Good morning. My name is Daniela, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. This is Liverpool's first quarter 2024 earnings call. There will be a question and answer session after the speaker's opening remarks, and instructions will be given at that time. Today, we have with us Mr. Enrique Güijosa, Chief Executive Officer; Mr. Gonzalo Gallegos, Chief Financial Officer; Mr. José Antonio Diego, Treasury and Investor Relations Director; and Mr. Enrique Griñán, Investor Relations Officer. They will be discussing the company's performance as per the earnings release for the first quarter 2024, issued yesterday. If you did not receive this report, please contact Liverpool's IR department, and they will email it to you, or you can download it at the IR website.
Please note that this call is for investors and analysts only, and questions from the media will not be taken, nor should the call be reported on. Any forward-looking statements made during this earnings call are based on information that is currently available. They are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks already outlined in El Puerto de Liverpool's most recent annual report. Please refer to the disclaimer in the earnings release for guidance on this matter. I will now turn the call over to Mr. Gonzalo Gallegos.
For their confidence and trust in me. Today, I will go through our quarterly results, and after that, Enrique and I will be available to answer your questions. I am pleased to share that we had a very strong start of the year, with sequential improvements across our key earnings metrics, notably net profit, setting a sound base for the coming quarters. During the first quarter, consolidated revenue increased 9.7% year-on-year. Retail revenue was 8.3% above a year ago, and we continued to achieve double-digit growth rates in both our financial services and real estate business units, with 22% and 11%, respectively. Same-store sales for Liverpool grew 5.9%, mainly driven by higher traffic. Positive top-line results were achieved despite facing a challenging base period, as same-store sales during the first quarter of 2023 grew 15%.
We continued to see some headwinds in overall consumption since quarter three, 2023. During the quarter, we used a different promotional strategy for our end-of-season sale, offering increased discounts throughout the event. Sales results benefited from a seasonal adjustment as Easter fell in March instead of April. On a category basis, Softlines categories continued growing slightly above average, particularly cosmetics and women's clothes. In Hard Lines, home and sportswear grew above average. So we have another strong quarter, achieving its best result in the last six quarters, delivering same-store sales of 12.6%. Almost 80% of this increase is explained by higher traffic. These results are due to our continued focus on improving the shopping experience with better merchandise selection, enhanced store maintenance, clear brand signage, and our marketing campaigns.
For perspective, ANTAD department stores reported a 7.5% increase in same-store sales during the first quarter. Total ANTAD apparel and footwear categories grew same stores only 4.2%, while general merchandise increased 7.1%. Regarding retail margin, the previously explained promotional strategy delivered higher margins due to markdown optimization, which, coupled with a stronger exchange rate and overall growth in softlines, delivered a gross margin of 33%, an increase of 84 basis points versus last year. Inventory position at the end of the quarter grew just 4.4% year-on-year. In financial services, the top line increased 22% versus year-ago. This reflects a 22.2% increase in our net credit portfolio as we continue to pursue a more aggressive growth in our credit card business.
We increased the number of cardholders 10.3% to reach over 7.4 million, a new milestone. On the other hand, Suburbia grew its cardholder base 25.1% to reach 1.7 million. Share of sales with our own credit cards during the first quarter was 47.5% in Liverpool, 1.2 percentage points above year ago, while in Suburbia was 30.3%, 3 percentage points above the year ago. Revenues from our shopping centers grew 11.5% year-on-year during the first quarter, as we were able to increase occupancy by 0.7 percentage points to reach 92.1%, and we continue to see healthy growth rates in the number of visitors.
Our consolidated gross margin of 42% was 148 basis points above year ago, mainly due to the improvement in our retail margin as well as a more favorable business segment mix. Operating expenses without bad debt provisions and depreciation grew 8.8% year-on-year. The main factors behind this increase were high payroll expenses and headcount increases, particularly in digital and technology. We closed Q1 with an NPL ratio of 3.1%. This is 38 basis points above a year ago. The NPL ratio for Liverpool was 3%, while Suburbia closed at 6%. This quarter, we posted a bad debt provision of MXN 925 million, more than double versus last year, due to overall portfolio growth, NPL increase, and a conservative coverage ratio.
