Good morning. My name is Sophia and I will be your conference operator. All lines have been placed on mute to prevent any background noise. This is Liverpool's third quarter 2026 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. Gonzalo Gallegos, Chief Financial Officer, Mr. José Antonio Diego, Treasury and Investor Relations Director, Mr. Enrique Griñán, Investor Relations Officer, and Ms. Nidia Garrido, Investor Relations. They will be discussing the company's performance as per the earnings release for the third quarter 2026 issued yesterday, Monday, October 26th. If you did not receive the report, please contact Liverpool's IR department and they will email it to you or you can download it at the IR website.
To ensure focused discussion, this call is for investors and analysts only, and we will be taking questions exclusively from them. 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 outlined in El Puerto de Liverpool's most recent annual report. Please refer to the disclaimer in the earnings release for guidance on the matter. I will now turn the call over to Mr. Gonzalo Gallegos.
Good morning everyone, and thank you for joining us today. During the quarter, we continue to see a cautious consumer, with sales growth remaining modest despite easier year-over-year comparisons. Against this backdrop, our results reflect an important balance. While retail demand remains soft, we maintain healthy retail merchandise margins and tight expense control, supporting consolidated EBITDA growth. In financial services, portfolio expansion moderated from the level seen during the first half of the year. This reflects softer retail activity, more normalized performance in complimentary credit products, and our decision to take a more selective approach to certain higher risk products as we continue to manage asset quality.
Real estate remained a positive contributor, supported by strong occupancy, the acquisition of the remaining stake in Galerías Metepec, bringing our ownership to 100%, and the completion of the new wing at Perisur, which added leasable space and new offerings to the property. Overall, the quarter reinforces the importance of disciplined execution and focusing on what we can control, particularly margins, inventory, and expense management. Let me now walk you through the results in more detail. Consolidated revenue for the period reached MXN 49.1 billion, an increase of 2.2% compared with the prior year. The real estate division was the strongest contributor to growth, with revenue increasing 16.3% to MXN 1.5 billion. Financial services revenue grew 6.9% to MXN 5.8 billion, while retail revenue increased 1.1% to MXN 41.8 billion.
Overall, the results reflect a challenging consumer environment with continued pressure on retail sales, partially offset by the performance of our real estate and financial services businesses. In retail, we continued to face a cautious consumer environment during the quarter. Consumer remained focused on promotions and discounts, while discretionary spending remained under pressure, particularly in apparel and accessories. Hardlines and cosmetics showed relatively better performance, while other categories continued to see softer demand. In this environment, we remain disciplined in our commercial execution, focusing on sales mix and margin rather than relying broadly on markdowns. Our healthier inventory position supported this approach and allowed us to be more selective with promotions. Liverpool same-store sales increased 0.8%, supported by average ticket. New brands and products launches such as Maison Margiela, Miu Miu, Meta 3, and the new iPhone release also contributed positively to this performance.
At Suburbia, same-store sales declined 0.5%, outperforming the ANTAD apparel and footwear benchmark, which declined 1.4%. We continue to prioritize profitability and a healthier sales mix in categories such as motorcycles and mobile phones. While sales growth remains modest, we achieved a significant sequential improvement in margins, which I will discuss in more detail shortly. Our digital ecosystem continued to grow with GMV increasing 8.7%. Digital penetration reached 30.3% of Liverpool and 7.4% of Suburbia. Following the migration to our new e-commerce architecture, including P360 and commercetools, we focus on stabilizing the platform and addressing transition-related disruptions. Some residual effects and temporary catalog disruptions continue to affect year-over-year growth. While we are working through a few remaining adjustments, the main issues affecting catalog availability have been addressed, allowing us to focus on further improvement platform performance and strengthening our digital growth trajectory.
Retail gross margin expanded 186 basis points to reach 32.8% during the quarter. We are particularly pleased with the progress at Suburbia, where gross margin improved by over 300 basis points. At the consolidated level, the improvement reflected a more favorable sales mix, disciplined promotional activity, and lower costs on imported merchandise due to the stronger peso. Our healthier inventory position also allowed us to be more selective with markdowns. While the foreign exchange benefit may vary, we remain focused on the factors within our control: inventory quality, commercial discipline, and a balanced approach to sales and margin. We do not expect every quarter to deliver the same level of margin expansion, particularly given the uncertainty surrounding consumer demand. Consolidated inventory decreased 5.1% year-over-year, partially driven by a particularly strong 22% reduction at Suburbia.
