Americanas SA

BOVESPA:AMER3

Earnings Call Transcript

[Operator]

Good afternoon, and thank you for waiting. Welcome to the B2W - Companhia Digital Conference Call to talk about the Earnings Result of the First Quarter of 2018. Today with us, we have Mr. Fabio Abrate, CFO and Investor Relation. Also from B2W, Mr. Carlos Padilha, CFO and Investor Relations Officer from Lojas Americanas. To follow our conference call, we suggest you to view the slides that are available at ir.b2w.digital. We would like to inform you that we are recording the event. [Operator Instructions] The replay of this event will be available after its closing for 1 week.

Before we proceed, we would like to clarify that forward-looking statements made during this conference call regarding the business process of B2W's projections, operational and financial targets are assumptions and beliefs of the company's board as well as available information. Such considerations are no guarantee of performance because we're talking about future events, and they involve risks, uncertainties and assumptions and they depend on circumstances that may or may not take place. Investors must understand that general economic conditions and industry conditions and other operating factors can affect the future performance of B2W Digital and lead to results that materially differ from those expressed in the forward-looking statements.

Now we would like to give the floor to our speaker that will start the presentation. Mr. Fabio Abrate, you may proceed.

[Fabio Abrate, executive]

Good afternoon, ladies and gentlemen. I thank everybody for their participation in our conference call. First and foremost, I would like to wish a Happy Mother's Day that will be celebrated on Sunday.

And now we will start our message to -- the message of this quarter ending 2017, the strategic plan of 3 years of 2017 to 2019, the company initiatives of 2018, our focus on accelerating the total GMV through a hybrid model of digital platform, 1P plus 3P plus services, with the continued growth of the Marketplace.

As a result of these actions the first quarter of 2018, we covered the growth of total GMV. We had a gain of market share and continued drop of cash consumption. The Marketplace continues developing itself very quickly with only 4 years of operation. We have reached the GMV of BRL 5.2 billion in the past 2 months.

This is a growth of 100%. And now the Marketplace share in the total GMV was 46.4% during the first quarter of 2018 and will represent over 50% in 2018. As a result of the evolution of its business model, the company presented a significant progress in the cash generation trajectory, reducing BRL 668 million in cash consumption during the first quarter of 2018, which totaled BRL 477 million. This is a drop of 58% vis-a-vis the BRL 1.1 billion that were registered during the first quarter of 2017.

Now in this sense, the company will continue its trajectory to generate free cash in the short term. Very important to turn B2W into a self-sustainable company.

Another highlight of the quarter was the creation of LET'S, a management platform that is shared -- and it shares logistic and distribution assets of B2W and Lojas Americanas. LET'S is building a flexible model of Fulfillment -- flexible Fulfillment platform to maximize the competencies of each one of the companies in order to capture all the opportunities of a multi-platform operation. In this sense, a number of initiatives are underway, including the acceleration of important fronts of O2O, online to offline and drop-off [ Lojas ].

And in April of 2018, we carried out a soft launch of AME DIGITAL, a payment digital platform that will revolutionize how people deal with money. This new B2W business is an IF initiative, innovation of the future, that wants to create and accelerate disruptive businesses. AME will be a part that is very important area of the B2W consolidation process as a digital platform that connects people, business, products and services, always aiming at better servicing the customers and to create value to our shareholders.

Now when we go to Slide 3, we will comment the main highlights of the first quarter of 2018. The growth of the company's GMV was 24.1%, vis-a-vis 11% of growth of the market according to the e-Bit. The market share of B2W has expanded 2.8 percentage points, going from 23.7% during the first quarter of 2017 to 26.5% during the first quarter of 2018.

Now the Marketplace GMV registered BRL 1.4 billion. This is an increase of 86.5% and totaling 46.4% of total GMV shares.

Now the B2W Digital platform has attracted more customers and merchants, so throughout the first quarter, we've connected over 2,400 sellers, and this is a new record.

