Good afternoon, everyone. Welcome to Organización Soriana's first quarter 2025 earnings conference call. With us today are Mr. Rodrigo Benet Córdova, CFO of Organización Soriana, and Ms. Claudia González Romero, Head of Investor Relations for Organización Soriana. Together, they will be discussing the financial performance for the first quarter of 2025 and providing a summary of the latest news on the company. At the end of the presentation, there will be a Q&A session to answer any questions you might have. We would like to mention that all lines have been placed on mute to prevent any background noise. At the beginning of the Q&A session, we will provide instructions as to how you may participate in today's conference call. Please note that the conference call may be recorded. I will now turn the conference over to Mr. Rodrigo Benet Córdova, CFO of Organización Soriana. Please go ahead.
Thank you. Good afternoon, everyone, and thank you for joining me in this conference call regarding the financial results of the first quarter of the year. Starting with the top line of our income statement, the company had a nominal decrease in sales of -1.1% versus the same quarter from last year, where total revenues closed in MXN 41.4 billion, impacted by a decrease in the same store sales indicator of -3.9% and to a negative impact in other income line due to a sale of land profit that we did not have this quarter. Going into detail by store format, we saw a better performance in the hypermarket and supermarket format, mainly those located in the North States like Chihuahua, Coahuila, Tamaulipas, Nayarit, and Zacatecas.
On the other hand, we noticed more pressure on the store format focused on the base of the pyramid like Soriana Mercado and Soriana Express that have the most negative performance. Moving on to our digital business, we achieved a sales increase of 18% in the quarter and also a very important increase of 64% in the number of orders. We believe that this positive trend will continue in the following months while we continue investing to improve the shopping experience in our digital channels.
Also, as part of the top line of the company, regarding our results in the real estate business, we closed this quarter with an occupancy rate of 89%, which is a growth of 80 basis points versus the same quarter of the last year, reaching an income of MXN 766 million as a result of the higher occupancy rate and commercial synergies made with different brands that are expanding or arriving to the country, such as gyms, coffee shops, sports centers, padel courts, e-commerce food, fulfill ment, departmental stores, among others that are making a very good complement to our shopping experience and deliver more value to our clients in every visit. The most positive performance is in the central part of the country, particularly in the states of Hidalgo, Michoacán, Morelos, in which we are seeing a very important recovery in the occupancy of our real estate business.
Also, as a very important part of our strategy, and I'm talking about our own brand's performance, we are still very pleased with the results and the progress made in the renovation of the assortment of the catalog with national and imported products from all over the world. Sales for the quarter show a double-digit increase, and also the participation over the sales of the private brands reached a little more than 13%. That also represents a market share gain of 1% versus last year's same quarter. Again, as is happening in the e-commerce business, we believe that the following months we will continue seeing important growth in the performance of our own brands that also will be supported with important investments to convert the Soriana private brand into a strategic pillar of the company.
Also, on continuing with these important strategies, I want to talk a little about our recently renewed loyalty program called Soriana Ya, the loyalty program of Soriana, where 47% of the transactions made in the stores are already identified clients, which was to highlight that this client spent 43% more in average ticket than the other clients and also takes home 68 more products than the registered clients. This shows that all the exclusive benefits that we are offering to our loyalty program clients are having a positive impact not only in the sales, but also in the frequency, the ticket, and several aspects that are really important to measure how it convinces the client to continue using Soriana Ya.
Moving down on the P&L, the gross profit reached MXN 9.3 billion in this quarter, which represents a gross margin of 22.5%, with a decrease of 4.2% against last year's quarterly results. Mainly, this decrease is derived from an investment in price due to an aggressive commercial strategy, as well as the negative effect of a non-comparable base in the other income that we already mentioned about the sale of land. Meanwhile, the operating expenses line shows a decrease of - 6.5% versus last year, reaching MXN 6.5 billion, which represents a 15.7% over the sales against the 16.6% of the last year. This situation has not been easy to achieve considering the double-digit increase in salaries. We could overcome this situation thanks to the implementation of several austerity and efficiency measures in all the areas of the company.
It's also important to highlight that this austerity program will continue in the following months and along all 2025, that we are expecting that with this program, we can control and we can continue seeing an important decrease in the expenses line of the company that will help us to recover a little of leverage in the P&L of the company. As a consequence of the variation just mentioned, the EBITDA of the quarter reached MXN 2.8 billion, which represents a margin of 6.8% and a decrease of 4.5% against the first quarter of last year. Going down into the P&L and regarding the financial items, the net financial cost for the quarter reached MXN 665 million, a 10.4% decrease, primarily due to an important increase in the financial income derivative from a higher cash balance and also a much more conservative increase of the financial expenses of only 3.7%.
Finally, the net income for the quarter reached MXN 699 million, which represents 1.7% over the sales and also a decrease against last year. Moving on to talk about our associated company, I'm pleased to mention that in this quarter, Sodimac, our home improvement and good use of business, continued showing positive performance in sales in the 15 stores that we operate in the United States of the country. Also, on the other hand, our great business with Falabella Soriana cards closed the quarter with more than 937,000 clients, and we are expected to surpass the 1 million clients very soon. Remembering that we already operate physically in 109 stores with branches of Soriana Falabella, but we also operate with virtual presence in all the stores of the company. By the end of this quarter, the portfolio is already equal to MXN 5.4 billion.
