CFO Federico Rodríguez will be presenting the results. Before we continue, a friendly reminder that some of our comments today will contain forward-looking statements based on our current view of our business, and that future results may differ materially from these statements. Today's call should be considered in conjunction with disclaimers in our earnings release and our most recent Bolsa Mexicana de Valores report. The company is not obligated to update or revise any such forward-looking statements. Please note that unless specified otherwise, the earnings numbers referred to are based on pre-IFRS 16 standards. I will now hand it over to Armando for his initial remarks. Please go ahead, Armando.
Thank you, Gerardo, and good morning, everyone, and welcome to Alsea's Q3 2024 earnings video conference. I would like to thank our team members and stakeholders for their continued hard work and support. Despite ongoing macroeconomic uncertainties and challenges in some of our key regions, we have again delivered solid results. Today, I will provide an overview of our performance for the quarter, covering our financial results, regional highlights, and key developments across our brands. I will also highlight our progress on digital transformation, ESG initiatives, and expansion strategy. To begin, here are the key highlights from the quarter. In the Q3 , sales increased by 9.3% year- over- year, reaching 20.3 billion MXN. That's an 11.7% increase when excluding foreign exchange effects. Same-store sales grew 7.7% year- over- year.
EBITDA increased by 9.3% year- over- year, reaching MXN 2.85 billion with a margin of 14%. Through strategic pricing and cost measures, we were able to offset minimum wage increase, thereby maintaining both our margin and financial strength. We served over 32.2 million digital orders in the quarter, totaling MXN 6.6 billion peso sales, which contributed for 32.5% to our total sales. Regarding our brand performance in the quarter, Alsea, Starbucks same-store sales increased by 2.6%. For Starbucks Mexico, same-store sales increased by 1.9%, despite a tough comparisons and the normalization of customer habits. During this quarter, we are slower than in the travel channel stores, reflecting lower traffic in airports, which accounts for roughly 10% of our sales.
There were also disruptions in more than 30 stores, driven by weather-related events, also impact on security measures implemented in certain parts of the country. Also, during the quarter, and particularly in July, increasing in rainfall affect our sales by 1%. Additionally, we had lower sales for merchandise, which pressured our average ticket during the quarter. For Starbucks Europe, same-store sales declined 12.3%, mainly affected by the ongoing pressures in France and Benelux, and reduced consumer traffic in popular tourists , such as Barcelona and Valencia.
Finally, in South America, same-store sales increased by 29.7% and decreased by 6.3%, excluding Argentina. We are implementing different commercial strategies in the market where we operate, and we are expecting to generate a recovery in transactions during the Q4 .
During the first nine months of the year, we opened 100 new Starbucks stores globally, reflecting an increase of 27% compared to last year. Domino's Pizza Alsea posted a 4.6% increase in same-store sales. In Mexico, Domino's Pizza same-store sales increased by 8.1%, driven by successful promotions like Domino's Manía.
This year, it marks the thirty-fifth anniversary of Domino's Pizza in Mexico. We are proud of the brand's accomplishment of this period and look forward for an exciting future. In Spain, same-store sales were relatively flat, reflecting store performance in the carryout and dining channels, while we continue to experience delivery channels challenges. In Colombia, same-store sales were up 7.7%, supported by an increased traffic from successful operation and commercial campaigns.
During the first nine months of the year, we opened 45 new Domino's Pizza stores globally, reflecting an increase of 36% compared to last year. In our Burger King sector, same-store sales, excluding Argentina, increased by 2.3%. In Mexico, we're reporting a sales growth of 0.9%. This was mainly driven by strong growth in delivery channel and digital initiatives, such as digital kiosk installations, which increased our average ticket.
Regarding the full-service restaurant segment, we delivered a very solid 6.3% growth in same-store sales. Vips achieved a solid 8.9% year-over-year growth in same-store sales, fueled by strong operation performance, expansion of the delivery channel, and successful seasonal promotions. Here, we are marking our 60th anniversary, and we are moving forward with the remodeling plans to improve the customer experience and continue building on the brand's success.
Chili's and Italianni's in Mexico report a strong same-store sales of 9.6% and 9.5% respectively, boosted by an increased traffic following effective marketing and commercial campaigns, such as Tres Para Mí and Paraíso Italiano . In Spain, Vips and Ginos also reported a very solid 4.3% and 5% increase in same-store sales, respectively, supported by commercial strategy, such as our breakfast platform and a very successful Club By loyalty program.
