Grupo Comercial Ched Ord

Good morning to all participants and welcome to Grupo Commercial Chedawa third quarter 2025 conference call. Participating in the conference call today will be Mr. Jose Antonio Chedawa, CEO of Grupo Commercial Chedawa, Mr. Carlos Smith, CEO of Chedawa USA, Humberto Tafolla, CFO, and Arturo Valakis, IRO for the company. We will begin the call with initial comments on Grupo Commercial Chedawa's second quarter, third quarter financial results by the company's CEO, Mr. Jose Antonio Chedowa and Chedowa's USA CEO, Carlos Smith.

Good morning to all and welcome to a presentation of Grupo Comercial Chedraui's third quarter 2025 results. I would like to start by acknowledging the recent severe flooding in the Veracruz region, particularly in the cities of Álamo and Poza Rica, which temporarily disrupted operations in three of our stores. Most importantly, we are pleased to report that all our employees and their families are safe. Through Fundación Chedraui, the company quickly implemented several measures to support impacted employees and local communities. These actions included the distribution of food baskets and the launch of a point-of-sale Roundup fundraising campaign to provide additional assistance. The company remains committed to reopening the affected stores as soon as possible to continue serving customers with the essential products they rely on. The company faced a challenging operating environment in the third quarter. In Mexico, consumer trends have continued to soften, while operations in the U.S. were impacted by changes in immigration enforcement. Despite these challenges, the dedication of our teams and the continued trust and preference of our customers enabled us to deliver solid results. In Mexico, same-store sales outperformed the TAD self-service segment by 183 basis points, making the 21st consecutive quarter of outperformance. EBITDA margin increased by 6 basis points to 9.9%. reflecting consistent operational discipline and the successful execution of initiatives aimed at driving efficiency and productivity. At Chedravi USA, although sales were below our expectations due to changes in immigration enforcement, EBITDA margins improved by 34 basis points, to 7.3%, supported by a rigorous expense management and continued cost reductions from our Rancho Cucamonga distribution center . We are also pleased to announce that Grupo Chedraui opened its 1,000th store during the third quarter, a great milestone for our employees and shareholders. Now, to start our presentation, please turn to slide 4, where I will highlight key achievements of the quarter. Chedraui Mexico's same-store sales grew 2.8% in the third quarter and surpassed Antat's 1%. This is the 21st consecutive quarter exceeding Antat's results. Chedraui Mexico's total sales increased 5.2% due to higher same-store sales and a 3.7% sales floor expansion. Consolidated EBITDA grew 3.2% compared to Q3 of 24. Consolidated EBITDA margin of 8.5% increased 28 basis points compared to 8.3% in Q3 of 24. Chedraui Mexico's EBITDA margin rose 6 basis points to 9.9%. And Chedraui USA's EBITDA margin grew 34 basis points to 7.3%. Net cash to EBITDA stood at minus 0.03 times. We accelerated our organic growth in Mexico with the opening of 32 stores. Consolidated net income grew 13.3%. to 1,646 million pesos in the quarter. In the following slides, I will comment in more detail about our third quarter results. Turn to slide five, please. During the third quarter, consolidated sales were flat compared to the previous year, primarily reflecting the currency translation effect from a 4% appreciation of the Mexican peso against the U.S. dollar. It is important to note that, despite the loss of operating leverage in certain operations, consolidated EBITDA for the quarter increased 3.2% versus the prior comparative quarter to 6,129 million pesos, while the EBITDA margin expanded by 28 basis points to 8.5%. This performance reflects effective inventory and promotional management, as well as disciplined expense control across all business units. On slide 6, our strategic M&A investments and organic growth strategy have continued to support the positive long-term trend in consolidated net income. Over the past four years, net income has achieved a compounded annual growth rate of 16.4%. highlighting the effectiveness of our strategy and disciplined financial management. Our return on equity has recently been affected by RCDC transition costs. However, even after considering these factors, our long-term strategic focus drove a 219 basis point increase in ROE to 13.2% in the third quarter. These demonstrate our commitment to creating long-term value to our shareholders. In the following slides, we will review the main highlights of our businesses in Mexico and the U.S. On slide 7, our summer campaign, Por Ti Cuesta Menos, delivered strong results during a period characterized by increased promotional activity. Our continued commitment to offering the lowest prices and targeted customer promotions enabled us to achieve a 2.8% increase in same-store sales, outperforming in CAD self-service by 183 basis points in the quarter. Also, our e-commerce sales penetration increased by 70 basis points to 3.8%. This performance was driven by higher consumer satisfaction and stronger repeat purchase rates across our digital channels. In addition, third-party partnerships with platforms such as Uber, Rappi, Didi, Rappi Turbo, and MercadoLibre continue to enhance growth and strengthen our ability to meet customers diverse shopping preferences. Please turn to slide eight. In Mexico, sales increased 5.2% compared to the third quarter of 2024, supported by a positive same-store sales and a 3.7% expansion in sales floor area. We're pleased to report that despite a challenging environment, Chedraui, Mexico's EBITDA grew 5.9% year-over-year to 3,381 million pesos, while the EBITDA margin expanded by six basis points to 9.9% of sales. This solid performance was driven by strategic expense control and enhanced inventory and promotional management, which offset higher labor costs. I will now turn the meeting over to Carlos Smith, CEO of Chedraui USA, for his comments on our U.S. operations. Carlos, please go ahead.

