Good morning, everyone. Thank you for joining us in this conference call, where we will discuss the results of the first quarter of the year.

Starting with the total revenue, the company generated 40.4 billion pesos during the quarter, representing a 2.4% decrease year-over-year. We ended the quarter with 802 stores in operation, full of wings by the closure of eight units as part of our company-wide efficiency and profitable plan.

In respect of the performance of our store formats across the country, we would like to highlight the strong performance of super format, which is characterized by a more focused SKU assortment and a reduced general merchandise offering, which aligns well to the current consumption trends. The strongest sales performance for this format was recorded mainly in the states of Quintana Roo, Jalisco, Sonora, Nayarit, and Tabasco.

Regarding our digital channels, during the quarter, we achieved a 23% growth in digital sales along with a 22% increase in the number of orders, reflecting continued customer adoption and engagement across our online platforms. Moving on to our real estate business that is an important part of the income, we closed the quarter with an occupancy rate of 90.5%, representing a 6% increase year-over-year.

We achieved a total revenue of 816 million pesos. These results were driven by commercial synergies with fast-growing national brands across multiple sectors such as gyms, coffee shops, restaurants, and apparel retail.

Through these partnerships, we were able to accelerate occupancy by successfully renegotiating lease terms and strengthening the commercial collaboration with key strategic partners in all the stores. We also very proud to report the continued progress in the consolidation of our private label strategy.

We remain focused on developing new products and expanding shelf space for both domestic and imported brands. This initiative has shown a consistent growth year-over-year and currently represent 14% of the total sales, almost 1 point more than last year.

Brands such as Quality Day and Valley Foods continue to deliver double-digit sales growth and significantly outperformed the national brands. This trend has a positive impact not only in the customer preference and loyalty, but also in the gross margin expansion of the company.

Also, as a very important part of the strategy and in terms of the customer engagement, our loyalty program, Soriana YA, now accounts for a little more than 50% of the sales from identified customers. These clients purchase 70% more items per ticket and have an average ticket size of 60% higher than non-identified customers.

These results clearly demonstrate the value of the exclusive products and promotion offers through our loyalty program that day by day is getting more important as part of the strategy of the company. Profit for the quarter: this line reached 9.9 billion pesos, representing a 24.7% gross margin with a 7% increase compared to the same quarter of the previous year, mainly driven, among other factors, by a non-recurring income such as land sales, insurance recovery, but also and very important, because improvements in their operational shrinkages both in stores and in distribution centers, and also because the progress in commercial negotiation increases the memberships, and also the increases of the membership sales in our format City Club.

In this regard, the increase in gross margin partially offset the 17% increase in the operating expense versus last year, which results in 7.6 billion pesos, representing 80.8% over the revenues, compared to the 15.7% in last year. Mainly, this increase reflects the double-digit minimum wage increase in all the country and that is something that is happening for several years in a consecutive row without having a growth in the revenue in the same comparable way.

As a result of all these changes, the EBITDA for the first quarter reached 2.8 billion pesos, representing a 7.1% margin and a 1.7% increase year-over-year. Also, the net financial cost for the quarter amount to 502 million pesos, representing a 20.6% year-over-year decrease, mainly driven by a reduction in the average debt balance, which results in a 52% decrease in the financial expense.

Mainly with this, the net income for the quarter reached 834 million pesos, representing 2.1% over the sales and a 19.4% year-over-year increase. Also, and turning to our associated companies, we are pleased to report that our financial services partnership with Falabella closed the quarter with almost 1 million active cards, 108 service modules, and a loan portfolio that surpassed 6.5 billion pesos.

In the other hand, Sodimac continued to perform favorably, with 15 stores in operation and a solid positioning across the country. Regarding the CapEx, during the first quarter, we invest 578 million pesos, primarily focused on maintenance and equipment replacement to enhance the customer comfort.

This investment supports improvements in store navigation, safety, self-checkout equipment, and also, and very important, continue with the remodeling program of the stores. Lastly, we are pleased to share that we have now completed 11 months of operation with our strategic partner, Vemo, an alliance aimed to build the most important ultrafast electric vehicle charging network in Mexico.

This initiative displays a strong growth potential in the electric vehicle market, while also reinforce our commitment to the environment responsibility. Currently, we operate 23 station across major cities in the state of Nuevo León, Morelos, Mexico City, and the State of Mexico.

Hoping that this information provided will be useful, basically, we conclude our intervention, and we can go to the Q&A session. Thank you very much.

Yes, hi, Rodrigo. Thank you for the comments.

I have two different questions, if I may. Firstly, if you could just talk a little bit about how you're thinking about the outlook for the remainder of the year.

