Earnings call transcript: Sendas Distribuidora Q2 2025 beats EPS forecast, stock dips

Sendas Distribuidora SA (ASAI3), a prominent player in the Consumer Staples Distribution & Retail industry, reported its second-quarter earnings for 2025, surpassing analyst expectations for earnings per share (EPS) but missing revenue forecasts. The company posted an EPS of $0.1625, significantly higher than the anticipated $0.0894, marking an 81.77% surprise. Despite this earnings beat, revenue fell short of expectations, coming in at $19 billion compared to the forecasted $19.53 billion. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations. The market reacted with a 2.96% decline in the stock price during after-hours trading, closing at $9.85 from a previous $10.15.

Key Takeaways

• EPS exceeded expectations by 81.77%, but revenue fell short by 2.71%.
• Stock price declined by 2.96% in after-hours trading.
• Continued expansion into new product categories and private label products.
• Strong free cash flow and reduced net debt position.
• Persistent market challenges include consumer purchasing power pressure and food inflation.

Company Performance

Sendas Distribuidora demonstrated robust earnings growth, with a notable increase in EPS, reflecting effective cost management and operational efficiencies. However, revenue fell short of expectations, indicating potential challenges in sales growth or market conditions. The company continues to innovate with new product categories and private label expansions, particularly in Southeast Brazil, which may drive future growth.

Financial Highlights

• Revenue: 21 billion reais, with a year-over-year EBITDA margin increase to 5.7%.
• EPS: $0.1625, an 81.77% surprise over the forecast.
• Free cash flow before interest: 2.7 billion reais.
• Net debt reduced by 200 million reais, with a leverage ratio drop to 3.17.

Earnings vs. Forecast

Sendas Distribuidora’s EPS of $0.1625 significantly outperformed the forecast of $0.0894, marking an 81.77% surprise. This performance indicates strong operational efficiency. However, the revenue of $19 billion fell short of the expected $19.53 billion, a 2.71% miss, suggesting potential challenges in market conditions or sales execution.

Market Reaction

The market responded to the earnings report with a 2.96% decline in Sendas Distribuidora’s stock price during after-hours trading. This reaction reflects investor concerns over the revenue miss and broader market conditions, despite the strong EPS performance. Despite recent volatility, the stock has demonstrated remarkable momentum with a 53.31% return over the past six months and an impressive 84.64% year-to-date gain, according to InvestingPro data. The stock’s current price is $9.85, a decrease from the last close of $10.21, and remains within its 52-week range of $4.97 to $12.04.

Outlook & Guidance

Looking forward, Sendas Distribuidora aims to further reduce its net debt to EBITDA ratio to 2.6x by year-end, indicating a focus on financial stability. The company plans to expand its product offerings and explore financial services, which could enhance revenue streams. Same-store sales recovery is expected, despite current market challenges. Analyst sentiment remains positive, with two analysts recently revising their earnings estimates upward for the upcoming period. For detailed analysis and comprehensive financial metrics, investors can access the full Pro Research Report available on InvestingPro.

Executive Commentary

CEO Belmiro Gomiz highlighted the company’s ongoing innovation and project initiatives, stating, "The company has not stopped. The company has a series of projects and innovations." He emphasized readiness for new initiatives and the potential for private label growth, noting, "Private label around the world is about 20% of the food sector. In Brazil, it’s 2-3%."

Risks and Challenges

• Consumer purchasing power remains pressured, affecting sales.
• Food inflation is between 7-7.5%, impacting cost structures.
• Trade-down movement persists, with consumers opting for lower-cost options.
• Potential impacts from economic factors such as sports betting.
• Limited price elasticity may constrain pricing strategies.

Q&A

During the earnings call, analysts inquired about the mix of B2B versus B2C sales, with executives indicating no significant changes. Questions also focused on the company’s cautious approach to pricing strategies amidst limited price elasticity and ongoing monitoring of deflation and trade-down trends.

Full transcript - Sendas Distribuidora SA (ASAI3) Q2 2025:

Gabrielle Lou, Investor Relations Director, Assai: To activate your mic will appear on the screen, then you must activate your mic to submit questions. We would also like to instruct you that all questions be submitted at once. We wanna highlight that information in this presentation and possible statements that could be made during the earnings call related to business perspectives, projections, and operational financial targets represent beliefs and assumptions of the company’s management as well as information that is currently available. So future statements are not a performance guarantee, and they depend on circumstances that could not occur. So investors must understand that market conditions and other operational factors could affect the future performance of SAE and lead to results that differ materially from those listed in future statements.

Now I would like to pass the floor on to Gabrielle Lou, the Investor Relations Director. Good morning, everyone, and thank you for participating in the earnings call. For the second quarter. We wanna present the executives present here, Bomitu Gomiz, our CEO, Aymar, our c our Timber c CFO. Vamid is our VP of commercial and logistics and Anderssonka Studio and operations.

