U.S. Markets close in 3 hrs 31 mins

Edited Transcript of LLIS3.SA earnings conference call or presentation 18-Nov-19 2:00pm GMT

Q3 2019 Restoque Comercio e Confeccoes de Roupas SA Earnings Call

Nov 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Restoque Comercio e Confeccoes de Roupas SA earnings conference call or presentation Monday, November 18, 2019 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Livinston Martins Bauermeister

Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers

================================================================================

Conference Call Participants

================================================================================

* Olivia B. Petronilho

JP Morgan Chase & Co, Research Division - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen. At this point, we would like to welcome everyone to the Restoque Earnings Results Conference Call for the Third Quarter '19. Today, we have with us Mr. Livinston Bauermeister, the company's CEO. We would like to inform everybody that the release is available for downloading from the site at www.restoque.com.br. (Operator Instructions) We have simultaneous webcast for this presentation.

Before proceeding, we would like to mention that forward-looking statements are based on the beliefs and assumptions of Restoque's management and on information currently available to the company. They involve risks and uncertainties as they relate to future events and, therefore, depend on circumstances that may or may not occur. Investors should understand that conditions relating to macroeconomic scenario, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

I would now like to turn the conference over to Mr. Livinston Bauermeister who will begin the presentation. You may proceed, sir.

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [2]

--------------------------------------------------------------------------------

A good morning to all of you, and welcome to our earnings results call for the third quarter 2019. The company management believes that the results of this quarter should be interpreted as part of the general context of the company for this year based on the measures that have also been adopted for the year 2020. Therefore, before I remark on the specific results of this quarter, I would like to set the context for you.

After the changes on operating adjustments carried out between the years 2017 and 2018, the company management became convinced that the company's sustainable growth in the long-term was different on 2 factors: a strengthening of our brands and the company's focus on the customer experience and satisfaction. To be able to obtain these goals, it would be fundamental to eliminate the conflicts existing in the company. Therefore, we had an expressive reduction in the promotions in the retail channel. Besides aiding us to strengthen the brands, this has also impacted the sales channel. Additionally, there was a significant reduction of sales to third parties that sell online, and therefore, company -- with the company -- competing with the company's online channel. And this is the channel with the greatest potential for growth.

Nevertheless, this movement has a negative impact on our short-term revenue, and we are now selling at full price in our channel, and we are migrating all the sales made to third parties to our own online channel. In the year 2019, the company's strategy, besides what I have just mentioned, was also based on a strong technological updating and once again, the strengthening of our sales online and in the retail through the omnichannel selling products and brands that historically have been successful in terms of the magnitude of sales, markups, relative representativeness in terms of price and the pricing that is linked to the value perception of such products.

Now this third quarter was [disjointed] by a continuity of this strategy, which will be the foundation to resume sustainable long-term growth. Now the net impact of this on our results for the third quarter, and if we think of the growth, was up BRL 136.2 million, especially in Le Lis Blanc and Dudalina brands; 95.9 million of sales to online channels for third parties to eliminate, as I mentioned previously, the conflict with online sales; and BRL 57 million of a drop in sales due to the reduction in promotional sales in our retail channel, once again, to have a more sustainable and sound operation and reduce our conflict with the wholesale channel.

On the other hand, the effects of this strategy already show a reflection in the growth of sales online that reached 137.2% growth. The online sale of products and inventory of the stores through omnichannel, attaining 55% of the sales for this channel, a growth of 11% in sales for multichannel customers with a growth of 37% in wholesale sales for the Le Lis Blanc for the third quarter and a growth of sales in same stores for John John brand with a growth of 7.9% and Rosa Chá with a growth of 42.9% as well as a more stable performance for the global brand, among other positive aspects for this quarter.