B2W deliver a proprietary platform of B2W that operates and controls the deliveries of the Marketplace, connected 2,800 sellers during the quarter and already services 7,700 sellers and represents over 63% of the company's sellers' base.

Now Slide #4. We would like to highlight the evolution of cash consumption. During the first quarter, the company dropped cash consumption in approximately BRL 669 million versus the first quarter of 2017. This is the lowest cash consumption during the first quarter in the past 5 years.

In order to capture all of the effects, cash generation is measured by the variation of the net debt compared to the past quarter, always disregarding the operational resources that are a result of an increase of capital.

Now to Slide #5. We would like to highlight the quick development of the Marketplace. During the first quarter, the Marketplace registered a growth of 86.5%, totaling a GMV of BRL 1.4 billion and a share of 46.4% of the total GMV.

Now in the period, we have connected over 2,400 new sellers. We started with a base of 9,700 sellers in December 2017 to 12,100 sellers in March of 2018. The sellers' base increased 2.4x when we compare the first quarter of 2017 when we had 5,000 sellers and the first quarter of 2018 when we ended with 12,100 sellers.

Now the B2W Marketplace assortment registered a growth of 82%. We started with a base of 2.7 million of items during the first quarter of last year to 4.9 million items at the end of the first quarter of 2018.

On Slide 6, we would like to highlight the realization of Seller Day 2018. This event during the third edition had a participation of over 1,500 participants including sellers, suppliers and strategic partners. Aiming at engaging and developing our sellers, the event lasted 12 hours and had 4 simultaneous stages. In addition to this, during the Seller Day, we announced novelties for the year 2018 like Buy Box Split and the availability of the distribution center of Itapevi in São Paulo for Fulfillment Marketplace.

In August, we will have a second edition that will be even bigger of this event. We will have the presence of over 3,000 participants and Black Friday and the events at the end of the year as our principal focus.

Now when we see Slide 7, we would like to highlight the availability of the Itapevi distribution center for Marketplace sellers. This DC has 105,000 square meters and a capacity to service 100,000 orders a day with a deadline of shipping in 1 day tops. The Fulfillment service will not be charged until the end of 2018.

On Slide 8, we would like to highlight the rapid evolution of B2W Deliver, a platform that operates and controls deliveries for B2W Marketplace. This service that was launched in March of 2017 has 7,700 sellers connected, and this represents 64% of the total seller base.

At the end of 2017, B2W Delivery was integrated to the [ Prime Fidelity ] program, allowing sellers to sell their products to our member customers of the program with rapid delivery, high levels of services and free shipment.

This way, the items available in the Prime loyalty program started at 150 exclusive items and over 1 million items between the first quarter and the third quarter.

On Slide 9, we will talk about the first option in the B2W Services for delivery, the Drop Off store. Currently, sellers connected to B2W Deliver have 3 types of services: option 1, fulfillment, that is storage plus delivery; two, pickup that is you would withdraw the product from the DC of the seller and then we deliver; and drop-off hub is when the seller delivers in one of the direct hubs and we're responsible for delivery. Until the end of this year, B2W Delivery will make available a new model of order collection for sellers of the B2W Marketplace that will also post their products in Lojas Americanas.

Now on Slide 10, we will talk about LET'S. This is the shared management platform of logistics, assets and distribution assets of B2W and Lojas Americanas.

LET'S is building a flexible Fulfillment model with the objective to maximize the competencies of each one of the companies to capture all the opportunities of the multi-platform operation. Now in this sense, a number of initiatives are underway, including the acceleration of important front of O2O, online to offline.

We have Click and Collect. Now this option, Click and Collect, is available in 400 Lojas Americas to deliver products of 1P and will be expanded to 800 stores until the end of the year, including the assortment of connected sellers to B2W Delivery. This way, the model will be the only Click and Collect operation that is present in all the states of Brazil.

Another initiative for each store, 1 seller. The initiative enables any physical store, the upseller in the Marketplace of B2W with the withdrawal of the product with the inventory of the store in 1 hour after you buy it online.