Now I’ll pass the phone to Bill Meade so he can begin the presentation. Thank you, Gabi. Thank you, everyone, for participating. It’s a pleasure to be here, and thank you so much for this participation. I wanna start by thanking our team for the work done in this quarter, and I’m meant to also say that the numbers we’re gonna present today are also very important because we’re gonna provide also, of course, more context about the market opportunities and challenges we’ve seen now looking into 2025, especially in the second and third quarter.

We believe that the second quarter was very positive in our assessment when you look at the overall scenario in combination with the competitive environment and market environment, the purchase power of the consumer, and revenue reaches 21,000,000,000. So the sale same store sales is below the level of the food inflation, which has been internally around ’7 or seven and a half percent. Of course, the objective of the company is to search for same stores at the level of the inflation, but what we see is a persistence of the trade down movement of about three and a half to 4%. And this has a variation according to the social levels and regions in Brazil. This exchange and the swap for cheaper products or economic products, trade downs, and we’ve already talked about the causes of this, high interest rates, and the sports bets, etcetera, which has really made us keep up with the scenario where consumers are forced to buy cheaper products.

So this is a movement that not only affects Assai because when you look at the share, it was completely stable. But when you look at the progression of the volumes in the quarter, excluding part of this, where we’ve seen a strong trend of part of the market with a real high concession of timing and deadlines that impacts our reseller customers. And besides all that, we still have a stable volume. So within the scenario, the company has, as you’ve mentioned, working on store maturity, and I’m gonna talk about this a bit more, especially for the converted stores. And I think maybe mentioning an number that could surprise a lot of people about the results of this project, which is still not at its final phase, but the company has searched for balance.

And so having there’s an important balance that was made from a expense maintenance rate. And despite some expenses of projects that are really important considering the wave of innovation in the company. And so with this, we’ve been able to have a series of expansions and services and buttery sliced cold cuts, bread, etcetera, and bakeries, which could lead to some effects and and impacts on the expenses. But the inclusion of these downtown stores, etcetera, could maybe pressure the EBITDA, but this demonstrates this as the company is delivering an EBITDA margin pre IFRS of 5.7. This is an increase of 30 bps compared to the previous year, reflecting the store maturity and innovation that was made despite this combination, of course, of strict expense controls, which helped us increase our EBITDA margin by 30 bps.

Now when we look at the EBITDA pre IFRS, we see that it is important if it leads to actual cash. In the second quarter, when we look at the LTM, Assai has really been able to deliver a conversion rate of this EBITDA margin into free cash flow of about 90% of our EBITDA, which has been transformed into cash. So as the investment cycle is a lot lower than what we had in previous years, we present free cash flow before payment of interests of 2,700,000,000.0 reais, either in the evolution of the EBITDA and reduction of the investments, but also major discipline also in the working capital and the policy on receivables and granting of pain. Since we saw this relevant movement of increasing prices and the strategy of the company has proven to be quite assertive when we consider our leverage. The company is focused on deleveraging at this moment.

And this combination of this amount of half a billion plus a reduction of 200,000,000 in the net debt at this moment, we where we’re maybe at the peak when it comes to the SILIQ rate at 15 rate percent, of course. And so the fact is we have probably one of the highest actual interest rates in the world, which leads to financial results that are quite strong, especially when you consider the net sales. But when you pay, of course, paying off the investments the company made in the last few years, so with this leverage drops at about 50 points, closing at 3.17, dropping 0.48 in the ratio we’ve seen in the second quarter of last year. So the net income also had an important evolution. Of course, the interest rates and the debt carryover costs are pretty high at this moment, but there’s an important evolution in the net income even when just part of it is the recognition of some credit that was made.

You have all the information in the earnings release as well. We can advance to the next slide. And then as we were saying, we bring in this page here, which is the Campina store, very important store. And then you can see this vision of how things were doing. We all know that this was one of the most challenging projects in Brazilian food retail, but also from the perspective of shifting paradigms, which was the objective of the company, to really place stores in downtown regions so that we could expand the target audience we had.

Right? So, obviously, putting in stores in central regions, like the store in Amorera, if we consider Campinas, Abolissant, or Assai, these are stores that have a different rationale. So, of course, they also bring in a higher interest rate and an expense rate that’s higher, which is was also requiring this gross margin that was more healthy in these stores. So when you look at the EBITDA margin pre IFRS discounting the rent or the lease, there’s a leap of 4.1 to 5.5. And so that was delivered in the second quarter and an average sale per store that’s way above the average sale in the company of about 26,000,000 naira.