Obviously, a tough start to the beginning of the year in terms of same-store sales, and generally still seeing a soft environment. Just wondering, sort of when you think about, with FIFA World Cup in the second quarter and perhaps some easier comps along the year, sort of how do you think and how do you position in terms of pricing and inventory for the coming months and quarters?

Then secondly, on the gross margin, you obviously had a good improvement, and I know there's a couple of different drivers of that, but if you could also talk a little bit about sustainability of gross margin and the opportunities or the potential headwinds that you could see to that. Maybe, sorry, if I'm [chuckles] extending myself, but maybe a third question.

Just in terms of labor costs obviously a continued pressure, maybe help us just think about what you can do to mitigate those pressures, especially in the context of reduced workweeks and continued minimum wage increases. Obviously, there's some efforts on the self-checkout side that you talked about, but yeah, just if you can talk about sort of the different initiatives that you have and where it could potentially limit the labor cost increases to if that's sort of still high single digit for the remainder of the year or potentially higher.

I think those are the three questions. Thank you.

Irma, nice to see you again. In terms of the same-store sales of the year, basically, we are not changing the guidance that we said the last part of the 2025.

Basically, we are really conservative. We are expecting something around 4%.

Obviously, in this first quarter was not the results that we want. In general, as you mentioned, we see some specific events that could help us to accelerate the same-store sales.

Obviously, the comparative base in our case is easy. We doesn't have a very good performance in same-store sales last year, we are expecting that we can accelerate the rate on that.

Basically, the soccer tournament for Soriana, it will be double important because it's also at the same time that Julio Regalado. That is the most important commercial campaign that we have, and it's something that all of you know that.

We are preparing something special in order to combine Julio Regalado with the World Cup. We believe that we are much better prepared for this Julio Regalado than last year, particularly in terms not only of the promotional aggressiveness, but also in terms of the efficiency in logistics and working capital.

Probably something that you have seen particularly in the last six months is that the company have important improvements in the working capital, in much better management of the working capital cycle, and is something that we expect that we can continue in Julio Regalado, that obviously have an important benefit in the free cash flow. We are expecting to have a much better summer season in this year.

In terms of the gross margin, as you mentioned, Irma, we have a specific event, non-recurrent event, like the sales of some part of the reserve land of the company and some recoveries from insurance, but also have recurrent items that is helping the gross margin, like the reduction in the shrinkage. Important to mention is across all the logistic chain of the company, not only in the stores, but also in the CEDIS, but also even in the shrinkage that we receive, something that we call hidden shrinkage that we receive from the suppliers.

The company have invested very hard in have much better logistic process since the shipment of the product in the CEDIS from the suppliers to the delivery in the store. We are obtaining positive results.

We still see space to continue reducing the shrinkage. It's not in the goal that we internally set.

You can expect that we can continue with a little couple of points, basic points more improvement in the gross margin, but what we believe is that we have to invest part of that expansion in the gross margin into the sales to accelerate sales. No matter that mathematically speaking, we feel comfortable with the competitiveness of the company, the perception of the client is still very far away from the point that we want.

We have to continue investing in price, but also in publicity, but also in perception in order to gain that market recognition that right now is something that we doesn't have. Yes, we believe that we can maintain the gross margin level, but something that for sure we will do is continue investing in price.

Obviously, the market is not easy. We have seen important reduction in terms of macroeconomic factors along the country.

In some regions, we are seeing a decrease in the foreign investment. In some regions, we are seeing a decrease of the generation of new employees.

Particularly in some regions, we are seeing a decrease even in the tourist activity. For sure we have to maintain the competitiveness of the company as one of the main pillars of the strategy.

Finally, going to your third question about the expense and the labor cost, yes, we are really worried. We have several years, it's not the first year that we have a double increase in the minimum salary.

That obviously doesn't not only affect in that positions that have minimum salary, affect the whole company because creates a aspirational factor that put some pressures to increase the salaries in all the levels, not only in the basic levels. Is very hard for the company never has an increase in the labor cost of double-digit.

Remember that basically labor cost is the most important expense of the company, almost accounts for 80% of expenses. For sure, it's something that is really hard to us to leverage with growth in the gross margin and expense so important like the labor.

To be completely honest, the feedback that we have from the federal government is that at least in the period of the President Claudia Sheinbaum, the increases will continue. Obviously, we believe that is something positive for the country, for the population to have an increase in the minimum salary.

An important part of that minimum salary is supposed to come back again to sales in basic products, and we are a company that we are in a very defensive market, very basic products. In the short terms, creates pressure.

What we are doing apart from all the strategy that we already talked about the self-checkouts that basically right now we are in the way to implement around 600 more self-checkouts in the company that have an important saving in terms of personnel. We are also developing some efficiency in the CEDIS again in all the logistic process in which we are increasing the use of technology to decrease the use of personnel, particularly to make all the audits and all the safety checks to measure the shrinkage, to measure the activity of the product, to measure the activity of the packages that we send to the stores.