Throughout 2018, all the 1,320 Lojas Americanas and in addition to the ones that will be inaugurated until the end of the year will be connected to this program. It's important to remind you that at the end of last year, Lojas Americanas was connected to the B2W Marketplace, making their products available to deliver them in the states of Rio, São Paulo and Rio de Janiero. Until the end of the year, the deliveries will be brought into all the states of Brazil.

On Slide 11, we would like to highlight that B2W is still recognized as the best service to customers. America may -- won an award, e-Bit and is the dearest diamond store.

Now regarding the service indexes. During 1P, our average grade is 7 and our competition have 5. Now our Marketplace was graded with a 6 while Marketplace of the competition was assessed in 4.7.

We would like to highlight that the grade of our Marketplace has evolved. There is a gap in service level regarding the assessment of our direct sales. And we understand that this is a great opportunity for improvement and service offers to sellers so that they can improve their operation and can also have better service levels to our customers. In this sense, we reiterate that B2W delivers and continues growing and were contributing to having much better service levels in the 3P.

On Slide 12, we would like to highlight the soft launch of AME Digital. This is the digital payment account that will revolutionize how people deal with money. Initially, the AME client can buy at Americanas.com with a lot of benefits and also transfer and receive resources.

Everything is very practical, modern and safe. This new B2W business will have a launching roadmap for new services and new functionalities throughout the year 2018.

Now AME Digital is initiative of IF, innovation and future, and its mission is to create and accelerate disruptive businesses.

And at last, I would like to thank the dedication of all the associates that are part of the best digital team of Latin America. We would also like to thank our suppliers for the partnership, our sellers of the Marketplace for choosing our platform, our shareholders for the trust and mainly to our customers for their preference.

[indiscernible] comments related to our performance in the first quarter of 2018.

Now I would like to open the session for Q&A so that we can enlighten any essential questions. For all those who would like the opportunity to participate, kindly be brief on your comments.

[Operator]

[Operator Instructions] The first question comes from Fábio Monteiro, BTG.

[Fábio Monteiro, analyst]

There's a lot to explore in terms of results. But I would like to focus initially on what caught my attention, apart from the operation in itself, in the growth of GMV. But what caught my attention was what you announced in terms of like -- where the Lojas Americanas and on the source, which is a very important option for the seller, and I was not expecting it to happen so soon, and also the initiative. But I wanted to understand that you explained some good effects for the customers. Smaller time, shorter time, consumer experience is improving. And I would like to understand if you already imagined a roll-out this year in terms of rate reductions? Could you please give us an idea of the magnitude of this cost reduction and also the level of service in general because obviously, we have the decrease of our [indiscernible] may have an impact, and that could decrease the gaps on the Marketplace. Could you specifically talk about the freight cost and also the improvement of the rating.

[Fabio Abrate, executive]

