Marcelo Pimentel - CEO:
Rafael Russowsky - CFO and Investor

Relations Director:
Ruben Couto - Santander:
Felipe Rached -

Goldman Sachs:
Danniela - XP:
Andrew Ruben -

Morgan Stanley:
Lucca Biasi - UBS:
Nicolas Larrain - JPMorgan:
Gustavo Fratini - Bank

of America:

Operator: Good morning, everyone, and thank you for waiting. Welcome to GPA's Fourth Quarter of 2024 Earnings Release Video Conference. I would like to highlight that we have simultaneous translation on the platform for those who need it. Simply click on the interpretation button, which is the globe icon on the bottom of the screen and select your preferred language, Portuguese or English. For those who wish to hear the video conference in English, there is an option to mute the original Portuguese audio by clicking mute original audio.

This is being recorded and will be available on the company's IR website, where the full earnings release material can be found. The presentation can also be downloaded via the chat icon. During the company's presentation, all participants' microphones will be disabled. Soon after, we will begin the Q&A session. To post questions, click on the Q&A icon at the bottom of your screen and key in your question to join the queue.

When announced, a request to activate your microphone will appear on the screen and you must enable your microphone to pose the question. We kindly ask that all questions be asked at once. We would like to underscore that the information within this presentation and any statements made during the video conference regarding GPA's business outlook, projection, and operational and financial goals of the company are beliefs and assumptions of the company as information currently available. Forward-looking statements are no guarantees of performance. They involve risks, uncertainties, and assumptions as we're talking about future events and therefore depend on circumstances that may or may not occur.

Investors should understand that general economic conditions, market conditions and other operational factors may affect GPA's future performance and lead to results that differ materially from those expressed in such forward-looking statements. Joining us today are GPA CEO, Marcelo Pimentel; and CFO and Investor Relations Director, Rafael Russowsky. I will now hand it over to Mr. Marcelo Pimentel to begin the presentation.

Marcelo Pimentel: Good morning, everyone.

Thank you for joining our fourth quarter of 2024 earnings conference. This quarter marks the completion of the first three years of our turnaround project, and I am very pleased to announce that we have exceeded our expectations, reaching historic indicators that demonstrate solid operational progress and the evolution of our results. On Slide number 4, you can see the highlights of the period. We achieved on Q4 a historic milestone of 9.5% of adjusted EBITDA margin, the highest level since 2020, driven by an acceleration in same-store sales performance that grew 9.6%, an increase of 4.6 percentage points when compared to the previous quarter, with volume growth as well. Now, notably, Pão de Açúcar and Extra Mercado posted strong performance, growing 10.2% and 10.3% respectively with significant improvement over the previous quarter's result.

Our e-commerce, well, we continue our strong growth trajectory and we reached 16.2% of growth this quarter, reinforcing our leadership both in our own channels and partner platforms 3P. We continue expanding our market share with an increase of 0.6 percentage points in Sao Paulo in self-service market, marking two consecutive years of growth. This is in line with our strategic plan. Our gross margin totaled 27.2%, 0.2 percentage points above Q4 of 2023's result. This shows operational efficiency improvements across our banners and formats.

And finally, a significant 40% reduction in net debt and financial leverage pre-IFRS 16, totaling 1.6 times the EBITDA. Rafael will deep dive into these facts, but it's important to remember that we started from 10.6 times of leverage during Q2 of 2022 when we initiated the turnaround journey of the company. On our next slide, I break down the highlights by strategic pillar. Starting with our top line, we had an outstanding sales performance during Q4. We totaled BRL 5.6 billion in total sales on Q4 and when excluding direct sales from our partner models, we totaled BRL 5.3 billion.

This is a growth of 8.3 percentage points on total stores. Now we have the proximity format growing 14.4 percentage points in total stores, supported by the opening of 59 new stores in the last 12 months. 29 opened only on Q4 of 2024 and that continued the rapid maturity. On Q4 of 2024, well, this clearly demonstrates the operational progress achieved over the last quarters that were driven by our differentiation and complementary strategy across banners and formats. This accuracy became a significant acceleration in same-store sales, even amid high inflation.

This demonstrates the resilience of Pao de Acucar's premium format in addition to the consistent market share gains. Now in same-store sales, I would like to mention, I highlight Pao de Acucar and Extra Mercado. This posted their strongest growth since Q1 '22, both grew in sales and volume with a significant increase in perishables, a highly strategic category that is heavily impacted by inflation. Market share growth, I would like to elaborate a bit more. Now we gained 0.6 percentage points in Sao Paulo's self-service market, consolidating two consecutive years of growth.

Pao de Acucar has accelerated market share capture in the premium segment, while the proximity format has gained 1.6 percentage points vis-a-vis small markets. The smallest markets reinforcing the success of its value proposition delivered to their customers. Now, talking about top line, I would like to talk about the excellent response of Extra when we review assortment and we've seen the different categories. As part of this transformation, we have refurbished 60 stores, 43 during Q4 alone, featuring new internal layouts, facade adjustment, price clustering, and strategic assortment reviews and the results up till the moment have been extremely positive and reassure all of us. These 60 revitalized stores present a 6.7-point post-change sales uplift, confirming the growth and profitability potential of the banner.

