Earnings Call: Q4 2024

Feb 27, 2025

Summary

Q4 sales grew 9.9%, same-store sales rose 5.5%, and gross margin reached 30%; EBITDA margin was 8.2% after a property write-down and elevated new-store costs. 2025 plans include six openings and MXN 4–4.5 billion in CapEx.

Good morning, everyone, and welcome to La Comer fourth quarter results conference call. Before we begin, I would like to remind you that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risk and actual results may differ materially. Please refer to the detailed note on page 2 of the presentation. I would like to turn the call over to Mr. Rogelio Garza, Chief Financial Officer of La Comer. Please go ahead, Rogelio. Thank you, Yolotl, and welcome everybody to this conference call. We're going to present the results of the fourth quarter of 2024. I'm going to share with you our presentation. The highlights for the fourth quarter is that the same-store sales of the company growth in 5.5%. We increase our total sales in 9.9%, and our gross margin reached 30% during the quarter. Starting with the sales, we can say that we continue to having a spread in our growth in same-store sales versus the rest of the market. All our formats reported an increase in sales. We participate during the quarter in the Buen Fin campaign in November. In addition to that, we have, during October, the campaign, the La Tienda Rosa that is a campaign in which we support breast cancer help to women in Mexico. Additional to that, we launched a campaign of German products, Guten Tag. That was a campaign that was very well accepted by the public and in which we bring to Mexico many new products from Germany that we're offering all our stores. By product category, we can say that we increased the category of perishables and prepared food. As in previous quarters, the western region continue to be a market in which we have been growing above the average of the company. We think that we continue having a good performance in growth, and the strategy of the company, of differentiation of the company, have good results in attracting new customers. This is the participation of e-commerce. We continue having a very stable During the fourth quarter, because some effects in the calendar, usually it's a little bit lower than the average, but we continue to having a good participation of e-commerce from the total sales of the company. The participation of the aggregators continue to being very stable versus previous quarters. A little bit below, but this is usually in the fourth quarter of the year, we have a small decrease in participation, but we continue to having a good participation in e-commerce. In total, is more than 11% of our total sales are coming from La Comer en tu Casa, our own solution, or from aggregators, more than 11%. We have in gross profit, a big growth in margin of around 66 basis points of increase in margin in gross profit. Really some of the categories in which we have higher margins grow above the average of our growth in the company, like perishables. Usually perishables have been growing as a percentage of our total sales and some prepared food have been growing above the average of the company. That helps us, that the mix of the product is toward more differentiated products, and that makes our gross margin higher. In addition to that, we have a very stable inventory management with shrinkage of inventory in a very stable level and a very good relationship with supplier that helps us to maintain win-win relationships in the long term with suppliers that help us to maintain gross margin. At the EBITDA level, we have an 11% increase. Our margin is 8.2%, our EBITDA margin during the quarter. During this quarter, we have an extraordinary expense of MXN 130 million. That is because we write down one property that we have, the building that we bought a property, and it was a land and a building. Of course, we bought that property because we wanted to have a store there, and we have to demolish the building, and we need to recognize in our financial statement the write-down of that building in order to build a new store there. It is a store that we expect to open during this 2025, but we started the demolishing of that property in the fourth quarter of 2024. We recognized the diminution in the value of that asset during the quarter, and we have that extraordinary expense during the quarter. In addition to that, we have some big increases in some areas in expenses. Most of them are directly or indirectly related to the opening of five new stores during the quarter. We opened five new stores and three of them were City Markets. We have a substantial increase in the operative expenses of the stores that we need to hire the people before the opening of the stores, and we need to train the people, and we have a lot of expenses in order to be ready to the opening of the stores. If we compare the pre-operative expenses that we have in 2024 versus what we have in 2023, it was more than 65 basis points of the sales that we spend more because the opening of those five new stores. Additional to that, we have advertising expenses that increased substantially versus 2023. Most of that increase was because the advertising campaigns that we needed for the