I would like to also underscore, when it comes to the technology that we have adopted, that the sales of the Le Lis Blanc and the mobile checkout system that does not require a cash structure in the store, obtained 44% of all of the channel sales for this month, once again, showing how this adheres to the sales model of the company and the efficacy of convergence towards technology and the retail operation, enabling us to expressively increase the gain and, of course, enhance the experience, optimizing the work of the sales force and reducing expenses. Notwithstanding this, management of the company is aware of the fact that there was an impact on revenues due to the strategy adopted this year. This is a relative and relevant impact and, of course, has an impact on the operating results of the company. We would like to mention that we're intensely working on a growth of sales and an enhancement of operating results for 2020. When it comes to optimizing the company management, there was a reduction of 1/3 in the number of directors and area head. And we're seeking operating synergies, and we're trying to simplify structures. Once again, we have a very cohesive and strongly aligned group of managers who are focused on resuming the operating results.

We have also focused our projects on priority issues, issues that are aligned with the company's strategy, as I mentioned previously. We privileged technology projects, once again, enhancement of the customer experience, all associated to our core business and an enhancement in sales. We're working in-depth to align the products and the collections of the year 2020. Comparing this with our historical and very successful brands and the company fostering an adherence of these brands to the size of collections, a good mix of products, something that will be representative at the right price range. This also includes pricing linked to a new value perception of our products. Throughout the last 3 years, the company has given more importance to the range of higher prices, higher costs, and we have expanded brands that multiply costs in terms of our final products, and the amount sold compared to the number of collections is lower. We had an increase of leftovers. We had a greater need for promotions, and all of this fed back into the process, once again, hampering us to make the most of our new collections.

Now all of this work, along with the reduction of promotional sales that we began in 2019 and with the advantages of sharing the inventory in the company through all of the retail channels and through the channel online, will enable us to make the most of our collections with a higher percentage of products sold at full price, a reduction in the representation of promotions. And this will enable us to eliminate our inventory leftover, and this will enable us to better sell our products associated with a decrease of inventory that for 2020 will represent BRL 100 million.

During the fourth quarter, we're undergoing a focused cutback on costs and expenses to improve our cash generation in 2020, along with an optimization of management and a focus on these priority projects that I have mentioned. We are reducing the headcount and focusing on the project areas that are not linked to the core business and do not directly impact our sales. This represents a savings of BRL 35 million approximately for the year 2020.

We're also cutting down on traveling expenses and additional expenses, allowing us an annual savings of approximately BRL 8 million for the year 2020. For 2020, marketing expenses as well will be reduced by 35%, enabling us a reduction of BRL 27 million, decreasing the company share in large events, international events and advertising in traditional level. We're going to [hear] these expenses through marketing activities that will have a direct impact on sales, promotions in store, CRM actions and much more, with more than 50% of the total amount applied in digital, media and others that, of course, are very important for sales. The company investments will also undergo a cutback of 35% in 2020, an amount of BRL 40 million, thanks to the nonrecurring activities carried out this year. We had the investments in (inaudible) and the implementation of the new omnichannel platform, as part of these projects. We're also preserving our core business, ensuring that the online and omnichannel sales will increase, link to an enhancement and customer experience -- all of these links to sales and customer experience.

Working capital will have a positive impact, thanks to the normalization of our wholesale operations, which, in 2019, had a drop of 59% due to the expressive cutback on sales to third parties. And all of this will go on to the channel of the company. We're convinced that with the end of this cycle of cutbacks and revenue that we carried out in 2019 and because of the reduction of our partnership with third parties and the reduction in the level of promotions and reductions on revenue, should have a positive evolution in 2020. All thrust by the maturity of omnichannel and by the new flow of customers online due to the performance of the wholesale channel and the positive performance of the retail channel due to the adjustments in collections and a greater focus on sales. All of this work on the part of revenues and expenses will represent an expressive enhancement in our operating results in 2020.

We now go on to the comments referring to the results of 2018 (sic) [2019]. Growth income had a drop of 33.4% due especially to the strategic decisions that I have just mentioned. Sales in same store has a drop of 29%, and there was a reduction of 16.9% per square meter. Now this drop is due to the performance of Le Lis Blanc, Dudalina brands, more specifically, and sales were impacted by the decision of reducing promotional sales in September. And this month, in September, September was responsible for 16 percentage points of this drop of 29.9% in the wholesale channel for the quarter. On the other hand, there was a growth of sales in same stores for John John, Rosa Chá and the stabilization in the performance of the Bo. Bô brand. This loss of revenue in the retail channel as a whole should be offset in 2020, and the result of the measures that have been put in place by the company management and that I have just mentioned.

