Earnings call transcript: Sendas Distribuidora Q3 2025 earnings miss forecasts

Sendas Distribuidora SA, trading under the symbol ASAI3, reported its third-quarter earnings for 2025, revealing a miss on both earnings per share (EPS) and revenue compared to market forecasts. The company posted an EPS of 0.0967 USD, falling short of the anticipated 0.128 USD, representing a surprise of -24.45%. Revenue also came in below expectations at 19.29 billion USD, against a forecast of 19.61 billion USD, marking a surprise of -1.63%. Following the earnings release, the stock saw a slight decrease, with a 0.34% drop in its price.

Key Takeaways

• Sendas Distribuidora’s Q3 EPS missed forecasts by 24.45%.
• Revenue fell short of expectations by 1.63%.
• Stock price declined by 0.34% post-earnings announcement.
• The company is focusing on expanding product lines and financial services.
• High interest rates are impacting consumer behavior in Brazil.

Company Performance

Sendas Distribuidora, a leading player in the cash and carry segment, reported a slight decrease in net income to 195 million BRL for Q3. The company maintained an EBITDA margin of 7.6% and reduced its net debt by 500 million BRL. Despite the earnings miss, operational cash generation was strong at 4.2 billion BRL, with free cash generation reaching 13.1 billion BRL over the last 12 months. The company continues to optimize its store network and control expenses amid challenging market conditions.

Financial Highlights

• Revenue: 19.29 billion USD, below forecast
• Earnings per share: 0.0967 USD, missing forecast by 24.45%
• Net income: 195 million BRL
• EBITDA margin: 7.6%
• Net debt reduction: 500 million BRL
• Operational cash generation: 4.2 billion BRL

Earnings vs. Forecast

Sendas Distribuidora’s Q3 results showed a significant miss compared to analyst expectations, with EPS falling short by 24.45% and revenue by 1.63%. This performance contrasts with previous quarters where the company had managed to meet or exceed forecasts. The magnitude of the earnings miss is notable and may influence investor sentiment negatively.

Market Reaction

Following the earnings announcement, Sendas Distribuidora’s stock price declined by 0.34%, closing at 8.74 USD. The stock is currently trading within its 52-week range, which has seen a high of 12.04 USD and a low of 4.97 USD. The market’s reaction reflects concerns over the earnings miss and the broader economic challenges facing the company.

Outlook & Guidance

Looking ahead, Sendas Distribuidora plans to focus on deleveraging and expects an improvement in Q4 performance over Q3. The company is also exploring opportunities in financial services and private label products, anticipating potential consumer spending relief from income tax exemptions.

Executive Commentary

CEO Belmiro Gomes highlighted the economic disparity in Brazil, stating, "We have never seen such disparity among social levels in Brazil." CFO Aimar emphasized the company’s resilience, noting, "The company continues to present net income even after paying BRL 600 million in a quarter." Gomes also outlined the private label strategy, aiming to offer products cheaper than leading brands.

Risks and Challenges

• High interest rates in Brazil, currently at 15%, are affecting consumer behavior.
• Economic disparity is leading to volume retraction in the CDE income classes.
• The company faces challenges in maintaining growth amid high levels of consumer debt.
• Market competition remains intense, requiring strategic store expansions and product innovations.

Q&A

During the earnings call, analysts questioned the impact of high interest rates on consumer behavior and sought clarification on the company’s private label strategy and CapEx plans. The discussion also covered the dynamics between B2B and B2C channels, highlighting the company’s focus on optimizing these areas to drive future growth.

Full transcript - Sendas Distribuidora SA (ASAI3) Q3 2025:

Earnings Call Moderator, Assaí: We would also like to note that this earnings call is being recorded and is going to be provided on the company’s website, irsa.com.br, where you can already find the earnings release. We will have our mics off, and soon after we will begin the Q&A session. To submit questions, select the Q&A icon in the bottom part of the screen, write your name, company, and language to enter the queue.

Para ativar seu microfone, aperte.

As you are announced, a request to activate your mic will be made, and you should activate your mic to submit questions. We would like to let you know that all sub-questions should be submitted at once. Information contained in this presentation and possible statements that could be made during the earnings call related to business perspectives, projections, and operational targets and financial targets at Assaí represent assumptions and beliefs of the company, as well as information that is currently available. Future statements are not a guarantee of performance, and they involve risks, uncertainties, and assumptions as they relate to future events and rely on circumstances that could or could not occur. Investors must comprehend that economic conditions generally, market conditions, and other factors can also affect the future performance at Assaí and lead to results that differ materially from those listed in future statements.

Now, we’re going to pass on the word to Gabrielle Helu, the Investor Relations Director. Hi, good morning, everyone. Thank you for participating in our earnings call for the third quarter. I’m going to present our executive CEO today with us today. Belmiro Gomes is our CEO, Aimar is our CFO, and Anderson Castilho is our Operations VP. Vlamir dos Anjos is our Logistics VP, and Sandra Vicari is our People and Sustainability Manager. I’m going to pass the phone to Belmiro for his initial comments and presentation. Thank you, Gabi. Thank you, Directors, for keeping up with us. Good morning, everyone. We’re going to talk about our numbers in the third quarter. This is a very challenging quarter. The first page here of the presentation. From a very positive perspective, the company’s firm and its trajectory for deleveraging, even in this very restricted environment.

We’re going to talk about this up ahead, but ever since the beginning, the company has been going through deleveraging and reaching a level of debt that is the lowest when it comes to the EBITDA ratio, what we’ve been registering ever since 2021. The company has been very strong with this, in line with an important margin advance, and especially in this third quarter due to major rigid control in the levels of expense. In this. During 2025, we had a result when it comes to expenses in this third quarter. We brought in, as you can see the release in the presentation, the vision of sales in the quarter. Is that because October was better? No. This vision is a fair vision because it brings in the effects of our campaign.