Thank you, Antonio. Good morning, everyone. In the quarter, Chedraui USA experienced the headwinds of stricter immigration enforcement activity across the United States. These activities have had a negative impact on the number of transactions at our stores, primarily at El Super and Fiesta, as well as the average sales ticket for our business customers at Smart and Final. We have to assume that immigration enforcement activities will continue to affect our operations in the coming months, and therefore, we have implemented strict expense controls to offset the expected loss of operating leverage. It is important to note that despite current trends, both El Super and Fiesta's same-store sales have grown considerably over the last four years. When comparing the first nine months of 2021 to the same period of 2025, same-store sales compounded annual growth rate for El Super with 6.9%, 7.3% for Fiesta. Also, EBITDA margins over the same period increased nearly 100 basis points for El Super and 330 basis points for Fiesta. These results demonstrate our commitment to delivering solid long-term results despite the short-term challenges. To review the results of the third quarter, please turn to slide nine. Chedrawee USA same store sales declined by 1.9% in dollar terms compared to the same quarter of last year. This is primarily explained by decline in transactions at El Super and Fiesta due to stricter immigration enforcement and a high same store sales base comparison to the prior year. At Smart and Final, same store sales decreased 0.5% in dollar terms primarily due to a lower average ticket from business customers. Overall, Tigrayo USA's total sales decreased by 0.9% in dollar terms. Additionally, the appreciation of the Mexican peso against the U.S. dollar by 4% contributed to a sales decline of 4.6% in Mexican pesos. Please turn to slide 10. Discipline expense control across the organization allowed Chihuahua USA's EBITDA margin in Mexican pesos to remain flat compared to the third quarter of 2024. This control compensated for the loss of operational leverage leading to a 7.3% EBITDA margin, which represents a 34 basis point increase compared to the third quarter of 2024. The combined ELF Super and Fiesta EBITDA margin of 8.1% in the quarter was 25 basis points lower than in the prior comparative quarter. Smart and Final's EBITDA margin of 6.6% improved from 5.7% in the third quarter due to decreasing RCDC expenses versus the previous year. We are confident that the ongoing strategy of increasing perishable penetration and ongoing efficiencies from RCDC will contribute to Smart Final's margin recovery in the coming quarters. This concludes our report on the U.S. operations.