In the wholesale channel, besides the growth of 11% and sale to multi-brands and physical stores this quarter, just a highlight as well to the growth of 30.7% in wholesale sales for the Le Lis Blanc brand in October. I would like to underscore that there was a migration of Le Lis Blanc to the wholesale model of sales, the same model adopted by John John and Dudalina. And there was a growth of sales of 91%. For the first collection of 2020, these are the collection of 2019 for the brand. Now this shows you the potential of expansion of the brand in the multi-channel in 2020 with the operation of this new model.

We go on to gross margin that reached 62.8% in the quarter with a growth of 1.9 percentage points. And for the 9 months of the year, gross margin stands at 64.7%, stable vis-à-vis the 9 months of 2018.

Our total company expenses, including depreciation and amortization and other expenses headed throughout vis-à-vis the third quarter 2018, reaching BRL 115 million, a reduction of 8.1% during the year. Now if we consider the readjustments to make results comparable, which are better shown in the release, expenses were reduced by 0.4%.

As a conclusion of the factors mentioned previously, the company obtained an EBITDA of BRL 20.2 million. It is important to highlight that to be able to comply with the financial covenants of the company, the adjusted EBITDA was BRL 338.9 million, and the net debt-to-EBITDA ratio ended the third quarter of 2019 at 3x. For the sake of comparison, at the end of the third quarter 2018, adjusted EBITDA to measure our financial covenants in the 12 months prior was BRL 233.9 million, and the net debt-to-EBITDA ratio was at 2.8. It is important to also mention that the measurement of the covenants in the company takes place annually based on consolidated financial information on December 31. This indicator reaches its annual peak on the third quarter due to the company's seasonality. A graph with this indication, once again, can be found on the release.

Now regarding this, we would like to highlight a material fact that took place after the release of the results for the third quarter, through which we released the following information. The company management is debating a proposal to increase its [stock] or social company that will materialize until the end of 2019 approximately in an amount of BRL 200 million as a part of the issuance of BRL 20 per share, which is the weighted average of the share of the company in the last 3 trades. This will be subject to the approval of the company's Management Board. The company will maintain their shareholders and the market informed regarding the deployment of this proposal.

This ends the call. Now faced with all of this, we would like to highlight that the company is entering a new cycle of this trajectory besides becoming consolidated as the largest company of retail specialty in the country. And with brands that are most admired, we would like to face up to the expectations of our customers, create value for the shareholders, maintain long-lasting relationships with our commercial partners and also service the companies where we work.

With this, I conclude the presentation. We will now go on to the question-and-answer session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Olivia Katarina (sic) [Olivia Petronilho] from JPMorgan would like to pose a question.

--------------------------------------------------------------------------------

Olivia B. Petronilho, JP Morgan Chase & Co, Research Division - Analyst [2]

--------------------------------------------------------------------------------

I have 2 questions, in fact, focused on the strategy that has just been explained. The first, regarding the migration of multi-channel sales to the omnichannel of the company. I would like to know if you are still addressing the same customers that you used to address with the other platforms. And the second question refers to your reduction in inventory, and which would be the strategy for this? Will you resolve this with -- in the strategy, are you going to have some promotions in January?

--------------------------------------------------------------------------------

Operator [3]

--------------------------------------------------------------------------------

Please remain connected. The Restoque conference call will continue on very briefly.

(technical difficulty)

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [4]

--------------------------------------------------------------------------------

We had a slight technical glitch, but we're back. Olivia, thank you for the questions and for participating in our conference call. When it comes to the reduction of our inventory, there are several important components, and that amount of BRL 100 million is the reduction of inventory expected for 2020. This reduction will come from 2 sources: lower purchases of products for the year 2020, which means that we're working to make a better use of our collections and the products we will be purchasing; and a natural reduction in the company inventory, thanks to this lower purchasing level. We hope to attain that reduction of BRL 100 million throughout the year 2020.