Last year, we brought in this strong campaign, which was the anniversary of 50 years at Assaí. This year, it was in the third quarter. This year, we were able to perform the displacement into the month of October, which is our anniversary month. That was positive because that was very.

We also bring in this release separating both universities. We are exposed to all of the social levels from AB all the way to class E, and we are exposed to B2B as well, which is small businesses that supply with us. That represents about 40-45% of the sales. In some cash and carries, it is almost 50%, and in others 20%. What we saw in this quarter, maybe one of the biggest differences in performance between sectors and same stores, which meet high income of sectors that also service low income. What we saw is in our own customer flow, we have this complete stability in regards to last year with a minimum variation in the flow at a trade-down level that is very equivalent to what was going on in the first quarter and second quarter without the operation.

We look at the consumer as a whole, but then we separate this consumer per social level. What we see is we have class A and B gain volume and CDE with a retraction in volumes. In this quarter, Brazil reached the highest level of interest in the last years. In our vision, that led to a level of debt for families, about 80 million CPFs and about 8 million. That reached an all-time high, and that reached an interest rate of 15% that was higher. That was very visible when we looked at channels that supply low income. These channels also supply with us. When we look at the B2B public, it normally has a bigger retraction in volumes. The last Nielsen research at B3 demonstrates this difference in performance when it comes to volumes.

That’s very important between different retail formats that service classes A, B had an increase in volume of 2.7, where actually the volumes of retail formats that are normally the mini markets, grocery stores, and independent players really supply strongly at the cash and carry. They had a setback in volume in third quarter of 8.3, Barter had a setback of 12% in third quarter. And that’s also because of methanol, which should impact a bit more in Q3. Then food service had a drop of about 6%. Basically, we’re at a level if I talk about high interest rates, I’m just going to be one more person. In practical terms, what’s the understanding we have? We have 7% of the population with fixed income, and BRL 8 trillion applied to fixed income.

We have 83% with the debt service really compromised at about BRL 500 billion. The actual interest rate causes the transfer of income. You can see clearly that the sectors or formats in the business with AB class gaining a lot of volume and CDE class losing capacity. You have this scenario where you have jobs, full employment, and lower income. You have this increase of income reaching CDE population, but a purchase power that’s at all times lower and lower. That demonstrates our B2C public does not have much of an impact, but in B2B, there is a significant impact. When we look at any number, even cash and carry overall will register. That is a level of performance that makes sense, right? That is what is going to service high income and low income.

That considers the better performance of who’s servicing low income. We noticed that this increase in the credit comes mainly because of the buy now pay later possibility. In some cases, that was even higher. What we can see is higher exposure to risk with a lot of consumers and employees also with this payment. Despite this, what was the company’s position? We saw that there’s not elasticity, and that’s where we reflect a lot of this volume. Então isso fica visível com o EBITDA, ele sobe 0.2.

This is visible with EBITDA; it goes up 0.2, and that demonstrates a level of resilience. If you consider the same stores, the levels there are, you could expect this, and this level of the drop in volumes is not insufficient to impact the objective. Net income is really impacted by this debt service. The third quarter is the quarter that reflects in totality; it is a leak rate at 15%. This percentage of interest, almost 450 basis points in regards to the third quarter of 2024. Of course, with this, it is still high. Despite this, the company’s leverage, of course, if interest was lower, we would be leveraged quicker, but it is following this journey as we had disclosed. We saw that the numbers of retail in the third quarter generated a lot of concerns.

We wanted to provide this vision that the company really has been keeping up with the deleveraging pace. You can advance the next page, please. Gross profit has an improvement.

Due to store maturity, especially when it comes to services. That really contributed a lot in improving the gross profit. When you reduce this, the purchase makes in B2B with lower margins, you also generate a positive effect in the gross margin. Expenses are the biggest point on the third quarter. We consider the self-checkout, and that really helped us when it comes to productivity with a high turnover scenario and lack of labor. Expenses, if we take a look at the volume of sales, there is elevation; it goes up more than sales, but below inflation. The highlight here in our view is the EBITDA that goes from 5.5 to 5.7 in the post-IFRS view. We reached 7.6% EBITDA margin. That is what I wanted to say. I’ll pass this on to Aimar to advance into the next slide.

He’s going to talk about debt and cash. Aimar, the floor is yours.

Good morning, everyone. I’m going to add on to the explanation and what Belmiro was mentioning. We have some information here, such as cash generation, debt, and leverage. This page shows how Assaí is really resistant, even in a moment with a more difficult period. Even with this evolution in the third quarter, below what we would like it to be, we were still able to reduce the net debt by BRL 500 million. This is not insignificant. It’s also starting off from an operational cash generation of BRL 4.2 billion, and this is reasonably greater than the second quarter. If you pay a CapEx of BRL 1.1 billion in the last 12 months, it’s going to have a free cash generation of BRL 13.1 billion. You pay the interest of the debt of BRL 2.2 billion, and you improve the final cash position by BRL 900 million.

When we talk about the BRL 500 million in reduction of the net debt, it’s because we’re presenting the variation in the receivables, and then we reach those BRL 500 million. Before the receivables, the variation was BRL 900 million, almost BRL 1 billion in generation in 12 months post-debt services. When we see another view on this issue, we can understand that the actual gross debt was also reduced by BRL 500 million. We added all of the interest during 12 months, then we paid all of the debt service, and it still went still as gross, it was lower by BRL 500 million. It wasn’t because of a cash increase, because it was very similar to what it was in the previous year, but the gross debt also dropped.

I think this is another indicator that’s important, not only the net debt’s dropping, but also the gross debt. On the next chart, I’ll show you our maturities chart here, and then I’ll talk about the gross debt as well. A bit more. On the right side, you can see that’s very clear that the leverage continues on a trend that is very strong. If we imagine the level of the interest rate in the last two quarters really changed from a year-over-year comparison. In the third quarter, effective CDI was almost 40% greater than the effective CDI of the same quarter last year. Even so, you have the deleveraging trajectory that continues to reduce half an EBITDA in the period. We keep up the guidance. It’s about 260 for the next quarter.