Inventory remains well-managed, supported by our integrated demand planning process, effective assortment management, and improved in-store merchandise allocation. The sequential trend points to continued normalization, although we remain cautious and continue to monitor inventory closely amid uncertain demand. Our priority is to maintain the right inventory levels and product availability while avoiding unnecessary markdowns and protecting profitability. Turning to financial services, revenue increased 6.9% to MXN 5.8 billion, supported by 8.8% growth in the gross loan portfolio. Income growth moderated compared with the double-digit rates recorded during the first half of the year. We see three main factors behind this change. First, the slowdown in retail sales is now having a more direct impact on credit activity, while lower store traffic is also reducing credit applications.
Second, complimentary products such as cash advances, off-store transactions, and personal loans have delivered strong growth over the past few years and are now entering a more normalized growth phase. Third, as past-due loans have increased, we have selectively tightened our approach to certain higher-risk products, particularly cash advances and personal loans. Against this backdrop, the active cardholder base increased 7.3% to nearly 9 million accounts, reflecting continued consumer preference for our credit offering. These changes reflect a more measured approach to growth rather than a shift in our overall strategy. We continue to see opportunities to deepen our relationship with customers, particularly within our core target segment. Our focus is on offering more products to customers with attractive risk and profitability profiles, using our customer data to identify opportunities while maintaining disciplined underwriting. We believe this approach provides a sound basis for sustainable growth without taking on unnecessary risk.
At the same time, we have taken steps to protect profitability in the segment through disciplined expense management. These efforts include optimizing customer benefits, improving workforce efficiency, and enhancing our performance-based collection model. Together, these initiatives help offset the impact of slower revenue growth while maintaining our focus on customer relationships and responsible portfolio growth. Regarding the health of the loan book, the non-performance loan ratio reached 5.2% at quarter end, an increase of 80 basis points year-over-year. This reflects the maturity of the expanded portfolio, together with the current macroeconomic pressures impacting consumer payment capacity across the broader market. We have responded by strengthening our provision position and maintaining a disciplined approach to risk management. Credit loss provisions totaled MXN 1.6 billion, representing an increase of 20%. Reserve coverage ratio reached 12 % of the gross portfolio, up 130 basis points year-over-year.
As the portfolio evolves, we will remain focused on balancing growth, profitability, and asset quality. We are monitoring performance closely and adjusting underwriting where necessary, particularly in products with higher risk profiles. Our objective is to continue serving our customers while ensuring that portfolio growth remains sustainable. Turning to real estate, the division continued to deliver solid growth, with revenue increasing 16.3% to MXN 1.5 billion, in part due to higher occupancy, which increased 90 basis points to 94.5%. Performance benefited from the acquisition of the remaining stake in Galerías Metepec in early July, bringing our ownership to 100%. Growth was also supported by the continued commercialization of retail space at that location, the contribution of hybrid leasing contracts, and the initial contribution from the expansion of Perisur, which I will discuss in greater detail shortly.
Results also benefited from a more favorable comparison with the prior year, when non-recurring tenant compensation related to the construction phase at Perisur affected the comparison base. The business continues to benefit from a strong occupancy and the gradual contribution of recently developed space. We remain focused on commercializing the portfolio and improving the performance of our properties. on September 10, we inaugurated a new wing at Perisur named Domo Perisur, completing an important phase of the property's expansion. The project added approximately 10,000 square meters of gross leasable area with a focus on premium dining and social experiences. The expansion strengthens the property offering and provides customers with more reasons to visit. Following the opening, parking revenue at the location increased 9.6%, an early indication of the additional activity generated by the expanded space.
