.2%
39.4%
39.1%
39.3%
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 |
Our private labels totaled R$ 208.8 million in 1Q24, accounting for a growth of 18.1% compared to the same period of the previous year. The sales share jumped from 6.3% to 6.7% when considering total sales, and from 12.8% to 13.8% when considering only self-service sales. The good performance is driven by the progressive increase in the category's share at Extrafarma, which already operates at a higher level than Pague Menos.
Our supply chain continues operating efficiently, with a stable stock out rate compared to previous quarters. Compared to 1Q23, when the logistics integration with Extrafarma was not fully completed, this KPI recorded a significant reduction of 44%.
PRIVATE LABELS | STOCK OUT | ||||
(in R$ million and % of total sale) | (1Q23 = base 100) | ||||
7.0% | 6.9% | 6.7% | -44% | ||
6.3% | 6.6% | ||||
100
82
54 54 56
176.8 197.1 215.4 210.6 208.8
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 |
07
EARNINGS RELEASE 1Q24
OPERATIONAL DATA
MARKET SHARE
We observed stable market share dynamics in 1Q23, with share gains in the North and Center-West regions and stability in the remaining regions. Domestically, we recorded a slight decline of 0.03 p.p. in our market share, due to the growth breakdown between regions.
It is worth highlighting that traditionally the market share data calculated by IQVIA suffers distortion in the first quarter of the year due to its methodology. While the share of chains is calculated by sell-out, that is, sales made to the end consumer, the share of independent participants and associations is calculated by sell-in, informed by distributors. In the months before the annual readjustment of medicine prices, when there is a reinforcement of retail stocks, the sell-in volume tends to grow more than the sell-out, thus overestimating the market share of independent participants and associations.
MARKET SHARE BY REGION (%)
1Q23 1Q24
19.94 19.85
6.06 6.03
15.15 15.48
4.22 | 4.56 | |||||||
1.74 | 1.67 | 0.93 | 0.93 | |||||
BR | NE | N | CO | SE | S |
The good market share performance occurs despite the slowdown in our organic expansion. While our store base increased only 0.4% in the last 12 months, the market recorded growth of 1.6%, driven by a growth of approximately 5% in chain stores. Even with this mismatch, we managed to consistently record growth in line with the market over the last few quarters.
OMNICHANNEL PLATFORM
We continue to consistently advance in our omnichannel strategy. Our multiple digital channels totaled R$ 416 million in sales in 1Q24, accounting for a growth of 32.3% compared to the same period of the previous year. The total sales share reached 13.4%, representing a 2.2 p.p. increase over 1Q23, progressively closing the gap between brands.
OMNICHANNEL SALES
(R$ million and % of total sales)
13.4%
12.1% 12.5%
11.2% 11.4%
314.4 342.8 373.6 382.1 415.9
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 |
OMNICHANNEL SALES
(% of total sales)
Pague Menos | Extrafarma | ||||
12.8% | 13.1% | 13.9% | |||
14% | 12.5% | 12.2% | |||
12% | |||||
10% | 11.1% | ||||
9.9% | |||||
8% | 9.1% | ||||
7.9% | |||||
6% | |||||
4% | 5.0% | ||||
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 |
8
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Empreendimentos Pague Menos SA published this content on 15 July 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 July 2024 21:45:01 UTC.