Good morning to all participants, and welcome to the Grupo Comercial Chedraui first quarter 2026 conference call. Participating in the conference call today will be Mr. José Antonio Chedraui, CEO of Grupo Comercial Chedraui, Mr. Carlos Smith, CEO of Chedraui USA, Humberto Tafolla, CFO, and Arturo Velázquez, IRO for the company. We will begin the call with initial comments on Grupo Comercial Chedraui's first quarter financial results by the company CEO, Mr. José 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 ANTAD'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 continue 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're facing, we remain confident in our long-term outlook. As such, we will continue to invest in the countries where we operate. CapEx in the quarter totaled MXN 2,196 million, 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 Supercito, 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 ANTAD'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 2025. Chedraui USA's EBITDA margin increased by 21 basis points to 7.7%. Net cash to EBITDA improved to - 0.10 x in first quarter of 2026 compared to net debt to EBITDA of 0.03 x in the first quarter of 2025. Our organic growth for the quarter consisted of opening one Tienda Chedraui and 18 Supercito 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 U.S. dollar. Consolidated EBITDA declined by 3.8%, and EBITDA margin stood at 8.6%, a 22 basis points improvement compared to first quarter of 2025. 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 2026 compared to the same quarter of 2021. This demonstrates our long-term commitment to creating long-term value for our shareholders. In the following slides, we will review the main highlights of our businesses in Mexico and the US. On slide seven, for the first quarter of 2026, our same-store sales grew 2.1%, outperforming ANTAD self-service segment by 73 basis points.
A lower spread compared to ANTAD 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 2026, 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. Chedraui 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 faced 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. Chedraui USA same-store sales declined by 2.8% in US 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 US 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.
Chedraui USA's total sales decreased by 2.6% in U.S. dollar terms. In Mexican pesos, the 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 Mart EBITDA margin reached 8.3%, compared to 9.3% in the first quarter of 2025, mainly explained by the pressure on transaction count experienced at El Super and Fiesta Mart. Finally, Smart & Final'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.
Thank you, Carlos. Now we turn to the consolidated financial results on slide nine. Consolidated sales of MXN 69,796 million declined 6.2% compared to the first quarter of 2025, mainly explained by a 14.3% appreciation of the Mexican peso when consolidating Chedraui USA sales. Gross profit posted a 2.8% decline in peso terms. However, favorable inventory and promotional management in Mexico reduced RCDC costs and efficiencies at Chedraui USA contributed to a gross profit margin expansion of 87 basis points to 24.3% in the quarter compared to 23.4% in the prior comparative quarter. Consolidated operating expenses, excluding depreciation and amortization, decreased by 2.2% in peso terms and represented 15.7% of sales. This result is explained by the effect of the appreciation of the Mexican peso when consolidating the results of Chedraui USA's operation and expense containment programs in both countries.
Consolidated operating income decreased 0.6%, with operating margin increasing 30 basis points to 5.3%. Consolidated EBITDA declined by 3.8% and EBITDA margin was up 22 basis points to 8.6%, benefiting from cost and expense efficiencies. Financial expenses decreased by 2.9%, explained by lower interest expense on Chedraui USA's debt and the appreciation of the Mexican peso against the U.S. dollar in the last 12 months. The prior was partially offset by lower financial income in Mexico, driven by lower interest rates. Consolidated net income increased 1% to MXN 1,583 million and represented 2.3% of consolidated sales, up from 2.1% in the prior year quarter. Finally, please move to slide 12.
We closed the first quarter of 2026 with a net cash position of MXN 2,556 million, and our net cash to EBITDA ratio improved to -0.10 x from a 0.03x net debt to EBITDA ratio in the same period last year. CapEx for the quarter totaled MXN 2,196 million, representing 3.1% of sales and increasing by 63.8% compared to the same quarter of 2025. Now please allow us to move on to the question and answer section.
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would 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. Thank you. Our first question comes from the line of Robert Ford with Bank of America. Please proceed with your question.