If we head to the next slide, we have observations on financial results, and these always cause a negative impact that’s very significant in the net income due to the debt size. It is still a financial result that grows about 23% quarter over quarter compared to the interest variation of 40%. Of course, you see the sales impact at 3.2% against 2.6% a year ago. It could really, in a very worsened scenario, if we hadn’t performed progress in the debt situation and cash management, then that could be greater if it was just following the interest variation year over year.

In the net income, we had 195 million in the quarter against 198, and that reflected the weight of the financial results and a bit of a credit in income tax this year, making the net income be proportionally greater than if you had an income tax debit that was similar to the previous year. Even so, considering all of these differences, the net income was kept at about 50 million in these quarters that are not considered intermediate. A net margin of 1.1%. We believe that even at a moment where the scenario is very complicated, the company has been deleveraging, continues with strong cash generation, and the company continues to present net income even after paying 600 million in a quarter. In this way, we understand these results to be very consistent.

On the next slide, you have something else that I never lose track of, which is the maturities of the debt, right? You can see our generation of cash year over year. We did not need new cash in 2025. We have no more maturities in 2025. We had a prepayment still in the third quarter that helped to extend our payments for our future maturities. We have a flow in 2026 and 2027 that allows us to say, or at least to infer, with a big level of security for 2026, almost 100% of this, actually, that we would not need new cash for refinancing. In 2029 and 2030, the volumes are concentrated. You can remember that capacity for payment when it comes to cash generation is going to grow over the next years, 2026 and 2027.

We will have two years in 2026 and 2027 to continue working on our debt extension transaction. We understand that the BRL 6.2 billion in 2028 and the BRL 5.3 billion in 2029, since we do not need new cash in 2026 and 2027, will continue to perform prepayment transactions to reduce this concentration of these maturities in 2028 and 2029 and throw more maturities into 2030 and 2031. Even with the need for funding in 2028 and 2029, that is not going to be significant. I think that is what I wanted to say about the financial capacity of the company, which I believe is something that even in a scenario that is maybe more complex, it provides us with a little more comfort and tranquility. Okay, thank you, Aimar. Next slide, please.

We’re going to have Sandra from our—she’s our VP of People and Management, and she’s going to talk about our initiatives with sustainability in line with a topic that’s very important at the moment where we have COP30 going on. Good morning, ladies and gentlemen. I’ve been talking about our sustainability strategy a bit, and we’ve been advancing in this strategy. When we consider this pillar, where our work is to fight emissions and climate change conditions, we launch a public goal to reach up until 2035 the reduction of the use of landfills. We would like to reach the goal of being zero landfill. We also have been advancing the use of waste. We’re increasing composting processes and also in the correct disposal project. We’ve been involving 96% of our stores already in the program.

This gives us positive numbers when it comes to our efficient pillars. When we consider fighting climate change, we talk about ethical and transparent management. We have significant recognition in integration and ESG. We were the first food retail company in the ranking. We are firmly working in this sense when it comes to ethical and responsible practices in the company. In people development, we have been advancing in our diversity and inclusion work with numbers that are very positive. Leadership of Black people in leadership positions, women in leadership positions. Today we have a significant amount of countries that are immigrants and refugees, over 1,000, actually. We have continued to be working on fighting hunger and our other programs related to food safety.

We have also had some strong work involving our employees in volunteering programs during this year, especially with a focus on our regionals. In October, we like this. We also had this award of the Academy is also supporting entrepreneurs. We had the eighth edition of our award with over 2,100 entrepreneurs receiving support financially and training. We also had the national phase now in September, now in São Paulo, sorry. We also had the special awards for special categories, technology, innovation, sustainability. In the eight editions we have already had, we add up over 9,000 awarded entrepreneurs. Consistent work supporting entrepreneurship. In all of these advances, we have been able to have operations that are more sustainable, and that has been strengthening our governance. We have been advancing with the development of communities that are part of our story.

Now I’ll pass this on to Belmiro. We’re going to highlight this recognition as well. Infomoney is what’s most conscious as well as with one of the most valuable, as well as a series of other awards, first among companies that are most admired by consumers for the fourth consecutive year and top of mind. A series of other recognitions as well and acknowledgements that the company has had in this period. We can move on to the next slide. As we talk about the future, as the biggest and most present company in food retail, when you look at the cash and carry operation exclusively, it’s the most valuable brand. Our customer flow is stable with 40 million people visiting our stores monthly. The company now reached 60% penetration among homes in São Paulo.

That gives us space considering the strength of the brand, volume, and customer flow, and a series of projects up ahead. We have spoken about this a lot, and this is what we are going to be discussing as well in the human environment in the short term. That is most challenging, and the company has a series of avenues for growth, right, when it comes to health. We have been believing that there is major potential when it comes to medication, vitamins, supplements, and HPC, which is personal health and cosmetics. The company is starting this project, taking advantage of this process with part of the population being more willing to have products with better prices. We have a very relevant project with private label, especially in regions where you have more density of stores due to this brand strength. We also have the financial services front.

We have a pilot on the street when it comes to the B2B public as well. We’re testing the terminals, and soon we should have some news as well as we have this is one of the main value levers. One important point is also in the digital channels, especially with our partnerships for last mile. That’s considering iFood, and we’ve had more adhesion from customers and less logistics that’s better when provided by last mile providers than if we were to do it ourselves. There’s also an expectation, as we’ve seen, how performance among social levels has been with the income tax exemption. There should be some more relief for the CDE public that’s spending most of their income paying off their debts. That’s it. Now I’ll pass the floor back to Gabi, and we can get back into Q&A.