So they still don’t have the same level of productivity if you look at the sales per square meter of the organic store network, but the stores are still in this maturity period. And the first store opening just entered the third year. We still have stores with two years or one year of operation. And so, however, they do have a store maturity hired up ahead. But then we can, of course, advance to the next slide.

And we’re bringing this research that we’ve done with over 19,000 respondents that was conducted by a bedding company, and they’re helping us in important projects in the company. And after this conversion period, now Assai has stores that are a 400 square meters of sales area and 10,000 as well. So there’s stores that are located in the outskirts of the city, but there’s also stores that are in regions that are downtown regions or important cities in Brazil, especially the big capitals, such as Brasilia, Guerreana, Rio De Janeiro, Sao Paulo, and so on. So what was the result we’ve seen? Well, the strategic objective was to break down some stigmas there was with Cash and Carry because it used to be just limited to specific type of public.

Right? So meeting the public the B2B public is challenging. Right? But when we look at this research in the markets as I was president, It’s a penetration rate that’s really high for class a, b, c, and maybe actually, this research was done by electronic means, but that demonstrates how now the company is really within its portfolio of stores has, especially based on its customer portfolio, a penetration and potential. And so when we look at the the gen gender, which is 60% men, 61% women, when you look at age ranges, that’s another important metric for us since each age range has a different purchase power.

Right? But if you also see a lot of stability in this, especially from the customers that are 18 to 24, five to 29, and so with 61% penetration rate. So this is the split today of the more than half a billion people that go by our stores, the 500,000,000 customers today that SIE services, and that’s why the brand became the most valuable. And so this completeness also allows us to break down on some stigmas. And it’s not just about having this well, it’s really about what this is gonna provide for us up ahead.

Right? So in these last two years, the company’s really been focused on delivering the conversions, the level of productivity, and EBITDA margin that we had in the organic network, and implement new store services that which are also vital to this kind of model, but the company has not stopped here. So the fact that we have this penetration in social levels, gender, age ranges, etcetera, this really allows us to explore new product categories and in really search for an increase in share of wallet, important projects in the company start. And there’s a very important project also starting off now where Assai is gonna start taking its first steps, which is exploring its private labels, especially in the Southeast region of Brazil and especially in Sao Paulo where you have a logistical cost that’s lower, and that’s providing a course of broadness that’s gonna help us really improve the margins we have. So there is a movement towards either in and out projects or whoever has been watching us has seen our entrance into home appliances and electronics, which is, the air fryer, etcetera.

So there’s this movement, and that’s a very important process within the pharma channel. And that really has been evolving. We’ve been very vocal and participative. And I believe that the project in the way it was presented now allows for greater potential to explore another product category and other categories that are correlated just as the In N Out project that in our perspective should bring in relevant gains. And, also, financial services now with Asai’s credit card machine project, bringing in another opportunity for the b two b customers as well.

So I think we’ve already seen this on the release that the pre IFRS EBITDA goes from 965 to 1,000,000,079. And then after this, you have the cash for the company and the net income of 86,000,000 in tax credits. It goes from 6 a 165 to 164. And I think I might as well considering the impacts of some of our debt reprofiling work. There’s also an occasional impact in the second quarter with the prepayment costs.

Now I’ll move on. We can advance to the next slide. Aimar. So we’re gonna talk about Aimar and deleveraging this as well. Well, thanks, Belmiro.

Good morning, everyone. Thanks for being here in our call. I’m going to talk about how due to all of this operational context Belmiro mentioned, From a financial perspective, we ended up having as a main highlight in the quarter operational cash generation of 3,900,000,000.0 in the last twelve months. Right? So that demonstrates the capacity the company has to generate cash despite or even after paying the twelve months of CapEx at 1,200,000.0, and the free cash flow generation was 2,700,000.0.

And so with this, after paying interest and everything, the net debt of the company ended up dropping by 200,000,000 reais year over year. You can just notice that before the adjustment of the discounted receivables, the variation of the net debt the financial net debt would was 700,000,000,000 year over year. Now another thing that we also observe in an interesting manner here and we start observing more over time is that on the left bottom chart, you can see that in the second quarter of twenty five, our net debt drops at 1,300,000,000.0 in regards to the second quarter of last year. So of course, a reprofiling process and prepayment is and then also a absolute reduction of the gross debt as you have over time and over the years paid and refinanced a lot less than what we pay or what we have as debt maturities. And so with this and with this cash generation behavior, we had in the quarter a reduction of almost half a percent of EBITDA.

And so there’s still this important move towards reducing the leverage, now reaching half an EBITDA year over year, and that allows us to imagine or state that the guidance of about 2.6 times net of EBITDA will be reached at the end of the year. So I think this is an important milestone, this number at for the end of the year. When it comes to financial net debt, it it it’s about two times leverage. And when we consider the contractual covenants in the second quarter, we’re at about 1.78 times against a maximum covenant of three times the EBITDA. So that’s what it is when it comes to the leverage and debt.

