Inretail Peru Corp

Good morning and welcome to In Retail Peru's first quarter 2026 conference call. At this time, all participants are in a listen-only mode. And please note that this call is being recorded. After the presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask a question. Also, you can submit online questions at any time today using the chat function on the left side of the webcast platform, and they will be answered with the presentation during the Q&A session. Simply type your question in the box and click submit. Before we begin, I would like to remind you that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. Joining us today from In Retail Peru are Mr. Juan Carlos Vallejo, Chief Executive Officer, Mr. Marcelo Ramos, Chief Financial Officer, and Mrs. Andrea Sabri, Investor Relations Officer. They will be discussing the quarterly report distributed by the company yesterday, May 11. If you have not yet received a copy of the earnings report, please visit www.inretail.pe on the Investor section, where there is also a webcast presentation to accompany the discussion during this call. If you need any assistance, please contact the investor relations team of In Retail Peru. Please be advised that forward-looking statements may be made during this conference call, and they do not account for economic circumstances, industry conditions, the company's performance, or financial results. As such, these forward-looking statements are based in several assumptions and factors that could change, causing actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the quarterly report, which was issued yesterday. At this point, I would like to turn the call over to Mr. Juan Carlos Vallejo, Chief Executive Officer of InRetail Peru, for his opening remarks. Mr. Vallejo, please go ahead, sir.

Thank you, Sarah. Good morning, everyone. I'm Juan Carlos Vallejo. Thank you for joining InRetail's first quarter in this call. Today we will discuss the key highlights of our results for the first quarter of 2026. Joining me are Marcelo Ramos, our Chief Financial Officer, and Andrea Fabri, our Investor Relations Officer. I will begin with a brief executive summary and then Marcelo will walk you through our detailed earnings presentation. During the first quarter of 2026, the Peruvian economy demonstrated strong performance. We saw significant momentum in private consumption, an increase in consumer credit, and raising formal employment, all while inflation remained under control. Towards the end of the quarter, a few headwinds emerged that slightly tempered this strong start. This includes the rupture of the DGP gas pipeline, renewed uncertainty regarding the severity of the El Niño phenomenon, ongoing geopolitical tensions, and local political uncertainty. Overall, however, general economic conditions during the quarter were markedly more favorable than those we faced last year. Enriquez successfully capitalized on this positive momentum. We record revenue growth across all segments, further outpacing the competition and strengthening our leadership position in the market. We move forward with determination in executing our strategic priorities. This includes advancing our organic expansion projects, reinforcing the value proposition across our formats, and continuing the transformation of our logistic operations. Tending to our financial results, consolidated revenue for Q1 2026 increased 10.2% year-over-year, while consolidated adjusted VBA reached 785 million soles, representing a growth of 22.2%. Two retail posts are robust revenue growth of 13.1%, primarily driven by our hard discount and cash-and-carry formats. Adjusted BPA for the segment reached 299 million soles, a 30.7% increase. Pharma delivered a solid value growth of 6.2%, underpinned by a strong performance in our pharmacy unit, resulting in a 12.3% increase in adjusted BPA. Meanwhile, shopping malls saw adjusted VBA growth 41.8%, largely due to a low comparison rate from the previous year. I would also like to highlight a few subsequent events. First, in early April, InRiddle and IFS completed acquisition of InFinance XP, formerly FinancieraO, for a purchase price of $130 million. Through this 50-50 June venture, we are taking an important step forward by adopting a proven global model, the synergy between the retail and consumer finance. Second, for the fifth consecutive year, InRetail has been included in the Dow Jones Sustainability Index . This is a testament to our unwavering commitment to SGE and sustainable growth. On a final note, at our shareholders' meeting last Friday, a Shared Ripple Trade Program was approved for an amount of up to $100 million. We are currently finalizing the execution details and will provide updates in due course. With that, I will hand the floor over to Marcelo, and as always, we look forward to answering your questions at the end of the presentation.