All of that is moving to more technological approach. That is also helping us to reduce personnel.

I think that last quarter I also talked about some efficiency that we obtain in the Human Resources department. Just as an example, in the past, we used to have around 40 people here in the headquarters that were in charge to make all the register of the personnel.

Remember that we are a company with more than 8,000 people and with a turnover higher than 50%, we have to hire a lot of people every month, and that requires a lot of administrative process. In the past, all of that process were do it centrally by a equipment of 40 people, and right now, basically, everything is do it by artificial intelligence with two people.

We have an important reduction of direct people just in that process. Just to give you an example.

Also in the stores, it's not only the self-checkouts, we are also implementing something that we call multifunctional personnel, in which the same people can develop different duties or tasks along the day. Probably in the morning is in the package of the store and in the afternoon is in the cashier line.

Obviously, that sound like something very easy, but even there are legal aspects that you have to take care before doing that, or some issues that we have to fix with the unions because at the end of the day, that personnel belongs to some unions and they are hired for a specific task. Just to give you a sense of all the things that we have to change in order to found and to implement efficiency in order to reduce the impact of the labor cost.

Yes, it's something that at least we see that the following two years, we will continue with that and we have to find ways to be more efficient. I don't know if I'm clear enough with the answer.

Very clear.

Thank you very much. No, no.

Can maybe just add, in the other income line, if you could just clarify, as you mentioned earlier, there was a land sale, was that capital gains? Or what is associated with land sale with insurance?

It's in other income line, and it's from we sell the reserve. Obviously, what the register that we make is only the profit, not the sale of the land.

It's just the profit that we have for the land. Okay.

The major part is coming from efficiency in the gross margin, but also we have some non-recurrent items like that one and the recovery of insurance. Thank you, Irma.

Sorry, can you hear me?

Hi, Rodrigo. Thank you for your time.

I had two questions, but they were already tackled. One of them regarding the income statement, the 509 million occurred under other income, and also on the gross margin expansion.

Already pretty clear. Thank you.

Thank you for joining to the conference, Ricardo. Thank you very much.

Anyway, if you need some other information, just send us an email, and it would be a pleasure. Thank you.

Appreciate it.

Hi, thank you very much for taking my questions. Could you please share updates on private label penetration, if possible, by store format?

Also, just to follow up with gross margin expansion, out of the initiatives that you are implementing so far, just to understand which out of those would be the most promising for the near future?

Sure. We are really happy with the performance of the private label.

As I mentioned, the total company already represent 14%. It's still far away from the objective, particularly we have a specific target for some format, like an example, for Mercado and Express.

We are aiming to achieve close to 20% in the medium term, in a three-year, four-year period. Still we are far away.

Right now, like an example, in Mercado, already accounts for almost 16.5%, 16.6% the private brand. In the low-income sector, the private brands have a higher penetration, but still with plenty of room to continue growing.

Something that is important also to mention is that our private label strategy is not only for at the entry level of private brands. We are also have an strategy for commercial brand level and also even for premium private brands.

In general, in this point, if you ask me which is the brand with the major success or the highest performance is Valley Foods, it's not Precisssimo. Precisssimo is the private label that we use for entry-level products, and Valley Foods is more for commercial level, or even Valley Foods brand that is the luxury private brand.

In general, this medium-class or commercial level and premium-level private brand are the ones with the best performance. It's obviously something that takes time because we are trying to find the better suppliers all around the world.

Actually, important part of our sourcing is not from Mexico, is coming from other countries. The chocolates is coming from Canada, the peaches is coming from Greece, a lot of toasts is coming from Spain, from Portugal.

That obviously help us to show to the client the very high quality and this aspirational factor to our clients that is helping us, and it's helping to reposition the image of Soriana in medium classes and high-income classes. Obviously, something for the long term.

It's part of the strategy. It's a key part of the strategy, and we will continue trying to increase the participation of the private brand.

About the efficiencies in the gross margin, right now, we can say that there is three important or four important things that is helping us to increase the gross margin. The most simple things to explain is the non-recurrent items that I already talked about that, but that is something exceptional that happened once.

The second most or the second thing that to talk about that is the improvements in the shrinkage. Again, in the distribution centers, but also in the stores.

Number three, obviously, the private brand. Every time that we increase the private brand, we gain not only loyalty, we gain also margin.

Remember that in general, our private brand have something between 15% to 25% more gross margin than the commercial brand. The increase and this acceleration in the sales of the private brand is helping us also in the gross margin of the company.

Obviously, and also very important, the negotiations and the all improvements in our commercial relationships with the suppliers is helping us, and it starts to deliver results not only in the gross margin, but even also in the working capital. I think that in general, still we are far away from the objective, but we are on the right track to change the performance of the company.