For perspective, our coverage ratio at the end of the quarter was 9.9% of the gross trade portfolio. The ending balance of the bad debt reserve represented 3.2 times the NPL balance. Our Q1 EBITDA of MXN 5.9 billion was 14% above a year ago, while our EBITDA margin was 14.4%, 54 basis points above the same period of 2023, due to the strong consolidated gross margin, partially offset by the higher operating expenses. Net profit increased 33.5% year-on-year, achieving MXN 2.9 billion, reflecting the strong operating results, lower financing cost, and a more favorable exchange rate. Turning to our digital channel, GMV in the first quarter was 20% above a year ago. The digital share for Liverpool was 27%, 200 basis points above the same period last year.
Monthly active users for Liverpool Pocket increased 10%. We continue to see strong growth in the marketplace. Our marketplace GMV during the first quarter grew 56% year-on-year, and we closed the quarter with 49% more sellers and 50% more SKUs. In the case of Suburbia, our Q1 digital share more than doubled to reach 5.8% of sales. Monthly active users in the Suburbia app increased 21%. We now have a digital kiosk in more than 63% of our stores, and we are taking full advantage of our recently implemented fulfillment capabilities for digital orders in all our store base. During the first quarter, digital orders that were delivered in 48 hours or less accounted for 46% of total orders.
The share of Click and Collect was 39%, 6.7 percentage points above the same period last year, and direct store deliveries were 28% of total home deliveries, 7.5 percentage points above a year ago. As we strive to increase the relevance of our app, we continue to strengthen our mobile financial services ecosystem. As we previously communicated, we are now offering cash loans named Livercash. At the end of the quarter, we closed a portfolio of more than MXN 1.1 billion, 3.7 x the balance we had a year ago. Furthermore, we continue testing our deposit and investment offer with a group of our own employees. CapEx for the quarter reached MXN 2.9 billion, 2.6 x above a year ago. This includes the acquisition of the Altama City Center shopping mall, located in Tampico, Tamaulipas.
This property represents the 29th mall in our portfolio, contributing to an additional 41,000 square meter GLA, which represent an increase of close to 6% of our total GLA. Excluding this effect, about half of the investment was in our Arco Norte project, while the balance is focused on new stores, remodeling, and expansion projects. Cash flow from operations during the quarter was a negative MXN 2.9 billion. This was an improvement of MXN 1.3 billion versus the same period of 2023, considering the above-mentioned favorable operating results and credit portfolio requirements. During the first quarter, we completed the sale of our Huehuetoca property to the federal government. This cash benefit was offset by the acquisition of the Altama shopping mall.
At the end of the quarter, cash on hand was MXN 23.3 billion, and our net debt to EBITDA ratio is 0.11x. Regarding dividends, during our stockholders' annual meeting, which was held on March twelfth, an amount equivalent to 20.3% of the full year 2023 net profit, equivalent to an amount close to MXN 4 billion, was approved to be distributed. The first installment of MXN 1.77 per share will be paid on May the twenty-fourth, and the remainder of MXN 1.80 per share will be paid on October the eleventh. In terms of new stores, we opened one new Suburbia store during the quarter at Puerto Vallarta, being the first in this city. We also opened six new Liverpool Express units to reach a total of 23 of this new format.
As I get ready to end my remarks, Enrique, I want to pause and thank you for your countless contributions to the Liverpool brand and team. With that, let's move to our Q&A.
Thank you. We will now conduct a Q&A session. If you would like to ask a question, please press the Raise Your Hand button located at the bottom of the screen. If you are connected via telephone, please dial star nine. We remind you that all lines have been placed on mute.... When it is your turn to ask a question, you will be unmuted. If you have placed yourself on mute, you will need to unmute yourself to be able to ask a question. We will now pause for questions. Our first question comes from Héctor Maya. Please state your company name and then ask your question.