Our global expansion strategy is focused on capitalizing on the most profitable opportunities across all our markets. During the Q3 , we opened 66 new stores, including 56 corporate units and 10 franchisees. Most of the new openings were in Mexico and Europe, especially targeting high traffic areas. While expanding in high potential regions, we are also remodeling existing locations to enhance the customer experience and drive future growth.
We are confident in our ability to meet the expansion targets outlined in the guidance provided early this year. Our digital transformations continues to fuel growth. By the end of the quarter, loyalty sales grew 38%, reaching MXN 4.7 billion, accounting for 24.1 million orders, and contributing for 25% of our total sales.
Additionally, by the end of the quarter, Club By has surpassed 2.4 million members, which represents almost 5% of all the Spanish or the Spain population, while Starbucks Rewards reaches over 2.1 million active users across all Alsea regions. Regarding ESG and people, we made a solid progress in executing our ESG initiatives in the Q3 , reflecting our commitment to sustainability and social responsibility. We keep advancing in our people strategy as our growth turnover rate remains very healthy at 60%.
Additionally, 28% of leadership roles are filled by women, and we support more than 2,200 employees from the priority groups. In Mexico, Fundación Alsea donate MXN 10 million to support 12 community kitchens operated by the Save the Children in Sinaloa. Additionally, through our Va Por Mi Cuenta initiatives, we provide over 200,000 nutritious meals during the quarter.
Our second charity run, Alsea Con Causa, lead to the donation over 4 tons of grain to support more than 17,000 people. In Europe, we install more than 600 solar panels in our support centers, stores, and factory, reducing our CO2 emissions by over 343 tons. In addition, we carry out Aperturas con Causa through brands like Domino's, Vips, Ginos, and Starbucks, which supported over 18,000 people.
We remain focused on delivering our ESG commitments, ensuring that our business positively impacts the communities in which we operate. I would like now to hand it over to Federico Rodríguez, our CFO.
Thank you, Armando. Good morning, everyone. Moving on to Alsea's Q3 performance, despite a challenging macroeconomic environment, quarterly sales increased by 9.3%, driven by effective commercial and promotional strategies. Excluding the FX, sales would have increased by 11.7% for the quarter. In Mexico, sales were up 7.9% to MXN 10.6 billion. In Europe, sales increased by 13% to MXN 6.4 billion, while in euro terms, sales increased by 0.9%.
Finally, South America sales increased by 7% to MXN 3.2 billion. In Mexico, the adjusted EBITDA increased by a strong 14.8% to MXN 2.6 billion for the quarter. This growth was driven by lower material costs, increased sales, successful commercial and promotional campaigns, and effective expense management.
Additionally, the 4.9% growth in same-store sales continues to enhance operating leverage. In Europe, the adjusted EBITDA decreased by 1.3% to MXN 883 million for the quarter, and by 11.3% in euros, due to a decline in same-store sales arising from the macroeconomic pressures we are facing, as well as some other external factors in France. In South America, adjusted EBITDA declined by 28.8% to MXN 445 million, driven by the devaluation of the Argentine peso and a reduction in the operating leverage. The net income for the third quarter decreased by 60.56% year- over- year to MXN 186 million.
This was mainly due to a negative non-cash effect from the currency exchange translation, which increased the cost of the U.S. and euro-denominated debt in Mexican pesos terms by the end of the quarter. For the Q3 , the EPS were MXN 1.98, post IFRS 16 EPS rose to MXN 3.65 pesos, an increase of 54% year- over- year. Regarding the CapEx, in the Q3 , this was amounted to MXN 4.2 billion pesos. We anticipate CapEx to slightly exceed the initial guidance due to the start of the construction, of the new distribution center and factory in Guadalajara. This strategic investment will strengthen our logistical capability and support future regional growth. We allocated 58% of the CapEx to store openings and remodelings, 28% to maintenance CapEx, and 14% to other strategic projects like digitalization projects.
Throughout the quarter, we prioritized prudent and responsible investment with a clear focus on profitability and payback. Our pre-IFRS 16 gross debt increased by MXN 5.6-MXN 5.5 billion year- over- year, reaching MXN 32 billion by the end of the quarter. This rise is due to the debt taken for the minority shareholder acquisition in Europe, as well as to the impact of a weaker Mexican peso on our foreign currency debt at the quarter end. Turning to financial ratios, the total debt to pre-IFRS 16 EBITDA ratio closed the quarter at 2.8x , while the net debt to EBITDA ratio stood at 2.4x . At the end of the quarter, 92% of the debt was long term, with 63% denominated in Mexican pesos and 37% in euros.
