Companhia Brasileira de Distribuicao SA (CBD) 2022 Q3 法說會逐字稿

[Interpreted]

(technical difficulty) (Operator Instructions) We inform you that this video conference is being recorded, and it will be made available on the company's IR website, where the complete material for the earnings release is available. You can also download the presentation from the chat icon. (Operator Instructions)

We emphasize that the information contained in this presentation and any possible statements that may be made during the conference regarding the business prospects, projections and operating and financial goals of GPA are beliefs and assumptions of the company's management as well as information currently available. Forward-looking considerations are not performance guarantees. They involve risks, uncertainties and assumptions because they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions and other operating factors may affect the future performance of GPA and lead to results that differ materially from those expressed in such forward-looking statements.

With us, we have GPA, CEO; Marcelo Pimentel, the CFO and Investor Relations Officer, Guillaume Gras; Exito Group CEO, Carlos Mario Giraldo; and Exito Group CFO, Ruy Souza. I will give the floor to Marcelo Pimentel to start the presentation. Please, Marcelo.

[Interpreted]

Thank you. Good morning, everyone. Thank you for attending our Q3 earnings call. I'd like to start by making a couple of comments about what we've done so far based on strategic pillars and the projects we have been working on in the new GPA Brazil. You can follow along on your screen. As far as top line is concerned, I'd like to highlight our growth sales in our expansion from an important structuring activities for our sustainable growth. Our gross revenue was up by 14.2%, 6.6% in the same store perimeter when compared to Q3 of '21. We have concluded the work on ideal assortment, including the best categories, especially for the Pão de Açúcar brand. We have started our rollout for the other stores that will provide a better purchase experience for our customers. We've been working on reviewing our supply chain and our inventory management to improve the availability ratio. This index has been improving 20% in the quarter when compared to Q3 of last year.

I would like to highlight our perishables initiatives, which is a strength of our group. In Q3, it was up 1.6 percentage points and the penetration of perishables in the total sales, a major improvement in this category that is so important for recurrence margins and loyalty. Since July, we have been implementing a specific project called Refresh. The project aims at improving the value proposition of the category, looking at the entire chain to provide more quality, freshness, variety on a consistent basis. As a consequence, we have a boost in sales, less breakage and more profitability in the category.

On to the second pillar, customer experience. I'm very pleased to announce that we've had a 35% improvement in our NPS when compared to Q3 of 2021. We're now identifying the detractors of that service level to develop a complete action plan that includes reducing breakage, training employees and implementing self-checkout. At the end of Q3, we have more than 80% of our stores with self-checkout, and we're now implementing that in proximity stores. The new Pão de Açúcar Paulista Avenue, which was our first 100% self-service store. On the digital pillar, we have been moving along to strengthen our multichannel view and our leadership position in retail in Brazil. We have increased GMV by 8% in the quarter. And to support that evolution, we have increased our assortment, especially in perishables.

We have more availability for delivery, same-day delivery and ultra-convenience store, accounting for 65% of digital sales. This is made possible by the introduction of the James logistics in the GPA’s channels and expanding the partnership with iFood and Express sales. We have expanded our operations with a new strategic partnership for retail. (inaudible) this time, it is with Magalu. Early numbers show a huge potential for that partnership. We're now rolling out a new cash and collect improving customer experience, reducing friction, removing barriers and providing more fluidity in the physical stores.

In October, we started testing the Bs platform, and that is B2B platform. GPA is the only retail partner. Our fourth pillar is that of expansion. You've heard me saying that I'm very pleased to work for a company that investing in a daring organic expansion plan. In Q3, we have restated our commitment to that agenda, expanding the number of stores we'll be opening by 2024 to 300 stores, focusing on the proximity model because there's better return on investment using the existing logistic grid and meeting the demand of our customers.

In Q3, we have opened seven new stores. Six minute stores and one Pão de Açúcar in Ribeirao Preto. We've had 14 conversions concluding our conversion plans. Two, symbol stores, Pão de Açúcar on Brigadeiro Luis Antonio Avenue and the extra hypermarket at Ricardo Jafet Avenue, both here in Sao Paulo. We have reclaimed other 24 to G7 model. They've been improving at every aspect. We have now over 50% in the G7 model. That number will go over will exceed 55% by year's end. That project will be concluded in 2023. For Q4, we have another 40 stores in the minute format and Pão de Açúcar stores.