Thank you. Thank you very much.

Very clear. About being far away from the objective, what would be the timelines of that objective?

Medium-term? Much more for longer-term?

Particularly, like an example, for the private brand, that the objective is a five-year objective. It's a medium-term, medium-long term.

In terms of efficiencies and improving the gross margin?

The improvement of the gross margin is already there. Just this quarter, we have a more than 200 basis points increase in the gross margin.

What is the most important thing that is lack, or we have a lack in the results, is to convert that into higher sales. To be completely clear, I think that the most important issue in our P&L is sales, and we start to talk about sales per square meter and the performance against our competitors.

That is also related with the perception of prices, the perception of quality that I talked in the beginning of this conference. It's not only to have the right price, we also have to have the right perception, and that is something that you cannot achieve in just one year of good prices.

You have to working through several years in order to gain that perception, and it's something that right now Soriana doesn't have, and we have to continue on that. In the other hand, like an example, in terms of quality, this private brand is helping us to deliver to the client a better image of quality in our products, but it's not something that will happen in six months.

All of these strategies that we already start to see some improvements reflected in the numbers in the P&L, in order to see an important change, it will take years, not only months. Excellent.

Excellent. Thank you very much.

Very clear. Thank you very much.

Hi. My question was answered.

Thank you.

Thank you, Gabrielle.

Hi, Rodrigo, Claudia. Thanks for the time.

Three main questions. If you could provide some color on the store closures and what do you expect going forward?

The second one would be regarding depreciation. I see a slight decrease.

Is this something that we should look into the coming quarters as well? The final question would be the land sales.

Is this something that you are expecting to continue in the near future? Thank you very much.

Hello, Miguel. Going to the first question about the store closure, we already do eight close.

As part of the efficiency plan of the company for this year, we are planning to close 12 more. For the full year, it would be 20.

In addition of that, we are implemented a reduction in the sales area of around 60 stores for this year, particularly in hypermarkets that, as Miguel, in the past, we used to open very big hypermarkets of around 10,000, 9,000 square meters sales area. Right now, we open a new hypermarket, probably the average is 5,000, 6,000 square meters sales area.

We have plenty of stores that are very big to the condition and to the requirements of the clients of nowadays. What we are doing is, in one side, make this store closure program, in the other side, the reduction of sales area.

That area that we obtain from the reduction is converted into the real estate business that is very profitable and is growing in the company, and actually even complement the value proposition for the client and create extra traffic to the store. In general, we see this strategy as a very helpful in one for the company, and we will continue with this along this year.

Going about the depreciation, yeah, in general terms, we are seeing, particularly is related with investments in systems and other assets that we believe that the period of amortization and depreciation of that asset are the right one. We made some changes on that, and we though are not seeing an important change on that.

Basically, what you are seeing right now is what you can expect going into the future. Finally, on the last question about remember, Miguel, the last question was about

Land sales.

The land sales. No, this was a little special because was the sales of a whole store that we have been closed probably seven years ago.

That is not something frequent. What is a little more frequent, Miguel, is spaces that we are not using in the total land of the store, something that we call sobrantes, that in some cases, we doesn't seem like a very real estate attractive in that part of the land because is not in the front of the street, is not giving the face to the main highways, the main corridor.

We are willing to sell. That kind of things, we will continue with that, but is not very important.

It's just a small spaces of the total land of the store. In general, we are not seeing this as a recurring thing.

Actually, right now, the land portfolio of the company, the land reserve, amounts for approximately 45, 50 stores that we already have the land, and the idea is to use that land reserve to the following years opening plan.

Right. Thank you.

Thank you, Miguel.

Sorry to come back onto the line. I just wanted to clarify.

You had mentioned earlier the one-off effects of the capital gains of the land sale, as well as the insurance payments. I was wondering, when I look at your press release and the income statement specifically there or the P&L, there is a line under other income and expenses, and we see a positive 509 that obviously helped the EBITDA margin this quarter.

Is that what reflects those two effects? Or initially from your initial remarks, it sounded like it helped the gross margin.

I was wondering what it is that we're seeing reflected in that 509.

No. No, basically, the profit that we made from the land sales is around 18 million pesos, and is in the other income just below the sales.

It's in the top line, Irma. The amount that you are seeing that is basically below the operating income is more related for operative and accounting issues that are not part of the day-by-day operation, particularly this amount that you are seeing is related with the cancellation of a liability of the personnel, el pasivo laboral, the liability of personnel, of...

Labor liabilities, yeah.

Exactly.

Great. Perfect.

Thank you so much for clarifying.

Don't worry.

Thank you very much for your questions, for joining us to this conference call. Again, if you have any other question and requirement of information, please send us an email or a call to Claudia or to me, and it will be a pleasure to respond as soon as possible.

Have a very good weekend. Thank you very much.