When it comes to the wholesale channel, the multi-brand stores, we do have some figures and indicators in the release, and we observed a reaction that began in the second quarter that continues on to the third quarter. We had 11% sales to physical stores, multi-brand stores. And now in the fourth quarter, we are also observing this growth. And perhaps, the most expressive refers to the Le Lis Blanc sales. For the first collection of 2020, the sales are now being done based on orders, and this sale process has grown 91%. Therefore, we expect a resumption in the wholesale channel in the sales for physical stores and on the online channel.

When it comes to the online channel, we also have significant growth of 137%, still based on a small base vis-à-vis 2018, but we believe that this movement is the right one, and the company has become very selective when it comes to its participation in the marketplace. Evidently, we assess all the options and possibilities. Nevertheless, our main focus is the operation of our own channel because of our positioning, because of our brands. And as we have worked strongly to eliminate the conflicts among channels, we would like to grow with this and have a sustainable growth based on that channel that we operate and that we control. This has been our focus for the last month of 2019 and going onwards to 2020.

--------------------------------------------------------------------------------

Operator [5]

--------------------------------------------------------------------------------

[Gabriel] from Santander would like to pose a question.

--------------------------------------------------------------------------------

Unidentified Analyst, [6]

--------------------------------------------------------------------------------

I only have 2 questions. First, very much aligned with the previous questions. When would you begin to observe a recovery in your brick-and-mortar stores, a stronger recovery? Can we expect this for the coming year with a stronger recovery? And the second question, if you believe that 1 of the foundations of the company has had a quantitative impact on sales on store operations.

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [7]

--------------------------------------------------------------------------------

[Gabriel], thank you for the questions and for your participation in the call. And thank you for the opportunity to speak about this issue, but of course, it's very important for us. Let us begin with omnichannel. We're quite convinced of this solution of integrating the wholesale channel with the online channel. It makes sense for the company operations. At the company, all of the brands operate with quite a broad assortment but with a limited number of pieces. When we distribute the products to all of the stores, generally, the stores receive few units of each product. Now when we begin to operate with omnichannel, and we have been doing this since the second semester, each store and online customers can have access to the company's entire inventory from all stores as well as the inventory that is geared to the online channel. Therefore, the possibility of conversion of the customer finding the product he or she wants grows significantly. Because of this, we have used a figure here that shows how representative the omnichannel is vis-à-vis the online channel. It already represents more than 55% of the online channel sales. These are products that the customer purchases and that are sent directly from our brick-and-mortar stores, which means that in very few months of operation, more than half of the channel is being serviced by omnichannel, and this gives us an important indication, quantitively of the expectation of growth for this channel.

When it comes to the recovery of the wholesale channel, this quarter, we have already observed a recovery. Despite the fact we don't have sales or promotions, we did have an important event of sales in September of last year. Now even within this, Bo. Bô, Rosa Chá and John John have had a positive impact. Now for Le Lis Blanc and Dudalina, if we exclude the promotions or sales, the effects that we had in September of 2018 and if comparability were the same, they would have a relatively minor drop of 3% to 4% in the wholesale channel. So the 20% drop, more than 16% is due to the fact that we no longer held these sales in September. The brands are relatively stable for the quarter. And putting aside the effects of the sales for comparability purposes, 3 of the 5 brands have had growth or stability, and the 2 larger brands had a relatively minor drop. Our expectation with all of the work that has been carried out for the year 2020 is, once again, to resume growth sustainably in the retail channel, which is our most expressive channel. And that is why we're doing all this work. The collections for 2020, will, of course, end up with a significant growth in this channel.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

Mr. [Carlos Herrera] would like to pose a question.

--------------------------------------------------------------------------------

Unidentified Shareholder, [9]

--------------------------------------------------------------------------------

I have several doubts, especially relating to how we can model the company or which will be our expectations in terms of performance in 2019. We understand there will be a reduction of revenue between 25% and 30%, closer to 30%, and the EBITDA will stand at BRL 50 million. Is this in line with what we should expect? And we're speaking about this is 5x the net debt ratio. What will happen in 2020?