opening of the new stores. We have a big increase in labor expenses. Some of this increase is because of some changes in the legislation in Mexico, but additional to that, we have some increases in labor expenses because the opening of this new five store. When we open a new store, usually we overstaff the new store because we wanted to be sure to provide a very good level of service and in order to be ready for the rotation of the people, because usually when we start a new store, it has higher rotation than when the store is stable in the future. We have the practice to overstaff the stores that are opening in order to be ready for that rotation and to be sure that the service level that we provide to our customers is good. Then we have some of the increase in labor expenses is because of this situation, that the new five stores require extra labor. During the time that these stores were operating during the quarter, they have a higher proportion of labor expenses during that period. In addition to that, from the five stores that we were opening, three of them were City Markets that usually have a higher proportion of expenses and a higher proportion of labor. The City Market format is more labor-intensive, and it requires labor that is a better quality and more training of the people in order to provide the differentiation service that we require in a City Market. In addition to all those issues, we have some increases in IT expenses because we have invested in technology and in security in our systems in order to be sure that we provide good service to our customers, and we are very secure in all our systems. The highlights for the whole year is that, during 2024, we growth in same-store sales 7.7%. We increased our total sales in 12.5%. The gross margin increased to 29.3%, and the EBITDA margin reached 10.4%. We have a good year in 2024, and these are the results of the year. These are the projects that we have during the fourth quarter of 2024. All of these projects, all of these new stores were opened, one in October, two in November, and one in December. All of them were during the fourth quarter. There were five new stores, three City Markets, two in the metropolitan area of Mexico City and one in Guadalajara, one La Comer in Querétaro, and one Fresko in Guadalajara. All of these stores are performing very well, and we have this expansion during the quarter. In addition to that, we remodeled two big stores, one in Mexico City and another in Los Cabos. The idea is to continue with our expansion plan. We have the plan to open, during 2025, around six new stores. We have projects for more than that, but we estimate that we can open, during the year, six new stores in 2025. Talking about sustainability and social responsibility, during the quarter, we launched this campaign of La Tienda Rosa, the pink store, in which we help women in the prevention of breast cancer. In addition to that, we cooperate with Pro Bosque Chapultepec in Mexico City, and we helped with food in Banco de Alimentos de México and Un Kilo de Ayuda. We continue to use all our packaging in our stores that is, in some way, more environmental friendly. In addition to that, we continue moving toward more renewable sources of energy in our stores. That's all. I will give the floor to Yolotl, if you have some questions. Okay. Thank you very much, Rogelio. Yes, as Rogelio said, if you have a question, please raise your hand and you can talk, ask the question. Yes. One for Thiago. Please, Thiago. Okay. Yes. Good morning. Hi, Rogelio. Hi, Yolo. Hi. Thank you for taking my question. I have a few points I would like to touch here. The first one is on the new stores that you mentioned, right? If I understood correctly, you are thinking about potentially six new stores in 2025. I am wondering if we could get a little bit more information on the timing, if it is more concentrated on the first half, second half, and what formats you are thinking. Yes. No, please, I will make my follow-up later. Okay. Let's start with that. Yes, we have six new stores. The format is, I would say, we expect three formats of La Comer, maybe two of Fresko, and one or two of City Market. This is more or less what we are thinking. Almost all of them are toward the second half of the year. I would say maybe one will be in the second part, but most of it is going to be during the second half of the year. Awesome. No, fantastic. My follow-up here would be specifically on the fourth quarter. I was looking back to the relationship same-store sales to the new store sales. These new stores, they came slightly above my estimates here, so they were a positive surprise. Just wondering if you could talk a little bit about the performance in top line, if you feel that these new five stores that you delivered in the fourth quarter, they beat your sales estimates. How have they been doing? Just so we can get an idea of ramp-up and the normalization going forward here. Yes. These new five stores that we opened at the end of last year, they were very important stores. They were very big stores, three of them City Market, one Fresko, a big Fresko, and a big La Comer. They are located in very good locations. So they have very good Until now, we have good results in those