Thank you, Juan Carlos. Good morning, everyone. Thank you for joining us on this call. Today we will review the key highlights of InRetail's first quarter results for 2026. Now, please turn to page 4 in our earnings presentation to begin reviewing our consolidated financial results. As Juan Carlos mentioned, we observed stronger consumption dynamics across sectors this quarter, which benefited many market participants simultaneously. This positive momentum was partially driven by the incremental liquidity provided at the latest round of pension fund withdrawals. InVital was able to capitalize on this favorable context, growing across all three segments, further outpacing the competition, and strengthening our leadership position. The company achieved a 10.2% growth in consolidated revenues driven by a double-digit growth in food retail and a solid growth in pharma and shopping malls. In terms of adjusted EBITDA, we reported a strong double-digit growth of 22.2% compared to Q1-25. This performance was driven by revenue growth, gross margin improvement, and dilution of fixed costs. Additionally, it is important to recall the low base of comparison in Q125, which was impacted by the extraordinary events related to the incident at the Real Plaza Portillo Mall, including the temporary closure of multiple establishments and incremental operating expenses. Overall, as we have seen in our conciliated figures, Q126 was a strong quarter for the region. We leverage this positive environment to advance our key strategic priorities and further solidify our market leadership. Please turn to page 5 to review our consolidated net income results. In Biddle Register, a net income of 182 million soles in Q126, a slight decrease compared to Q125. The decrease in net income is mainly due to a NetFX loss in Q126 compared to a NetFX gain in the prior year period. As you know, during Q126 the Peruvian sold depreciated to 3.495 as of March 31st. This unfavorable movement created non-cash P&L impacts stemming from our dollar-denominated lease liabilities on the balance sheet. All in all, the unfavorable FX impact offset the improvement in attractivity and the market-to-market gain from valuation of investment properties. Excluding FX and market-to-market effects, net income would have increased by 40.8% in Q126. Now, please send page 6 to the SCAD for cash flow breakdown. We entered the first quarter with 1.9 billion soles in cash, in line with our year-end balance. Historically, operating cash new generation in the first half of the year is lower than in the second half due to seasonality. This is explained by higher working capital requirements, particularly in food retail or store restocking and payments to suppliers. Regarding capex, we invested 138 million soles across our three business segments during the quarter. This was primarily directed towards expansion projects, including the opening of new locations and format renovations. Specifically, we opened 41 hard discount stores and 22 pharmacies on a gross basis, while also renovating 196 hard discount stores with an improved value proposition. CAPEX was also allocated to schedule network maintenance and the continued improvement of our logistic platform. including residual investments for our new pharma distribution center and our hard discount distribution center. Finally, capex was lowered year-over-year due to the high base of comparison in Q125, which included major investments in pharma distribution center and selected land-bank purchases. Now, Christian speaks further to discuss our consolidated financial debt. We entered the first quarter with a consolidated net leverage ratio of 1.8 and 0.3x reduction compared to Q1.25. This improvement was driven by strong growth in adjusted EBITDA and our higher cash balance. In retail consumer, we recorded a net leverage ratio of 1.4, remaining relatively stable compared to last quarter and landing below Q1.25 levels. This performance was driven by adjusted EBITDA growth alongside a reduction in total debt across both the food, retail and pharma sectors. Meanwhile, in retail shopping malls ended the period at 3.1. This was supported by the strong adjusted EBITDA growth against a low comparison base, which helped offset the increase in total debt following the new senior note issuance last October. Both issuers maintain healthy leverage ratios consistent with respective credit profiles. The short-term position of our consolidated debt saw a slight temporary increase consistent with the cyclical working capital requirements mentioned earlier. Thanks to our successful capital extractor strategy in 2025, our debt maturity remains healthy. The only significant maturity until 2028 is our in-retail consumer senior notes, providing us with strong liquidity position. Now, let's move to phase 8. On a consolidated basis over the last 12 months, in-retail has generated more than 23 billion soles in revenues and 3.1 billion soles in adjusted EBITDA, with a solid EBITDA margin of 13.4%. Now, let's discuss results by segment. Please turn to page 10 for food retail. Food retail costed a strong revenue growth of 13.1% in Q126, favored by improved consumption and the low comparison rates. We registered an adjusted sales growth of 8.9%, with positive growth across all quarters. Revenues in our hard-to-count format grew more than 30%. supported by a strong sales growth of 16.6 and the contribution of 237 stores opening in the last 4 months. The format continues to gain traction. We are working decisively to reinforce the value proposition anchored in three pillars, proximity, high quality and low prices. As part of this plan, we are renovating stores, deploying an autonomous commercial team to improve private label sourcing, simplifying operations, and implementing a more independent logistic network. We believe this will strengthen our long-term competitive position even more. Our cash-and-carry format, on the other hand, posted a strong double-digit sales-to-sales growth of 13.7%. favored by the low comparison rates and market momentum, which