We remain committed to a strong balance sheet and are confident in comfortably meeting all debt covenants and obligations, thanks to our healthy capital structure. At the end of the quarter, we posted a cash position of MXN 4.6 billion. Before we go to the Q&A session, I want to add detail to our other current liabilities line and cash flow. This is with the intention of being more transparent with the market and keeping you informed of what's happening with those two lines. Hopefully, this will help you to get a better understanding of the business and the operations of Alsea. The increase in the other accounts payable line is due to a pending EUR 90 million payment to minority shareholders of the European entity that we acquired earlier this year.
Additionally, more than 80% of this account is explained by the following items: the derivative instruments for hedging risk, the recurring and variable compensation, which includes the long-term bonus, the store manager bonus, et cetera, operating and supply provisions such as water, electricity, internet, et cetera, legal and labor reserves, among others. During the first nine months of the year, Alsea has increased the pace of openings in comparison with the first nine months of 2023, reflecting a consumption in working capital during the year. Besides, this working capital consumption is related with a one-time supplier payment in Argentina and lower operating leverage in Spain, attributed to regulatory changes affecting perishable products. I will now pass you over to the operator for the Q&A session. Thank you.
We will now start the Q&A session. If you have a question, please press the Question button in the browser. Please make sure you are not in full screen mode to see the button. The first question is from Mr. Alejandro Fuchs from Itaú BBA. Please go ahead.
Thank you, operator. Hello, Armando, Federico, Gerardo, congratulations on the results, and thank you for the space for questions. I wanted to ask you two quick ones on my side. First is on Starbucks in Europe. We saw semester sales down 12% during the quarter, which actually was better than what China reported yesterday, right? With Starbucks Corporation. So wanted to see how you're feeling about the overall France operation of Starbucks for the medium term, and if your perspective for growth, maybe your prospects have changed in the country. And then the second one would be in South America. Wanted to hear your thoughts of what you expect for consumption environment in Argentina, Chile, and Colombia for next year. Thank you.
I mean, I think, gracias. Related to Europe, I mean, we continue to see similar trends on the other hand that we have in France and Benelux, no? We are double-digit traffic still decline, which, some of the time was partly because of Olympics, two weeks that really helped us over there.
... Now we are implementing commercial and promo and promotion campaigns, such as bundles, and we are attracting customers again in our store. We expected, we are expecting to deliver the one-digit same-store number for this quarter down in Europe. The last four weeks that we've been doing this... It's a 360 program. I won't say this is only bundles. This is we have a 360 program with EMEA, Starbucks France, and also Alsea helping, and we are recovering transactions in a good manner, and hopefully by the end of the year, we are hopefully to be flat, you know?
I think the deep problem is already down as much as it can be, and now we are looking for a recovery in. It's progressing well since weeks 37, from week 42, no, with gaining of transactions over the same period of last year.
Perfect. Regarding the your question around South America for 2025 , Alejandro, for Argentina, we're expecting to recover half of the lost traffic in 2025 . As you know, we have had a loss of more than 10% in terms of traffic during 2024, obviously because of the macroeconomic in Argentina. And regarding Colombia and Chile for twenty twenty-five, we're expecting to have a low- to mid-single-digit growth in terms of transactions. That would be the guidance for South America. But remember that South America is less than 7% of the total EBITDA of the company. It's relevant as a country, we are still thinking to develop the pipeline of such of all the brands like Starbucks or Domino's Pizza, but it is not relevant in terms of the whole pie of Alsea.
Muchas gracias, Armando.
Gracias.
Gracias, Alejandro.
Thank you very much for your question. Our next question is from Mr. Ben Theurer from Barclays. Please go ahead.
Yeah. Good morning, and thank you very much for taking my question. Also two ones. So the first one really just quickly following up on Starbucks, and obviously the changes, and there's likely going to be a little bit of a change in the global mandate. I wanted to see how this is going to affect you in terms of, like, your growth commitments, particularly in Europe, but also in Mexico, where we've seen a little bit of a slowdown.
So what should we expect in terms of, like, new store opening as we look into 2025? And then the second question really is just to relate it to the option, the EUR 90 million, roughly MXN 2 billion pesos. How is that going to impact your leverage, and is that anything that you work on, as you look into potential financial solutions, be it a debt financing or anything, that you might need for those two billion extra as you start having to pay them in Q4 and then Q1 ? Thank you.