Hey. Thank you. Good morning, Antonio, Carlos, Humberto, Arturo, and thanks for taking my question. It's gonna be a tough year in Mexico and U.S., Antonio, and I was wondering if you could discuss or maybe expand on some of the efficiency and expense mitigation strategies that you referred to earlier about how you're thinking about that over the balance of the year. The gross margins have been very impressive. Maybe if you could touch on some of the segmentation, private label or perhaps other elements besides price that are behind that. Lastly, I'd love to hear your comments on the performance of your latest vintages of Supercito. You're clearly skewed toward opening a lot of these smaller locations right now, and I'm very curious in terms of how they're performing with respect to sales and returns versus your existing store base. Thank you.
Good morning, Bob. Thank you for your question. Well, consumption has been softer than expected in Mexico as well as in the U.S., and particularly in Mexico, where we have a very important presence in the South and Southeast. To give you some numbers, well, ANTAD reported same-store sales decrease in the Southeast of 1.9% in that region, where we do close to 42% of our sales. We were positive. We were not negative. That means that in every region where we participate, we have been able to out-perform ANTAD. That shows that our proposal to the consumer is valued and is still being valued by the consumer and probably more than what used to be in the past. We're focusing on sustaining our strategy to be able to outperform the market where we participate.
We are focusing on efficiencies on the expense side, and we have been able to sustain that. On the other hand, on the gross margin side, even though due to the weakness of consumption, we expect a more competitive environment, it's clear that when the market is weak in consumption, everybody also takes care of and focuses on not losing gross margin. That has been enabling us to sustain the gross margin and even increase it a little bit. On the Supercito side, depending on the region, if you take other regions than the Southeast, we are growing quite strong on the Supercito same-store sales, basically the metropolitan area of Mexico City, where everything looks really good. We still believe there's a huge opportunity on the Supercito.
Remember that probably a little over 50% of the market is still informal, and that's where the Supercito are competing against. We have not changed our guidance. We believe that there are still opportunities that we can focus on, and I'm still looking forward to meeting the guidance. We see in the second quarter of the year a weaker comparison base than what we had in the first quarter. We still believe we can reach the guidance in the long term, Bob.
Okay. No, very encouraging. Thank you so much.
No, thank you.
Our next question comes from the line of Benjamin Theurer with Barclays. Please proceed with your question.
Yeah, good morning, and thanks for taking my question. Actually, following up a little bit on your reiteration of the guidance, and I want to go north of the border, particularly looking at the US market, which clearly there are a lot of things still going on and immigration policy and enforcement being talked about and just the softness that was there and a little bit that base effect. As we move throughout the rest of the year and maybe any early signs of April, have you seen this trend going from this low single-digit negative, maybe more towards a neutral on same-store sales in the U.S. so that we can actually try to get to the guidance of 1%-2% same-store sales growth? Just to understand a little bit what you're seeing currently in the market versus what was Q1.
Yeah. Good morning, Ben. Yeah, I think when we look at our sales performance, there's probably three topics that we need to consider. The first is obviously in Q1 of 2025, we had a very strong quarter. Same-store sales were up just shy of 3%. Really strong growth at the El Super and Fiesta banners, which were just shy of 5%. Smart & Final had a very good quarter. We knew we had a very tough base. The second item there is obviously we've got a very cautious consumer that's stretched thin. They're dealing with less EBT dollars. It's a consumer that's willing to shop at a lot of places. They're concerned about grocery pricing. They're looking for value. Ultimately, as a price leader, that is exactly what we're focused on because that's what we deliver.
We think we've got a good advantage there. Certainly the immigration policy has impacted us. What we're seeing now is a little bit less noise and less theater, and we will be cycling through some of that noise that we had last year towards the end of the second quarter. We expect some improvement there. Yes, I think that we've seen some improvement in March. We've seen some improvement in traffic in April. We think things are going to get on the right track here shortly.