Hi, thank you very much. Can you hear me there?
Yes, we can, Héctor.
Hi, perfect. Hi, thank you very much, Enrique, Gonzalo, for taking my questions. The first one, if you could please share with us an update about your investments with Arco Norte, and how you're coming along with the next phases of the project. Also, if you could share with us your views on your investment in Nordstrom, because we understand that the company's potentially going private. So what are you considering to do in this scenario, or how would you evaluate this investment so far? And, and if you could also tell us about the learnings that you get from, from this investment. Thank you.
Thank you, Héctor. So talking about Arco Norte, we're happy with the current state. Overall, the status of the overall project is about 60% advanced. So talking about the construction of the building is very close to 60%. The software implementation is a bit higher than 60%, but it's around that phase. And all the equipment, talking about sorter, conveyors, racks, and those type of things, they are a bit below 60%. But the overall percentage, I would say, is around 60%, and we're still targeting to start operations in the soft line building around the second quarter of next year.
Talking about the hard lines building, that's already up and running, and we're currently working on getting more synergies to get more efficiencies out of this new site. Talking about Nordstrom, we know we were not actively participating in the decision of the company. As you know, the board took on an independent team to assess whether or not it makes sense for them to go private. Right now we are waiting on their findings to see whether or not we get more information. At the moment, we have no intention to either increase or decrease our stock participation. Talking about the learnings, as you know, it's a passive investment, so we don't have a lot of learnings to share at this moment. Thank you.
Thank you. But I mean, if the scenario of a company going private comes to happen, would you evaluate on doing something else with this investment in the future?
We would have to... we would certainly analyze all of our options available to determine whether or not we want to do something different, but at the moment, we're not participating in that process.
Perfect. Thank you. Thank you very much. Very clear.
Thank you. Our next question comes from Benjamin Theurer from Barclays.
Yeah, good morning, and thanks for taking my question. I just wanted to ask around the performance. Obviously, year to date, it's been very strong and certain effects in here. But how do you feel about the consumer behavior, and what is, like, kind of the read-across you're getting from some of your financial services performance, where we've seen a little bit of an uptick on the NPLs on a year-over-year basis? Not to be worrisome, but just wanted to understand about the state of the consumer and how you feel about the strength into 2Q here, and what are, like, your current scenarios for the back half post-election?
Thank you, Ben. We have seen some headwinds in overall consumption since Q3 of last year, particularly in Liverpool, and certainly the comparison versus last year is not helping. As you know, last quarter, we posted a 15% increase, so the comp base is not very helpful. So we do see some risks as we advance. So the overall sales expectations is to be in line with our guidance to have a full year of around 8% for Liverpool, 13% of Suburbia. So we are more happy with the overall margin performance than with the sales performance. Now, moving to financial services, as you remember, before COVID, we were operating in the 4%-5% range.
So we're expecting to have a continuous, if not, as low increase in NPLs up to that level. So at the moment, we're not very concerned. We did have a small increase in NPLs, but it's in line with our expectation. So we're not foreseeing a significant, a significant risk regarding NPLs, and we are still targeting to be around the 3% level for the rest of the year. Thank you.
Thank you.
Our next question comes from Andrew Ruben from Morgan Stanley .
Hi, thanks very much for the question. I was hoping to dig in a bit more on the labor side. You mentioned in the OpEx commentary the increase in the minimum wage. I'm curious if you could help us around the proportion of your employees that are minimum wage, and also when minimum wages increase, how you see wage gains cascading through through higher paid employees? And then the second follow-up, we saw you mentioned a personnel expense control program, primarily in Liverpool, and any more color around what that entails would be very helpful. Thank you.