Ben, good morning. Thank you for your question. First one, I mean, just, as you've been seeing in the news and what Starbucks USA has been reporting, the new, our new CEO right now is very focused right now on resolve the American, American business, no? We've been seeing him a video yesterday. He's completely focused on the U.S. business and also on the China situation. We had a call with him two or three weeks ago. Actually, tomorrow, I do have a call again with Domino's Pizza International, where we don't, we've been not having any changes. The changes that they've been doing are internally from the U.S., not from international. But I think the communication is clear and well done.
We are not experiencing nothing as much as the problems that they are doing, even though in Asia, or even though in the rest of the world, China and Mexico and other countries. A lot all healthy with operation in the best way and stay and with great results in all the KPIs, in operations, staffing, people, image, and everything else. So the sentiment that we measure of the customer for us is still very high, and we're gonna believe that.
Regarding growth for Mexico, as we've been saying in the papers, the stores that we've been open, the past stores that we've been open are tremendous suc- they have been tremendous success, even though better margins and better return of investments since the base, since the beginning of the stores. So also we are gaining better margins, very top, the average of sales, because the stores that we've been open in the last months of the last year are more profitables than the portfolio. So we're gonna s- step up and been, we have a great pipeline for next year that we're gonna achieve. Of course, we will be more cautious in South America regarding the macroeconomic environments, and of course, we've been very more focused also in France, no?
For us, Starbucks has been friendly regarding how and where to open, and if there is a circumstance in France that we have to slow down the pace, we will do so, and we will have in our number. But as I've been telling you, in this company, CapEx allocation is the key of the game, and we will stay aiming and focused on that strategy.
Perfect. To complement Armando's answer, and Ben, the white space that we have targeted and we presented to you on Alsea Day, the last March, is pretty much the same. As Armando said, we have a slowdown in France because of the macroeconomic pressures we have suffered during this year and other external factors. But in the long term, we believe the market space is there for, to have more than seven hundred stores in France. And regarding the EUR 90 million leverage we have with the minority shareholders, we'll be paying EUR 50 million out of the EUR 90 million in December, as we said, in the last February, and EUR 40 million in February 2025. So this implies that the net leverage ratio for the end of the year is 2.3x prior to IFRS 16.
That was included into the initial guidance that we deliver in the.
Okay. And just, the source of payment for that, will that be cash on hand, or you're going to look into some sort of-
Cash on hand.
Cash on hand.
Cash on hand. Yeah.
Perfect. Thank you very much.
Sure.
Thank you very much for your question. Our next question is from Mr. Ulises Argote from Santander. Please go ahead.
Hi, Armando, Fede, Gerardo. Thanks for the space for questions here. I think also a couple of my on my side. First, maybe you can make some comments there, at least, directionally, on how you're seeing trends in early Q4 . I think on the release and on your remarks, you're citing kind of that loss of operating leverage obviously impacting your margins there.
Exactly.
So any comments on how that could look, and maybe what other initiatives you guys are doing in terms of things that could help with that turnaround in margins? And maybe the second question, just if there's any kind of update to the guidance that you guys have. But I think in the last quarter, you said maybe there could be some updates in this one, so just to double-click on that. Thank you.
Do you want...?
No.
It is too soon to give you a clear trend regarding the Q4 consumption. Obviously, we had a terrible July, a bad August, and a really improved September. We are quite confident, and maybe I can mix both answers, so this is that we will be accomplishing with the guidance that we deliver on the day, not in the top line, because of the effects we suffer, impacts we suffer during the H1 of the year. But we are quite clear that the seasonality that starts in mid-November to mid-January will work a lot to accomplish with this.
Regarding the trend, and as Armando said, we are starting to see an improvement in the different same store sales, especially in traffic in France, but it is too soon to say this will last for the next months. But, regarding the forecast and the guidance, we will be accomplishing the EBITDA and the EBITDA, the EBITDA margin.
If I may add, Ulises, a little bit more color on what we're seeing on the Q4 . I would say in the last weeks we've seen very similar trends than the ones we saw in the Q3 , Ulises, overall. So I would say on a consolidated basis, we should be, I don't know, mid-single, high single type of growth. So we're still seeing, I would say, a resilient consumer environment in most of our markets, particularly in Mexico, I would say, in this one.
All right. Very clear. Thank you very much, guys. Gracias.
Thank you.
Thank you very much for your question. As a reminder, if you have a question, please press the Question button in the browser. Please make sure you are not in full screen mode to see the button. That was the last question. I will now hand over to Mr. Armando Torrado for final comments.
Okay, please, thank you, thank you very much for joining this, our quarterly video conference. Please, if you have any further questions, please contact our investor relations team. And thank you very much for connecting today. Have a great day, and see you in the next conference next year, in twenty twenty-five. Thank you. Bye.
Thank you very much.