Thank you, Carlos. We now turn to the consolidated financial results on slide 11. Consolidated sales of 71,768 million pesos were flat compared to third Q of 24 and were primarily impacted by a 4% appreciation of the Mexican peso. Gross profit rose 4.8% due to favorable inventory and promotion management in Mexico and reduced RCDC costs at Chedraui, USA. Gross profit as a percentage of sales stood at 24.6% in the quarter compared to 23.4% in the prior comparative quarter. Consolidated operating expenses excluding depreciation and amortization increased by 5.6 percent compared to the third quarter of 24. this is mainly attributed to higher labor costs in mexico and the u.s and a higher store count in mexico consolidated operating income of 3 745 million pesos grew 3.9% compared to the third quarter of 2024, with the operating margin increasing by 21 basis points to 5.2% of sales. Consolidated EBITDA grew 3.2% and represented 8.5% of sales, a 28 basis points increase compared to the prior comparative quarter. Financial expenses declined 7.3% due to lower interest expense on Chedraui USA's debt and the appreciation of the Mexican peso against the US dollar in the last 12 months. The prior was partially offset by lower financial income in Mexico, driven by lower interest rates. It's remarkable to note that, despite the challenging environment, consolidated net income at 2.3% of sales grew 13.3%. to 1,646 million pesos in the quarter. This result represents a 27 basis points improvement compared to the prior comparative quarter. Finally, please move to slide 12. We closed the year with a net cash position of 743 million pesos and our net cash to EBITDA ratio improved to minus 0.03 times from a positive 0.02 times in the same period last year. CAPEX for the first nine months of 2025 totaled 5,860 million pesos, representing 2.7% of sales and coming in below the prior year due to the significant investment in RCDC in 2024. Now, if you allow me, please move on to the Q&A section. Thank you.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Renata Cabral with Citigroup. Please proceed with your question.

Hi. Good morning, everyone. Thank you so much for taking my questions. The first one is about the softness in the economic situation both in Mexico and in the U.S. My question for you is how the company is calibrating pricing, promotions, and cost control to preserve margins without sacrificing traffic, if you can see some actions that the company is taking would really be helpful. And the second question is related, but it's more towards Mexico and regional gaps in terms of performance, especially in the southwest of the country. What are the levers that you are using to narrow the performance gap in terms of sort of closer in pricing or format differentiation? Thank you so much.

Thank you, Renata.

Well, I will talk about Mexico. As we already mentioned and you pointed out clearly, we're experiencing softness in consumption, particularly in the south region of Mexico. Due to higher basis, we don't have Tren Maya, we don't have the airport of Tulum, we don't have the construction of Dos Bocas, and we're experiencing Pemex not paying as well as they used to. They're vendors and service providers due to those reasons we're experiencing this situation. Now, on the pricing strategy, we are just as aggressive as we have been in the past years. There's nothing new about it. We maintain the gap against our competition. And as you already know, we have probably the best cost structure that supports this price aggressiveness that in the end allow us not only to maintain our margins, but even to increase them. And we believe that will continue to happen. We don't see anything different. Actually, for the way we operate, aggressive market it's it's just like more of what we're used to we'll keep working of being more efficient managing inventory so that we have as few as possible cost reductions and being conscious and focusing in reducing all the cost and expenses of that will allow us to maintain our margins. It's just the way it is, and we've been doing that for a long time already.

Thank you.

Yeah, hi, Donato. This is Carlos. You know, very similar story, I guess, in the U.S. Certainly, as we look internally, anticipating a tougher pandemic, market condition and a tougher environment. Internally, we're very, very focused on efficiency within our processes and productivity. Very, very tight expense controls. So that ultimately, from a customer-facing standpoint, we continue to deliver on what we think is incredibly important, which is value, right? We work very hard at maintaining proper price gaps with our competition. We're very, very focused on our average retail pricing so that it doesn't creep in order to continue to offer great value and ultimately gain market share.

All right. That's very helpful. Thank you so much.

Our next question comes from Ben Thur with Barclays Bank. Please proceed with your question.

Yeah, good morning, and thank you very much for taking my question. Just following up, obviously, on the issues and call it the softness in Mexico, wanted to understand how you think about, in general, just the expansion plan for the reminder of the year. Is there anything that you reconsider on the CapEx side? And how should we think about just the idea of investments as we look maybe a little bit of a sneak preview in 2026? And then I have a quick follow-up question.

Thank you for your question, Ben.