Fabio, thank you for your participation. We are clearly enthusiastic about the announcements we made in relation to the initiatives of LET'S. We remind you that LET'S was built at the beginning of this year. And in fact, we have a shared management that's quite interesting. In terms of assets, the mechanisms and the data of Lojas Americanas, we believe this is an evolution of our platform as a whole. The 2 companies have aggressive plans when you look into growth and future. Each one has their own assets, but this can absolutely be very good. It can contribute to the business. We're always pursuing to serve our customers better. We want to surprise them all the time, and also aiming at efficiency in terms of costs. In that sense, serving our customers better, we made some announcements, we have some important initiatives from O2O. Remember that Lojas Americanas started in the Marketplace in São Paulo in the end of last year as a seller. Until then, we distributed our goods through the DC in the state of Rio, São Paulo and Minas Gerais. And the novelty here is that by the end of this year, delivery will be extended through all the states of Brazil. In Click and Collect, we believe that this is a very convenient service for the client. Until then, we had 400 stores. We have continued assessment of where we believe we have an opportunity. We have the services implemented in 400 stores. Now we have decided to broaden this service to 800 stores by the end of the year. So we're talking about increasing twice the number of stores that are going to have this service available to the customer. I also remind you that once this increases size twice, this isn't the only model of Click and Collect that's present in all the states of Brazil. Our third initiative is that each store is a seller, which is a fantastic business. This enables AME's brick-and-mortar store to become a seller in the Marketplace of B2W with the collection of the goods in the stores just 1 hour after the online buying, just to compare the best benchmark we have from abroad, in terms of those services, it's 4 hours. So abroad, they operated 4 hours. In Brazil, we have some initiatives that talk about 24 hours. Our proposal here is to have it delivered up to 1 hour after the online procurement. So it's going to be available for the customer to pick it up. We're talking about implementing that in all the current stores of Lojas Americanas, currently 1,320 stores and in all the new stores that will be inaugurated. Also this is this specific assortment is complementary. Then we have one of the beauty aspects of our 2 businesses, the combined business, B2W and Lojas Americanas. Our assortment is complementary. We do not compete in assortment when we look into the business of the brick-and-mortar and the online business. And also, the other option that we have in the B2W Delivery because the drop off stores was restricted to the hub. Today, we operate with a margin of 200 hubs, and we want to increase this network of hubs. We are talking about virtual [ capillarity ] when we look at the physical presence of Lhasa in the states, in the city. The idea is to have each store becoming also a Click and Collect point of goods for our sellers. We are extremely excited and enthusiastic about the results of the first -- this is the first question you asked and also there is great perspective that we have for the future.

[Fábio Monteiro, analyst]

Great. Fabio, I would like to take this opportunity to ask about AME Digital. I would like to understand how -- what is your strategy, rather, in terms of adding new online retailers, offline retailers. Do you have the pipeline? This year, we're going to see a movement towards looking at Lojas Americanas, including them in the Marketplace, in the payment platform, I would like to understand that. And also in terms of services in the platform, what we could expect in terms of new products along the coming months.

[Fabio Abrate, executive]

Great. Thank you for your questions. We are really enthusiastic about the AME initiative. It's a natural consequence of the platform evolution that started operating e-commerce and it went to the Marketplace. Today, we have a very powerful hybrid business between 2P and 3P. And along the last 12 years, we have built some dealers that are fundamental to take this huge step through AME Digital. This is a first product of IF, innovation and technology. In our structure, it's responsible for creating and nurturing disruptive businesses for the 2 companies, B2W and Lojas, where we already see the initial results of IF, Innovation and Future. I did say it wrong. This was a soft launch of the product with Americanas.com on April 27 to a better group of users. We defined it as family and friends. We made it available, the app initially, for i OS and Android. And AME became a payment name in the checkout of Americana to the QR code. We launched the website as well, the solution which is www.amedigital.com, and we launched it into the website, americanas.com. And also the -- the [ Flash VR ]. And they have the ability to buy products and having the benefits, the cashback benefits. So we selected a group of items and then we have a range between 5% and 15% in which the client will pay the value and will receive back in his account a value so he will spend again in the system. So there's always a cashback. And if he pays 100, he's got a cash back of 15. We also have installments. This is a proposal in the digital scope, where we have the best installment of the site. So for the customer, we have lots of positive good news. After launch, the functionalities are just the traffic that customers can register their credit card. And through the app, they will buy using the card or through deposit or -- into the AME account. Today, they're able to make transactions between the accounts. I can transfer it to you, you can transfer to me, and I also can collect if I wanted. I want to charge something, I can call extra value from a third-party. Well, this is just the beginning. This is a soft launch. We have a brilliant future ahead of us. You made us -- this study on this kind of business, in China, in other countries of the world. So we have this dimension, what we are creating and where we're going to be. So soon, we will leave the B2W platform, which we call [indiscernible] and we will go through offers and [indiscernible], the natural path is the sellers themselves as you said. And another natural path for us would be to have Lojas Americanas as a client of this payment need. This should happen still in 2018, because we are in a very accelerated phase, and we are really excited about this new business of the company. Thank you very much, Fabio.