As far as profitability goes, I would like to point out the SG&A drop of 0.7 percentage points. That's the result of breakage reduction, logistics optimization and restructuring that is now appropriate to the size of GPA. I would like to conclude with the ESG and culture pillar. Greenhouse gases reduction, we have reached a 40% reduction in the quarter when compared to the same period of last year. The team has been consistently working to expand the female leadership in the company. We are at 37.1% of women in leadership positions we've announced, and we're very pleased to announce it, the introduction of yet another social project, that's the Qualita biscuit, 100% of its profit is converted to the education program, generating Falcons, a partnership that makes us very proud. I would like to conclude now and turn over to Guillaume Gras for the financial results.

[Interpreted]

Thank you, Marcelo. Good morning, everyone, and I thank you for participating in the GPA Group results call. I'm going to continue on Slide 7, presenting the figures for the consolidated performance, which considers all the GPA Brazil operations and the results of the Grupo -- Exito Group. The group's consolidated sales totaled 10.5 billion in Q3, growing 8.9% compared to last year, a result of the growth of Brazil and the strong performance of Colombia, which represented 42.5% of sales in the period. Year-to-date, net revenue grew 6.8% vis-a-vis the same period of the previous year, reaching 30.6 billion.

Moving on to Slide 8. We present the evolution of the consolidated adjusted EBITDA margin, which reached 6.3% in the quarter, 0.8% points smaller than last year, movements that I will explain further on. Year-to-date, EBITDA totaled BRL 2.2 billion with adjusted EBITDA margin of 6.6%. On Slide 9, we see that the company continues with a solid cash position of BRL 3.9 billion, 1.7x the short-term debt and with a low leverage level that represents 1.7x our EBITDA. According to Bridge, in the past 12 months, the group generated an operating cash flow of BRL 1.3 billion in the level of continued activities financing our investment plan. In the discontinued sphere, our hypermarket transaction generated a positive impact of 2.4 billion, mainly due to the 1.7 billion of early payment of the installments of 2022-2024, which was partially absorbed by the increase in interest rates.

On Slide 10, we present a total revenue of Nova (inaudible) Brazil, which reached 4.6 billion in Q3 and excluding gas stations, was 4.3 billion, resulting in a growth of 14.2%, driven by the converted stores, hypermarkets and the same store spheres, which grew 6.6% vis-a-vis previous year. A highlight for the proximity format with double-digit growth of 21.7%, explained by the increase in sales in the beverages, bakery and roasteries sector in addition to the continuous increase in the flow of transit stores and greater number of stores serving partners of last miles and the Pão de Açúcar, our same-store sales reached 5.5%. And the mainstream Mercado Extra, and Compre Bem banners, the same-store sales grew by 2%, impacted by a one-off effect from the incorporation of Compre Bem which brought logistical and systems challenges. Finally, in e-commerce, our GMV was 409 million in Q3, up 8% vis-a-vis last year, excluding sales from hypermarkets in Q3 last year and reaching an online penetration of 11.1% of our sales.

On Slide 11, we present the evolution of the adjusted EBITDA margin of the new GPA Brazil in the pro forma view, which considers the prorated division of certain expenses that cannot be reclassified to the net income from discontinued operations in the book as they are only partially related to discontinued operations. Therefore, adjusted EBITDA totaled 257 million in Q3 and adjusted EBITDA margin reached 6% with an impact of 1.1% on gross margin, explained mainly by, first, the increase in inflation resulting from the need to increase promo share and continuous increase in the cost of in-store goods transformers, packaging and logistics; two, the fee from last mile partners who share our sales had a new negative impact in the fee, but was offset by the positive impact on the dilution of expenses. SG&A expenses had an increase by 6.4% in value compared to last year, below inflation in period, which resulted in a dilution of 0.7% point, reaching 18.5% of net revenue. This reduction concentrated in the line of general and administrative expenses with the restructuring carried out at the headquarters after the hypermarkets transaction. With this, we reduced the percentage of general and administrative expenses on revenue from 3.7% in Q3 last year to 3% in Q3 this year, and we continue with a focus on further reducing this share. Year-to-date, adjusted EBITDA totaled BRL 903 million with a margin of 7.3%.