Now we’re going to begin our Q&A session. I want to remind you that if you have questions, you should select the Q&A icon on the bottom part of the screen. Write your name, company, and language to enter the Q. As you’re announced, a request to activate your mic will appear on the screen. You must activate your mic to submit questions. We’d ask you to please send in all of your questions at once. Again, our first question comes from Daniela Ager at XP. Dani, we’ll enable your audio, so you may proceed. Please, you may proceed, Dani. Hi, good morning, guys, and thanks for taking my question. I have some on my side. The first one is a follow-up of the last comment you had, Belmiro. I want to understand more about the financial services dynamic.

You talked about the terminals, and I want to understand what this would represent, what would be the context, if it’s in Assaí, if it’s something that you’re going to do on your own. If you could give us more information, I think that would be great. My second point is maybe a little bit more on this context here, where you have a little more space to do something. I think you guys have been doing excellent work in gross margins and expense controls, but we want to understand a little bit more about what could be done in the core business, right? When it comes to expenses, do you still see space to keep up expenses as they are? You’ve been quite lean for a while, right?

I want to understand if this is something you can still imagine, something very controlled, or if we are going to see some acceleration. On the side of the store, I know you are presenting new categories, but what else would you be able to do? I do not know, with financial services, if you could maybe do something when it comes to payments for B2C and B2B, considering income challenges, I think that would be interesting to get to know a little more. Actually, heading to the opposite side here, when we talk about expenses, I think we can understand here, and you can even highlight some different initiatives and how we have been able to really keep up with this level of expenses that, in our view, is obviously sustainable. First of all, good morning. Great question.

Expenses in Assaí is something that we’re very disciplined with. It’s not like a single line, right? We have different initiatives we work on. I always mention as a main pillar with customers at the center of the business, right? We have some different initiatives with recurring expenses. We also have replenishment and, or even like owners of restaurants, etc., which this is a big differential. What we see as a team is that expenses in the company are involved in all areas. There’s not like a single approach, right? Something that we do over the years, and our expenses are pretty stable. I don’t see anything very different from this from now on. We kind of have the same dynamic, trying to be more efficient, trying to be quicker with our processes, but without losing track of the customer.

I think this is the main work we do, right? When we look at expenses up ahead, there is nothing very different compared to what we have been doing. Just to add on, when we look at the stability of the customer flow, we see that obviously we are already preparing for a scenario where inflation would obviously reach a point where monthly shopping or bulk shopping would lose a bit of attractiveness, and you increase the replenishment levels, right? This is a transition to inclusion of services. There is actually a lot of criticism when we had the battery café compound and even now the self-checkout. This is for people that want to buy quickly, like day-to-day shopping, right? If you want to have like an actual project, there is a bunch of projects when it comes to investments and using technology to keep expenses under control.

Besides the self-checkout, there’s some other data also and important advances with cameras and data transfers in good quality, which allow certain functions in the store to be done in a centralized manner, reducing costs, etc. We’ve assessed this in other departments. There’s a bunch of projects the company has been working on at this moment. Some are really focused on what we consider to be innovation, or some projects that I highlighted that we should be discussing more now in the fourth quarter. There’s a lot coming when it comes to efficiency and productivity. We also have an IT lab, and we have some initiatives for artificial intelligence that have been helping us in marketing and content production, etc., could also help us with productivity within administrative fronts. We have a JV with GPA and Viva Arejo.

We’re discussing this, and we’re very close to wrapping up with this negotiation process. We had a waiver for me to develop the sale of the terminals with the B2Bs. In end customers of B2Cs, we see big opportunities also to sell insurance and other financial services as well. This is one part that’s kind of released, but there’s an expectation to unleash relevant value in the company with B2C, especially in lower income levels, right? We don’t expect to increase our credit concession. The company is actually focused on deleveraging and also because we don’t believe this is going to bring in a bigger volume of sales. With partnerships for that customer public, B2C and B2B, then yes, there is a demand for credit, and that could help us to expand our sales. I hope to have answered your question, Dani.

Yes, that’s very clear. Thank you, Belmiro. Our next question comes from Luis Guanais, BTG. Luis, we’ll enable your audio. You may proceed, please. Hey, good morning, Guido. Good morning, Gabi. Good morning, Aymar. I have a question here about profitability. Looking into a bit of what you mentioned with expense control, if you could break this down, maybe into the delivering path for next year, you reinforced the company’s guidance, and part of this is also considering an improvement in margins. If you could give us a little more details in regards to CapEx and working capital, which was also a highlight in the last quarter, that would really help us in our projections. Thank you very much. The deleveraging path, of course, there’s one aspect that’s not in our hands, which is the SELIC rate.

That would be one of the biggest components, right? What is in our hands, which is the manageable perimeter with working capital, we expect to have stability, of course, and we are always searching for improvements. Our view at this moment, if we are tightening up a bit more with our suppliers, because high interest rates apply to everyone, right? That would probably come in pricing, right? The objective is to keep this discipline. In the closing of the third quarter, we actually had a little—we were a little more stocked up. Now, in this scenario, what we have seen, especially in B2B with this volume, we, for example, would not have any stock elevation because these customers are really pressured with their working capital, and they have to replenish the amount of products they sold.

The third quarter, in our view, was an important point, especially for food service. In September, the bar was almost 12% downwards, and we saw the methanol crisis with the bar industry. People do not go, they do not order portions of food. This is a public we have a lot of penetration with, so bars and snacks suffered. Because of this methanol scandal, we had a major impact, right? When it comes to the levels of investments, we have already actually—we gave them a warning, and there was an expectation of about BRL 1.2 billion. Maybe that is not even going to become material. For the next year, in 2026, it is going to be very restricted. The forecast we have is that it should be at most BRL 700 billion, and that is kind of what we have when it comes to projects.