And on the next slide, we also have the information on the continuity of the debt reprofiling. This process has been super important and, actually, it not only extended the time frame, but it also reduced the average spread of our debt in a very important manner. So as you can all see on the right side of this page, below the flow of maturities here, we have an average timing of thirty nine months. And a year ago, it was thirty one months. So it’s an increase of over 25% of the average term in one year.

So the average cost that was now at CDI plus one twenty eight a year ago is CDI plus 1.46. So it’s almost 20 bps of the spread reduction in a year. And so we understand that there is a possibility considering the current fixed income market and that our next transactions in regards to reprofiling of our debt we’ll be able to even reduce the spend a little more even. So to add on to the slide, besides all the movement we had in ’24 where we prepaid and postponed 3,600,000,000.0 with new fundraising of 3,600,000,000.0 in that total amount of 6,600,000,000.0. In this ’25, we had another 1 and a half billion fundraising to prepay debt of 2,000,000,000.

This already took place, and that’s already been reflected in our balance sheet. And now we have this operation with opportunities that appear where we prepaid a commercial note from December of 500,000,000, and we refunded for the basically, the same spread, c a plus 95. And this is an all in cost and, basically, almost the same value, 50,000,000 less, but a maturity in three years. And this operation is already reflected here in this flow of maturities where once again, I can highlight that in 2025, we already have finished all the payments. There’s nothing else to be paid.

And in ’26 and ’27, the level of total maturities of the principal amounts, one point two and two point four. And when you compare with our potential EBITDA in those two years, you see it’s gonna be a value that is really, nonconcerning when it comes to payment capacity, and that helps us state that we are relatively comfortable in going past these two years that could be maybe continuity in the turbulence of the financial market without needing to have new fundraising for the company at least in 2026. So that’s very probable. And the maturities of ’28 and ’29 are a little greater. We have nothing else, basically, after ’30 and ’31.

And then what that will consider is that we should remain throughout ’26 performing our prepayment movements and extensions of maturities in ’28 and ’29. So I think that’s it. That’s when we consider basically leveraging Dan and the company. Okay. Thank you, Imar.

And to wrap up, we bring in the evolution of the targets and policies in the company and different initiatives from an ESG perspective. Assai is recognized as one of the companies with many different initiatives when it comes to social inclusion and diversity, so we highlight some important points. We went over over a thousand employees, including migrants and refugees. This is something our area has been working on when it comes to labor. And we also had our solitary kitchen, 10 kitchens in over eight states around Brazil, over 530,000 meals and more than a 100% of our goal.

The brand became considering this the most valuable brand in food retail of 500,000,000 customers, demonstrates how the brand has become very strong, and we’re ready to adopt different initiatives from now on. And once again, within the GPTW research as one of the best places to work, especially the best in the segment when it in the retail, wholesale, and cash and carry categories when it comes to excellence in customer service besides the series of other initiatives when it comes to climate impact reductions, reusing waste, and increase of over 30% of the stores that have a composting project in place. So I think when it comes to presentation, that’s pretty much it. Now close, and we can get into straight into the q and a process so we can value our time as much as we can. Thank you so much, everyone.

Now we’ll start our q and a session. Please, if you do have a question, please select the q and a icon. At the bottom part of your screen, write your name and company and language to enter the queue. As you announced, a request will appear. Then please activate your mic and submit your questions.

We would ask you to please submit all of your questions at once. We’ll start off with our first question from Joao Suarez at Citibank. Joao will enable your audio, you may proceed. Okay. Hi.

Thanks, Rodrigo. Good morning, everyone. Vamira, we’re in the scenario of disinflation, and I think this is gonna be important for the sector since the consumers’ purchase power is really pressured and with the prices going up. But I wanna understand how you guys and the overall cash and carriers have been positioned. Right?

We also see the price slowdowns in categories that should be a little less significant. And so if you could explain your expectations and if this could be beneficial to generate more volume. And then we also see this situation with the working capital. Right? So could you explain a bit of this effect And if we could exclude this, or how would this impact the third quarter?

Right? And so, well, we talked about the closing of the stock after July, and we see the working capital. And we see this the the June for the overall retail, as we’ve seen in all sectors, was way below expectations. So this ended up making the stock in the quarter end up being a little higher than what it was stated in as our core objectives. And but when it comes to the stock and of our accounts receivable or accounts payable, And our category that we work with also allows us to perform route adjustments when it comes to stock.

So the stock that we closed was in June was already a 100% normalized. When I look at inflation, we should see some movements, like some categories of products that had high inflation. And so you would imagine some normalization when you consider a batch that’s very positive. And so some of these impacts, of course, our expectation is that they should get part of the resources when we consider trade down. It’s not only due to a brand substitution.

