Organización Soriana, S. A. B. de C. V. (SORIANAB) Earnings Call Transcript

Good afternoon, everyone. Welcome to Organización Soriana Third Quarter 2026 Earnings Conference Call. With us today are Mr. Rodrigo Benet Cordova, CFO of Organización Soriana; and Ms. Claudia González Romero, Head of Investor Relations for Organización Soriana. Together, they will be discussing the financial performance for the third quarter of 2026 and providing a summary of the latest news on the company. [Operator Instructions] Please note that the conference call may be recorded. I will now turn the conference over to Mr. Rodrigo Benet Cordova, CFO of Organización Soriana. Please go ahead.

Good afternoon, everyone, and thank you for joining us again in this conference call regarding the financial results. To start and before discussing our results, I would like to share with you a little our perspective on the current consumer environment in Mexico and some of the trends that we are observing across the market. The consumption in Mexico has been very challenging during the quarter. Despite moderating inflation, consumers remain under financial pressure and continue to manage their spending very carefully and remain very focused on price. We are seeing shoppers prioritizing essential items, making purchasing decisions more careful much over than in previous periods. As a result, competition across the retail sector remains very intense with all the players competing for a limited share of consumer spending. Given this market condition, our same-store sales declined 3.6% during the quarter. This result reflects both the broader consumption trends affecting the industry, the challenges within our commercial execution and the net effect of the 18 units closed as part of the efficiency program that we previously announced. Our focus remains on enhancing the value proposition and driving a sustained improvement in sales performance based on an action plan per store and location throughout the country maintaining operational excellence in product availability and increasing our competitiveness in core categories. With that context in mind, we can move to our third quarter performance. Regarding the top line of the income statement, the company reached MXN 4.8 billion as a total income, showing a decrease of 4.3% compared with the same quarter of last year. Moving from overall sales per channel, I would like to highlight that the supermarket format is outperforming. We observe a client, obviously, with better socioeconomic level with more confident and constant consumption, less affected in transaction and number of articles by ticket, mainly compared with the formats that are focused in the low-income segment. In the same way, City Club have had an important increase in sales consecutively in the last 2 quarters, in addition to a double-digit increase in the e-commerce channel of the membership club. Talking about the e-commerce. Also during the third quarter, our e-commerce business continues to strengthen its position as an important sales channel within the grocery retail sector, driven by the growing adoption of omnichannel shopping, greater consumer demand and the continued development of home delivery and in-store pickup services. Compared to the same quarter of last year, our channels considering the Soriana app and Soriana web reached an increase of 35% in sales and a 40% increase in the number of orders, intensifying competition between digital platforms and the traditional channel. Actually, and in fact, in Mexico, in general, sales conducted exclusively through the Internet increased 17% year-over-year compared with the 3.2% growth that we saw in the retail sales in the country, according to the last economic indicators quality. This performance highlights the stronger momentum of digital commerce, where we are completely active investing year-by-year. Following with the income, also the other important business, the real estate business showed an increase of 7.5% in the quarter and an occupancy rate of 91% due to several projects with banks, Cafeterias, fitness clubs and other new services that we are adding as part of the value proposition of our shopping malls. Going down into the P&L, the gross profit reached MXN 10.2 billion with a decrease of 4.3% and an expansion of 10 basis points. The improvement in gross margin is the result of shrinker management improvements, both in savings and in the stores, good relationship and negotiation with the suppliers in Julio Regalado campaign and increasing our sales in the private brand due to more than 300 new SKUs in territory categories that, as you know, have much better margin than the commercial brand. Regarding the operating expenses, it showed a decrease of 2.4% versus the same quarter of last year, reaching MXN 7.9 billion. This decrease in the expense is mainly attributable to indirect costs like maintenance, travel expenses, cleaning services and marketing in which we have accomplished a lot of efficiency as happened also in the last year. As a consequence of the depreciation just mentioned, the EBITDA of the quarter reached an amount of MXN 2.3 billion that implies or represents a margin of 5.7%. On the other hand, and regarding the financial item, the net financial cost closed in MXN 532 million, an important decrease of 18% versus the same quarter of last year, basically as a consequence of a lower financial rate interest and also as a reduction in the debt, mainly related with a much better efficiency in the working capital. As a result of the items previously mentioned, the net income reached MXN 473 million. That implies a decrease of 19% in the quarter and a MXN 2.3 billion, showing an increase of 18% in cumulative figures. As an update of the CapEx for the year, it's important to mention that the company is accelerating the remodeling plans along the country. In fact, this year, we have completed 23 store upgrades and refurbishment, further improving the shopping environment and overall customer experience, resulting in average in a plus 20% in sales. As of the end of the quarter, the company already invested MXN 2.6 billion. This amount also includes the investment in 3 new stores. Actually, today, we are celebrating the opening in Costa Rica, while of a new hypermarket, while 2 other additional stores are scheduled to open in, Nuevo León. One of these will open in November of this year and is a key project developed in partnership with City Club and Sodimac to be delivered in other 2 phases. And the other store currently under construction is expected to open in the beginning of next year. We are very confident that both projects will be highly successful and will be adding a little more than 8,000 square meters of sales area, creating nearly to a little more than 650 new direct jobs. Also important to mention that as part of the efficiency program and actually 2 of the stores that we were closed during the year, it will be converted during the next year into Sodimac stores. Finally, we are glad to comment about the FAZT alliance, the most ambitious project regarding fast charging station, where we have already 34 sites in operation, and we continue with the goal for more than 1,000 stations for the year 2030. Looking at this year as a whole, 2026 so far has been marked by a slower demand recovery and a very competitive retail environment. In this context, we are balancing the need to drive sales performance while remaining disciplined in how we manage profitability and cash generation. As we move into the fourth quarter, we expect consumer spending patterns to remain very cautious. However, key seasonal events such as Buen Fin and the holiday season could provide important opportunities to improve our performance. We are entering this final period of the year with a clear plan focused on driving traffic, improving conversion and capturing a larger share of household spending. Obviously, the main opportunity is to increase the sales per square meter. In parallel, we will continue to focus on operating efficiency, disciplined expense management, working capital optimization and a very prudent capital allocation. We closed out this year. Our priority is simple: to improve our commercial momentum while preserving the financial discipline of the business. The environment remains challenging, but we are confident in the long-term opportunities in the Mexican retail and in our ability to strengthen our position over the time. Our team is fully focused on executing the action needed to return to profitable growth and create sustainable value for our shareholders. Thank you very much for your continued support. And now we can go to the Q&A session.