The new stores that are important, almost all of them that have projects are done in BTS to have quicker deleveraging. The objective throughout 2026 is to focus even more on deleveraging since the interest rates are still a bit higher than what we expected. I think that’s it, Guanais. I hope I answered. Not sure if you have any questions still. That’s excellent, Belmiro. Thank you. Our next question comes from Alexandre Mamioka. Alexandre. Thank you. If we explore a bit of the private label issue that you mentioned in the beginning of the presentation, Belmiro, if you could give us a little more of an update. We focus on the short-term results as well, and we take more of a high-level base considering the cash and carry industry as a whole. I think that over the last few years, this was very clear, right?

The cash and carry movement was capturing these sales. I think that throughout last year, you guys started talking about cash and carry a little more, starting to capture supermarket sales. I just wanted to maybe get an update on how your guys’ mind is about this industry trend overall, not only Assaí, right? To start capturing the sales of supermarkets as well. Thank you. I think going backwards first, the cash and carry model, we always tried to make it very clear because sometimes people get a little confused with the cash and carry model and other formats. Now most of the distribution in Brazil for small businesses are done in formats that operate within cash and carries, right? What we see is this difference of performance among social levels, which is really strong, right?

You’re at this moment where you’re strongly moving towards income transfers, right? To lower income, to higher income. We’re at an interest rate level that, well, high interest rates are necessary. Yes, but what we’ve seen is sometimes when you look at the economy, you look at all of the social levels in a single package, but on average, what do you think? Because this year we’re going to have a payment of over BRL 600 billion in fixed income, which is going to go to 17% of the population. That’s going to push your inflation as well as other aspects, right? When you look at CDE classes, you have an all-time high of debt levels month over month. That’s where you create that, right? The cash and carry format is more exposed to low income than to high income.

When you look at retail formats, we noticed that that’s where performance was even worse than cash and carry because it reflects that public entirely. That is where we brought in the information to highlight this. While interest rates remain high, we should remain. I think there are some improvements expected now after this methanol crisis. We have this end-of-year period where the consumption is always a little bit higher. You also have the exemption of income tax that is going to help with this public. Part of this should be headed to consumption, right? This is the movement that we see in the industry, the private label project, and why we believe this is going to be the moment.

Brazil is a continental country, and the difficulty with private label is because if you look at the map behind me, you can see that we have very high distances. If we try to take this to the Northeast, it is going to arrive a lot more expensive. That is because of the Brazilian tax scheme. It is so crazy, right? We were able to reach a level of tax of fees where the logistics costs are less high and the brand strength. We brought in a lot of expertise and the expectation that in the first quarter we already have products that should help us to capture margins, but also meet customer demands as they are searching for products with lower costs. We believe that this is persistent. We have seen this not only here in Brazil, but in other markets as well. Perfect.

Belmiro, thank you so much. Our next question comes from Thales de Granelo. That’s from. Please, Thales, we’ll enable your audio so you may proceed. Good morning, Belmiro, Aymar, Gabi. We have a question about the CapEx. You talked about BRL 700 million next year. Is there a discussion with the company on maybe interrupting the expansion momentaneously to really accelerate deleveraging due to higher interest rates that were not in the base scenario case last time you guys reviewed expansion? Also in regards to the batch of stores in 2023, the total sales that’s already similar to the legacy stores’ pre-conversion, but margins are below. This is mainly due to the cost of the lease, or is there another factor? Is there another factor that’s not on our radar? Yes, we did discuss this.

The stores that are being opened now are going to definitely be the stores with the best levels of returns that Thales ever had because these are projects that are very selective. These are projects where the values paid with the new stores of about BRL 700 million, BRL 220 million-BRL 240 million would be the equipment part. All of the other projects, we stocked them up within the bank with projects that required the company’s capital to acquire properties, etc. All of this we will not be investing in, as you mentioned, because interest rates got way above expectations. Now, especially in markets where we have a little quicker maturity, next year we are actually going to open up this number. We already received a lot of questions in regards to this.

For example, in Osasco, basically our first store there, we’re opening on Tuesday in Uchinga, inside São Paulo, where we don’t have an Assaí store yet. As you see, we have low levels of investments, the return rates for these stores can be really high. In our view, they have a ramp-up. It really justifies the maintenance of this level. The BRL 200 million are important, of course, for deleveraging, but that would also not be relevant enough to the point of removing these 10 units of stores. All of them, with the exception of one in Anápolis, are projects where the Assaí brand is really high. In 2023, you have a significant weight of lease. This is something we’ve been working on as well to bring in this store network when it comes to profitability.

We need to at least take a look at the store network in 2025 and 2026, which is better than what we had. I think I know that at the moment in cash and carry in the market, it could have some skepticism, but it is going to be a store network with better performance and a better ramp-up. That is where we are very much convinced about the store openings. Thank you, Belmiro. That is very clear. Our next question comes from Vitor Hargos at BBA. Vitor, we will enable your audio. You may proceed, please. Thank you, Belmiro, Aymar and Gabi. First of all, with October coming in stronger, you could maybe imagine that Q4 would have the same sort of sales that is very similar to what you presented in the first semester. That is the first question.

The second one is about when we think about increasing the hygiene and beauty category. How is this growth going? Do you imagine that you could be impacted in some way in the market considering competition in the marketplace? Thanks, guys. Yeah, there is an impact. It’s not going to reach the lower social levels, but it does affect A and B and the movements that have been going on in the marketplace. We have also been assessing this and the social levels. It’s not something that’s relevant from a volume perspective, but there is an impact. Actually, the movement we had in the drugstore project was so that we could also put this pharmacy in the store, and that would also help us in this category, which sometimes we won’t use the pharmaceutical channel for.