Right? In some of these, we also saw the size of the reduction of the packaging and consumers having shorter purchase periods, etcetera. And this could, of course, generate a positive point for us. But what we look at when we consider from now on is that the scenario for the second quarter would be relatively stable and not necessarily repetition because the second semester, of course, is more important than the first, but there’s no, like, big expectations from perspective of a drop in volumes or so. So the company’s focus at this moment has really been towards new projects, including new products, new categories, and assortments.

As I highlighted in the presentation, maybe in a more broad manner, but the commercial team has also been working on this daily in a granular manner in microcategories, and I hope to have answered your question. Yes. He did answer, but just a quick follow-up on trade down. What do you guys see as trade down, and do you think the trade down itself how much room do you have to improve in the second quarter? When it comes to volumes, that’s clear, but I think this metric would be maybe a driver for acceleration, would you say?

Well, it should be. We have to be cautious, though, as we’re careful with with whoever’s operating the market because the trade down we’ve seen was not expected from last year and this year. Alright. Well, we’ve had quite tough food inflation years. But when you look at the unemployment rates or even the levels of social programs that we’ve seen, we wouldn’t we shouldn’t have the the levels of trade down we’ve had in certain categories.

So we see there’s another phenomenon which made company with families with lower income lose even more of their available income. So that becomes more visible when you see this each region in Brazil. And so we’re in the next season, we should have results disclosed in a more complete manner, but this is quite visible in the Northeast due to other kinds of habits and activities that are forcing the populations to do this. Should this get back? Well, it should.

But if part of this is not due to a lack of income but because of new habits such as the sports bets with 270,000,000,000 reais, even if you have more cash coming, this could actually make more money going to the bets market. So we have to be very careful about how we consider this. Right? There’s a drop in prices, and now we’re gonna have a resuming and trade down because what we see is sometimes the behavior is different. It’s not what it should be or how it should be.

Was that clear? Yes. Very clear. Thank you, Pomido. Now our next question comes from Talis Grannello at Safra.

Talis, go enable your orders. You may proceed. Good morning, Balmiro and everyone. I have two questions here on my side. I wanna understand why you have a higher tax rate, and this was a bit higher than what we expected in last year, etcetera.

But I also want to understand a bit more about if you guys are still noticing a reduflation or a reduction in packages, right, sizes, which would be like this package reduction inflation. Well, about the tax rates, I’ve talked about this also with the smaller packaging for products, but the difference of this net and gross sales, this is related to the movement towards the tax substitution process because of the tax reform. So in Rio De Janeiro, they actually removed some of the products from the tax substitution process. So as this takes place, you have a bigger part of these taxes that would be in the cost, and that doesn’t really change the gross sales. But just to switch the sale the net sales, you can see the complexity of this tax system in Brazil, but at the end of the day, these are shifts or changes that the states have with the inclusion of categories and removals also in the tax substitution.

And then you get into the credit debit regimes, and at the inflow and outflow, you have more products paying ICMS tax. And then this tax impacts the correlation of the net and gross sales and not necessarily reaching the COGS. I hope that’s clear. Let me if you could maybe talk about this a bit and the reductions of the sizes of the packaging. Well, good morning, everyone.

Thanks for the questions, Alice. And just to talk about the reduction of packaging, we this was a movement we imagined in a softer manner in ’25. But to our surprise, the industry continues to try to search for ways to make their products fit into the consumer’s pocket. And besides this, although it’s not as strong as what it was in the pandemic or in other periods, it continues to be an important movement. And besides this, we also see that the prices the modification in the chemical composition of the products produce like, products like chocolate or juices and cream and condensed milk, etcetera.

You have modifications in the actual formulas of the products that keep prices stable, but, basically, you have a reduction in the quality of the products. So the industry has been moving in this direction with a reduction of packaging and a shift in the composition of the products so it doesn’t impact consumers anymore. I hope to have answered. Great. Very clear, Vam Vamiru.

Now just to follow-up on all of this and this entire scenario you mentioned in the beginning of the presentation and even in the release. Having said all of this and considering the fact that maybe a price accommodation in the second quarter, do you guys think it would be possible to accelerate this level and recover a bit of the same store sales as we had in the first quarter, or should it be, like, a slower second quarter? Well, there is an expectation for recovery. Of course, there are economic scenario factors that could impact this, but the company’s focus is to recover. You always focus, of course, on having same store sales be above the inflation, not below.

Right? But when you look at most of what we have as bets to recover this, we can see a possibility of an increase in share of wallet. So over 80% due to the new projects the company has considering the customer base we have at the moment. And so also imagining there’s a bit of reversals also in when it comes to behaviors or trade down. So, of course, this is a lot more connected to the competitive advantage we have between us and the cash and carries and other retail channels as well.

