Unicasa Industria de Moveis SA
BOVESPA:UCAS3
Earnings Call Analysis
Summary
Q3-2023
In Q3 2023, Unicasa reported an 11.3% year-over-year decline in revenue, falling short of expectations due to lower store conversions, delayed real estate deliveries, and a stricter credit environment. Despite this, same-store sales in the North American market were positive, and the company was able to slightly increase the monthly productivity of exclusive resellers. Operating expenses rose by 4.4% due to expansions in the U.S., although domestic expenses decreased by 6.8%. The gross margin was positively impacted by U.S. operations, but ultimately net margin dropped to 6.7%, down 4.5 percentage points from last year. The company received the first installment of Finepi funds amounting to BRL 49 million, with subsequent disbursements scheduled for the next two years. With BRL 9 million in accumulated profit and a commitment to paying mandatory dividends, Unicasa maintains cautious optimism for future profitability despite headwinds.
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Good afternoon, ladies and gentlemen. Thank you for waiting. Welcome to the Unicasa Indústria de Móveis S.A. conference call to discuss the results of the third quarter of 2023. Today with us, we have Mr. Guilherme Possebon de Oliveira, CFO and Investor Relations Officer.
We would like to inform you that this event is being recorded. [Operator Instructions] This event is being broadcast simultaneously on the Internet via webcast, and you may access it at unicasamoveis.com.br/ir, where the presentation is also available for download. The slide selection will be managed by you. We would like to remind you that you may send questions to Unicasa to the website, and they will be answered during the Q&A session.
Before proceeding, we wish to clarify that forward-looking statements that might be made during this call in relation to Unicasa's business outlook, projections, operating and financial targets are beliefs and assumptions of Unicasa's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events. And therefore, they depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operating factors may affect the future results of the company and may lead to results that differ materially from those expressed in such forward-looking statements.
Now I would like to turn the floor over to Mr. Guilherme Possebon de Oliveira to start the presentation. Mr. Oliveira, you have the floor.
Good afternoon. Now let's turn to Slide #5 for Unicasa's sales performance. The revenue for this quarter was rather different from what we expected, considering that the store sales were positive. Our expectation was a quarter more in line with last year's. We expected an improvement in the impact that we talked about in the previous quarters, such as the postponement of sales conversion due to delays in real estate deliveries by construction companies and the scenario in which the end consumer was postponing stages in the construction of their homes due to a more stringent credit scenario. Thus, the reduction in store sales conversion into sell-in at the plant that we saw up to the second quarter persisted into this one. Thus, we were 11.3% below the revenue level of last year.
On Slide 6, we have the revenue breakdown, and we can see that the same-store sales performance was negative for the first time in this year. And the positive side in revenue was the foreign market, driven by the performance of our operation in the North American market. In the other channels, we continue to feel the impact that persisted in the 2 previous quarters, which were the effect of the Favorita brand closure, a strong impact from the reduction of the multi-brand segment, the country's economic scenario and the impact of the closed stores.
On Slide 7, we see that the average productivity of exclusive resellers in the quarter reached BRL 107,000 per month, up by 3.5%.
On Slide 8, we have a chart with the evolution of our exclusive and multi-brand point of sale, closing the quarter with 150 domestic exclusive stores, 18 exclusive stores abroad, 67 domestic multi-brand and 24 multi-brand stores abroad.
Turning now to operating expenses on Slide 10. We have a chart with the evolution of our SG&A going up 4.4% this year. The U.S. operation added about BRL 1.9 million to expenses and refers mainly to the new Miami store acquired last January. And for the next quarter, we will see increases in this channel, referring to the New York store expenses opened on October 25 and another new store acquired on November 1. We should note that the net -- that net of the U.S. operation operating expenses went down 6.8%, mainly due to the drop in variable expenses.
On Slide 11, we show the summary of our results. The gross margin increase stems mainly from the recognition of the U.S. operation revenues, partially offset by the lower fixed cost dilution due to the drop in revenue. Thus, we reached 6.7% net margin, a drop of 4.5 percentage points vis-a-vis last year. And it is important to remark that at the end of October, the company received the first liberation of Finepi funds amounting to BRL 49 million. And the next 2 will occur annually, and the amount will be BRL 12 million and BRL 5 million, respectively.
Now I would like to turn the floor over to the operator to open the Q&A session. Thank you.
[Operator Instructions] The webcast platform sends us the first question. What about the dividends? How can you improve the profitability of the company vis-a-vis dividends?
Thank you very much for the question. In relation to dividend, we have about BRL 9 million of accumulated profit. So our visibility for the fourth quarter indicates that we will be maintaining our profitability. So we believe that we will be having dividends. Of course, the market conditions may change. But everything points to the fact that we will be able to pay mandatory dividends. And we have our internal policies regarding dividends, and we will be complying with them unless something different is approved by the shareholders' meeting that will be held on -- in April 2024.
And the other part of the question regarding profitability and the next steps, I can tell you what is happening as we speak now and up to September without giving you a lot of guidance for the future. When you look at the results of Unicasa up to September accumulated, we can see that we have a major impact from the closed stores for a long time. We have been working with the selection of our dealers, our retailers, and we understand that most of them already have a very good positioning and they have been generating recurrent revenues. So when we close the store -- and now you should look to the average productivity of the stores, and the revenue has been improving consistently. So if we close the store, we no longer have that revenue from the store that was closed.
And our store expansion team was formed around the middle of last year. Just a moment, please. So going back, our expansion team was formed 100% last year. We took a little bit longer to form it because of the pandemic and other factors. And some people left the company during the pandemic, and so we remained with a not so good team. So our work regarding store expansion will take a little bit longer to show -- or the result to show. So we have been closing more stores than opening new ones.
And another point that impacted the results of the company were the multi-brand with a strong drop because of the country's economic situation. And so talking about the profitability of the stores, we are focusing on our U.S. operation. And if you look at the slide of our expenses, you can see that we had BRL 1.9 million added to our expenses from the store. And there is a disclaimer saying that we added an additional 2 operations. Ever since last year, we have been announcing the opening of the New York store, and it was opened last October.
So now we will have all the rent, operations and other -- rent expenses and others. And in November, we added another store, our own store in the United States, an additional one. So for the next 2 quarters, we will be seeing these stores, and this explanation will be recurring. The fixed expenses of these stores will be hindering our results because these are operations that start only with expenses and no revenue yet. And they have no revenues yet because they are still new. It will take about 9 months up to the moment, we are able to deliver to the clients, and this is when we will be able to recognize the revenue. So we will have a long time with these expenses from these stores that are in maturation. So this is what you must understand regarding the profitability of the company. Thank you.
[Operator Instructions] At this time, our Q&A session has come to an end, and I would like to turn the floor back over to Mr. Guilherme Possebon de Oliveira for his closing remarks.
Thank you very much for attending our meeting. And for additional information, please contact our Investor Relations area. Have a very good afternoon. Thank you.
Unicasa's conference call has come to an end. We thank you very much for participating, and we wish you all a very good afternoon. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]