Now, customers, our NPS totaled 80 points. This is an increase of 4.2 points vis-a-vis Q4 of 2023 and 14 points vis-a-vis Q4 of 2022, maintaining an excellent level and the evolution in service to our customers. This improvement has been seen in all our banners, but I would like to highlight once again Extra Mercado, which totaled 84 points of NPS. This is an increase of 7.2 points vis-a-vis Q4 of 2023. An example of customer recognition in Extra, we were the most recognized brand in Baixada Santista, a key region where we almost have 30% of our stores.

All of this NPS progress is a result of a number of initiatives, and I would like to talk about the continuous training program of our employees and the retrofit of the stores that reflect better service to our customers regarding price perception, availability of products and store structure. 86 stores have been gone under – have been refurbished across Pao and Extra throughout 2024. Now, in the digital expansion, this is an additional quarter of strong growth, expanding EBITDA margin and positively impacting consolidated margin, evolving continuously, and our leader in e-commerce of food in the digital channel. In our quarter, our revenue grew 16.2% with a penetration of 2.2% of the company's growth, which is a 0.8 percentage point increase year over year. Now, during this quarter, we had Black Friday that is gaining more momentum in the e-commerce food channel.

We had record-breaking sales with 18% better than last year, improving margins and better on time and complete order rates. Now, when we go to Slide 6, we have our EBITDA margin totaling 9.5%, the highest since 2020, in addition to gross margin hit 27.2%. This is a 0.2 percentage point’s improvement from Q4 of 2023. Rafael will talk about our financial performance. Now, in expansion, we opened 29 new stores on Q4, totaling 60 new stores in one year.

I'm talking about 59 proximity stores, 44 Minuto Pao de Acucar, 21 Mini Extra, and 4 new Pao de Acucar Fresh. In addition to a new Pao de Acucar in Campinas in the state of Sao Paulo, we remain focused on expanding premium proximity formats with the Minuto Pao de Acucar banner in Sao Paulo, which is a mature and scalable model with stronger potential in Sao Paulo's dense and verticalized urban regions. Now my last slide, here we have our ESG and social initiatives. Now this is our sixth strategic pillar in order to fight climate change. We had a 6.7 reduction in greenhouse gas emissions in Scope 1 and 2.

This is a result of investments and retrofit and spillages and leaks in companies. Now diversity and inclusion, well, it's 50% of leadership positions. Now in inclusion and diversity promotion, I am happy to announce that we ended Q4 with almost 50% of women in our leadership. We also ended the year with around 59% of leadership positions are heard by Black employees with 51 persons in top management. We ranked number one in the Corporate Racial Equity Index.

This is a result of our intentional initiatives in order to involve in this pillar and I end this chapter. Now I'll talk about the social impact through our partnership against waste. In 2024, we've donated 1,200 tons of food in addition to 850 tons collected from customers, benefiting over 330 social organizations that are partners of the Pao de Acucar Institute. Marcelo Pimentel : We closed the year with 1,100 participations from our employees as volunteers, exceeding our initial target of 700 respondents. I close now my first contributions and I turn the floor over to Rafael who will talk about our numbers.

Rafael Russowsky : Thank you, Marcelo. Good morning, everyone. Starting on Slide number 9, I'd like to show the total revenue which reached BRL 5.6 billion in Q4, a growth of 6.3% in total stores vis-a-vis Q4 of last year, with an emphasis on the proximity format, which is the focus of our expansion plans which showed an increase of 14.4%. This growth reflects a 9.6% increase in same-stores, excluding the calendar effect, as well as the opening of 60 new stores in '24, 59 proximity ones and one Pao de Acucar, 21 of which were proximity stores in Q4. On the other hand, the total result was impacted by the closure of three Pao de Acucar stores and three proximity stores in the quarter in line with our ongoing portfolio optimization process.

I would like also to highlight the impact of the rebalancing of our Aliados format, which despite a drop in sales helped improve profitability. It's worth mentioning that the Aliados format begins 2025 with a fully rebalanced comparison base. In Q4 '24, we recorded a strong sales momentum with a significant increase in same-store growth driven by an increase in volumes and by the growth in average ticket, which reflected inflation levels in the period. This performance clearly shows operating progress made in recent quarters, boosted by the complementarity of our portfolio of banners and formats, which have been consistently gaining share for two years in a row quarter after quarter. In addition to this solid growth, GPA's sales volume increased despite higher inflation with the premium format of the Pao de Acucar banner as a standout.