Okay. Following up on that, you still have a 30basis points-60 basis points margin expansion target in the U.S. business. Q1 is closer to 20 basis points. Should we think about this in a similar way as kind of like traffic comes back, operating leverage comes back into the system, and you kind of like can get this into the guidance range? Or is there anything else that you can do from a cost savings efficiency perspective to get a little bit more margin out of the U.S. business?
Well, you certainly hit the nail on the head in terms of the leverage that we gain by the top line improvements. Certainly, we will never stop looking for efficiencies in our supply chain and within our store operating expenses, as long as it doesn't impact the ability to serve our customers.
Perfect. I'll pass it on. Thank you very much.
This is José Antonio Chedraui.
Our next question.
Hi. Good morning.
I'm sorry. Go ahead.
Yes. Hi, good morning. Just a quick one regarding Supercito. Can you provide a little bit more color on what's the CapEx there, maybe per store? Where do you see more opportunities besides Mexico City and the metro area? Thanks.
Hi, all. Thank you for your question. About the Supercito, we don't give CapEx per store. Just to give you an idea, the return on invested capital, it's a little bit higher than the bigger formats, and it still is. It's sustainable, of course. Growth and expansion in same-store sales differ between the cities where we penetrate. That's due to the particularities of every region where we participate. We're bullish about the Supercito. We believe there's a huge opportunity. Again, remember that more than 50% of the market in Mexico still in the informal sector. The opportunity still very important for Supercito.
Okay. Thanks for the call.
Our next question comes from the line of Renata Cabral with Citi. Please proceed with your question.
Hi. Thank you so much for taking my question. My question is related to the CapEx this quarter. We saw an increase compared to last year. We know that CapEx might be concentrated sometimes in some quarter. If you can give us some color on why those increase in the first quarter 2026 would be really helpful. Thank you so much.
Hi, Renata. Thank you for your question. Well, usually, the speed of CapEx depends on the opening of the new stores, basically. We're being able to open them early in the year compared to the past years. We believe that most of the stores will be earlier than the fourth quarter of the year, instead of what happened last year, for example, where we opened most of our stores in the fourth quarter of the year. I think that puts a little bit more pressure on the CapEx, but on the other hand, it's more efficient for us to be able to open stores earlier in the year than the fourth quarter where it gets really busy. I think we're gonna be benefited on the operation side.
Very clear. Thank you so much. If you allow me just a follow-up regarding the capital allocation, considering the current level of the balance sheet, which is pretty healthy, what are the priorities of the company, in terms of expansion, dividends, and potential M&A?
Well, yes, Renata. We're focusing basically in our organic growth at the moment. Investment in remodeling stores and technology, and open always for M&A expansion. Even though we don't have a particular target at the moment that we're talking to, we're open for that. We have said all the time that, in case we don't find any consolidation opportunities, we will just increase our dividend policy as we have done, I think, in the past two years or more.
Very clear. Thanks so much.
Our next question comes from the line of Emiliano Hernández with GBM. Please proceed with your question.
Good morning, Antonio, Carlos, Humberto. Thanks for the space. Regarding e-commerce, as penetration continues to grow, how should we think about the structural profitability of the channel versus brick and mortar? Given the increasing relevance of third-party platforms here, how are you balancing growth versus control over customer data pricing and the overall customer relationship? Should we expect a greater emphasis on their own channel, going forward?
Hi, Emiliano. Good morning. Well, yes, as e-commerce penetration keeps increasing, we reached 4.2% in Mexico and 3.5% in the U.S. Remember that we do e-commerce in two ways. In Mexico, we use our own platform and we also use third-party operators where we are more efficient in terms of the cost of doing it. In the U.S., we do it through third-party, and we don't lose any efficiencies in our operation since we do that. In Mexico, we have also started a project with Rappi doing quick commerce. That particularity, doing it with a third-party association will be even more efficient and losing less of the efficiencies compared to the physical store. We believe that with the increase projected, we will be able to hold our EBITDA margins as we projected in the guidance.