[Operator]

The next question is from Joseph Giordano, JPMorgan.

[Joseph Giordano, analyst]

I would like to understand the acceleration of GMV. We see some stability. I would like to understand until May how you see GMV as a company. I imagine that along the year it will be easier. So we have some wins against this transition. This will disappear. How do you see the trajectory of GMV acceleration during the year? And the second point, when we look at some competitors that Fabio mentioned with the integration of the platform, with the physical platform, how do you see in terms of Click and Collect, in terms of penetration of sales and the freight modalities? And what do you think that this will go to? Do you think it's going to reach 40% or 50%?

[Unknown Executive]

Thank you for your participation. In terms of the first point, acceleration of growth. We are believing what we have agreed upon in 2017. We had a transition year, extremely important. The main point was not focused on the GMC growth, it was the acceleration of the Marketplace and the transition of some categories and items to 3P. And even this transition year, we observed the results in the financial model of the company and the cash consumption model. When we ended 2017, into 2018, the focus, obviously, is always the customer. Our strategy is customer-centric. But we are going to accelerate the GMV again, the total GMV. We see the result in the first quarter increased by 24%, and the market saw an increase of 11%. It was accelerated by the Marketplace. It's a very interesting phase, 87% growth in sales in the Marketplace. When we look at the last 12 months, we see an increase -- twofold increase. And it's also a [ strength ] base of collect -- acceleration of new sellers. We have 2,000 sellers by quarter. We accelerated in the beginning of 2018, 2,400 new sellers in the basis, and we see acceleration in the penetration of B2W Delivery, which is the [ main ] driver in the Marketplace. It's a sustainable growth. We have levels of services that are extremely good for our clients. This is the year of growth. We delivered 24% in the first quarter. The Marketplace grew by 87%. But we expect an evolution quarter-after-quarter. We are just beginning -- this is just the beginning of this acceleration. We already observed in the first quarter the result in the cash of the company. The cash consumption was BRL 1.15 million, now we looked at the first quarter of '18, BRL 478 million, a reduction of 58%. We believe that we will combine this trajectory. We have an optimal balance between 1P and 2P and the cash consumption of the company. The second point you mentioned, on Click and Collect. We believe that this is another service that we will offer our customers. B2W has a platform for distribution and logistics that was built to deliver goods anywhere, especially, at the client's house, the customer's home. This is a major challenge, but we have shown that all the investments we made place us in a vanguard position. If the customer desires to have the goods or the products delivered in a specific -- physical point, that's also great. We're ready to deliver there. It could be a store of Lojas Americanas. It could be a metro station, a gas station, anywhere. We are ready to deliver there. As a controller in shareholders, this is great quality in terms of the number of stores and cities. This is a natural path for us to observe these places. And if it's the case, we could increase the number of stores. Today, we operate with 400 stores. We identified an opportunity to double the size, so by the end of the year, we will have 800 stores, and we will be the only platform, the online platform, with Click and Collect in every state of Brazil.

[Joseph Giordano, analyst]

I would like to have a quick follow-up on Click and Collect. It's very interesting to make cost cheaper in the existing platform. I would like to understand how the increase in prices on the mail services has an impact in the company.

[Unknown Executive]

Joseph, thank you for your question. This is a very important point. We already paid attention to this subject in 2011. We are now in 2018. We have been focusing on that for 7 years now. We verticalized our distribution and logistics, which encompasses all our technology. Today, we are almost independent of the post office. We have our own grid, our own network. We built a platform that -- technical platform, a technological platform. It's all asset-light, and we developed it first to face the challenges that we had at 1P. And today, all these platforms, all this network is available to the sellers in the Marketplace. Today, the Marketplace sellers face the same challenges that B2W faced in 1P. So most of our growth in the Marketplace is sustainable, exactly because we have the support to the sellers in many fronts and the front of distribution is one of the main points.

[Operator]

Our next question from Felipe Cassimiro, HSBC.