Pao de Acucar grew 10.2% in same-stores, once again helping the growth shown in the previous quarter. This momentum was driven by the combined effect of volume and average price growth. The proximity format showed same-store growth of 4% with the stores open after 2022 continuing to increase their share with the growth in the two-digit in same-store, showing the high quality of expansion projects and the efficacy of our investment strategy. In addition, it is important to note the significant 1.6 percentage point increase in the market share of this format when compared to larger supermarkets in the Greater Sao Paulo area, according to data from Nielsen. Extra Mercado, our other chain, recorded a same-store increase of 10.3%, the largest increase since we started recording that series in Q1 2022.

That performance reflects an increase in sales volume, especially in the groceries categories, as well as a strong growth in average price of perishables influenced by inflation, as seen also at Pao de Acucar. As Marcelo mentioned, we have made significant progress in the project to review assortment and category management at the Extra Mercado banner. This quarter, we have revamped 43 stores, making a total of 60 stores already revamped under that banner. The impact of those improvements became clear with those stores showing above-average sales growth, directly contributing to the acceleration of performance in the period. Finally, e-commerce continues to stand out, having reached 16% of increase in Q4 and reaching revenues of BRL 625 million.

The footprint of digital sales in total sales was 12.2%, up 0.8 percentage points when compared to the same period of last year. Our performance was especially robust on seasonal dates, especially Black Friday, when we recorded exceptional rates of on-time delivery and complete orders, reflecting once again significant improvement when compared with the previous year. In addition to accelerated fast growth, I would like to reinforce the importance of e-commerce for the company's profitability. Currently, this channel already operates with a double-digit contribution margin, thus contributing to the dilution of fiscal store expenses in a 100% ship from store model. On Slide number 10, we have the profitability momentum measured by gross profit and adjusted EBITDA.

We had yet another quarter of significant advancements with the adjusted EBITDA margin reaching a record level. As shown in the chart above, gross profit reached BRL 1.4 billion in Q4, 2024, with a margin of 27.2%, accounting for an increase of 0.2% when compared to the same period of 2023. The chart also highlights the moment when we started the company's turnaround project, showing clearly the sustainability of continuous gains achieved since then. We remain focused on the evolution of profitability, driven by projects started in 2023. One of the main highlights of these results is the Extra Mercado banner, which is already beginning to reflect in its profitability line the progress of the assortment review and category management, which began in the second quarter of last year.

In part 2025, we have a solid pipeline of strategic initiatives, including reducing losses, improving commercial margins, growing retail media and optimizing the store network. These actions reinforce our commitment to the continuous evolution of profits, always in search of sustainable long-term results. In the chart below, we can see the adjusted EBITDA totaled BRL 498 million with a margin of 9.5%, accounting for a significant increase of 1.5% vis-a-vis Q4 2023. It is also worth mentioning the robust growth of 25.3% in adjusted EBITDA over the previous year, reflecting the effectiveness of our initiatives aimed at improving profitability and operating efficiency. Adjusted EBITDA recorded in Q4 2024 reached the highest level since 2020 and, as shown in the chart, marked the ninth consecutive quarter of evolution.

In other words, since the start of the turnaround, we have managed to implement continuous gains in EBITDA margin quarter after quarter. Moving on to Slide number 11, with the financial performance of the net income. As shown in the chart, in Q4 2024, we recorded a continuing net loss of BRL 737 million this quarter. In the quarter, we had impacts on other operating income and expenses, especially from non-recurring items that helped increase the loss. I'll go through those effects to give you greater clarity on the nature of the numbers.

We classified an impact of BRL 563 million related to specific topics, of which BRL 272 million related to the topics we call structuring for GPA and BRL 291 million to exceptional topics. With regard to structural issues, the main impact of BRL 150 million has to do with the impairment of a group of stores adjusting their recoverable value as they are not strategic assets for the company. In addition, we made tax settlements in the quarter, which totaled BRL 80 million. As already shown in various interactions with the market, we continue to be active in the search for solutions for contingencies, also making progress on agreements that generate benefits such as discounts on interest and fines, better payment terms, and the use of credits to settle obligations. Lastly, we started Q4 '24 with a project to restructure the administrative area with a focus on efficiency gains.

The impact of provision terminations was BRL 43 million, considering the total project, and we predict an annualized reduction in expenses of about BRL 100 million. The other impacts on the net loss and continuing operations are related to exceptional events, including the provision for probable loss of BRL 191 million related to the INSS discussion and the recomposition of the provision for labor lawsuits to the tune of BRL 100 million. The INSS contingency provision originates from a thesis adopted by the market regarding the non-levy of employers' INSS on benefits. At the end of '24, the STJ, the court, judged this issue or ruled unfavorable for the taxpayer and considering the merits of this decision we have reclassified our loss from possible to probable in accordance with our policies. It is important to note that in our case this discussion is still at the admin level and that any cash disbursement will only occur after the final ruling, which historically can take between five to eight years and also there is still the possibility of a settlement to reduce those amounts.