Well, actually, we're not slowing down on our expansion program. Even though we are experiencing this softness in consumption environment, particularly in the south region, we still feel we're going to be very close to our guidance in terms of sales, very close to the low range. So we're aiming to hit that guidance on sales. On the other hand, we'll probably... uh, be able to expand our EBITDA margin even a little bit higher than we, what we projected in our guidance. And, uh, probably instead of, uh, opening, uh, 10 big stores, we'll end up with probably two more, which, uh, we'll end up with 12 of the big stores. And, uh, we're right on the supersitos to open 130 stores throughout the year. So, uh, We're not changing our strategy. We feel there's a lot of opportunity. Even though consumption is not as strong as we would like to, there is an informal market where we still feel there's an opportunity for us with all of our formats, and we'll pursue that for sure.

Thank you. Perfect. Thanks. And then one quick one for Carlos. I mean, now with the distribution center up and running, can you remind us how we should think about just the margin evolution over the coming quarters? Because it felt like it was a little behind schedule and maybe some of the recovery. So just want to understand if there was something still within the third quarter that impacted and how should we think about going forward as it relates to the the not having double cost anymore of what the impact of EBITDA margin that should have?

Right. Thanks, Ben. Yes. Well, first of all, you know, our RCDC operation is making improvements every day, and we're very excited about that. Our service levels to the stores is very, very good. Our productivity is improving. We're currently running at about 85% of where we think we're going to end up. And freight as a percent of sales in Q3 has already equaled where we were back in Q3 of 2023. So we're excited that on the transportation side, we're probably a little bit ahead of schedule. on the warehouse operation was slightly behind schedule. But overall, we still have not shed all of our duplicated costs. And that'll be tailing off towards the end of next year. Most of them coming off at the end of Q1 and Q2. And we'll be getting back to a very normalized state towards the end of 2026.

Thank you very much.

Our next question comes from Alejandro Such with ITU. Please proceed with your question.

Thank you, operator. Hello, Antonio, Carlos, and .

Thank you for the faithful questions. I have very just two quick ones. The first one, in terms of gross margin, we saw very relevant expansion of ITC. Maybe you can walk us through. Alejandro.

Hi, Alejandro. Hi, Alejandro. This is Carlos. I'm really, really sorry. We cannot hear your question. Can you speak, can you pick up the handset or do something different?

Yeah. Is this better? No. No, no. Okay. Shall we go to the next question?

Alejandro, we'll look for you afterwards. We'll contact you and try to answer your questions. I'm sorry that it was not just possible to hear you.

Okay. This is the operator. I did try and add some gain to his line. but his sound quality was bad, so I'll go to the next participant, okay? Our next participant is Ander Brunnen with Activer. Please proceed with your question.

Hello, good morning. This is Ander Brunnen from Activer. Thank you for taking my question. Your growing ticket below inflation Can you provide more color on the factors driving this performance, particularly the role of competition, data level dynamics, machining, customer behavior?

If I understand your question, Andres, you're asking about our dynamics about customer and TICKET INFLATION. WELL, WE'RE EXPANDING OUR CUSTOMER BASE, OUR TRANSACTIONS, BUT NOT BEING ABLE TO GROW OUR TICKET, PARTICULARLY AGAIN IN THE SOUTHWEST REGION. AND WE STILL MAINTAIN Our pricing gaps against our competition, we are still beating untapped. And, well, at the moment, I don't know what Walmart results will be for the third quarter. They have not reported. But we still feel we are at the same competitive environment as we were.

Thank you very much. That was very cool.

Our next question comes from Bob Ford with Bank of America. Please proceed with your question.

Thank you. Good morning. I'm Antonio Carlos, and thanks for taking my question. How are you guys thinking about evolving consumer elasticities as things slow down, and maybe private label in particular, or key traffic drivers both in Mexico and the U.S.? ? And then Carlos, I think you foreshadowed this in the past, but I'm just really curious with respect to the RCDC and subsequent capabilities that we should be mindful of, not just like the elimination of redundancies or getting to those efficiency rates you expect in the warehouse, but just incremental capability.