[Felipe Cassimiro de Freitas, analyst]

One, I would like to understand about the delivery from the sellers and could you elaborate on the percentage of sellers that use the complete Fulfillment model and what do you expect regarding the evolution of this figure until the end of the year? Now to the Prime, could you talk about the average delivery deadline for customers, and how you expect to improve your delivery deadline until the end of the year?

[Unknown Executive]

Felipe, thank you for your 3 questions. Regarding B2W Delivery, we launched this service one year ago at the end of March of 2017. And up to the day, the penetration rate has been very high, because we have been growing strongly on the denominators so we increased the denominator, the amount of sellers connected to our platform, and simultaneously, we increased the amount of sellers that use that service. For you to have an idea, at the end of March last year, 3% of our base was using B2W Delivery. In June 2017, we already had 23%; September, 32%; at the end of the year, over 50%; and now in March, we're saying that 64% of the sellers' base already uses the services. And when we talk about these services, we break it out in 3 options. One would be fulfillment. So we store [indiscernible] the last mile to the seller. The other option is we go to the DC, the seller collects the merchandise and takes it to the customer; and three was drop-off in the hub. So the seller goes to a direct hub, and then, they place the merchandise. We pick it up and deliver it to our customer. And now we have our fourth option that is basically, we transform Lojas Americanas in -- a place to collect the product, which is fantastic because in addition to the 11 DCs we have 200 hubs. And when we talk about the popularity of Lojas Americanas, we're talking about 1,320 stores. So we are exponentially increasing our network of distribution. So this is very good, and this is connected to a level of services, and today -- and always be our main concern. And this, connected to the Marketplace, we have to give all the support to the seller so that our customers continue extremely satisfied with us. Now fulfillment is one of the options within B2W Delivery. And now the novelty here was that during the sellers' day of April, we launched something fantastic that was we used all Itapevi DC that has 105,000 square meters and a capacity of shipment of 100,000 orders a day and we made this available with no cost to our sellers until the end of 2018. So I can already tell you that our space is practically packed full. So the experience was of 100%, and we're talking about a period of time of around 1 month. So I believe that there has been a lot of compliance here. Now our Prime program, our loyalty program where customer pays BRL 79 annuity and they can have quick delivery.

[Felipe Cassimiro de Freitas, analyst]

What is rapid delivery?

[Unknown Executive]

When we compare rapid delivery to a standard deadline of the market, it's 50% faster than the market. So here, the customer has a service differential that is very important because they receive their products in -- at half the time, and they're able to -- they don't pay for the shipment. We expanded this program at the end of last year. So the program, it listed in the past only with Submarino and now customers can also purchase at Americanas.com and at Shoptime. In the past, we only had 1P item available for purchase, so we were talking about 150,000 items. Now we have 1P and 3P items so they can have access to over 1 million items. So this is very good for customers and good for the company. You have recurring purchases here. So the recurring purchases are 2x in savings. We're talking about 5x in savings. So this is a program that is very profitable for the company and services our customer.

[Operator]

Next question from Gustavo Oliveira, UBS.

[Gustavo Oliveira, analyst]

I would like to understand more about Prime. Could you update us what is happening with Prime? What are the current results of this expectation? My second question, I would like you to clarify the services that you have in the Itapevi's DC. You have Fulfillment, last mile or only Fulfillment? And within this question or within all the investments in logistics, I would like to better understand how you see the company's profitability activity. You're gaining a lot in gross profit, but strong -- and with strong investments in logistics I believe that you're not -- with this, you can't expand your margin. I would like to understand how you see this throughout the year. Is it going to be a slight expansion of the EBITDA margin? Could you please connect this to your fulfillment and delivery strategy? What is going to happen in these terms?

[Unknown Executive]

Okay, Gustavo, and thank you very much for your three questions. Now regarding Prime, I would like to remind you that we launched it as a pilot project in Submarino. And after 1.5 years, we decided to accelerate this program. The pilot program was so that we could understand the results and to be sensitive regarding the company's churn.