In addition, we made the recomposition of the provision for labor lawsuits, updating the estimates of disbursement and the assessment of the probability of loss based on a more detailed analysis of the history of lawsuits. Disbursements related to this revision are expected over the next few years. Finally, in the next slide, we have the management cash flow for the last 12 months, a period in which we generated free operating cash flow of BRL 256 million. This number was driven by a significant improvement in the adjusted EBITDA pre-IFRS 16, which reached BRL 811 million, recording a significant growth of 85% when compared to 2023. In addition, we had an efficient management of merchandise working capital and a CapEx of BRL 674 million, down BRL 52 million from the previous year.

Despite the positive evolution of the main operating lines, the generation of free operating cash showed a reduction of BRL 50 million compared to '23, impacted exclusively by working capital needs for non-merchandise due to a lower monetization of ICMS credits, returning to more normal levels. Cash flow after sale of assets reached BRL 1.5 billion in the 12-month period impacted mainly by the sale of non-core assets and by the following with an evolution increase of BRL 963 million when compared to 2023. Lastly, I'd like to highlight the BRL 140 million improvement in net financial costs, coming mainly from a significant drop in our gross debt. On Slide 13, we go into more detail into the drop in our debt, as shown in the chart. Net debt fell by BRL 911 million between the fourth quarter of '23 and the fourth quarter of '24, from BRL 2.2 billion, down to BRL 1.3 billion.

The result reflects the positive effects mentioned above, including the generation of BRL 256 million in operating free cash flow, the efficient execution of the sale of non-core assets, and the funds raised in the following. The reduction in the financial leverage was even more significant, considering pre-IFRS 16 adjusted EBITDA numbers our level. Leverage fell from five times in Q4 '23 to 1.6 times in Q4 2024. This progress reinforces our commitment to reducing debt levels and building a more robust and balanced capital structure, the result of a combination of disciplined financial management and the continuous evolution of operating performance. This concludes our presentation of financial numbers, and I now open the floor for Q&A.

Operator: We'll now start the Q&A session. Once again to ask a question, you have to click on the Q&A icon at the bottom part of your Zoom screen and type in your question to join the queue. When announced, a prompt to activate your mic will appear on the screen and you can then unmute your mic to ask questions. We kindly ask you that you post questions all at once. First question then from Ruben Couto from Santander.

Ruben, we'll now unmute your mic so that you can go on with your question. You may go ahead, sir. Ruben Couto : Good morning, Pimentel and others. To Rafael's last point about the company's cash generation and leverage level. For 2025, when we look forward to that operating cash generation vis-a-vis the EBITDA recorded in 2024, we see a low conversion level, especially looking at the company's track record and some of your peers in the market.

What do you envision in terms of evolution for those conversion numbers, those cash conversion numbers throughout 2025? I would believe there is still some room for margin expansion, but any other lever you could see coming into place to improve cash conversion to continue to decrease leverage? Thank you. Rafael Russowsky : Ruben, just to your point, when we talk about cash conversion, we're talking about EBITDA and operating cash. So we're talking about, if you look back on Page 13 of our release, we're talking about a cash conversion moving from BRL 811 million EBITDA to BRL 930 million in terms of operating cash flow. So the operating cash conversion is a very robust one, of course, when you subtract from that number CapEx investments, you still have a conversion which is still low. But remember that CapEx is, at the end of the day, helping open new stores, helping to improve our IT facilities, and that with time will position us in a place of more efficiency, also growth or faster growth because of new stores.

As you saw, the growth coming from new stores, especially under the Minuto banner have been generating. We see an additional sales level, which is quite significant for the company and we also believe that with those investments, and this has been discussed with the market sometimes, investments of about 3% of revenue, that is expected to decrease as we improve our IT facilities and we make other structural investments for the company. With all of that combined, we expect to be more efficient. So I believe that throughout 2025, we should see significant improvements on that front, of course, our objective is to continue to increase EBITDA, and we have a CapEx, which should remain balanced, give or take, at the same level we had last year. So that dynamics, and with an improvement in sales and more efficiency throughout because of those investments in the past two years, with all of that combined, we expect once again to continue to increase EBITDA, to reduce considerably CapEx, and thus increase our cash conversion taking into account investments already made.

Operator: Now our next question from Felipe Rached from Goldman Sachs. Felipe, we will unmute your mic so you can pose your question, so you may proceed. Felipe Rached : So, thank you for taking my question. I would like to deep dive on earnings improvement. This quarter, you've talked about SG&A, but do you see any opportunities in gross margin? In your release, you spoke about a number of levers that you've exploited on this front.

We're talking about mixed change, retail media, your relationship with suppliers. I would like to know if there is more to do on the operational part, especially on the breakage side, and assortment. And if you could give us more color regarding how relevant retail media is already, and what is its size potential? This would be extremely interesting.

Marcelo Pimentel: Thank you, Felipe. So let's start.

This is an excellent question that allows us to elaborate a bit more on what we have been doing. We have to remember that 2023, we carried out the first exercise, starting with Pao de Acucar, that would work on three points. One would be store clusterization, category management program, and the clusterization in terms of store pricing, and all of this combination provided the improvement that we started realizing as of the second semester, and especially on Q4 of 2023 and throughout the entire 2024 in the Pao de Acucar banner. Now, we also carried out the same thing in 2024 for Mercado Extra banner, and also the proximity banners, and then we started to realize a margin improvement as of the second semester and the last quarter of 2024. We now expect throughout 2025 to see this benefit, and here the expectation is of an improvement.