We now move on to Slide 12 with total revenue from Grupo Exito, which presented a solid sales performance in Q3, reaching the fifth consecutive quarter with double-digit growth in same-store sales at constant exchange rates. Gross revenue totaled 6.9 billion in the quarter, with same-store growth of 20.3% vis-a-vis last year and due to the appreciation vis-a-vis Colombian peso Total store growth was 8.8%. For the year, the Group Exito has a growth revenue of 20.5 billion and e-commerce GMV 636 million in Q3, growing 9.8% and online penetration of 9.6%. This grows the Exito Group was driven by growth in three countries in it operates. In Colombia, the same-store sales growth was 14.8% due to solid cash and carry performance in the quarter. In Uruguay, the significant growth of fresh market stores with high share of sales of 51.5% reached same-store sales of 11.1% in the quarter. And finally, in Argentina, growth above inflation was a reflection of the good performance of the commercial calories and the consolidation of the real estate business in the country, resulting in a same-store sales of 126.8%.

On Slide 13, -- we present the evolution of Grupo Exito's adjusted EBITDA margin, which was 7.6% in Q3 with an adjusted EBITDA of 464 million, a decrease of 6.2% vis-a-vis last year, especially impacted by the inflation rate in the three countries where we have these operations in the year-to-date EBITDA reached 1.4 billion with an adjusted EBITDA margin of 7.5%.

Moving on to Slide 14. I would like to remind you of the timetable for the separation or spin-off process of the Exito Group. In September, we announced the preliminary analysis of the transaction by the Board of Directors. We are currently in the transaction preparation phase with the approval request from the banks submitted and the work of all the necessary documentation for the listing of ADR BDRs to obtain approvals, which we hope to complete by December this year. During the first quarter of 2023, we will go through the approval period by the governance bodies and regulators. And then we expect to complete the transaction over the Q2 2023.

Moving on to Slide 16. I move on to our sustainability agenda. In this chart, we described some of our initiatives and highlights in Q3 in Brazil and Exito. And fighting climate change, we continue to evolve in our practices and processes to reduce our greenhouse gas emissions, scope one and two, in line with our commitment to reducing 38% by 2030 base year of 2015. We ended Q3 with an accumulated reduction of 40% compared to the same period in 2021. And at Exito, we highlight the volume of 672 tons of both consumer recycled waste. Onto Q3 2022, 27% more than the same period in 2021. Those results in addition to being recycled, they are a source of funds for the projects of the Exito Foundation. On the promotion of the diversity front, I highlight the three-point increase compared to 2021 in the percentage of black men and women in our general staff reaching 55% we declare themselves to be black and brown. And in leadership positions, management and above, we've reached 40.4%, which is the result of the development program for black men and women with a participation of 130 employees and the beginning of a new exclusive training program for black women, which counts on 70 employees.

At the Exito Group, we highlight the sustainable commerce, which we reached 90.7% of suppliers, fruits and vegetables from local production in line with our target of 91% by the end of 2022. In textiles, 90% of clothing are produced in Colombia with 80% of national fabric, generating more than 9,000 jobs, of which 70% are occupied by women. And finally, on social impact, we ended Q3 with more than 3.2 million meals implemented by donating to food banks and partnering social organizations which fruits and vegetables from our stores that are not in conditions of sales, representing an increase of 5.5% compared to the same period in 2021. Through the Exito Foundation, we benefited more over 45,000 children until September 22 in the program to fight chronic child on nutrition of children up to five years of age. The number of beneficiaries increased by 27% compared to Q2 2022, and it is in line with these years ago of reaching 60,000 children by the end of 2022. Here, I end our presentation of financial results, and I propose to open to our question-and-answer session. Thank you.

[Interpreted]

We will now start our Q&A session. (Operator Instructions) We're starting with Marcella Recchia sell-side from Credit Suisse asks the first question. (Operator Instructions)

[Interpreted]

Marcelo, Guillaume. What is the #1 challenge in the multi-retail model dealing with inflation and impact on gross margins, especially when you compare it to the cash and carry channel. That's my first question. Question number two is the following. Why is it that we see losses going up in discontinued operation almost 3x as big as Q2.

[Interpreted]

Thank you, Marcella. I'll be answering the first question as to inflation and impacts the margin. As part of the first pillar we are addressing, there are four elements: ideal assortment, clusterization of stores and price positioning. What we have seen so far is that we managed to transfer their price in some stores. Other stores, however, due to the geographic location and stronger competition, that is more difficult to do. In that context of our value proposition, of course, we have been investing to bring those customers back, especially in hygiene and cleaning products. Meat products, we have moved along quite successfully there and investing the quality of perishables, mainly for fresh fruits and vegetables.

