Grupo Comercial Ched Ord

Good morning to all participants and welcome to the Grupo Commercial Chidrawi first quarter 2026 conference call. Participating in the conference call today will be Mr. Jose Antonio Chidrawi, CEO of Grupo Commercial Chidrawi, Mr. Carlos Smith, CEO of Chidrawi USA, Humberto Tafoya, CFO, and Arturo Velasquez, IRO for the company. We will begin the call with initial comments on Grupo Comercial Chedraui's first quarter financial results by the company's CEO, Mr. Jose Antonio Chedraui, and Chedraui USA CEO, Carlos Smith. Thank you. You may begin.

Good morning to all, and welcome to our presentation of Grupo Comercial Chedraui's first quarter 2026 results. I want to thank all of our employees for their hard work and dedication to our mission, improving the lives of people by bringing the products they prefer at the best price to as many places as possible, thereby inspiring them to grow and develop within Chedraui. Their commitment has been key to maintaining strong margins even as soft consumer trends continue to be present in Mexico and the United States. In Mexico, consumer spending has been weaker than initially expected, especially in the Southeast. This affected our same-store sales growth this quarter. Despite soft consumer spending, we outperformed in TAD's self-service segment by 73 basis points, making this our 23rd straight quarter of outperformance. Our margins at Chedraui, Mexico remained strong at 9.5%, even with higher labor costs, thanks to our expense control and expansion in our gross margin. At Chedraui, USA, sales continued to be impacted by stricter immigration enforcement. Despite the loss of operating leverage, EBITDA margin improved by 21 basis points to 7.7%. As a result of rigorous expense management and efficiencies from our Rancho Cucamonga Distribution Center. Finally, I am pleased to inform you that despite the challenging environment we are facing, we remain confident in our long-term outlook. As such, we will continue to invest in the countries where we operate. CAPEX and the quarter totaled 2,196 million pesos, representing 3.1% of our consolidated sales, and a 63.8% increase compared to the first quarter of 2025. We focused our investment on new store openings with one Tienda Chedraui and 18 Supercitos, as well as store maintenance and remodelings. Please, to start our presentation, turn to slide four, where I will highlight key achievements of the quarter. Chedraui, Mexico's same-store sales grew 2.1% in the first quarter of 2026, surpassing Antat's 1.4% growth for the 23rd consecutive quarter. Chedraui, Mexico's total sales increased 6.3% due to higher same-store sales and a 4.6% sales floor expansion. Consolidated EBITDA increased 22 basis points to 8.6%. Chedraui Mexico's EBITDA margin stood at 9.5% in line with first quarter of 25. Chedraui USA's EBITDA margin increased by 21 basis points to 7.7%. Net cash to EBITDA improved to minus 0.10 times in first quarter of 26 compared to net debt to EBITDA of 0.03 times in the first quarter of 25. Our organic growth for the quarter consisted of opening one tienda Chedraui and 18 Supercitos in Mexico. In the following slides, I will comment in more detail about our 2026 first quarter results. Please turn to slide five. During the first quarter, consolidated sales declined 6.2% compared to the same quarter of last year, primarily reflecting the currency translation effect for Chedraui USA sales from a 14.3% appreciation of the Mexican peso against the US dollar. Consolidated EBITDA declined by 3.8% and EBITDA margin stood at 8.6%, a 22 basis point improvement compared to first quarter of 25. Despite the loss of operating leverage, we were able to compensate with cost efficiencies from the RCDC better promotion management in Mexico, and strict expense control programs in Chedraui, Mexico and Chedraui, USA. On slide six, 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 five years, net income has achieved a compounded annual growth rate of 16.5%, highlighting the effectiveness of our growth strategy and disciplined financial management. Our return on equity has been affected by the RCDC transition costs and non-recurring items in the past quarters. However, even after considering these factors, Our long-term strategic focus drove a 274 basis point increase in ROE in the first quarter of 26 compared to the same quarter of 2021. This demonstrates our long-term commitment to creating long-term value for our shareholders. The following slides we will review the main highlights of our businesses in Mexico and the U.S. On slide seven, for the first quarter of 2026, our same-store sales grew 2.1%, outperforming Antat's self-service segment by 73 basis points. A lower spread compared to Antat is explained by our strong presence in the southeast of Mexico. which is experiencing even softer consumer trends than the rest of the country. We continue to enhance our e-commerce strategy to give customers diverse shopping options. As such, our e-commerce sales penetration in Mexico increased by 76 basis points to 4.2% in the first quarter of 26 compared to the same quarter in 2025. This performance was driven by higher consumer satisfaction and stronger repeat purchase rates across our digital channels and a strong third-party performance, mainly from Rappi Turbo, Rappi, Uber Eats, and Didi. Please turn to slide eight. Despite the continued weakness in the consumption environment in Mexico, total sales in the first quarter increased 6.3% compared to the first quarter of 2025, supported by growth in same-store sales and a 4.6% expansion in sales floor area. EBITDA in the quarter increased 6.2% compared to the same period of the previous year, and EBITDA margin remained at 9.5%, as higher labor costs were offset by a strict expense control along with enhanced inventory and strategic promotional management. 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. Chihuahua USA continues to operate in an environment with stricter immigration enforcement, which negatively impacted store traffic in the first quarter, particularly at El Super and Fiesta. We also face a strong comparative base from Q1 2025, which, when coupled with the reduced traffic, had an impact on same-store sales performance this quarter. As we stated on last quarter's call, we implemented strict expense controls to help mitigate the loss of operating leverage. It is important to note that we continue to boost productivity at our RCDC operation, and we were successful in improving our EBITDA margin in the quarter by 21 basis points. Finally, I would like to comment that while we don't expect major changes in immigration enforcement in the near future, we remain confident that in the medium and long term, our operations and profitability will continue to improve as we optimize RCDC operations and maintain tight control over expenses. Now we will review the results for the first quarter. Please turn to slide nine. Chitraui USA same-store sales declined by 2.8% in U.S. dollar terms compared to the same quarter of last year. This is explained mainly by lower transactions at El Super and Fiesta due to immigration enforcement and a high same-store sales base comparison to the prior year. At smart final, same-store sales decreased 1.4% in U.S. dollar terms, once again affected by lower transactions in Southern California, where immigration enforcement has been stricter, coupled with the impact of softer sales coming from household customers. Chedrawa USA's total sales decreased by 2.6% in U.S. dollar terms. In Mexican pesos, 14.3% translation effect contributed to a sales decline of 16.5%. Please turn to slide 10. EBITDA was basically flat in U.S. dollars, but declined 14.2% in Mexican pesos, while EBITDA margin rose 21 basis points to 7.7% as a result of disciplined expense control across the organization and cost benefits from the RCDC. The combined El Super and Fiesta EBITDA margin reached 8.3% compared to 9.3% in the first quarter of 25, mainly explained by the pressure on transaction count experienced at El Super and Fiesta. Finally, Smart Vinyl's EBITDA margin of 7.3% improved 135 basis points compared to the same quarter of 2025, largely explained by the efficiencies gained at RCDC, as well as gross margin improvements. This concludes our report on the U.S. operations.