Point number two here, it is regarding our relationship with the industry mainly during this current moment. With all the macroeconomic context, Pao de Acucar has a great opportunity precisely because of the assertivity of the strategy adopted in 2022 to focus on the premium audience and to focus even more in the state of Sao Paulo. Now, this concentration and our focus -- this accounts for 90% of our revenue, and this is a discretionary public that is still resilient to the economic moment. This was not only demonstrated during Q4 of 2024, but we have already realized in the turnaround of the year a continuous and a strong retail performance. Now, all of this, well, we can see that our customer wants assortment, quality, fresh products, and we believe that there will be no slowdown.

Now, this is why the industry wants to work with us, they want to be close to us, and they want to have access to our customers. The point number three that is correct was breakage, availability of products. During 2024, we saw an improvement, although it was slight in our breakage performance, but we did, but we were short from what we expected, and we have a major ambition for 2025 to see the results of everything that was done in 2024. And here, I'm mainly speaking about the intelligence of supply chain perishables in our stores that this is where most of our breakages are concentrated. The intelligence of perishables, how I sort things correctly in the stores is very important.

The second impact on breakage, which is a pilot project, is a refrigerated transportation of fruit, vegetables to our stores, and this, of course, protects our quality of product, reducing the breakage, and we are carrying out this test in a number of stores. If it is successful, we will deploy this in the other stores. Now, at last, you spoke about retail media, and here we are extremely happy with the results of retail media. We doubled the revenue in '24 vis-a-vis '23, and we doubled base on the initial stage of this project. Up till this moment, the retail media project was focused on our sales through the sale of physical spades and televisions and spaces and parking lots and equipment of all our brick-and-mortar stores, but now we are changing toward the main part of the retail media that is data transaction together with the industry, both to promote linking purchase behavior, CRM, and retail media as well as now we are initiating the hyper-personalization project or hyper-customization project and the industry will be able to speak to the individual about products and items, be it specific or correlated and this will be much more assertive for the industry.

This is why the investment gives us better return than traditional media, but this is relevant for the customer. I speak to the customer for something that really matters to them. In retail media, I am extremely happy with what we saw in 2024. We want to double the sales of a product that has 80% margin, and now focusing on what really will increase this result exponentially. And we are extremely reassured with the future, and this will contribute with the continuous improvement of our gross margin.

Operator: Now, our next question from Danniela from XP. Dani, we will unmute your microphone so you can pose your question. Dani, you may go on.

Danniela Eiger: I would like to elaborate on growth dynamics, especially same-stores. Pao's[ph] acceleration really draws our attention, but what about proximity? It hasn't followed this trajectory or this trend, and it has been slightly below the others during the last quarter, especially Extra Mercado.

So, you had a same-store flat during Q4. I would like to better understand how we can see this trend regarding the formats from here on. If there is something else regarding the proximity format?

Marcelo Pimentel: The answer is simple and you are going to understand it once I explain it. What is the difference, mainly during Q4, well we have a seasonality peak, which is high in supermarket stores, and you've seen the result, the growth of same-store sales, Pao de Acucar Extra, practically the same, and also in e-commerce. And why does this happen? Because during Q4, we have Black Friday and Christmas, and we are facing a reality of summer with temperatures above average, which has given us excellent performance.

And this is for supermarket and e-commerce stores, where we have space to carry out sales promotions. Now, when we speak about proximity stores, I believe we should expect a stable and predictable behavior than that of the supermarkets, because in a proximity store, we're talking here about a store between 200 and 250 square meters. You do not have physical space to announce seasonable sales. So the behavior is stable. Something important to highlight here is that despite the increase in same-stores, although it's in mid-digits, something that we consider a positive result, the margin of the stores has been growing constantly, precisely because of what I just underscored.

Now, in the past, until the last quarter of 2024, we would deal with promotional actions, promotional calendars of Mini Minuto and Extra, very similar to what we would do in the supermarkets. We had a weekly price activation during the last quarter of 2024. We changed the strategy, and now we have changes every fortnight, and this did not change the sale behavior of the stores. So convenience was much more important for the customers than promotions that would carry out every week. And now, as of January, we have changed the strategy toward monthly changes.

So these stores, on average, operate with between 3 and 5 percentage points above the gross margin of a supermarket. So the bottom line of this operation continues improving, and it is sounder, and it is closer to EBITDA results from the Pao de Acucar banner. I do understand your concern. This is an expected performance on our side, and within our expectations, we are highly satisfied with this, and we do understand that this is a behavior that exists because of the seasonality that we see in supermarkets. Now, my last point here would be, let's remember that our focus of Minuto Pao de Acucar is in the city of Sao Paulo.