That initial impact was not enough to transfer inflation prices. This is going to be gradual. We have to consolidate that value proposition first. And then customers will realize that Pão de Açúcar can become a place where you can purchase everything you need, not only for premium products, and we have to better position ourselves as to direct competitors. Hypermarkets, cash and carry, especially for basic food products, hygiene, cleaning products. So, these are the challenges we are faced with at this point in time. We are aware, however, that this is the right strategy to resume the relevance of the complete package -- the complete basket of products to our customers. And then we'll be able to adjust our pricing strategy once we have higher volumes, especially when we negotiate with our suppliers.

As to the results of the activities results are driven by provision of labor cases we've had. We had higher volumes than expected in the quarter. Over 50% of employees that were fired to the company, and we have provisioned that, we had acknowledging that cost at the start of those cases. And in order to mitigate the costs we have implemented a policy in an attempt to reduce that cost.

[Interpreted]

Let me just follow up on your answer, Marcelo. You've said that in areas in which there is more competition, it's more difficult to transfer inflation increases to the price. What are those regions? Would you be able to tell us that?

[Interpreted]

These are more on the periphery. These are areas in the outskirt of towns, especially the extra brand. I'm talking about the outstarts Sao Paulo and Rio more specifically. And as far as Pão de Açúcar goes, as G7 stores are renovated, and we are going to continuing on that program, we have been able to increase sales and margins at the same time. That's why it's a gradual process. For the Extra brand, our expectation is that the price perception will be more competitive. And for the Pão de Açúcar brand, it's more connected to the experience per se. In the G7 stores, Pão de Açúcar, we have more sales, about 5% above the average of those that haven't been renovated and 1% above those that have been renovated earlier for 2023, as we roll out G7 stores and by adjusting positioning for the Extra brand, we expect to recover those margins.

[Interpreted]

Tiago, sell-side Analyst from XP. Unmute your mic and ask your question, please. Thiago.

[Interpreted]

Can you hear me?

[Interpreted]

Yes, we can loud and clear.

[Interpreted]

Marcelo, Guillaume and the entire team, we have basically two questions I'd like to ask. Thinking about profitability now looking about SG&A. You've mentioned that you've been focusing on continue to dilute the importance of SG&A. I'd rather -- I'd like to know whether you are at the level you're expecting or is there any room for more improvement in that direction? Ever since you've restructured the headquarters. I would like to better understand whether that comes from operational leverage of reduction of expenses. So that's my first question. And I would like to understand how it relates to the higher EBITDA margins for Brazil. These are the two questions I'd like to ask. Thank you.

[Interpreted]

Thank you, Thiago. So, these are great questions. And I would like to once again point out our strategy as to the fifth pillar, which is profitability. Part of what's going on, and that's why it's a gradual recovery. We are actually focusing on three points on the short term. And at the same time, our sales teams are renegotiating with suppliers. The #1 thing, which is more evident, which is the restructuring of the headquarters, that will be concluded by December and these are very substantial gains. As we have seen in Q3, and you see that even more evident in Q4. Let me just point out that we have been very careful, and we are respecting the team. We did not want to implement cuts left and right at random. And we wanted to increase synergy productivity, improving the decision-making process amongst the leaders here at headquarters. And we've seen benefits after that.

Number two, we've been trying to optimize logistics. When we take away hypermarkets, we've been working with the supply team, the commercial team, the logistics team, all suppliers, and there's still room to improve those numbers in the next quarters by optimizing logistics costs and finally, improving loss or losses management. By changing the hypermarket format, we've had problems in the first two quarters, managing inventory from hypermarkets to supermarkets, those were challenges in shrinkage numbers. That's why we had an overall impact in that number. That number is already better in Q3 and it keeps on improving in Q4. When we look three years down the road, we believe that those numbers can be improved even further that will contribute to the EBITDA margin of the business.

Addressing your last question about EBITDA. We do believe that Pão de Açúcar’s EBITDA will improve and it must improve, and we're focusing even harder to reach the high singles, even reaching double-digit numbers. We believe that will happen gradually so that it is sustainable. In our three-year program, we've seen -- or we believe that this change will happen ‘24, ’25, that's when we'll reach ideal EBITDA levels, especially when compared to where we stand today.

[Interpreted]

The next question is from Joseph Giordano, sell-side analyst from JPMorgan. Joseph, we're going to enable your microphone so that you can ask your question. You may proceed.