And the biggest bet, really, that we see up ahead is really from a new project perspective and an increase of the share of wallet. That was already the strategy when we had the acquisition of Extra and really breaking down a bit of the stigma that cash and carriers are just for poor people, but really to add this format into all of the customer classes and levels because that allows you to enter new products, selling new categories of products, and generating a positive pressure on the same store sales. Well, great. That’s fine. Thank you very much, Pomido and Vamir.

Our next question comes from Luca Biazi, UBS. Luca, we’ll enable your audio so that you may proceed, please. Well, hi, guys. Good morning. Thanks for taking our questions.

We have two, actually. First, on the product mix. If you could talk about the demand you’ve seen breaking this down into individuals and B2Bs and if this change in the third quarter. And the second point is about price elasticity. Could you talk about how you imagine this in the current scenario?

And if you guys think it makes sense to maybe have a little more competitive advantage in pricing to gain volume. Well, thanks for the question. There hasn’t been any big change in the product in the customer mix. About 42% of the sales are made to b two b’s. And so what we’ve seen ever since last year is that we had our competitor with a search with a policy to search for volumes.

Right? One there’s two ways to achieve this. Right? Reducing price or increasing terms. Right?

Payment terms. So it’s very relevant, for the reseller public. So looking at the numbers we’ve seen and the comp that the company has already disclosed that expanded even more. They’ve burnt a lot of cash, and that doesn’t seem such a good, like, such a good strategy because the pub the reseller public is really focused on pricing in terms. If you eliminate this public, you can see there’s really low levels of elasticity because consumers have low levels of elasticity.

So all of the tests we’ve been working on since we’re in 25 states allow us to have Vameda others adopt different initiatives. And what we see is there’s no price elasticity. So the movement of reducing margins, imagining that it’ll lead to positive aspects is really not what we’ve seen at this moment. So that is why I’ve been working on the maturity and services brought in this improvement in margins. And if this were the strategy, maybe we could say, okay.

Well, that would be stable in the margin to deliver 27 beeps, but with the same store sales of seven, eight, or 9%. But that would not happen. You only see this when you look at the share effect, which is rigorously stable. So the best combination or that’s least worse is the company’s strategy. And so the market has not had elasticity.

When it comes to customer mix, we haven’t seen any big movements in this sense. I hope that was clear. Yeah. You did answer. Thank you.

Our next question comes from Vitor Fuziharu. Santander. Vitor will enable your audio. Okay. Good morning, guys, and thanks for taking your questions.

The first one is a follow-up for the deflation segment and B2B. So I just wanted to understand if you already see some of the slowdown in B2B with this dynamic. And the second one is if you also looked into different points about the stores maturing. And since you still have this small gap, I wanted to understand if there should be a sales per square meter that’s above what we imagined. Well, with the starting off on with the last one, there’s an issue with the size of the stores.

Right? The average square meters, considering that the hypermarkets were bigger stores. There is a potential to operate with the sales per square meter that’s greater than the organic store network. But part of this and but part of this is also due to other projects. And so and so the objective was really to be enabled to enter new categories of products and expand our scope.

And so some new projects the company has that I’ve imagined understand this. Of course, the deflation movement, we don’t see any loss of stock because BTPs don’t have highest levels of stock with the interest rates, the levels they were at, and with the level of purchasing. Because the consumer that performs trade down, well, it’s a reflex of the entire population. So even for the BTPs, whoever’s from food service, they already operate with minimum stock levels, but the resellers didn’t really stock up. So our vision is that they should react according to their sales.

So their sales will determine the purchase more than a purchase or acquisition movement would determine. That’s because of the frustration. It’s possible to trade down or lower consumption level that impacted everyone in the sector. So I think there’s a real clear vision on this, and that’s probably why the company created this strategy to expand or increase payment terms. Okay.

Great. Bomida, thank you. Well, moving on to our next question comes from Pedro Campila at XP. Pedro, enable your audio so you may proceed, please. You can you can proceed, please.

Hi, guys. Thanks for this. Bermuda, I wanted you to talk about the private label implementation project. And if you could talk about the main impacts this could lead to when it comes to margins and the potential relevance also for other brands, please. Well, obviously, within the limits of what we can discuss, what we see is one of the main reasons for this private label project is that private label around the world is about 20% of the food sector.

In Brazil, it’s, two to 3%. And why does this happen? Well, because you don’t want to fall into the same mistakes. Right? So this is really related to the logistical costs and volumes and the tax issues, and the objectives are really to try to improve the levels of margin the company has due to the volume.