Normally, they can deliver non-perishable products with high added value, which is what you can justify as volume, right? Any product that reduces added value, especially when it comes to, well, there is an impact, but now he is getting more from pharma and super geared towards high income. If you consider this, there is going to be regression, right? This is probably if you consider the Nielsen research that shows independent pharmaceuticals and pharmacies that did receive the Mounjaro already. The performance difference is huge, right? You actually see this anomaly within pharmaceutical at this moment, which in some way distorts and brings pharma to a performance level that is a bit distorted or very different than the other sectors. The first question, Belmiro, if you could think about how the fourth quarter and sales should be very similar, considering that this is fairly strong.

Yes, that’s the expectation. October’s strong. There was an effect with the campaign, but there are also other initiatives in November and December. What can we say? Of course, you have to be careful because in September, no one was expecting the impact we had for the overall market, right? If you look at the sectors as a whole, that’s why you have to be more cautious. We do look at this to consider the sectors that are setting back, and we believe the bar sector should recover a little bit. It is an expectation we have. There are some strong Black Friday initiatives and for the end of the year. Of course, we’re subject to reflecting on what this B2B public is all about. You have to be careful about this.

We can look at October with a one-month-only campaign, right? Our next question comes from Felipe Hashaji at Goldman Sachs. Felipe, we’ll enable your mic so that you may proceed. Please, Felipe. Hey, guys, thanks for taking my question. I want to explore a little bit more of the self-check topic. I understand that helps us. Considering they have a list of items, it’s relatively low, but could you open up the percentage of the carts that are below the limit of items? Just a quick follow-up on expenses. How much would you estimate be impacted if you were to consider all of the open vacancies, right? How the challenge of hiring employees and checkout operators and how this could be impacting the value of the format and how this could be impacting the sales? Thank you for that question.

We’ve definitely had a lack of labor for businesses as a whole. What we’ve noticed is that cash and carry, it’s a format that’s more geared towards middle income. There’s a bit more tolerance, right? Of course, it’s difficult to say how much we’re losing in sales because the lack of personnel has been a general factor for all sectors, for super mini markets, cash and carry, and the fact that you have a bigger amount of employees in a cash and carry store or even a higher rate of absenteeism than a store that operates with like 20. In our case, we have an average group of about 300 people per store, 200 and some, but it’s going to depend on the size of the store, of course, but obviously have an impact. The objective of having self-checkout was two points, right?

In our view, it was a sequence of services to make the model also more attractive for smaller day-to-day shopping and also because there’s pressure in finding employees, right? When it comes to sales, I can’t break down the number or share this, but in transactions, we’re about 20% of the tickets. Of course, a business is not going to go like a B2B is not going to go to self-checkout, but we have so many shoppings that are 50 or 60 BRL, but other purchases that are 7,000, 10,000, right? It really helps reduce the perception of the queue at the checkout and also helps the employees. Our levels are we’re going to have a turnover. This is the overall commerce. We have 95% of our vacancies filled out, and our people management department has been doing really good work trying to replace these vacancies.

Overall, people get debts, then they have to be fired to get their benefits, and they go from they’ve spent money on their bets, and then that’s something that’s going on, right? That’s going to be 5.5, 0.20, etc. Anyways, now this level is already pretty persistent, right? From the base perspective, that would not be too much of a difference. Thank you, very clear. Our next question comes from Bob Ford at Bank of America. Bob, we’ll enable your audio so that you can proceed, please. Thank you very much. Thanks for taking my question. Belmiro, could you update us on the app to lever sales, and how the treasure hunt work has been evolving as well, and also in the Black Friday in Ottawa. We’ve been working on some changes.

We brought someone else here to help us with in and out. In Black Friday, we’re going to have some products that are going to be very cheap. We already have most of the products we received in the end of the third quarter, and they’re going to be in the stores for Black Friday, and especially from next year onward. These are different products. Of course, we’re going to start testing these categories. We have some that are geared towards higher customer social levels and others for lower social levels. I can’t give you the numbers of the prices yet, but if you can visit the store, you’re going to see you can buy a set of suitcases at spectacular prices.

These are some items that are going to come in, as well as other home utilities, utensils, sets of cups and plates and dishes, etc. These products are all available in the store. The app has a penetration rate that is really strong. You can see numbers with 21 million customers registered, with 16 million contactable. We finished for the month of October, and there is that increased adhesion rates. The base that we are building with the CRM should, in our view, be really important because that is why we are so anxious about the financial services, because we really believe it is going to help us explore 16 million customers, right? Which is one of the biggest customer bases in Brazil. With a level of loyalty to the brand that is also really high, that creates a lot of avenues for growth in the sense.

Thank you, Bob. I hope I answered your question. Yes, you did. Thank you so much. Our next question comes from Luca Biazzi, UBS. Luca. We’ll enable your audio so you may proceed, please. Luca. A majority of our questions were answered, but it would be interesting if you guys could talk about possible updates in regards to the preliminary injunction issued with GPA in Cascino. Thank you. We’re still having the judge listening to the parties, and that’s why we can’t talk about this yet. We should have a decision, but the judge is still listening to the parties. He required some information and asked for more assessments. We are still waiting on some decisions in the sense before we can disclose information. From the contingency perspective, there’s a big effort on behalf of GPA to perform a transaction with the fiscal authority.

They actually highlighted this in their release call. Of course, this is a topic that we understand that we can’t be jointly responsible, of course, but if they can find a solution on their own, we consider that to be something positive. We also see it as something very positive with the changes in GPA with the shareholders and controllers. This is something that will always be more positive with a big potential. We have seen these changes very positively as they occurred at GPA. Very clear, Belmiro. Thank you so much. Our next question comes from Eric Hwang at Santander. Eric, we will enable your audio. You may proceed, please. Hi, guys. Thanks for taking my question. On our side here, we wanted to cover the gross margin a bit.