[Interpreted]

Marcelo, Guillaume, I'm going to straight to my question. I have two questions. The first one is on the growth side. We have an expansion plan. Do you have any updates regarding prospecting -- but if you have any construction work underway and in what regions for the opening? This is my first question. And the second one is about margin. We see gross margin. You've mentioned that is well positioned. I'd like to understand with you if the historical levels of gross margin may resume to the segment or if we could think that structurally, we have a margin level -- gross margin level that is lower considering the repositioning of the formats. And lastly, within strategy of differentiation to date, what have you been doing differently within the extra market to differentiate from the most regional competitor in neighborhoods? So, I understand this is a more difficult market and I'd like to know whether it makes sense to change the banner and use this as a sort of umbrella opportunity for the Pão de Açúcar umbrella considering contextualization of stores.

[Interpreted]

Thank you. Regarding expansion. Well, as to expansion, we continue with a lot on our pipeline. Today, we have various stores under construction still to be opened this year, most of them Minuto and we also have five Pão de Açúcar stores under the construction here, Joseph, compared to what we have as an expectation for opening. In Q4, we have two Pão de Açúcar stores that overflow to the Q1 2023 due to some construction work delay of our suppliers. And regarding our goals and certainly, regarding our grade of 300 stores, we're still firm on it. Another different point or important points different from what happened previously. Is that were close to 40% of the spot approved for 2023 in the pipeline. So, we start the year with a portfolio of spots that have been approved, I mean, signed contracts with the tenants already prepared. And with a strong demand of developers so that we have earlier openings, not allowing greater focus in the last quarter, which is always the greatest challenge.

Obviously, regarding location, as I've been mentioning, focus for Minuto Pão de Açúcar total focus for Sao Paulo City. These spots being very successful to us. We see a maturing of the stores that is faster than what having planned. We have been able to reach this model of EBITDA margin on those stores, very close to the Pão de Açúcar model, which is helping us to speed up this model. We do not want now to move into new cities we want to benefit or tap into the strength of the brand and the network of stores that we have and use those stores as ship from spots to the dot-com model.

Here, we are very sound with our expansion plan. With regards to gross margin, I believe that we have a major recovery avenue of gross margin, considering what I've mentioned previously, starting with reduction of breakage, which still have high numbers compared to the market. I believe that we have in the next two years, at least one point of margin with the reduction of breakage. We also have adjustments that are being performed regarding optimizing productivity both in the store model and in the production of products and negotiation with suppliers, especially in categories that we had left somewhat weakened.

And here, I believe that when we look at future projections, the margins that we see now are certainly not the margins that we have the potential to deliver in the future. And Marcelo, we have on gross margin point to be captured in logistics, reminding everyone that today vendors, yes, they have to deliver from distribution centers to the stores. This is a point that we are actually aiming at negotiating with them.

And lastly, regarding extra market, I think it's been a positive surprise to us from this work that (inaudible) Montero who's arrived along with trucking in the commercial department, they have been very competent in their work in resuming the relevance of the value proposal of the extra market. And this has actually been a banner that we see recovering faster here. Unlike Pão de Açúcar, it is a very -- a proposal that is very focused on groceries and perishables market, more geared to this audience that is much more driven by price. And as we are adjusting the models of volume purchase to this banner model and also adjusting.

We've also adjusted the marketing models with the path that we were preparing for this model. We've unified the banner Compre Bem with the extra market in the marketplaces where we have the same regional ads in TV, and we see a recovery that is faster of this banner. So, for our business model, we believe that it does have its own place and it wouldn't be necessary to change the value proposal for the extra markets.

[Interpreted]

Our next question is from Ricardo Fratini, sell-side analyst from Goldman Sachs. Gustavo we're going to open your audio so that you can ask your question. You may proceed, Gustavo.

[Interpreted]

Marcelo, Guillaume, I have two questions related to GPA Brazil. The first one is on the relative performance of the old hypermarket stores that have been converted. If we compare them to an average store, the G7 format, is there any significant difference in terms of sales, product assortment and profitability customer profile that go to these stores? And the second question, you mentioned the impact of incorporating Compre Bem. The last question, you talked a bit about unifying the banner with the extra market. Will this be a brand that will no longer exist. Can you give us some more taste on this future prospect if this will have any impact on next quarter?

[Interpreted]

Let me start by the last question, no. No, nothing will be changed. What we are doing is stepping into the synergies between the two banners since the value proposal is the same. This is precisely what we had planned. As we unify and incorporate Corporate Bank, it would be benefiting from the purchasing model from groceries and perishables, and the banner remains. What I could say is that I do not see today need to expand it. When we talk about expansion, it makes much more sense for us to keep on expanding the banner of extra market than the Compre Bem. And we have it here, and we're going to keep it. As to the converted store performance, it is a gradual process. What do we see here? When you migrate the stores that have migrated from extra hypermarkets to extra markets, those that have faster adherence and greater one because the value proposal in the food products is quite similar.