So when you look at the food service, we have over 60% or 50% of the consumption in Brazil. There are products where we have, like, 40% share. And so when you look at the city of Sao Paulo and Riojoneta, the shares were really relevant. And if you consider the phase where the company was focused on the conversion of hypermarkets and deploying services. And so the implementation of this private label market process, we really intend to have a more competitive price for the b two b’s, and it’s also an option for consumers.

And, also, considering the pressure in with some suppliers as well, considering the size we have, and we represent almost 50% of our revenue. So this makes us now really be able to implement a project this without having such high logistical costs or being subject to tax issues that maybe force you to produce a product with private label, but then you maybe have to face different scenarios with than a regional brand. Right? So regional brands, of course, represent an opportunity that could come from the private label brand. And this is gonna start off now in the second quarter in second semester.

Sorry. But there is a major potential for this. Moving on. Our next question is from Rodrigo Gachin at Itau BBA. Rodrigo, we’ll enable your autos.

You may proceed, please. Well, good morning, Vomito and everyone. Two quick questions here. First, everything you mentioned so far of trade down and deflation and even the base effect you mentioned in June, to understand how the third quarter started. Well, one question I had was when I read the release and the supply supply financing that got better in July, matching this with what you mentioned and the improvement in the stocks.

Was this due to a recovery in levels of days in stock, or was it a nominal stock difference? Right? So just to match this would be important. And the second question is what you just mentioned about some of the gross margin projects. I wanted to detail this a little more.

Right? So how much do you imagine would still be the gross margin issues? And what you can still we can already capture from the pricing project. Could you share a few of the details about this? And, well, yeah, some things, yes, but others, you can’t.

So when you look at the second quarter you see, obviously, it’s better, but if not, we wouldn’t have adjusted this as quickly. So this correction is really related to the number of days. But, of course, we have to be careful with this because the second quarter really demonstrated this. Right? The performance in April and June was pretty weak, especially the last half of June compared to what we had seen in April and May.

So June, July is the positive month. August is starting now. So we have to be careful. Right? Because you could have July positive and then August positive and September being more challenging.

Right? So the phenomenon in June had happened last year as well. We had seen last year that June was weaker, and then July was getting back to after back to school phase that was strong as well. But now we’re gonna wait on the third quarter to get a little more details on how this is gonna behave. Right?

So when you see the margin evolution and the levels we’ve been operating with, you’d probably imagine that it would be impossible a while back. So, of course, now keeping the competitive advantage, the company has been searching for improving margins. And once again, I wanna highlight that especially what we believe in strongly is the project. Since once this has been completed, you’ve had the deployment of this service, and then you also have, of course, the self checkout of 9%. And so why am I highlighting this?

Well, obviously, in a scenario with higher prices, this would be our objective, right, to keep up this as one of the biggest solutions for bulk shopping, but also for smaller day to day shopping. So this is also in behind or backing up different projects we’ve been working on in the company. And when we think about why we share that slide with the penetration per age range or social level, it’s really just to show you that there are opportunities for the company still. Because if you look at the gender effect or the social level effect and especially the age range effect, it’s not very common to see what we have in that slide. Right?

It’s not common for, like, a a company or one specific brand to achieve this. Right? It’s either variable position for b or CDE or, like, one specific customer profile. And Assai has probably the most complete penetration rate because of this diversity and being able to work with many different formats and people. So if we want to sell a new category or this other person, this other product, then we have people in the stores that are faithful to our brand and that can buy.

So I think that’s what we really bet on, and that’s why we’ve been highlighting this point a lot. Excellent. Super clear. But we don’t just a quick point of curiosity here just to understand here on our side how or or what happened in June in your perception with consumers? Was it more like from b to b or b to c?

Is it or is it also something difficult for you guys to understand month by month? But just a point of curiosity, is there a highlight? To be very honest, it’s really difficult. We looked at the market, Nielsen, and everything else, and we see that the market overall and so when you consider this movement on the next month, it tends to be stronger. And so the next month tends to be full fuller or the next month would tend to be stronger.

So well, excellent, Omida. Thank you so much. Thanks for the question. Our next question comes from Irma Skarts at Goldman Sachs. Irma Buena Bjorardo, so you may proceed, please.

Well, hi. Good morning, everyone. And I just have a question about the potential drugstore in store, and I just wanna get an update. I know that this is still a legal issue in parliament. Still hasn’t been approved as a law.

But I wanna get your mindset on how this, format has been evolving and understand how this, has been going on. And so, of course, not polluting the ticket of the existing store, and I wanted to understand better about how good the mix would be. And so the level of profitability as well. And maybe you don’t even have a pilot yet, but I just wanna understand your mindset on this. Well, yeah, thanks, Irma.