What takes place in the seasonality is that many people from the city of Sao Paulo leave the city because it's vacation period, and they go to the coast, and you have a sales boom in the coast and lower sales in the city. You can see this in the figures. So we are highly satisfied with these figures because this is something natural. And just an add-on in addition to everything that Marcelo has said, we are very comfortable and we are convinced with the adherence of this format for our customers. We've gained 1.6 percentage points of market share, and this demonstrates that this business has demand.

People like it and we are deploying it, and it is underway, especially in the city of Sao Paulo, where we are attracting customers. These customers are also coming from other formats, other brands, the competition, and we have been able to grow. Aligned with what Marcelo said, it is linear growth, but we are gaining market share, which is extremely important, and this shows that our format matches our customers' needs. Thank you very much.

Operator: Our next question from Andrew Ruben from Morgan Stanley.

We're now unmute your mic, sir, you may carry on.

Andrew Ruben: Hoping you could dig in a bit more on e-commerce and the release you mentioned, growth in 1P and 3P. I'm curious in the trends you're seeing between the two channels, and on contribution margins, you mentioned improvements as well. I'm curious what some of those drivers were and what you would need to see e-commerce margins either at or above the consolidated level. Very helpful.

Thank you.

Marcelo Pimentel: Thank you, Andrew, for your question. As for e-commerce, it has been a case of success as we turned the company around. Just as a quick recap to remember how we got here. So this was a business that had 8% of penetration in retail as a whole, and it used to work with EBITDA margins close to zero, two to three tops.

Since then, we have made important decisions and bold ones, if I may, so that the business could finally prosper. First, we closed James, a project which was a last mile project that sadly had a contribution margin which was negative. And more importantly, in mid-'23, we made the brave decision of closing down our DC, our distribution center for e-commerce and transfer all the operation to stores. So today, 100% of our e-commerce operations happen through that method called ship from store. With that, we were able to improve a series of performance indicators.

Number one, we got closer to clients and customers, and we reduced delivery times. From then on, we moved from a performance of 40% for zero of orders delivered on the same day to a number over 75% today, 75% of orders being delivered on the same day. Being closer to customers, we also reduced logistics costs, and with that, we were also able to bring the costs down to customers and also to GPA. Number three, as we closed our distribution center, we also reduced inventory levels, which was key to reduce inventory overall, over BRL 180 million, which were freed from the company's cash during the period. And lastly, and also very important, we introduced the sales of perishables.

Today and in no time, 35% of all digital sales happen around perishables, which are more profitable to us. And this is what sets us apart in relation to other peers in the market today. With that, Andrew, we were able to completely change the business's performance. First of all, stores engagement levels were great. The team did understand they could add sales through that channel and today we have moved from 8% penetration levels to above 12% of penetration of the total sales of the company and we moved from a EBITDA level -- EBITDA level of 1% to 2% margin to a margin today, which is double digit.

As for the future, looking ahead, today, we have a split between 1P and 3P to the tune of 45% 1P and 55% 3P. As we see it, we need to be across all platforms. We are a number one food retail at Mercado Livre, iFood, Rappi and all the others where we partner. Customers understand, they know they can find us there, but our ambition is to continue to grow our 1P base because that helps us in our ecosystem of taking care of the customer internally through data and as a consequence that also positively impacts retail media and total margin. Number three, just as relevant is that our premium clients, our premium customers whose basis has been growing, it is a multi-channel customer.

They want to be able to interact with Pao de Acucar whichever way they choose. They can go to the supermarket on the weekend. During the week, they would stop by at the Minuto Pao de Acucar and they also want to be able to buy online. So the online arm plays an important role in retaining those customers that go beyond physical sales. But our ambition, once again, is to continue to grow our penetration online as a total of the company.

That is an integral part of our strategic plans for 2025 through 2027 and we'll continue to work hard to achieve that.

Operator: Now let's move on to our next question from Lucca Biasi from UBS. We'll now unmute your mic so that you can ask your question. You may carry on, sir.

Lucca Biasi: Thank you for taking my questions.

I have two questions. Number one, about market share. As we discuss supermarkets competing with other formats and headlines saying that one of your main competitors are now trying to renegotiate their debt, who do you think you're stealing share from? And is there room to grow share in Sao Paulo still? And about gross margins, in relation to previous quarters of 2024, your gross margin expansion slowed down in the fourth quarter. I'd like to understand what where the drivers for that. You usually do more promotions in the end of the year, or are there any other factors involved in that drop in gross margins? Thank you.

Marcelo Pimentel: Well, thank you, Lucca. As for growth in market share in Sao Paulo, there are a couple of things to be said about that. And we are quite excited with what we've seen happen with the company. That market share is growing not because of one single driver. Let's start looking at Pao de Acucar.

Pao de Acucar has been gaining customer base more and more, the customers that we call valuable or premium customers. And with that, we are able to see also a gain in the city of Sao Paulo for premium supermarkets to the tune of 1.5% plus. Quite relevant. We see that on a weekly basis. We see weekly gains in market share for that premium segment.

