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.