We will continue to focus on the commercialization and operation of the new area as it contributes to the performance of the overall property. Consolidated gross margin increased 2.2 percentage points to 42.8%, reflecting the improvement in retail merchandise margins and the contribution of our business mix. Operating expenses, excluding provisions, depreciation, and amortization increased a moderate 5.9%. Personnel expenses rose 5.3%, reflecting salary adjustments and other workforce-related costs. Despite these increases, we maintain tight control over expenses at both the corporate level and across our stores. Consolidated EBITDA reached MXN 6.9 billion, an increase of 8.5% year-over-year. EBITDA margin expanded 82 basis points to 14.1%. Turning to Nordstrom, there are two points I would like to clarify regarding the reported results. First, results from associates decreased 73% year-over-year, mainly due to Nordstrom, whose contribution declined by 70%, or MXN 800 million.
This reflects, among other factors, higher depreciation resulting from purchase price allocation adjustments and other acquisition-related effects, as well as one-time expenses. These impacts were partially offset by higher revenue, a one-time tax benefit, and lower interest expense. Second, to better understand Nordstrom underlying performance, we prepared comparable figures for 2025 as the reported results covered a slightly different period and did not include the same acquisition-related accounting adjustments. We aligned the reporting period with our current calendar and incorporated the pre-acquisition expenses and other related adjustments into the comparative figures. On this comparable basis, Nordstrom revenue increased 3.2% year-over-year, while adjusted EBITDA margin expanded by 80 basis points to 7.3%. Adjusted net income also improved from a loss of $126 million to a profit of $16 million, providing a clearer view of the improvement in the underlying business.
Consolidated net income for the quarter totaled MXN 3.4 billion, a decrease of 14.5% compared with the prior year. The year-over-year comparison was affected by the non-recurring contribution associated with initial consolidation of Nordstrom in the prior year period, as well as accounting effects related to the acquisition. These factors affect the reported net income despite the growth in consolidated EBITDA. Excluding these effects, net income would have been approximately MXN 4.2 billion, representing a 5.8% increase compared with the prior year. This provides a more comparable view of our underlying performance, which benefit from growth in consolidated EBITDA. Turning to CapEx, cumulative investments, including those through the real estate trusts, reached MXN 7.1 billion. Approximately 55% was allocated to store openings and expansions, including investments related to Galerías Metepec and Perisur, both completed during the quarter.
Logistics technology and the continued development of our unified commerce capabilities accounted for an additional 22% of total investments, while 15% was allocated to store remodels and capital improvements. Our capital allocation remains focused on strategic priorities, improving the customer experience and supporting growth opportunities while ensuring disciplined investments and appropriate returns. Our consolidated balance sheet remains strong, supported by a cumulative operating cash flow of MXN 8.3 billion and a robust cash position of MXN 21 billion at quarter end. Net debt to EBITDA stood at 0.6 x, providing financial flexibility to fund operations, manage debt, and continue investing in our strategic priorities. We remain disciplined in our capital allocation and focused on preserving the strength of our balance sheet while investing in the business for the long term. Looking beyond immediate financial indicators, during the quarter, Liverpool received further recognition for its corporate reputation and overall performance.
TIME and Statista ranked Liverpool as the fifth highest Mexican company in the World's Best Companies 2026 list. In addition, Liverpool ranked among the top 10 companies in the Merco Empresas México 2026 Corporate Reputation Index, placing second in our sector. On September 10, we announced a strategic partnership with Primark to introduce the international fashion retailer to Mexico. We are excited about the opportunity and are currently working with Primark's global team on detailed planning for the rollout. We are also in the process of finalizing the master franchise agreement, which we expect to complete before year-end. The opportunity is significant enough to meaningfully contribute to our growth while it is strengthening our portfolio of international brands. As previously communicated, the model combines Primark's global brand and commercial capabilities with Liverpool's local market knowledge, real estate, and operational expertise.
We are carefully evaluating locations to maximize sales productivity and define the pace of expansion. Capital expenditures will be phased and funded through operating cash flow in line with our existing guidance. While the margin profile of value fashion differs from that of our existing retail business, Primark's high inventory turnover model offers attractive cash flow potential. We are also exploring opportunities to leverage our existing logistics network and other operational capabilities. We remain confident in the strategic fit of this partnership and look forward to sharing more details on the rollout and investment plans as they are finalized. This year, Suburbia's apparel brand, Weekend, celebrates its 50th anniversary. Over the past five decades, Weekend has built a strong connection with Mexican consumers by offering comfort, quality, and assortment at accessible prices.