In other words, our value proposition is quite complete, quite thorough. What we see today in the competition for premium customers, and I'd like to say several of those competitors are extremely competent. They are competent, but they are not complete. So you have players that are extremely strong in perishables, especially fruits and vegetables. You also see players who are strong more in the segment of wines and cheeses.

You see others who do a great job in overall grocery items but you do not see our value proposition, where in one single space, customers have access to the complete basket from quality perishables to wines, bakery, pastries, coffee, olive oils, and basic grocery items, including toiletries. That complete offer can only be found at Pao de Acucar. That's why as we improve that service, we see our customer base grow in the premium segment and that is clearly shown in the numbers with a gain in market share. Second item was our efficiency as we approach our proximity model because it complements Pao de Acucar. It does not compete, but complements Pao de Acucar.

So proximity helps customers in big cities and we're talking specifically about Sao Paulo. People who live in apartments and Sao Paulo traffic is increasingly worse. So people cannot walk to a store within five minutes. So the difference on Minuto Pao de Acucar is that Minuto Pao de Acucar are not a name post-buy. They are a convenience store.

I can buy anything out of categories that I could find in a Pao de Acucar, obviously with a smaller assortment. But if I choose to go to a larger supermarket, if I want to avoid going to Pao de Acucar, I can do that as well. I have, as I said, perishables, fruits and vegetables, basic grocery items, and so on and so forth and that has been well accepted by a customer, which is slightly different. What we've seen so far, and those of you here who live in Sao Paulo know that we see a growth in large apartment buildings all across town and according to our surveys, 70% -- 70% of all those homes are apartments of small studios, 50 square meters or less. People who are going to be using public transportation, people who have small space to store items so they cannot make large purchases, and they will walk more, use public transportation more as I said, and buy more frequently, but buy fewer items, that's what we see.

And because of that, we've seen a growth in our customer base. In other words, we see the arrival of new customers, customers we were not accessing before. Number three, to your point, in terms of the mix with promotions and margins vis-a-vis margins, what we saw happen in the last quarter, as you've seen in our numbers was a success case linked to a strong seasonality effect. We had a very successful Black Friday and a very successful Christmas period. So within this context, as I mentioned in my opening remarks, all in Black Friday alone, on Black Friday alone, we grew 18%, one-eighth, vis-a-vis the previous year.

So it does show in the margins. So, of course, it's smaller when we look at normal quarters. It has a higher weight. Seasonality plays an important role, has a higher weight, and because of that, you have a limit in terms of how much you can expand the margin in the quarter and this was especially impacted by a mix of categories because the weather is too warm, high temperatures. We see a higher penetration in the area of beverages, both alcoholic and non-alcoholic.

Those sales have increased. And, of course, margins for those categories are smaller when compared to fruits and vegetables or coffee, right? So it is a natural dynamic. But as I mentioned before, when I answered a previous question from Felipe, we continue to see huge opportunities there to grow gross margins as we extend our gains and as we work to reduce breakages, to improve profitability lines across other categories. And I'd like to close by talking about the Extra chain, which has been also a success story. In the past, questions were asked of me about the future of Extra, our retail chain.

We have been working hard to recover that chain. It is an extremely valuable brand, banner for us. People like Extra, especially on the coast of the city of Sao Paulo. And with the assortment, adjustment, the revamping of stores, we've been watching a significant increase in profitability for that line of business. It has completely changed the profitability of the chain.

That allows us to continue catering to a different customer base, which is complementary to the final result of the company. One final point about margin, which is important to mention, is the following. As you know, we have been focused on the expansion of the premium segment. Premium, of course, does offer higher margins, higher than what you see. New stores have even higher averages than the company's average, of course, the overall margin is impacted by Extra.

But, of course, Extra brings in lower gross margins than the premium. As we expand the premium segment, the premium segment becomes more representative of the whole overall sales. Automatically, you will see a slight increase in margins because of that. It's a simple mechanics as we change focus towards the expansion of the premium segment.

Operator: Our next question is Nicolas Larrain from JPMorgan.

Okay, Nicolas, we are going to unmute your microphone so you can pose your questions. So now you may proceed. Nicolas Larrain : I actually have two questions. One is regarding your sales momentum. Could you talk about the evolution of the sales growth during Q4? And could you elaborate on the January performance, January and February? And my second question is connected to private label.

We see a strong penetration within the company. So what is your view? And in terms of future penetration, are you focusing significantly on this or do you believe that the level that you reached in 2022 is enough?

Marcelo Pimentel: Okay, thank you, Nicolas. Sales during Q4, we had an excellent October, which was strong. November didn't start as strong as October because of the Black Friday expectation. The first fortnight was a bit weaker.

And then we had an extremely strong fortnight because of Black Friday and this made a difference and this is why we grew in sales and December was excellent. Once again, we started a little bit slow during the first 10 days, the first week. But then this grew exponentially. These were excellent months. And without giving you any type of guidance, of course, for us, January continued strong.