As you mentioned, it’s a project that is still under discussion. And we’ve been accompanying this discussion and the way that this new project has been presented. So there was a demand to sell over the counter drugs, but now we’re working on having a complete factory pharmacy or drugstore with the pharmacist with all the bonuses and notices and performing the segregation required since we would have a controlled or prescription only product area. And so we see that it it is, there are challenges, but probably it’s not more complex than a drugstore than a, battery that we already have, for example, with refrigerated goods and specialists. So once this is approved, the advantage we would have is that most of the expenses or costs are already in house.

These are costs like safety, lease, power, and all of this would already be available. So we would have the possibility to be even more competitive in this category. And I don’t believe that customers are gonna come into SA to just go to the drugstore specifically. But if they know they’re going to SAE and they know they can find certain drugs, like ongoing chronic purchases where people have scheduled purchases and people already know about what they need to buy, so they we don’t expect them to leave the hospital with a prescription to come into SAE. But the ongoing day to day shopping is really, like, when you consider the amount of customers we have today.

I believe we do have a potential to address this opportunity as well and include this department into the store because that becomes more than just a department. Right? And that’s the drug sales that would place Brazil at the same level as other markets that are mature, such as Europe or other countries where this already happens. And when you look abroad, it gives us a good idea of what should happen within the Brazilian market. So it is a category that is so important, and it gives us the opportunity to reach other subcategories with vitamins, supplements, and as you start having some a space for items geared towards health.

Right? So once this is approved, I believe it’s going to be very relevant for our industry as well. Great. Thank you so much. Our next question comes from Nicholas Lahain at JPMorgan.

Nicholas, we’ll enable your audio, so you may proceed. Perfect. Good morning, and thanks for taking my question. Belmiro, thanks. I have two points here.

You talked about new categories of projects, but could you share, like, how much this category is representing today for sales and maybe some categories that the company wasn’t selling a year ago or two years ago? And then also getting back to Irma’s question, what’s the working capital structure now with this potential sale of pharmaceutical products and drugs? What would be the structure change in the company when it comes to stock of the suppliers, etcetera? Thanks. Thanks, Nicholas.

I think from drugstores, it’s still really early to talk about this. We still need to have approvals. And whoever operates with drugs, it would basically have a a sum when it comes to sales and results. But, also, when it comes to working capital, of course, although you sell, it’s not maybe such a relevant volume to change the fundamentals when it comes to working capital. We’re just gonna reflect on what whoever is already in the sector operating considers.

Right? So about the new category, some projects we already discussed now are at the initial phase. Others, we’ve already shared at the off-site last year, such as tires. Assay became one of the biggest sellers of tires in Brazil. We had over 4% of the tire market in Brazil and over 5% of air fryers.

So in the off-site now, we should have more visibility about share and even more I think probably the other bigger point is gonna be captured up ahead considering that a lot of the projects are still starting off. And now, of course, the the company will gain will provide more speed. Perfect. Thank you, Belmiro. Now moving on to our last question, it’s gonna be in English, and it comes from Andrew Rubin at Morgan Stanley.

Andrew, we’ll enable your audio, so you may proceed. You may proceed, please.

Speaker 1: Hi. Thanks very much for the question. I’m curious if you could provide some more detail on the converted stores. I think you said they’ve reached a bit over 90%, of the organic and some narrowing of the EBITDA margin gap. But if you could refresh us a bit on the targets for those figures and how far far along you think you are for full converted store maturity.

Thanks again.

Gabrielle Lou, Investor Relations Director, Assai: Thank you, Andrew. In fact, the numbers we shared demonstrate that their performance, but there still is maturity up ahead. And so most of these projects, especially some of them from an operational improvement level, and so they can intend to continue with the store maturity. But there is still some maturities to be hired. It’s not a standard procedure because the competitiveness also in the region, etcetera, but you have a similarity among these stores, and they’re split into different regions.

So but, of course, getting back to this, they were this was a project that allowed for that penetration rate in classes a and b, and that brings us a few different opportunity windows, let’s say, to be able to really explore this more and add on more games and opportunities in the next semesters or years ahead of us.

Speaker 1: Makes sense. Thank you.

Gabrielle Lou, Investor Relations Director, Assai: Our q and a session has officially ended, and now we will pass the floor on back to the company for their final remarks. Thank you, Rodrigo. I just wanna thank everyone once again and thank the team. We’ve seen the market has a lot of challenges from a competitiveness perspective. And before, we never expect the same store sales at this level, but the company has not stopped.

The company has a series of projects and innovations, and it’s really been the brand that has been a protagonist in changing the sector. So there was a lot of stigma saying that it was geared towards a lower income public, and that brings us a lot of opportunities. But with a lot of hard work, I’m sure we’ll make it. Thank you so much, everyone, and let’s hope for a great third quarter. The earnings call for the second quarter of Assai at 2025 is officially ended.

The investor relations department is available to clarify any other questions or issues. Thank you so much for for participating, and have a great day and weekend.

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