Today, Weekend ranks among the five most purchased clothing brands in Mexico, with customers purchasing an average of two garments per visit. To mark this milestone, we launched a special 50th anniversary collection, reinforcing the role of our private label brands in building customer loyalty and supporting profitability. To conclude, the third quarter reflected different dynamics across our businesses. In retail, we maintain healthy margins and tight expense control despite modest sales growth. In financial services, we took a more measured approach to portfolio growth while strengthening our focus on asset quality. Real estate continued to deliver solid results supported by high occupancy and the contribution of new space. These results reinforce the importance of disciplined execution and focusing on what we can control while balancing growth, profitability, and risk. Thank you for your time today. We are now happy to take your questions.
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 ask your question. Our first question comes from the line of Irma Sgarz. Please state your company name and ask your question. Please unmute yourself to ask your question.
Hi, this is Irma Sgarz from Goldman Sachs. I assume you haven't heard my question, so I'll just repeat it here. I was hoping to firstly get a little bit of an outlook for the fourth quarter demand backdrop, what you're seeing at the margin in terms of consumer sentiment and whether there's any signs of consumers getting a little bit more constructive, especially in the formats or in the elements of your business where it's been seeing some softness and cautiousness. Secondly, I'd love to just hear, given the recent FX moves, but also overall movements that we're seeing across the supply chains especially for appliances and smartphones, et cetera.
We're seeing some price increases coming through the supply chains globally, so whether you're starting to see that or having those conversations and how that sets you up for thinking through pricing, but also promotional scope, both into year-end, and Black Friday campaigns, but also into 2027, where I think some of those effects are going to take hold, given the inventory and import cycles. Finally, just Primark, I know it's early days, but I'd love to just think whether conceptually you'd consider converting or whether there's room to using some of the Suburbia locations for the Primark build-out or whether you just think that the target public and segment that you're looking at for the value proposition there is going to be different from Suburbia and therefore not necessarily an overlap or a right fit. Thank you.
Thank you, Irma. Let me talk first about the outlook for the fourth quarter. We see the consumer confidence has remained relatively stable, but we expect demand to remain soft throughout the upcoming months. Customers are still cautious and very focused on getting the best value for their money, so promotions continue to play an important role on their decisions. Also, competition is very intense across most of our categories, so staying relevant to our customers is very important for us. On our side, we have been managing inventory carefully, taking a more disciplined approach to markdowns and keeping a close eye on expenses, which has helped us improve overall margins and protect profitability. Looking ahead, we'll continue to manage inventory and maintaining expense discipline.
Regarding FX, the stronger peso was a benefit this quarter, and on the other hand, the weaker peso could put some pressure on our margins going forward. That said, FX is not the only part of the equation. We are also seeing benefits from healthier inventory levels in a more selective promotional strategy and overall better expense management. While we don't expect to sustain the same level of margin increase every quarter, we remain focused on protecting profitability, even with a softer peso. Lastly, regarding Primark, obviously, we're very excited about the upcoming arrival of Primark in Mexico. At the moment, we are not expecting to convert Suburbia locations into Primarks. We do see that the target and the segment is likely different than that of Suburbia. We are analyzing very carefully the future locations.
But as I said, at the moment, we are not expecting to convert Suburbia into Primark.
Very clear, all of this. Thank you.
Thank you, Irma.
Our next question comes from the line of Joe Thomas. Please state your company name and ask your question.
Good morning. Can you hear me okay? Hello?
Yes, we can.
Okay. Good morning. Thank you. Sorry.
Good morning.
Joe Thomas here from HSBC. Just a couple of questions, please. Firstly, the real estate performance was good again, despite the weak retail environment. Occupancy up year-on-year and quarter-on-quarter, but how much of that was driven by the Metepec and Perisur extensions and acquisitions, please? Secondly, in the financial services business, non-performing loans were up. Could you discuss if there's any particular customer cohorts or products driving that and whether that's peaking? Finally, a question on the demand outlook, particularly on Suburbia. This is a slightly confusing picture because you removed cell phones and motorcycles in the last quarter, which had an impact. If you were to exclude that, how do you think Suburbia is performing on an underlying basis? Thank you. They're my questions.