So, we see here recovery to planned levels that is faster. When you have a change of extra hypermarkets to Pão de Açúcar, we still have a level of performance that is not leveled off. The majority of banners are at 90% of the stores actually are 90% at the index where we would like to see them. So, we see this gradual recovery. And we still have one or two stores specifically, I would say, that are not at the levels that we would like them to be. And here, we have a task force working specifically on those two stores as to profitability. And adherence, we are very confident and happy with the results.

The stores have a much better NPS than they used to have when they were hypermarkets, the share of perishables in those stores is above 50%, which is precisely what we wanted, especially in the Pão de Açúcar banner. And now it's a matter of making the transition because there is actually a transition that is a gradual one of customers. We had customers much more focused on high low and price. And in the transitions to the Pão de Açúcar banner, we are able to gradually bring the other customer that is not going to price, but also due to assortment, freshness, quality experience, and we see that gradually, the new client is going to our stores and being more frequent. But of what we observe as well is the increase -- consistent increase of our premium customers, customers that are obviously a much greater percentage of sales and profitability. With CRM and marketing, we are working specifically to capturing these customers to the new stores.

[Interpreted]

Our next question is from Vinicius sell-side analyst from Bank of America. We're going to open your microphone so that you can ask your question. Please, Vinicius you may proceed.

[Interpreted]

Marcelo, Guillaume. We'd like to explore a bit more the in-store operational improvement initiative that may improve your operating margins. What have you been able to identify with greater opportunities in this front? What has been implemented? And if you've identified any opportunity in terms of optimization and inventory reduction.

[Interpreted]

Thank you Vinicius. Yes, within the work that we've conducted of optimizing the headquarters, we've also been doing this work regarding the stores. There are some pathways in which we are investing regarding improving store productivity. First one of them is expanding the self-checkout that we have in the stores. This has been quite important to us, not only due to the optimization and productivity, but also considering customer experience. We have better NPS in the self-checkout compared to those that don't have a self-checkout, second point in the checkout experience, which was one of the pinpoint for customer experience was the work that we've done 100% completed of multitasking all store staff are trying to operate checkout, so they act faster, reducing cues. And this also has been bringing an adjustment so that we can adapt the multitasking within the stores. This helped the scale management and consequently, the number of operators or staff.

The third point is in the area of perishables. Important work has been worked on with the team regarding partnerships that we have with some suppliers regarding Sushi area, all the deli area and restaurants. We have five pilot stores to see what is worthwhile having in-house production vis-a-vis outsourcing. So, this is something that we should start seeing some benefits in Q1 in this front. Regarding productivity, however, I would like to reinstate this with you that we are unlike the headquarters where we have been quite aggressive. There are some stores, especially Pão de Açúcar stores, we will be much more careful because much of what we want to do is to recover the banner regarding the purchase experience and consolidating it with a premium banner of food retail.

What we have been doing are many tests to ensure what is investment bringing return and customer loyalty, what are expenses. Not necessarily everything will be seen under the same viewpoints. We have advanced depth of distribution centers so that we can reduce costs, food production store to store doing that from production centers, everything very careful because of the value of our Pão de Açúcar banner. Our priority is resuming the relevance of the mineral premium customers in the cities where we have our operations.

There was a question on Exito. Basically, or actually inventory. We have inventory with a turnover of 50 days, we have a potential gain that we want to capture of about two days, especially in categories in which we see excess inventory that are beverages, liquor and wine and then grocers and also CFTs and hygiene products or this is all related to redefining the assortment that is being carried out by the commercial department, we want to capture those two days along next year when we'll have the implementation of these new assortment.

[Interpreted]

The Q&A session is closed. And now I would like to turn over to Marcelo Pimentel for his final remarks.

[Interpreted]

Once again, I'd like to thank you for your presence to the call. I'd like to say that we continue firm and convinced in the recovery project of GPA to the value for both of our business. This is a mid-long-term project. It's not just a turnover that will happen overnight that needs to be done with great objectivity. We have been working a lot focused and without distraction to have pragmatic execution that brings us consistent and long-lasting results. I take this opportunity to thank all the 37,000 employees who have worked relentlessly on this project. I am confident that we will start 2023, much better positioned with a strengthened operation to reap the benefits of the work we have been carrying out. Thank you all, and have a great day.

[Interpreted]

We declare that the video conference is closed. The Investor Relations department is available to answer any other questions you may have. Thank you very much to participants.