[Gustavo Oliveira, analyst]

Will they renew this after a year? Yes? Why? No? Why not?

[Unknown Executive]

So after this experience period where the results were very positive, here, we decided to expand the program, and basically, is what I answered to Felipe. So it was just a Submarino project. It was restricted to 1P products and we operated in 3 cities, Rio de Janeiro, São Paulo and Belo Horizonte cities. We're talking about cities, we're not talking about states here. And at the end of the year, we decided to launch it in Americanas.com and now in Shoptime so that our 3 main brands they hold the loyalty program. We have expanded from 3 cities to 2,500 cities, so half of the municipalities of Brazil plus you can buy with free shipment and an extremely differentiated level of services. So today, we cover around 65% of the GDP of Brazil. In the past, we only covered 20%. And at the end, we -- now we have the sellers of the Marketplace. They're on board due to the level of penetration, the B2W in [ Guyana ], and I am in charge of this, and I guarantee the level of service, and natural -- that was to bring the sellers of the Marketplace with their assortment inside the Prime loyalty program. So results versus expectations were fantastic. And this is why we have accelerated this program. Point #2...

[Gustavo Oliveira, analyst]

Just one question, how many subscribers do you have in Prime?

[Unknown Executive]

We have thousands. We do not disclose this information. I understand that it would be good for you to have an idea for your model but the competition is also paying attention to this program. This is why we don't want to disclose the indicators regarding Prime for the time being, okay? Your second point regarding the fulfillment. Basically, what we have is a group that is on board on B2W Delivery. In the past was last miles services. Now I can include fulfillment. So what we have done here is to bring the seller in-house, so we stock their merchandise and also are responsible for the last mile. And this service is a service that is considered for free until the end of the year, which is fantastic because the logistic costs are the main cost tagged to an online operation and to be able to provide this type of solution and services to the Marketplace sellers, well, we believe that this is a great leap in terms of growth and the level of services that we provide to our end customers. Now regarding your third point, that will be the profitability dynamic of the company. In reality, we have already seen the profits that reflect the transition that we underwent. This was an accelerated transition from 1P to 3P. This was last year, so it has ended. So we basically transferred $2 billion in sales from 1P to 3P. This is not a simple process, you just press a button and your sales grow from one side to the other. We -- this was done seamlessly in 2017. Although last year was a year of transition, we started observing the positive effects regarding the cash flow of the company in 2016 because of BRL 1.6 billion. And last year, we ended with a consumption of below BRL 1 billion. Therefore, we were able to observe great evolution with something that won't be different during 2018. So our expectation is very positive for the entire year. And the figures of the first quarter already confirmed and show us that we're on the right path.

[Operator]

Next question from Thiago Macruz, Itaú BBA.

[Marco Calvi, analyst]

This is Marco. My question is about the Click and Collect. You mentioned some initiative in the beginning of this call. I would like to understand. We see some of your peers with a percentage of Click and Collect that's higher. Can you give us a qualitative idea of how you lose in -- of sales? How much sales you lose because you don't have a Click and -- a bigger Click and Collect operation?

[Unknown Executive]

Thank you for your questions. Click and Collect is one of our initiatives from O2O, online to off-line. We announced a few of them and one of them is Click and Collect. We are accelerating. We have 400 stores in the program. We're going to expand to 800 stores at the end of the year. We are going to double the number of stores. The client will have the possibility to buy online and collect in the store. We agree that the figure is constantly in as the client's demand new locations, we adapt our network and solve it somehow. I don't believe that we're losing sales, in fact, the opposite. An online operation is based on convenience. Convenience for the customer is to have the products delivered to his home. Our platform was built to meet that service, that need. Today, I'm able to deliver in 100% of the Brazilian municipalities, so our proprietary platform of distribution and logistics and brick-and-mortar is another set for us. We have the Lojas Americanas, 1,320 stores, very aggressive this year is present. But if the client demands, we have other options for Click & Collect. We have the option of delivering to a metro station, to a gas station. The most relevant for us is that we are very focused on the demands of the client. We listen to the clients, and if a customer asks for a different collections point or -- we can meet that request. We're ready for that.