Thank you, Joe. In real estate, we don't disclose the specific contribution of individual initiatives, and the contribution this quarter came from several initiatives. The acquisition of the remaining stake in Metepec, while the continued leasing of retail space and also the opening new wing at Perisur, obviously have a material impact on the 16% growth. The combination of these two expansions and also the management of our renewed contracts all contributed to the growth of that division. Talking about NPLs, as you know, following the pandemic, we set out to bring NPL levels back towards pre-pandemic levels. We are now approaching those levels, so obviously we are taking proactive steps to stabilize the portfolio rather than waiting for the NPLs to increase further.
Some of the customer products that has been very successful in the past few years, like off-store transactions, personal loans, cash advances, they have provided a significant growth in the previous years, and now they are entering in a more normalized growth stage. The combination of some actions that we have taken to control NPLs and also the normalization growth rates of these very successful products, I think the combination of those is reflecting on the division's overall growth. Talking about Suburbia. Certainly, the changes we have done around cell phones and motorcycles have had an impact on the top line. However, categories like men's, women's, and general merchandise all posted growth compared to the prior years. We are prioritizing healthier inventory levels and overall profitability over simply have more volume at any cost.
We believe this strategy is moving the format in the right direction. While we are not satisfied with the level of sales growth, we are very pleased with improvement in gross margins, cost control, and overall profitability.
Thank you for that.
Thank you.
Our next question comes from the line of Antonio Hernández Vélez. Please state your company name and ask your question.
Hi. Good morning. This is Antonio from Actinver. Just a quick one regarding competition and, seeing how Suburbia has been performing, even Liverpool, which of course it's a tough consumer environment. Could you please provide more light on where is competition tougher? Any regional perspective or whether if you're seeing more competition maybe from e-commerce? Thanks.
Thank you, Antonio. Competition is very strong across all of our categories. What we have seen in some of our big sales events like the Venta Nocturna, we have seen increased overall competition activity. Obviously, we take very proactive approaches to protect our profitability and to have promotions that are relevant to the customers to try to keep our share of the market and continue growing above industry benchmarks. We see it as a continued effort. It is done on a monthly and a quarterly basis, and certainly is something where we have top of our minds.
Thanks. From a regional perspective?
Well, rather than talking about the competition from a regional perspective, what we have seen is that the Pacific region, or the North Pacific region still have lower results than the rest of the country, and also some parts of the south of Mexico, where some of the oil industry and also the tourism industry have lagged, the overall consumption is reflecting that and also our overall sales performance.
Okay, perfect. Thanks a lot.
Thank you, Antonio.
Our next question comes from the line of Ulises Argote. Please state your company name and ask your question.
Hi, this is Ulises Argote from Santander. I was wondering if you could help us quantify how much of that improvement that we saw on the retail merchandise margins this quarter came from the favorable FX dynamics. I know you mentioned already in your remarks the volatility, but just trying to get a sense there of how relevant it was for this quarter. Thank you.
Thank you, Ulises. We do not disclose the individual effects on the gross margin, but certainly the stronger peso was a benefit. To provide some perspective, direct imports done by Liverpool are about 15% of inventory. If you also consider imports that are done by our vendors and that we acquire locally, overall is between 60%-65%, depending on the time of the year. Certainly, FX plays a role. Having said that, we do not expect to sustain the same level of margin increase due to FX every quarter. But we remain focused on protecting profitability and staying competitive because FX is the only variable in play.
All right, perfect. Thank you very much for that. Just to follow up there is no direct hedging strategy related to FX, right?
Regarding our balance sheet, it does. Our long-term debt is fully hedged or, well, almost fully hedged. However, on the P&L side, we do not hedge the purchases at Liverpool. We have some derivatives for our Esfera business and some other minor ones. The way we see it is that in the long term, we expect to pass on all the structural costs into pricing, including things like FX and import duties.
All right. That is very clear. [Non-English content] .
Thank you.
Our next question comes from the line of Froylan Mendez. Please state your company name and ask your question. We will take a next question from Ben Theurer. Please state your company name and ask your question.
Yeah, good morning. It's Ben Theurer from Barclays. Just one question I had on e-commerce. You've obviously talked about some of these platform migration issues that you said have been addressed. And we obviously saw in the quarter a little bit of a slowdown on the GMV side versus what we saw in prior quarters and particularly last year. So as we think about what was maybe platform-related, what was underlying business, can you help us frame a little bit your expectations as we move into the fourth quarter, and how we should think about some of these fulfillment metrics that also have declined in terms of the delivery within 48 hours, store servicing, et cetera? So that would be my first question. Thank you.