benefited ORECA and food commerce clients in particular. Management also successfully executed customer segmentation and portfolio strategies to capitalize in these tailwinds. Supermarkets, meanwhile, posted a moderate sales growth, supported by significant growth in non-food categories, particularly textiles and electronics, driven by increased disposable income. In terms of adjusted EBITDA, food retail grew 30.7%. This was driven by revenue growth and higher gross margins, the latter due to improvements across most formats and a reduction in shrinkage costs given the temporarily high comparison base in Q1-25. These effects were partially offset by changes in format in the previous years. Acceptably, the growth was also favored by the low comparison rates, which included extraordinary impacts from temporary store closures and reorganization expenses in Q125. These factors largely offset incremental expenses from the new store opening and logistics improvements in our hard discount format this quarter. Overall, Q126 was a very strong quarter for food retail. Our multi-format strategy allowed us to capitalize on the positive momentum. increasing customer interactions and accessing new homes, with a highly competitive pricing strategy. Now, we turn to page 11 for our pharma segment. Pharma posted a revenue growth of 6.2%, driven by an 11.9% increase in our pharmacist unit, which more than compensated for the decline in our distribution unit as we gradually exit non-core channels in build. We expect this decline in B2B revenues to continue through the year, given the 2025 comparison base. Our Pharmacist Unit delivered an adjusted same-social growth of 9.3%, driven by both pharma and non-pharma categories. Growth in the pharma category was notably supported by increasing demand in anti-addetics and weight control medicines. Consolidated gross margins increased to 32.6%, largely because our pharmacies unit now represents nearly 80% of the mix, higher than last year. Margins within our pharmacies unit slightly declined, while our distribution unit significantly declined its margins, mainly from a change in revenue mix in Ecuador. Farm adjustability grew 12.3% as revenue growth and margin improvements offset expenses from new stores and the gradual implementation of the new distribution center. We expect this implementation expenses to continue as we optimize the new facility. Please turn page 12 for shopping malls. Shopping malls grew 5% in revenues, mainly due to new GLA from the power center in Tarapoto and expansions in the malls of Primadera and Piura. Revenues were also benefited from the low comparison base, which included the temporary closure of several malls and the voluntary two-day closure of all of our malls, following the portfolio incident. Enant adjusted 10% social growth 13.9%, with positive growth in all categories except cinemas. 10% growth was fueled by the improvement in consumption, partially explained by the incremental liquidity provided by the latest round of pension fund withdrawals. Adjusted EBITDA for the segment grew 41.8%, primarily due to the low base in Q125, which included lost income and medical, legal, and other expense provisions related to the Q20. Adjusted EBITDA growth was also supported by the improvement in performance in other months. Now, please turn to page 13. We moved forward with determination in execution of our strategic priorities. We executed our planned organic expansions with 32 net new hard stores and 20 net new pharmacies opened this quarter. We also began developing our new power center in provinces expected to open by year-end. Additionally, we continued reinforcing the value proposition of our different formats to enhance consumer experience. We renovated 196 hard discount stores and remodeled several pharmacies with improved layouts to further capture high-growth, low-penetrated categories. We closed this quarter with a total of 1,721 food retail locations. The vast majority of these are our hard discount formats. However, when looking at our total footprint, supermarket and cash and carry still account for the bulk of our sales area. As a final note on our financial results, Q126 was a strong quarter across all segments, supported by the favorable economic cycle in Peru, as evidenced by the solid same-special growth. These results were also aided by the extraordinary impact in Q125 from the Tokyo incident, particularly in our shopping malls and food retail segments. These comparative effects should dissipate as the year progresses. Now, let's move to page 15 for a summary of a subsequent event. In early April, InVetel and IFS completed the acquisition of a finance XP for 130 million, represented a 1.19 price-to-book value multiple. This is a 50-50 joint venture with a co-controlled governance. As such, this investment will be booked under the equity method on our consolidated financial statements. Please turn page 16. With this transaction, we're taking an important step forward by adopting a proven global model, the synergy between retail and consumer finance. We've seen this work successfully in markets around the world. By integrating a solid finance offering directly into our retail ecosystem, we could unlock some key levels, sales growth, enhance customer loyalty, and increase shopping frequency. But more importantly, this strengthens our value proposition to our customers. It allows us to deliver a superior everyday value proposition, making their lives easier. We secured a strategic partnership with IFS, one of the country's leading financial institutions. Partners who bring deep expertise in both consumer finance and digital banking, while we provide the retail ecosystem. By maintaining a significant 50% stake, we ensure alignment on our core objectives, driving retail sales, increasing the penetration of in-finance payment methods in our establishments, and building a consumer finance company that is both scalable and sustainable for the long term. This concludes our presentation, and we are happy now to answer any questions you guys might have.