Thank you, Andrew. So our overall labor expense is one of our more important expenses. And what we have seen during the last years is two to three points of sales increase in overall people expense because it has a cascade effect. We have a number of people very close to a minimum wage, particularly in Suburbia, in our logistics operation. So these two to three points increase are not only impacted by the people that are very close to the minimum wage, but it has a bit of a cascade effect on the immediate upper levels. Because in some scenarios, we could have a person earning a payrolls higher than their supervisor. So we had to accommodate the overall payroll scheme.
And as I said, we had seen a few percentage points increase as percentage of sales. And we're trying to contain that with efficiency programs, so we have a higher band, particularly in our corporate positions, and we are very careful with all the discretionary expenses across the board. Thank you.
Great. Thank you.
Thanks. Our next question comes from Melissa Byun. Please state your company name and then ask your question. Melissa, I believe you're on mute.
Hi, so sorry about that. So Melissa Byun from Bank of America. I just wanted to get a bit of an update on BYD. So how is sell-through relative to plan? What is the attachment of financing you're seeing? And if you could also give us a little bit of an update on how big you think the addressable market is. Thank you.
Thank you, Melissa. Overall, we're happy with the BYD performance. During last quarter, we sold 576 units. That's actually higher than the sales of the previous 10 months. Particularly the month of March, where we were surprised by the overall sales performance. We sold 250 units. So we provided a guidance of around 1,800 cars for the year, so we believe we will be very close to that figure, but the first quarter results were certainly a nice surprise. And we think that the overall performance of the brand, not only with us, with all the distributors, will probably be in the 15,000-20,000 unit range.
Thank you. That's, that's very helpful. And then when you look at financing, what percentage of the units sold come with some sort of credit overlay, and then what are the terms for that?
It's about 70% of the units are financed. Our participation in that credit has been relatively small, and we are trying to close the gap between our credit offer and the competitors to have a significant participation in the financing of those units.
Yeah. Thank you.
Thanks. Our next question comes from Luis Willard at GBM.
Hi. Can you hear me? Yeah, I think it is.
Yes.
Hi, Enrique and Gonzalo. President Antonio Enrique. Hope you're doing well. First of all, first things first, Enrique and Gonzalo, congrats on your first call as CEO and CFO. Lots of luck on your new responsibilities.
Thank you.
So, I mean, you guys are not new in the company. You already know it better than most of us do. So why don't you share with us, you know, walk us through the vision that you have for the company now under your, you know, your different responsibility. Where do you see the largest opportunities yet? Going forward, if you feel you're falling short in anything versus your plan, or if you feel what areas do you feel you're doing more progress? That would be the only question. Thank you.
Enrique, do you want to take that?
Yes. Thank you, Luis. Thank you for your words, and to tell you the truth, I think that what you can expect, you know, at least for the next 12-18 months, is, like, continuity. As you know, I mean, I have been working with very closely with Graciano for the past nine years that he led the company as CEO. I was part of, you know, the major decisions that we have made in that timeframe, including the defining the strategy for Unify Commerce or developing our ecosystem and all the things that, you know, we're doing in several fronts in all our business units.
So, quite frankly, at this point in time, and particularly for the second half of 2024 and for the next 12 months in 2025, we're in execution mode. Most of you know, we have huge projects, transformative projects in our supply chain. Gonzalo already explained where we are in the Softlines building a plan, which is the next phase. And that, you know, sounds relatively simple in terms of, you know, putting together a new warehouse, but the fact of the matter is that it will entail a completely different revamp of the way we distribute our Softlines categories.
So it's not only, as was the case in phase one, one of Arco Norte, but it was, quite frankly, just moving from a smaller building to a larger building. In the case of softlines, together with the deployment of the new fulfillment centers, we're gonna change entirely again how we manage all lines in terms of how what's the percentage of merchandise that we centralize, how we receive the softlines at our warehouse, more and more bulk brought in terms of instead of receiving it pre-distributed from the supplier, and so on and so forth. So that's a major challenge. We're also in the middle of implementing a new planning assortment and allocation software.