Even though, yes, it's growing fast, and we believe it's going to keep growing in the near future, with the combination of physical stores and the association with the third-party operators, we believe we can sustain our margins in the long term.
Thanks, Antonio. That's great color.
Our next question comes from the line of Froylan Mendez with J.P. Morgan . Please proceed with your question.
Hello, gentlemen. Thank you very much for taking my question. You've been mentioning quite a lot this favorable inventory and promotional management in Mexico being the key driver for gross-margin expansion. My question is, what was different, or how do you perceive the reaction from the consumer this time around versus maybe last year where your comments were also similar? A follow-up on that same question, how long can these price increases in the industry last with this more sensible or less strength on the consumer side? What's the breaking point for the consumer to actually start behaving differently or more, or changing their consumption based on price increases from the industry? Thank you.
Well, thank you, Froylan. The better you manage your inventory, you're more capable to react to the changes in behavior of the consumer. Clearly, when you go through a weak consumption situation, and when your inventory is sound and fresh, it allows you to react better. Yes, we're seeing differences in consumption. The buying power of the consumer is weaker than we had in the past and probably weaker than what we expected. We're better positioned to confront that particular situation. We expect that with the freshness of inventory that we have at the moment, we're not going to be pushed to lose any EBITDA margin, even with the changes in consumption that we are seeing, Froylan. It's very clear. The consumer is changing, but we are well positioned to support that.
Does that complete your question?
Yes. Thank you very much. Thank you.
Our next question comes from the line of Leticia Velasco with InverCap Afore. Please proceed with your question.
Yes. Thanks. What are the key operational drivers behind the new distribution center? What is the expected basis points benefit you see to capture for the EBITDA margin by year end 2026? Thanks.
Hi there, Leticia. Well, I think that we're going to stick to our guidance for 2026, which, of course, includes the improvements that we're expecting to flow through the RCDC throughout the year. You're seeing some of that in Q1. Our gross margin expansion was really solid and especially at Smart & Final, and we expect that to continue.
Okay. Yeah. Thanks. Very clear.
Our next question comes from the line of Alejandro Fuchs with Itaú. Please proceed with your question.
Thank you, operator. Hello, Antonio, Carlos, Humberto, and team. Before I state the questions, I just have one brief follow-up. I wanted to see maybe Antonio or Carlos, if you can elaborate a little bit more on this strict expense control that you're implementing in Mexico and in the US. Are you planning to implement this through all of the year? If you can give us a little more color on what these products are, that'd be very helpful. Thank you.
Hi, Alejandro. Well, we're focusing on strict expense control. Even looking for savings in the corporate areas, both in Mexico as well as in the U.S., and being as efficient as possible at store level. There we're very cautious at store level because we don't want to lose sales. We want to maintain service. But basically, yes, we're focusing on that and exploring the inventory efficiencies that we have developed in Mexico as well as in the U.S. In the U.S., particularly coming from the investment in the RCDC that we have already talked about, and in Mexico using the freshness of our inventory. Basically, that's what we're focused, Alejandro.
Very clear. Thank you, Antonio.
As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Alberto Muñoz with Afore Coppel. Please proceed with your question.
Good morning. Thank you for taking my question. Regarding Supercito, could you detail your expansion strategy for the coming years, and what should we expect a sustainable run rate for new openings in the medium term? Thanks.
Well, about the expansion in Supercito, we believe as we have said, there's a huge opportunity due to the informal sector of the market. We believe that we would be close to 1,000 Supercito in the coming year. We're focusing on that. This year, we'll open 130 Supercito. We believe that we can double the number in the coming years. Yes, it's a huge opportunity due to that informal sector that still parts of the market in Mexico.
Thank you. Very clear.
Thank you. We have no further questions at this time. Mr. Chedraui, I'd like to turn the floor back over to you for closing comments.
Well, I just want to thank everyone for joining, and looking forward to talking to you again at the end of the second quarter. Thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.