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [10]

--------------------------------------------------------------------------------

[Carlos], thank you for your questions. Thank you for participating in the conference call. Well, this is a rather complex account, and it involves comments on our future performance and our recent performance, well, something more precise than what we have released for the year. The expectation of the company for the year 2019 was to create the results for 2020, but the company also has the expectation of fully complying with this financial covenant. So much so that on Friday, we disseminated this material fact that will have an important impact on the capital structure of the company for the end of the year 2019. What I can state regarding general aspects and results of the company in 2019 is what is in the release and what we have disseminated. I cannot make comments or expand on the information. The size was -- has been disseminated due to the confidentiality of some of the information.

As our shareholder, if you have additional doubts about the operation and for you to obtain additional data for your modeling, I suggest that you contact our IR department, and we will service you fully, once again, focusing on your doubts. And once you understand the operation, you will be able to set for your assumptions for the closing of 2019 as well as for the year 2020.

--------------------------------------------------------------------------------

Operator [11]

--------------------------------------------------------------------------------

(inaudible) would like to pose a question.

--------------------------------------------------------------------------------

Unidentified Analyst, [12]

--------------------------------------------------------------------------------

An additional question, looking forward in the company, your changes in terms of the retail markets that have happened worldwide, there's greater focus on virtual retail channels. My question is how you're going to have a differentiation in your inventory, what will you see? Is there price competition? Is it easier for the consumer to buy? Now fast fashion was able to quickly adapt to the online retail channel. The quality isn't the same, of course, but we don't have a super premium differentiation, of course. And perhaps, some retail channels could steal some of our -- your customers. So what are you thinking of doing in terms of customer differentiation?

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [13]

--------------------------------------------------------------------------------

Thank you for your questions and for participating in the call. Once again, this is an opportunity to expand on the vision of the company, our market position and what we are doing at this moment of market transformation. It is our understanding that the trend for the retail market, more specifically, in the segment in which we operate, is based on some main aspects. The physical presence, brick-and-mortar stores are very important as a component of the business. Online sales have grown significantly, and all of the movements of the company go in that direction, motivating and allowing for the opportunity to grow in that channel. But the main factor is the integration between these 2 channels. And the third pillar for growth and for maintenance of sustainable growth refers to our own brand operations. Therefore, we have 3 pillars: the brick-and-mortar stores, the online and our own brands.

Now if we adequately manage our own brands, we are going to sell to the end consumer. As the only option, they will have gone through our partners. If we manage the wholesale channel property, if we manage online sales and if we have a massive presence, the end user who wants to purchase our brands will always be serviced directly by ourselves or by those that we will allow to operate with our products and brands. And this is fundamental as part of the company's strategy for the year 2020. One of the main focuses is precisely the customer experience and satisfaction. We are maintaining the differentiation of our premium position and promotions and sales. As you can see, we're quite effective during the year 2019. So that we can maintain this positioning, this is what we're working on to maintain the premium segment of our brands and operations and to have the greatest control possible over the channels with which we operate with a broad presence online, with a broad presence in the brick-and-mortar retail market and, of course, working with our partners operating online.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

(Operator Instructions) Mr. [Gabriel Moreira] would like to pose a question.

--------------------------------------------------------------------------------

Unidentified Analyst, [15]

--------------------------------------------------------------------------------

In truth, this is [Eduardo]. You're speaking about a reduction of inventory for the year 2020, and that you will be purchasing less products. What are you going to do with the new collections and the sale of the products that you already have?

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [16]

--------------------------------------------------------------------------------

[Eduardo], thank you for the question and for participating in our conference call. Now what we said that we are doing, we have a presence -- the level of inventory that is quite steep, and part of that inventory is made up of durable goods and neutral products, products that refer to present day collections. They're not associated to the percentage of products that are quite specific and marked up as a present collection. What we are going to do is make the most of large part of the products that we have that are not going to be geared for sales or promotions or discounts. We are going to hold true to our strategy, and this will help us to create the inventory that will be sold in 2020.