We continue seeing an extremely strong retail market. The assortment is being sold. We don't depend on a category. We're selling our entire assortment, which is a benefit for our margin and we expect to see this and this continues in February. So we're extremely reassured with the beginning of this year.

Now, regarding our private label, this is the company's strategic project. This year, we have 11 strategic projects, and private label is one of them. We have talked a lot. And you will see throughout the year, the progress of our private label premium strategy, especially when we think about Pao de Acucar. The private label strategy is for the entry price tiers and mainstream price with a quality of brand and we have been enjoying the benefit of having this brand to have more loyal customers.

But we believe that there is a major opportunity to make progress. And our private label strategy and Pao de Acucar introducing premium products within our value proposition and here we are already making progress. This started during the second semester last year and throughout 2025, you will see in the Pao de Acucar stores a new private label premium tier that will compete with the best brands of the market and we have also carried out blind tests. We've done a lot of research and this is why we don't want to launch it anyway. We want to guarantee that it is a product above average.

So when the client takes this product home and there is an important factor because you're taking the brand to your home, we want the customer to be connected to what really means quality. So I hope that in brief, you consume our premium private label that you will be able to find in the Pao de Acucar supermarket. And with this, we want to expand the private label within our mix. We want an expansion. Thank you very much.

Operator: Now our next question Gustavo Fratini from Bank of America. Gustavo, we will unmute your microphone so you can pose your question. Gustavo, please, you may proceed. Gustavo Fratini : On our side, well, when we see the contingency figures, you are carrying out an interesting effort. We're seeing a strong drop.

When we compare '24 to '23, we have the ICMS contingency and INSS contingency, a line that draws an attention, that grows these fiscal fees, the CPMF, these taxes. I would like to know what the discussions have been like and if there are any expectations in terms of timing or cash disbursement when we think about this.

Marcelo Pimentel: Gustavo. Contingencies. Well, this is a matter that is current.

We have a contingency of the size of the company, of course, this is inheritance of companies that we exited in the past, and this is part of our responsibility, and we have to try to find solutions the best way possible. We have ICMS because of two major transactions. One was in April of 2024. That was the Sao Paulo agreement. We reduced BRL 3.5 billion in contingencies in these transactions.

Three, we paid out almost BRL 800 million, and we're going to pay this throughout 10 years. This is a very good agreement that was offered by the State of Sao Paulo to all the taxpayers, and, of course, we saw this opportunity, and we negotiated together with the State and with the General Prosecutor's Office, and this has benefited us and we've also announced an agreement with the State of Bahia. The contingencies were BRL 100 million that were eliminated through an agreement. We received an extremely significant discount and a payout -- a payout condition which was favorable to us. This ICMS, this has helped us to lower contingencies.

Now when we talk about PIS, COFINS taxes, we are talking about BRL 6 billion in PIS, COFINS contingencies connected to market thesis. And when I talk about market thesis, I'm talking about the retail sector. These are two major thesis that we have within this contingency. The bonus thesis and essential inputs bonus is because we have trade agreements with the suppliers. They do, they recompose their margin according to the volume sales, the position on the shelves.

They pay us a bonus and because of a contract and due to accounting points, we see this as a reduction. So, PIS, COFINS is charged on these values. We have essential inputs. There is a law that allows me to attain credit or payments of suppliers that lend products that I buy that are essential inputs in to continue my operation. These are the major two groups that I have here.

It is important to mention that these two groups are relatively new thesis. They didn't start a long period ago. The entire retail industry uses this thesis. All the companies that work in this industry use these thesis and these thesis are in the management instance. This is important.

There is a ruling for an industry in case of essential inputs that was favourable and we do not have any rulings regarding the PIS, COFINS thesis for bonus. In the higher instances, we are talking about sound instances according to our tax consultants and regardless of being sound thesis. They are in accordance to what we see in justice and it will take some time to see them, to see what happens. This is the core of the matter. So, what have we been doing and this is what you have been seeing throughout the past quarters in our accounts.

We have spent time and energy to find transactions that can reduce, eliminate or mitigate the risks of these contingencies. You saw the agreement of Sao Paulo, the agreement we held with Bahia and we are also focusing on other potential agreements. But I will stop here because once again, these are initial efforts and probably I will provide you more information during the upcoming quarters. But I would like to clarify that, yes, we are strongly focusing on trying to find solution to these matters. Thank you very much.

Operator: The Q&A session has come to an end. And now we would like to hand it over to Marcelo Pimentel for his final remarks. Marcelo Pimentel : Well, thank you, all of you, for participating in our earnings result call. I end this cycle with the sensation of doing my job and I would like to thank the entire team of GPA for everything they have done. I'm very thankful to you for delivering these three first years.

We've started 2025 accelerating as a new company, better structured and better prepared to continue evolving and growing in a sustainable and aware fashion. Thank you very much to all of you, and have a very good day.

Operator: We have brought our conference call to an end. Our IR department is available to answer any further questions. We would like to thank all participants and have a very good day.