Thank you, Ben. The transition to our new e-commerce architecture proved to be more complex than we initially anticipated because the challenges extended beyond just the initial platform migration. As we stabilized one part of the ecosystem, additional issues emerged across other components, affecting product catalog accuracy and order fulfillment on some deliveries. This meant the impact lasted longer than we expected, at least last quarter, and extended through most of the third quarter. We have made progress in addressing the main issues, but the experience has highlighted the complexity of integrating all these platforms and the importance of allowing sufficient time to stabilize the entire ecosystem. Our earlier focus remains on completing the remaining adjustments and restoring the customer experience and growth trajectory.
Okay.
Now talking Oh.
Yeah, go ahead.
Sorry.
No, no. Yeah.
For the fourth quarter, we expect digital growth to re-accelerate through the fourth quarter, and we are encouraged by October results. Most of our migration-related issues are now behind us, and we expect this disruption to decrease as we go along. If I may, just to talk about the click and collect change. The decline of those metrics was partially due to the issues we experienced while establishing the full e-commerce platforms. As I said, we had some temporary disruptions that affected how orders were routed and fulfilled. For instance, let me give you an example. In some instances, shipping directly to a customer's home was actually faster than click and collect, which is highly unusual and temporarily shifted some customers towards home delivery. These were temporary operational issues. Frankly, we are not concerned because we already saw this metric return to normal levels by the end of the quarter.
As I said, most of the early issues are now behind us.
Okay, perfect. Then one follow-up I had. We have talked about this a lot in the past as to how the consumers tend to be very focused on promotions, and obviously, the fourth quarter tends to be somewhat heavy on the promotion side. As you plan and look into the fourth quarter, where do you stand compared to maybe a year ago in terms of inventory levels? What are the things that you are looking from a commercial side, from a promotioning perspective, in order to drive sales? Then with that, hopefully drive a little bit of a traffic recovery in same-store sales. So how should we think about the promotion activity and how it then relates and translates into traffic into the fourth quarter?
Inventories are down 5% versus last year. We believe the health of the inventory is better than a year ago. So we think we are very positioned to enter the fourth quarter than a year ago. On a promotional activity, as you mentioned, it is a very heavy promotional quarter, and it is very relevant for us. So we have taken a very close look at all of the promotional activity to make sure it is relevant and that we continue on the factors within our control, like store execution and also promotion execution in order to have a very successful fourth quarter.
Okay, perfect. Thank you very much.
Thank you, Ben.
Our next question comes from the line of Bob Ford. Please state your company name and ask your question.
Thanks so much. Good morning, Gonzalo. Can you talk a little bit more about how you're thinking about Primark in terms of the magnitude of the opportunity and maybe some general expectations in terms of the economics of the franchise, brand development requirements, and the duration of the agreement? I understand the fashion velocity component, but how do you think about the value propositions at Primark compared to the value propositions at Suburbia and the positioning between the two?
Thank you, Bob. Look, at this moment, we are not in a position to share commercial details. We are working with Primark to finalize the franchise agreement, which we expect to sign before the end of the year. Hopefully next quarter, we will be in a position to provide more details on the commercial side. What I can share is that, therefore, we have full operating control of the business, and we expect to work very closely with Primark's team, drawing off their experience and best practices to accelerate our learning curve and maximize our chances of early success. For the plans, the rollout is still a work in progress, but as I said, I expect to provide more color in the next quarter. The value proposition, we don't see Primark as a direct competitor to Suburbia, but rather complementary to our overall retail ecosystem.
Primark is appealing to a different type of customer and has different price points and has different dynamics than Suburbia. We expect to bring in more customers into our ecosystem and provide more options to them. Regarding the profitability of the business, even though the margins will be lower, it's overall a more streamlined operation, so we expect to have a material effect on our results as time progresses.
Primark's not really known for having a strong credit overlay. How do you think about facilitating financing for customers?