What happened formerly when it comes to sales, we will sell off a large part of the products, including the durable and neutral products, and we would again purchase similar products for future collections. So we sold with discounts and, once again, purchased very similar products. This is what we're avoiding doing at present. And through this, we are going to increase the use made of these collections in 2020, aided by 2 factors: lower purchases and the right positioning of the products so that they can be sold at the right prices.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

(Operator Instructions) [Mr. Carlos Weber] would like to pose a question.

--------------------------------------------------------------------------------

Unidentified Analyst, [18]

--------------------------------------------------------------------------------

Referring to this process that you're undergoing in the company, when will this be concluded? When will we be able to see more normalized results?

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [19]

--------------------------------------------------------------------------------

[Carlos], it's good to hear you here participating in the call. Thank you for your question. This year, 2019 was a year of multiple adjustments in the company because the company management understood that this will be necessary to resume long-term and sustainable growth. These adjustments are beginning to show their first positive effects, and the company management as a whole is convinced that this is the way to go. This has been a difficult year due to that situation of conflict of channels and loss of revenues, but we're working towards 2020 with a much more stable vision, with a greater control of SG&A, a growth of revenues and a recovery of our results. All of those issues that had to be addressed to have long-term sustainable growth have been addressed during this year. And to respond directly to your question, in 2020, we believe that the operation will be more stable in a long-lasting way, enabling us to resume growth.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

(Operator Instructions) [Pedro Danielo] would like to pose a question.

--------------------------------------------------------------------------------

Unidentified Analyst, [21]

--------------------------------------------------------------------------------

I would like to know if you have a goal that would represent the online channel in the medium term in 2022, for example, and your goal for leveraging this year.

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [22]

--------------------------------------------------------------------------------

[Pedro], thank you for the questions and for participating in our call. The representativity of the online channel will follow a market trend, and we truly don't know which will be the trend. What we're doing is getting ready to grow. As I mentioned previously, as our brands are operated exclusively by ourselves or by those that we allow to operate, I mean, the brick-and-mortar segment, the growth, of course, will be absorbed, be it through a sharing of customers from brick-and-mortar stores and online or through new customers in the online channel. A specific percentage is something we don't have. We don't work with that. But the market tends to have, and we see this in the Brazilian market and in more developed markets, more relevant shares. This is the trend, and we know of operations and segments that are similar to the company that operate with 15% or 20% of the revenue through the online channel.

--------------------------------------------------------------------------------

Unidentified Analyst, [23]

--------------------------------------------------------------------------------

And regarding the leverage goal in the medium term, any idea?

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [24]

--------------------------------------------------------------------------------

The leverage goal for the company has been reduced. As we have been mentioning, it is a 1x. Now this is the goal that we're working with this year. Due to all of the adjustments undertaken, this goal is somewhat more remote. But during the coming year, we are intending to get to a 1x as our leverage rate.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

(Operator Instructions) We will now return the floor to Mr. Bauermeister for his closing remarks. Mr. Bauermeister, you can proceed, sir.

--------------------------------------------------------------------------------

Livinston Martins Bauermeister, Restoque Comércio e Confecções de Roupas S.A. - CEO and Member of Board of Executive Officers [26]

--------------------------------------------------------------------------------

Well, first of all, I would like to thank all of you for your participation. As you can observe, we're doing something quite broad and deep through the company management to be able to address all the operating issues and to guarantee the resumption of growth in the middle and long term. When it comes to the close of the year, as we made clear in the release and in the results, we do have an expectation in the increase of capital, and there is the intention of shareholders of subscribing an increase of capital, and this will balance the capital for the closing of the year.

Should you have any additional questions or doubts regarding the end of the year or the year 2020, the assumptions that we're working on for the year 2020 and regarding the close of 2019, we're at your entire disposal at the IR department to be able to clarify your doubts.

Thank you very much, and have a good day.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

Thank you. The conference call to release results for the third quarter '19 for Restoque ends here. You can now disconnect your lines. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]