[Operator]

The next question is from Franco Abelardo.

[Franco Abelardo, analyst]

I have 2 questions, one, related to cash consumption in the short term. We will have a positive generation of cash. We understand that in the second quarter, you already see cash generation for B2W. And second question, a follow-up in terms of margins. It's a bit different the way you look at margins. We saw expansions of growth margin, but we don't see the EBITDA margin. What was the EBITDA margin in 2017 in your distribution? Could we expect relevant expansions of the margin for this year?

[Unknown Executive]

Franco, thank you for your question. In terms of cash consumption, I cannot give you any guidance. But the history is a good proxy for what comes ahead. As I said, last year, which was a transition year, we already saw a reduction that was very significant in cash consumption, BRL 1.6 billion in 2016 to BRL 950 million in 2017. Nominally, almost BRL 700 million. And in -- for 2018, we expect that we will have a very positive result. The first quarter is already a good portrait of what's coming ahead for the next quarters. That would be the proxy for the projections. To your second point, margins. Now we adopted new norms, new accounting norms, that are valid as of January 2018. There are a few changes, but the final results don't change. For the final cash consumption of the company, we have a page in the press release, the Page 10, where we present the figures of 2017 with the reflected adjustments line by line. If you look at the margin, the EBITDA margin of last year, the first quarter of 2017 is presented now as 2.9%. And EBITDA margin of the first quarter of 2018 in the same basis is 4.6%. We expanded 1.7 percentage points. You really got the evolution of the gross margin of the company. We started with 1.1% last year to 7.3%. We're talking about almost 6 percentage points of evolution. And basically, here we have the results. We already observed the positive results of the -- that's a combination between 1P and 3P. As you unfold that, and it's not difficult to make the math, the marketplace, as we know, contributed strongly to this expansion. And we also observed an evolution in the gross margin of 1P.

[Franco Abelardo, analyst]

Would you help us understand what's the ratio having -- has it improved new services? What about general expenses estimate? You've related to 3P, the question is should we look at the SG&A expenses growing similar to the GMV figures? Or do you have another scale and it can dilute the expenses, improve it even more?

[Unknown Executive]

Thank you for your second question. The pace rate has maintained basically flat in the last 8 quarters. And the take rate is a function of 3 variables. The size of the seller in the platform of the B2W platform, the more he sells, the more incentives he has. This is the first variable. The second refers to what he sells, electronics, furniture, what kind of item. That also has an influence on the take rate. And also the number of installments. A seller that sells in 5 installments will have a different rate compared to the one who decides to sell in 2 installments. So those rate follow these variables, and we have been able to maintain our take rate in an average of the same level in the last 2 years. In relations to SG&A, the best way to observe SG&A is in terms of the GMV total percentage. When we look at expenses, especially sales, 2018, if I'm not mistaken, it was 9.8% in the first quarter of '18. And last year, it was 9.5% -- or rather the opposite. This year, it was 9.5%, and last year, 9.8%. So there's an evolution of 0.3 percentage points. Nominally, it grew by 20%, and GMV grew by 24%. So there was growth. But there's a buyback relation to the growth of -- the total GMV of the company.

[Operator]

Ladies and gentlemen, due to time, we won't be able to answer all the questions. We would like to ask you to kindly talk to the RI team that will be pleased to answer the questions.

Now I give the floor to Fabio Abrate for his final consideration.

[Fabio Abrate, executive]

Thank you all for your participation in our conference call. I would like to take this opportunity to ask you to check the great offers of the dear friends of the Brazilian internet, americanas.com, Submarino, Shoptime and Sou Barato. If you have any additional questions, our investor relations team is available.

Thank you all. Good afternoon.

[Operator]

Conference call of B2W is closed. We thank you all for your participation. Thank you all for using Chorus Call.