Thank you. Hi, Bob. Thank you for your question again.

Well, yes, private label is very important to support our pricing strategy. But not only that, we're working on private label and on exclusive brands as well to enhance our differentiation against our competition, focusing on quality, freshness in all of our formats, sustaining the pricing strategy that we have already put in place. And I think that that is working. Even though we're experiencing a difficult consumption situation where we do a little over 50% of our sales in Mexico, we're still in the end, on the overall, being able to sell, to grow sales more than our competition. And if you look at those particular regions, we're gaining market share there. So I think we're just on the right track.

Yeah. Hi, Bob, Carlos. You know, you've heard me speak to this before in terms of how well we think our formats in the U.S. are positioned to work. to excel and win during difficult times because of our value proposition. So certainly, we feel that leading with price is important. Leading with perishables is important. It generates frequency. And during difficult economic times, our formats are well positioned to capture additional market share for folks trading now. From, in terms of the RCDC, I think I've shared with all of you some of our thoughts, but certainly scale is very, very important. Capacity is very, very important for both organic growth and non-organic growth. In terms of private label, you've heard me say this, we're slowly migrating a lot of the strength of the private label program that we have at Smart and Final into our other banners. It's doing well, and we expect it to continue to grow, not only what we currently have, but expanding some of the assortment and the price points that we have in our arsenal. And then the ability to, especially at the El Super banner, the ability where we have a limited assortment, the ability to quickly pivot on dynamic assortment, right? Because we have a lot of that assortment available to the banner right now within the full assortment that we have at the RCDC. So we've got some new tools that we're dealing with given the launch of the RCDC.

And Carlos, when you talk about dynamic assortment, are you talking about seasonal? Are you talking about kind of special buys or closeouts?

Yes, seasonal. Buying seasonal in scale. Halloween is a huge, huge holiday for smart and final. And we piggyback on that for the L Super category. So a lot of seasonality, even within... you know, your traditional eight-foot sets at El Super, where you can try things quickly in and out and see how they perform. So it's just faster to market.

Understood. Very helpful. Thank you both so much. Thanks, Bob.

Our next question comes from Alvaro Garcia with BTG. Please proceed with your questions.

Hi, gentlemen. Can you hear me? Very well. Hello? Thank you. Yes.

Yes, we can. Thank you. We hear you very well. A couple questions on my end. One, following up on Alejandro's question on gross profit, we saw a material expansion in your gross margin. If you could give any color on how much of that is RCDC and how much of that is U.S. versus what you're seeing in Mexico because you had some Pretty bullish commentary on Mexico gross margin as well. And my second question, I thought you mentioned that you expect to maintain guidance in Mexico. It's a bit surprising. It kind of implies a pretty significant sequential uptick into the fourth quarter, really into mid-single-digit territory on the same sort of sales front. So any thoughts on why you think you can get there if you're seeing better activity into October maybe would be helpful.

Thank you.

Thank you for your question, Alvaro. Well, we feel very comfortable that we're going to hit our guidance. We're seeing a pickup trend in sales in this particular month, and we believe that even though on the sales side will be in the low range of the guidance. We believe we can hit that. We're also cycling the base, the high base, in some of the sales expansion due to what I already mentioned, the Tren Maya and Tulum Airport and those bocas. Not all of them at the same time, but we'll see a little bit easier base than what we experienced in the first three quarters. On the margin side, we do not disclose gross margin, but we're being able to gain EBITDA margin, and we feel we're going to be even a little bit higher than what we projected in our original guidance in Mexico. We feel comfortable with that. And we feel that with the next month coming, it'll be pretty much what we expect to since sales are going to help a little bit more than what they did in the first three quarters of the year.

Now, hi there. Go for it, Carlos, sorry.

Yeah, yeah, yeah, Alvaro, hi, this is Carlos. Yeah, and look, consistent to what we've indicated in previous quarters, we continue to shed supply chain costs, and that's improving our margins. And in addition to that, as also as we've indicated, we expected to see some improvement in cost of goods that come from the implementation of the RCBC, and we're beginning to see that as well. Our purchasing gross margin has been improving, and it continues to improve, so we're happy about that as we continue to maintain average retail pricing in check in order to provide great value to our consumers.