We’ve seen significant evolution, and we want to understand a bit about how you’ve been considering this gross margin level when it comes to sustainability and also additional opportunities. Part of this comes from the other store network that’s in maturity. These more relevant harvests with conversions are going to reach maturity. What would be additional levers here, and what can we think about in regards to your gross margin from now onwards? Thank you. Thank you, Eric. There is an effect, as I mentioned previously, and the fact that B2B reduced purchases. We have two prices in the sales area. We have the consumer prices, 17, 18, 19, and the price for businesses, which are people that buy quantities of about 12%. As you have a drop in B2B, you’re obviously going to improve margins, right? Along with this, you have a series of measures, right?

From a pricing perspective, the company has also been working on a project that’s going to improve our capacity for pricing. As when we look at this social inequality in the country, one example I like giving is if you look at the Congonhas store that’s right in front of the airport there, then you have the Interlagos store, five kilometers there you have Sintra Dutra in front of Grajaú. All of this is in the same avenue, right? You leave an income level of BRL 20,000 monthly to a level about three to four BRL monthly, right? You’re going to be operating as if they were different countries. That requires discipline in the store, different pricing.

In our view, especially these stores that are more like central or downtown, and the cost of services we deliver really allow us to continue with the evolution of the gross margin, of course, looking at competitiveness. There is also an expectation in our private label project that should bring in significant contributions when it comes to gross margin. We believe that we went through some positive cycles, negative cycles, and the margins keep up quite stable. Thank you, Belmiro. Just to follow up here on this point in regards to the benefit that the mix of B2B and B2C brought, could you guys quantify this a little bit just so we can get some more color on this? There is an impact of approximately 0.10-0.15. Also, B2B reduces the volume of purchases. We increase this and reduce the prices to them.

What we noticed is that this customer obviously has they do replenishment. If they have a drop in the volume of sales, since their supply cycle is very short for food service, for example, we have customers that come in every day. The average of food service, when we even presented to the investor day last year, was 162 visits per day. Almost one day, yes, one day, no, customers are at the store. When they reduce the volumes, they reduce immediately. With service, you cannot reduce prices because if you reduce the price of cheese or ham, it is a perishable good, right? Fruits and vegetables, it is perishable, right? If a pizza has a drop in their volume of pizzas delivered, they just stop immediately buying the amount of perishable goods.

The dispute for prices is a lot more in regards to disputing with other cash and carries, but not really increasing customer volumes, right? Which they will not do. Very clear, Belmiro. Thank you. Our next question comes from Joseph Giordano, JP Morgan. Joseph, we will enable your audio so you may proceed. Please, Joseph. Hi, guys. Good morning, everyone. And thank you. Two topics here. I think the first one is going back to the top line and looking more towards the end of the year as we have performance in October. As you mentioned, it is not 100% comparable due to the anniversary campaign, but I want to understand what you are seeing when it comes to food inflation when we see the third quarter.

There was still a gap compared to year over year, so it was favorable, two points favorable, but now maybe it’s going to be a turnaround because of the food inflation in the same store base last year was a lot stronger. How are you looking at the ticket issue? Can you imagine a possible trade-up? As I mentioned, I guess not. The second question is about this subvention, right, and understanding at the tax front if this higher level that we’ve seen throughout the first semester should be something more recurring. Thank you. Aymar will answer after. I’ll talk about the inflation, and then Aymar can talk about the subvention. If there’s any questions later on, we can come back. Of course, as I mentioned, we don’t see any trade-up, actually.

As you mentioned, what we see is one thing that’s called our attention a lot, which is Assaí has a penetration rate in social levels that’s very equivalent, right? The same penetration rate we had in Class A, we have in Class B, C, and D, and E, and even considering age ranges. A slide we had in some presentations really calls our attention. When we can have this vision and the time in the market of the behavior, right? We had never seen disparity among social levels in Brazil as we’ve seen now. You see AB gaining purchase power, gaining volume in some categories of products, increasing sales. Then when you look at the other side, you have a trade-down that’s significant.

If you observe their volume, which is what Nielsen brings in, the independent players have a drop of 8% of volume, and that’s relevant. Those small businesses that are close to their home, etc. These are the customers that supply at our stores. That’s where we see we have to be careful with the top line because we can see that the last impact was this buy now, pay later, right? The consignado. In August and September, people saw the size of the debt they have. We see this movement is still persistent. Of course, we have many different initiatives. Maybe September was a month that was kind of standing out of the curve. We expect that the fourth quarter will be better than what we had in the third quarter.

The structural issues leading to the loss in purchase power, as we already talked about the bets, etc., will continue. Data is difficult to analyze because, as I mentioned, when you see this income transfer among social levels and the highest level increasing purchase power, you generate pressure. That is why interest rates are already at a level where they can be inflated. Maybe there is not a better sector to demonstrate this than the food sector, right? As we like mentioning, Brazil is a country with social inequality, and there is this movement going on, right? That is why we believe that they will keep up the volumes, and we are actually registering an increase in sales to social levels with higher. That is where we have to be very careful about any signals, right? What we do not see as risks are the leverage trajectory.

I think the third quarter, what it shows us is that even in a sales level that’s below what the market expected, as we’re trying to understand this, of course, this could be happening quicker. I think that’s the main point, Joseph. Okay, thank you. Joseph, bom dia. Boa tarde, já. On the subvention, Joseph, we had BRL 34 million from previous periods. From a recurrence, we are considering about BRL 10 million per quarter. We had actually already talked about this number before, but there’s nothing that will change this trend of recurrence normally, with the exception, of course, of some extraordinary event that is not on our radar related to income tax. Okay, perfect. I hope I answered. Thank you. Our next question comes from Pedro Pinto. Pedro will enable your audio so you may proceed, please. Hi, guys. Thank you. Good morning, everyone.

Two quick questions here on my side. One is a follow-up about the issue related to the preliminary injunction, just about the timing, as you mentioned. It’s been about 30 days since we spoke about this, and 30 days was the period for the companies to provide their responses. Of course, it depends on the orders and requests from the judge, but I’m imagining if we’re going to have any additional answers from a timing perspective also. That’s the first one. The second one is about calendarizing the CapEx, right? If we could see what was done as CapEx year to date, including the guidance, and you guys talk about how you’re going to have deleveraging, and Belmiro mentioned maybe we won’t reach BRL 1.2 billion CapEx this year and BRL 700 million next year.