stores. We are expecting that most of them have the potential to continue growing and continue to contribute to the sales of the company. We expect a much higher proportion of sales coming from these five stores. They have potential to continue growing a lot. This is fantastic. Thank you very much. Thank you for the time. Okay. Thank you, Thiago. Hi, Miguel. Please go ahead with your question. Hi, good morning. A quick one regarding your expectations for 2025, considering the slowdown, how are you seeing consumption, and how do you expect to fare this year? Predicting the future is very difficult, Miguel. There are some uncertainties, of course, as always, that we continues. We have seen some moderation in consumption at the last part of 2025, and I would say that it continues to be in a good situation. It's not negative, and it continued growing. I would say that, until now, we have seen more or less the same situation, a little bit moderate, but not something dropping dramatically or something like that. I would say that La Comer, because of the strategy of differentiation, it should be able to maintain a spread in growth versus the rest of the market. How the whole market is going to behave is, maybe you are more expert than we are in that respect. But we continue to see consumption in good level, a little bit more moderate at the starting of 2025, that was very good, but in a healthy level. And in terms of margins, do you expect any pressures going forward, or do you expect to- Oh, yes. This quarter, the result that I just presented, they have the extraordinary effect of a write-down of a big property that we have in our balance sheet that we need to recognize. That is completely extraordinary, and it could happen in the future, but we don't have any specific knowledge that we could have that kind of event in our current projects. Addition to that, we have that situation of extraordinary expenses. They are not extraordinary because our plan is to continue growing and open new stores. But of course, when we open stores, we need to pay a price in margin because there are more expenses, and the new stores require more staffing, more expenses. The new stores usually have much lower margin at the beginning. Usually, the first quarter, they have many expenses related with the opening of the stores, and they could have a negative result, but very quickly start to contribute to the numbers of the company. And yes, when we open new stores, we could have some pressures in our margin because of that. As I have mentioned in previous occasions, I will expect an unstable and with maybe marginal improvements in the future in our margins, but very stable and maybe some gradual and marginal improvements. Thank you, Rogelio. A final one, if I may, would be regarding your CapEx for 2025 and any dividends paying this year. Yes. In payment of dividends, it should be something similar to the previous year. We have the policy to maintaining a payment of dividends similar, with some gradual increases in the payment of dividends. CapEx, we have a good portfolio of projects for this year. We can have maybe record CapEx for a few years. It could be between MXN 4 billion and MXN 4.5 billion during the year. Thank you very much, Rogelio. You're welcome. Gracias, Miguel. Please, Axel, go ahead with your questions. Hello, Rogelio. Hello, Yolotl. Thanks for the time. Just a quick follow-up on the first question. On your new six open stores you have planned, have you considered to expand to new cities, or it's going to be on the same locations and regions? Our major focus is in the same markets in which we already have presence. We think that we are in most of the major or most interesting market that we have. Maybe the only, I would say, exception to that is the southeast of the country that could be interesting for our formats, and we could have some interest to start in that market, in which we don't have presence and in which we can have some good opportunities there. Most of our growth is to continue to be in the same markets in which we already have presence. Perfect. Just a follow-up. Regarding the significant increase in the west region sales, can you maybe provide a bit more insight in the main drivers behind it? I think the major market is Guadalajara and the metropolitan area of Guadalajara, in which our brands have been reaching more and more acceptance for the customers. We started in 2016. Like-for-like growth was. Yolotl, could you hear Miguel? Yes. Sorry. Sorry. We started our first store in Guadalajara in 2016 with some presence there, and it has been every time more accepted, and we have very good results. We think that we are capturing more customers there every time our brands are more recognized and well accepted by the public there. Perfect. Thank you very much. You're welcome, Axel. Thank you, Axel. If another one, please, if you need a question to be answered, please let us know. Well, at this time, there are no more questions, Rogelio, so please proceed to closing remarks. Thank you. Thank you, everybody, for your interest. If you have additional questions, please reach Yolotl. Bye. Bye. Thank you for your participation in today's conference. This concludes the presentation. Thank you. Good day.