[Operator Instructions] The first question is from Ms. Melissa Bayon from Bank of America.

I wanted to know if you could give an update on October sales and then give a breakdown of traffic and ticket in the quarter and comment on regional trends. And then in your opening remarks, you mentioned that you faced some challenges in commercial execution. So can you please expand on that theme and whether that's something that you're addressing now going into the fourth quarter? I'm not sure if you were able to hear me.

Yes. Sorry, Melissa. I was mute, sorry for that. Talking about the response for the first question about the disclosure of the same-store sales. Mainly it's a decrease in transactions, Melissa. We can say that we have practically a flat ticket. The figure that you see in the same-store sales is mainly decreasing traffic that again is the one that we are focused on, and we are trying to recover the trust of the consumer and mainly working on that. And actually, it's related with the second question about the commercial execution. Basically, what we are seeing, and this is probably the second or the third quarter that I talk about that is that we continue having a very accurate measuring of the competitiveness against our -- the other players in the market. And to be honest, we continue seeing that mathematically speaking, we are really put in competitiveness. We have decreased particularly the prices of more than 300 basic products in the last 12 months in which we are assuring that we can deliver to our clients the best price. But again, we believe that we have to continue working in the perception and obviously, you know that we are basically in our hypermarket that is the main format, a high and low player that have their different perceptions in commercial terms with the clients. So we are working to adjust that and to be very efficient in show promotions that really have a positive impact in the perception in the long term and not only for the particular promotion, but in the long-term perception about prices and the value delivered to our client. And this is the things in which we are working on. We believe that we are in the right track. And actually, I will link this with the third question about the uptake in the same-store sales of October, in which we are seeing an important change in the trend with a very important positive change going that in which probably we will be -- if we talk about the difference of the same-store sales of the quarter against ANTAD, you will see an important difference. And what we are seeing with the first results of -- that we have as of today of October is that we believe, obviously, we doesn't have the information of the other players, but basically, our estimation is that we can, particularly in October, eliminate completely or 98% the difference against the competitors in same-store sales. So I mean, it's just 1 month. We cannot say that the commercial strategy is already success or taking place. It's just the first month in which we start to see an important change in the trends against our competitors. What we are positive, and we will continue with that. Again, the changes that we have to make is medium- to long-term changes, gain again the confidence of the client and particularly the perception of being the best option is not something that just happened in a couple of months. But we believe that we are in the right track and October as of today, looks to be a much better month.

Our next question is from Mr. David [ Yoda ] from S&P Global.

If you can repeat the question because I don't know if we are having some troubles with the call, but we can hear you.

Our next question is from Mr. Ricardo Ancira from GBM.

Just a quick one from my side on the tax rate. Looking at it, we're seeing a sharp increase compared to last year. So could you provide a little more color on the cost? And how should we look at it going forward? I am not sure if you can hear me?

We can hear you. If you can repeat the question.

Do you hear me now? Can you hear me now? Can you hear me now?

Ricardo. We might be having some technical difficulties on the side of Mr. Benet.