Great. Yeah, just one follow-up on, you know, you think,

You've mentioned strict expense control a couple times today on the call. I think that's sort of incremental or new. If you could maybe walk through, Carlos, you know, where that will come from and how we should think about that in the context of the margin of illusion going forward. Thank you.

Well, it comes from everything. I mean, at the end of the day, it comes from all corners of your P&L, that we start with labor and making sure that we're providing proper service, handling our labor productivity goals properly throughout the P&L. Store maintenance, advertising, just making sure we look at every single component of our P&L and making sure we're using our funds wisely.

Great. Thank you very much.

Our next question comes from Froland Mendez with JP Morgan. Please proceed with your question.

Hello, guys. Thank you very much. Just to understand if you could give a similar comment on how confident you are to fit or not to fit the guidance in the U.S. And on top of the previous questions, could you let us know what is the run rate level of EBITDA margins in the U.S. once we completely lapped all the double costs that I, for what I understood, could be only until first quarter, second quarter of next year.

Those two questions, please. Thank you so much. Hi there, Furlan.

Yeah, so, you know, we, as you know, we've had some unexpected headwinds here in the last, few months in the US, particularly impacting the super and Fiesta banners through the immigration enforcement issues, together with the fact that we had a very, very difficult comparative base. Last year in Q3, El Super grew about 6%, Fiesta grew about 8%. So we knew that going into the quarter, absent all the headwinds related to immigration enforcement, Our base was high. So we anticipate probably being flat for the rest, for 2025 in terms of comps. And that's a little bit lower than our guidance. As we said in, on previous calls, our goal is to be, 50 basis points higher on our EBITDA margins as to where we finished fiscal year 2023. We certainly didn't anticipate these recent headwinds when we announced those objectives. But independent of that, I think we're going to be really close. So we've got some positive signs that we've seen lately. Customer count in Texas is back to positive. which is very, very good. We're seeing some improvement in old super, which is very, very good. And in the quarter, our Northern California Spartan final division had positive comps with very solid customer account growth. So we understand clearly where this impact is being felt, but we're cautiously optimistic of where we what we're seeing lately. Now, We don't know how long this is going to last. We certainly believe it's reasonable to think that things will settle down a bit. But regardless of that, I think that we're going to have a different type of market moving forward. We're going to have less immigration flow. We're going to start seeing EBT back to pre-pandemic levels. So we're preparing ourselves for that kind of market. But we remain focused. super bullish on the Hispanic market in general. As you know, that market is the fastest growing demographic in the United States. It's 70 million people strong, represents 20 percent of the U.S. population already. That is expected to continue to grow. It's a young demographic. So we're very bullish on that. But it's going to be a difficult market. But if you've followed us over the years, we've performed very, very well during difficult times. And as the market adjusts, there will be winners and losers, no doubt. And we think that that's an opportunity for us. Not everybody will be able to operate efficiently in a difficult environment. We've been making very, very strong investments both on a CapEx side as well as an operating side that we've been flushing through our P&L and our balance sheet over the last 12 months. But as you guys know, the decisions we make are focused on the long-term well-being of our company and the creation of shareholder value. We're really not focused on meeting objectives on a quarter-to-quarter basis.

So, you know, we're going to be close to where we said we would be at the end of 2026. Perfect. Thank you very much.

Our next question comes from yours, Hasser Gulb. with Santander Bank. Please proceed with your question.

Hi, everyone. Thanks for the space for questions here. I just had one kind of quick follow-up there on the USO. I wanted to see if you could provide any details on the ticket and traffic dynamic there on a per-format basis. In the release, you put some details around smart and final, but I wanted to see if we could get some color there for Super and Fiesta on ticket versus traffic.

Thank you.