We are still assessing that opportunity. Obviously, as we bring in more customers in the retail ecosystem, those same customers are also entering the same credit ecosystem offered by our company. Certainly, it's an opportunity that we're looking at. However, it's too soon to say. We are focused on the retail part of the business and signing the master franchise agreement. The capabilities from the overall Puerto de Liverpool ecosystem, like logistics and credit and other things, we are certainly assessing all of them to understand which of them make sense to include in the overall business plan.
That makes sense. Gonzalo, you mentioned earlier, consumers are highly focused on value for money, right? How are you thinking about off-price in Mexico, particularly given your partner's business of Nordstrom Rack in the U.S.?
Yeah, that's a complex question. We've seen some experiences of competitors trying to off-price, similar to off-price in the U.S., in Mexico, and results have varied. The way we think about it is, whether the expansion on our retail ecosystem with an off-price value proposition makes sense or not to the customer, and that's a really hard question to answer. At the moment, we are not focused on off-price, but certainly it's something that we have asked ourselves from time to time.
Great. Thank you so much.
Thank you, Bob.
Our next question comes from the line of Andrew Ruben. Please state your company name and ask your question.
Hi. Thank you. Andrew Ruben from Morgan Stanley. Maybe just with that comment on Nordstrom Rack, to take the opportunity and get an update more broadly on where you are in terms of working with the Nordstrom team. I am curious, any learnings or shared initiatives from the past year plus, and just an update of where you are in the overall journey, if we should expect any more deeper integrations between parts of the business operations to occur over the coming years. Thank you.
Thank you, Andrew. The overall impact on our collaboration efforts with Nordstrom have been relatively low. We have talked about some things like their efforts on our end, and we are sharing best practices in some other things like customer experience, customer loyalty programs, cybersecurity, and some other things. However, the impact of those initiatives on the Mexican side have been relatively low. As we move forward, we are very happy with the development of the business. As we shared on a comparable basis, the business is doing very well. At the moment, we do not have plans to have a deeper integration in the short term.
Thank you.
Thank you, Andrew.
Our next question comes from Froylan Mendez. Please state your company name and ask your question.
Hi, guys. Can you hear me?
Yes, we can.
Thank you so much. I had difficulties the previous time. On credit, I was wondering what you're actually learning about the consumer. You said you tightened origination, that you want to bring NPLs back to pre-pandemic levels. What specifically are you seeing your consumer data that drove that decision? Can you help us understand if the deterioration is coming from Suburbia or Liverpool cardholders? Lastly, are you seeing any evidence that consumers are more leveraged than originally expected? I have this fear that because all of the fintech and credit offerings out there, consumers are starting to prioritize which obligations to pay. Thank you, Gonzalo.
Thank you. What we have been seeing is that our NPLs levels are approaching our pre-pandemic levels. In the past few years, we have been very successful to take on additional credit by adding to a portfolio, new customers, and taking on additional risk. Our view is that as NPLs are closing in into our pre-pandemic levels, we expect to take actions to stabilize those NPL levels at some point in the next year. What we're learning from the consumer is that we have taken some approach to tighten our highest risk products like personal loans, in order to stabilize our NPLs. Overall, the portfolio in Suburbia has higher NPLs than in Liverpool. However, the actions are taken on both banners. Answering your question, whether customers are more leveraged, the answer is yes.
The information we have available is that overall, our consumers are more leveraged now than what we saw before the pandemic.
If I may follow up, you mentioned very good dynamics on the real estate side, and obviously your portfolio is highly retail driven. How do you reconcile the weak same-store sales, let's say, or these consumers not really coming back versus the good performance on the real estate side, including occupancy? How do you reconcile both?
Our portfolio is very attractive for tenants. On our real estate revenue, we usually have a fixed rate component. So even though there is link between the overall retail performance and our real estate performance, is not one-to-one. Well, frankly, is that the diversity of our tenants help offset that too, because not all of our tenants are retail. We have restaurants and gym and services, and we have a great diversity of tenants. So the overall performance of tenants is not directly linked to the retail industry. So the combination of those.
Perfect. Thank you, Gonzalo.
Thank you, Froylan.
Thank you. That concludes our question and answer session. I would now like to hand the call back over to Mr. Gonzalo Gallegos for some closing remarks.
Thank you for joining us today and for your continued interest in Liverpool. I appreciate your questions and look forward to sharing further updates with you in our next call.