I’m imagining, would it be lower than BRL 1 billion, and would there be something left to next year to be applied? I want to understand this issue a little better and really see if this leverage really is preservable or if the company is really doing more spending, more projects, postponing them. Those are my main points here. Thank you very much, Pedro. Obviously, we had a series of cuts to reduce the volume of CapEx. One is related to the PMG, which is this model that helped us reduce the cost of construction very well. We still do not have the closing of the fourth quarter, but the levels we saw are the maximum levels of investments. We would like the market to work on these with this number, right? Some initiatives we had actually in this sense are not totally guaranteed or captured, right?

We’re working on the maximum levels of investments, and this could be lower than this. At the moment, it’s the maximum we could talk about. Yes, of course, we’ve also been assessing different measures, right? We’re a strong cash generator, and ever since we began this, we never had investments from previous shareholders, or everything the company did was done with its cash generation. We have a huge debt, as you all know, but it’s difficult, right? We see half of the cash generation by the cost of debt. No one was considering a SELIC at this level, right? That’s an important lesson from a company perspective, and we want to get back to comfortable cash levels in a short period of time. All the initiatives we can capture will be captured. Some are still being assessed.

The company is not intending to deleverage as quick as possible, right? From the preliminary injection and this lawsuit, the expectation would be to have another 15 days. Of course, the judge will provide as much as possible information, and then, of course, later we would expect it, but we have another 15 days. Thank you, Belmiro. Thank you, Pedro. Next question. It comes from Daniela Brettauer at HSBC. Daniela, we will enable your audio so you may proceed, please. Okay, good morning. Good morning, everyone. Can you all hear me? Yes, we can hear you, Daniela. You may proceed. Oh, two questions here. The first one is that I would like to explore the issue with the B2B, B2C dynamic.

You shared some comments that I believe were very interesting, but I wanted to understand if you had considered the drop in the average ticket and also the reduction in the volume of small businesses. We also had the methanol issue. I do not know if you can break down the weight of beverages. I wanted to understand how you have been seeing this trend now in the beginning of the fourth quarter, and how you have been working on this mix of B2B, B2C. Maybe interest rates would just drop around April, but what would be the main tools, right, to work on these two channels? I think both channels, you can split this by about eight subtitles, right? When you look at B2C, and that is very close to what each class has within the councils have a real elevated perspective on this, right?

But as I mentioned, I’ve never seen such an intense movement with this, right, in such a disparity, right? Sorry, my dog. No, don’t worry. Don’t worry. We can go and buy some dog food at our Assaí stores if you need. Anyways, even in businesses that service higher-income customers, we didn’t have much of an impact. In low-income, which is most of the population, that’s way above what we expected. That was the issue with the buy now, pay later, and the level of high interest rates. You’re at this clear perspective, right? Getting a lot of money with fixed income. You can just see the levels of delinquency that we’ve reached, right? Of course, in a challenging scenario like this, we’re going to have to review this from an assortment perspective.

We should really consider the more effective price of these items, to not have too much more of the same for these items that we can work with. Of course, the methanol distilled were always a category that were not very well serviced due to falsifications, which is almost a third of the market that accomplishes directly. That is almost one indirectly. We have products for portions, for food, and other things people are going to consume. Maybe you can just look at the results of two companies of beer now in the third quarter, and there is a significant reduction in consumption. Alcohol is a category that has been dropping and advances with GLP-1 pens that are going to also lead to a drop. Also, while the interest rates remain high, you can see the impact grows.

Industry overall looks at our format and says, "Okay, this guy has a lower operational cost, but maybe this reduced levels of discounts." Private label is going to help not only in the items of private label, but really balancing this out. The 60% penetration in the houses. The strength of the brand, and especially the moment where the population is willing to do this, right? We would understand that this would be an additional margin, right? Sergio Leite, he was one of the most experienced professionals in this front. We also bring Layani, a professional with a lot of knowledge and experience in the market with private label. We will have a full team to make this project advance.

We are very convicted that when we look at the Assaí brand as the most valuable brand in Assaí, this provides high credibility. This is where Brazil is an exception, right, when you consider this. We also believe in this movement, not that it is simple or easy. If not, we would not have this penetration rate of 3%, but we believe we have the skills and capacity just as we shifted other paradigms that maybe three years from now we are going to be talking about a high share rate, right? I think this is the moment, right? There are moments where we looked at this and said, "We would consider that there would not be adherence," right? There needs to be major scale, right? You cannot transport products with low added value, right?

If you try to take this product here and take it to see if you just were going to spend on freight and taxes, it’s going to be more expensive, right? That is why even if we do not want to provide details, it is not going to be the same in every region in Brazil. There may be regions where if you do not have suppliers, you are not going to receive unless it is an imported product, right? The objective is not to have a private label full portfolio, but we want to have private labels in certain categories where it can be cheaper compared to the leading brand and also help us with more negotiations in the brands we have today. They can also add, of course, a higher level of margins than what we have today.

We are being very cautious about this project, and we believe it is going to be very interesting. We are going to monitor this closely, and good luck on the project, and thank you for the answers. Thank you, Daniela. The Q&A session is officially ended, and now we will pass the floor on to the company for their final comments. Thank you everyone for being here. Of course, it is a more challenging environment, and the main messages that were transmitted, Assaí is a model or a company that has always been innovating, creating, and continuing this process. It is also compensatory stable from a cash perspective. With this movement, we believe this is going to stabilize as a measure in the next year. Thank you so much, everyone. The earnings call for the third quarter of 2025 at Assaí is officially ended.

The email list of relations is available to answer other questions. Thank you all for participating and have an excellent day.

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