OTHER RELEASES, YEAH, SO TRAFFIC WAS DOWN EQUIVALENT TO SALES AT BL SUPER SIDE, DOWN ABOUT 4%. AND IT WAS LESS DOWN AT THE FIESTA SIDE, IT WAS DOWN FOR THE QUARTER ABOUT 2%. BUT LIKE I SAID, JUST A FEW MINUTES AGO, WE'RE SEEING A POSITIVE REBOUND ON THAT SIDE. AS I MENTIONED, Impact in sales at Smart & Final was really felt in the Southern California region, in the same areas where we have proximity to all superstores that were impacted by immigration enforcement. The North was good, and we're continuing to see good strength in the North. I'm sorry. Actually, customer count at Fiesta was down one, and it was basically flat overall at Smart and Final with positive growth in the northern division. So a super ticket grew about 1%. Fiesta's was down about one, and Smart and Final was basically flat.

That's very clear.

Thank you very much. Yeah, that's very clear. Thank you. And another question, if I may, given the current cash position that you guys have, maybe you can walk us through a little bit on what are the capital allocation priorities you might have. You still kind of reiterated that store-opening pace and cap is related to that, but I don't know, maybe there's some room to increase dividends or to try something of their capital allocation works?

As we already said, we'll keep focusing on our store expansion in Mexico and as well as in the U.S. In Mexico, we'll be probably over our guidance in store expansion this year. And even though we have not given the guidance for 2026. We'll keep focusing on that store expansion. On the other hand, with our cash position, as we did these past two years, we have increased our dividends program. And we'll keep doing it if we don't have any better use of that cash. with a potential consolidation or organic growth. And that'll be our focus in using basically the capital to grow, to expand in stores, otherwise just expanding the dividend program as we have done.

Thank you very much.

Our next question comes from Hector Mea with Scotiabank. Please proceed with your question.

Hi, thank you very much for taking my questions. You mentioned that your expansion plans haven't changed, but just wanted to understand if there might be any changes in geographic considerations. For example, if other states in Mexico are becoming a higher priority considering the economic issues that you are facing right now in the southeastern region of the country? And same question for the U.S. Any considerations for other areas in the same states in which you operate, which maybe were not a high priority before?

That would be the first part. Thank you. Well, Hector, thank you for your question.

Well, no, we're just following our expansion plan. As I already mentioned, I believe that there is a huge opportunity because there's a huge participation of the informal market, and that happens in the south as well as in other parts of Mexico. And we believe there's a huge opportunity, particularly for supersito proximity formats I think are going to be very efficient to service the particular customer need of being able to buy their supermarket basket in the last time without having to carry huge bags of groceries, and we're taking advantage of that. And we're not changing our expansion plan, and we'll even increase it next year. We expect to open more stores for next year.

Hi, Hector. And, no, in terms of the U.S., as you know, we operate in California, we operate in Texas, we're in Arizona, we're in Nevada. We're in New Mexico, and we've got plenty of opportunity within the states that we're currently in to continue to grow our stores. And we're constantly looking at our potential pipeline, but we've got plenty of opportunity there before we launch into different markets where we're not in today.

Thank you very much.

Very clear. And just the last question, to get an update, please, on your vision for inorganic opportunities in Mexico's northern region, specifically just to understand, given the consumer environment now, if your ongoing appetite might have changed or if potential opportunities should have to wait for now, maybe 2026 would not be the year. But after that, just to get a sense, an updated sense of that.

Victor, did you mention inorganic? That would mean consolidation or expansion?

Consolidation. Because in the past, you have mentioned or the company has mentioned that there is appetite. Mexico just wanted to understand if that has changed.

No, we have. It has not changed. We have that appetite. But at the moment, we don't have any target or we're not looking at any target or talking to someone about that possibility at this moment. We're open for that. We have done it successfully in the past. And you can be sure that we'll take advantage of that opportunity if it comes to the table.

Excellent. Thank you very much. Thank you.

We have reached the end of the question and answer session. I'd now like to turn the call back over to Antonio Chinui for closing comments.

Well, I just want to thank everyone for joining, and I hope to be talking to you at the end of the fourth quarter of the year. Thank you. Happy holidays since I'm not going to be able to talk to you before holidays. And safe travels if you have to as well. Thank you.

This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.

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