That has been a project that has taken a little bit more than what we expected. And again, we're in full execution mode, so that's another big change towards, you know, the core business, to the heart of the retail division, to make sure that we have the state-of-the-art, you know, and incorporating artificial intelligence in order to improve significantly the way we plan our buys, the way we allocate it to different places in our supply chain network, the way we also plan our assortment, which is a capability that we today don't have. So that's another big project. Again, we are in full execution mode.
We're also implementing a new order management system, which is also, you know, at the heart of the retail business unit. We're expanding, you know, the Big Ticket phase for Liverpool. We already implemented the new software, so we are both for Softlines and Big Ticket or Hard Lines. But in the case of Liverpool, we, as we speak, we're in the rollout of 30 new stores. We only had one store as a pilot, so now we're including another 30 stores.
The idea is to complete the big ticket, you know, implementation before the high season, around October, in order to move to the softline for Liverpool phase, which we plan to be ready by the end of the year, to implement it in Q1 2025. We're also implementing a sales and operations plan methodology that we didn't have before, to make sure that we have, you know, the right integration between the retail plans and the logistics or capabilities. That's something that we don't do it, you know, like, today very exhaustively. So we're transforming that significantly. So those are, you know, like some of the big projects that we have in terms of software.
But as you know, it's not only, you know, software, it's also changing the work processes. It's also, like, the training and making sure that the people that are managing those processes are up to speed on what the changes are gonna be and accept the change. So, those are gonna continue as they're planned. And once again, being reiterative, we're in a full execution mode. In the case of financial services, as you know, we're also developing our ecosystem strategy. We continue to grow our personal loan portfolio, that's something we just implemented the capability to do that in our app, but it's gonna be very simple for our cardholders to take advantage of these potential personal loans just with a few clicks on the app.
We're rolling out also our new features to take deposits and also to allow our cardholders to make investments in a few options in terms of funds. We wanna be very careful with the route to making sure that we have the right, you know, like, offer, and it's understood very well by our customers. So we're gonna be careful with the rollout, but we plan to do that in the balance of the year. So that's a very challenging project as well. So again, just to reiterate that the idea is to continue what we have been doing.
Perhaps the big question that Graciano and myself need to, you know, like, to work on is, what's gonna be the next avenue of of growth for the company? So that's one of the questions that we always discuss in our strategic plans. And we need to identify, of course, what's gonna be the next blockbuster in terms of our top line and and profit growth for the next five to 10 years. So that's something that we intend to work together in the next, you know, like, several months. But other than that, I think that you will see more of what you have seen in the past several years.
All right, super clear, Enrique. Thank you, and looking forward for what you find to be the next blockbuster growth going forward. Thank you.
Thank you. Any ideas? Happy to hear.
Will do. I'll share them with you. Thank you.
Thank you. We have a last couple of questions from Miguel Ulloa at BBVA. First off, what is your target regarding the size of the credit portfolio to be achieved? And then we can step into the second question.
Well, we expect net loan portfolio growth for the year of around 14%. That is consistent with our guidance. Even though during the first quarter we certainly had a much better performance with an overall growth of 22%, we are not expecting to continue to that level in the upcoming quarters. So for the year, we are maintaining our guidance of around 14% growth in the loan portfolio.
Great. And then-
There was another question?
Yeah. Yep, the second question is on NPLs-
Right
... related to Livercash. Is there anything you can tell us, a bit more color on that front?
Well, it's too soon to tell. We started that to take advantage of the overall Open-to-Buy space that we had in our credit card business. So now understanding the customers, we saw potential to increase the overall credit. We currently have around a MXN 1 billion balance on that. We haven't seen a different behavior on the NPL fronts. So at the moment, no, we're not, we don't have a concern regarding NPLs on that front.
Perfect. Thank you. Well, we have no more questions in the queue at this time, so that concludes our question and answer session. I would now like to hand the call back over to Gonzalo Gallegos for some closing remarks.
Well, thank you everyone for your time, and we'll see you next quarter. Have a nice day.
That concludes today's call. You may now disconnect.