As an update of our expansion plan, in the last 12 months, we have opened 18 stores and we continue with our store remodeling plan for the year. Also, investing in maintenance and IT platforms, the CapEx for the quarter was MXN 613 million. Finally, I would like to share with you that a couple of weeks ago, we started operations with our new business associate partner, FAZT. This alliance is intended to build the biggest network of ultra-fast charging stations in Mexico, which shows a high potential role in the electric vehicles market as well as our social responsibility with the environment. The main goal of this initiative is the installation of more than 1,000 charging stations by the year 2030, starting this year with 57 stations in the main cities like Nuevo León, Estado de México, and Guadalajara.
With furthermore, we hope that this information has been of your interest. We can now continue to the Q&A session. Thank you very much again for joining us in this conference call.
We will now start the Q&A session. If you have a question, please enter star eight on your telephone keypad. In case your question has been answered, you may cancel it by pressing star eight again. The first question is from Mr. Bob Ford from Bank of America Merrill Lynch. Please go ahead.
The comp store declined in terms of—hey, can you hear me okay?
Hi, Bob.
Yeah.
Hey. How are you? Thanks for taking my question. Could you break down the comp store decline in terms of traffic and ticket and talk about how that's evolving in April because of the shift in the calendar? There were also some pretty big cuts to SG&A. How should we think about that in the context of store service levels? Then within the D&A, right, the depreciation and amortization, if we exclude the amortization of the right-of-use asset, the D&A was up 21.1%. I was curious as to what was behind that. Thank you.
Sure, Bob. First of all, in general terms, what we are seeing across the whole portfolio is that the pressure is coming more in the ticket side. Particularly, not something uncommon in this kind of economical situation in which when the client starts to feel more pressure in the pocket, it starts to increase the number of visits and decrease the average ticket. Particularly, in important areas of the company, in important regions of the company, we are seeing a decrease in both. I mean, I think that it's very clear that this first quarter result will have pressure in the top line, important pressure, and particularly, again, more pressure in the ticket, but there are some areas that the pressure is in both ticket and other clients.
When we are seeing this performance, again, it's something that is very usual in economical environments with a little pressure in the pocket of the consumer. That is why we continue putting a lot of attention to our private brand strategy, and it's something that we are already seeing, but that no matter this trend, the increases in the private brand are going very, very good, very different from the total company, from the total portfolio of Soriana, and makes sense. It's very good quality, better prices, and even for us, even better gross margin. We are expecting that this kind of performance will continue in the following months, and that is why we want to highlight the focus of the company to increase very quickly the participation of the private brand.
Going to the second question, Bob, about the expenses, particularly, I don't know, probably for sure you are aware, we are expecting to continue to see the whole year and also next year's pressure, particularly in the labor cost. Already, the federal government started to talk about the expectatives that they have about the increase in the minimum salary for next year. It is something that for sure will continue. That is why the company decided to implement an austerity program that we start basically in the second week of March. These first results that we are seeing, a decrease in the expenses line in several lines of expenses, will continue the following months. We are expecting that it's something that, again, we will have to maintain the whole year, particularly going into the depreciation and amortization increase.
Basically, this is related with the important increase in assets that we had last year, mainly because remember that last year we opened 18 stores that probably is more than 400% against the previous year. The company had a lot of years without important organic growth and investment in new stores that are changing in an important way this line of depreciation and amortization, and basically is related with the increase in investment.
That makes sense.
Just for everything was very clear, one other question, and that is with respect to the program, the cost-cutting program, were there any one-time severance expenses that you ran through the results in the first quarter?
No, actually, it will not be one-time, Bob. It will be continuous. We are.
[Foreign language] Just the cost of implementing.
No. Let me go in deeply into the cost of implementation. Basically, probably the only one that is more common to assume that higher cost is when you reduce the labor force. In general, Bob, in order to avoid that kind of cost, basically we are using the natural turnover of the personnel to decrease that amount of line. We are not expecting one-time cost for the austerity program. Actually, we are making everything to avoid that one cost. All the initiatives of efficiencies that we are implementing in this year, basically the main or the first condition that we are putting to all areas of the company is that have to be positive cash flow generation in this year.
Basically, not only all the programs to cut expenses, but any program in the company that probably are good programs that we decide that it would be a good idea to have in the company, but in the first 12 months does not deliver positive cash flow, net positive cash flow from the investment will be not suspended, but will be postponed to next year.
Interesting. That was super helpful. Thank you, Rodrigo.
Thank you very much for your question. Our next question is from Goldman Sachs. Please go ahead.
Hi. Thank you for taking my question. I would like to dig a bit deeper into your expectations for the remainder of the year in terms of consumption and how is the current competitive dynamic? Has it seen any players becoming more aggressive in pricing? Thank you.
In general, not particularly one player. I can say that the whole market is being more aggressive. We believe that this will continue. Actually, we are pretty sure that in particular, in the next two months, the aggressiveness will continue. Remember that we are very soon to enter one of the most important of Soriana, that is the summer campaign, Julio Regalado, that also starts to be a very important season for all of my competitors. I think that this aggressiveness in the prices will continue. Also important to mention, remember that the federal government recently made an announcement in order to continue this year with the PACIC program. PACIC program starts to be very relevant for all the retailers and starts to have an important weight of participation in the portfolio of these basic products.
Yes, we are expecting that it will be a very tough year in terms of price.
Thank you.
Thank you very much for your question. As a reminder, if you have a question, please enter star eight on your telephone keypad. That was the last question.
Okay. Thank you very much for joining us in this conference call. Obviously, if you have any other questions or doubts, please send us an email to Claudia and to me. Thank you very much and have a good week.
Organización Soriana would like to thank you for participating in today's conference call. You may now disconnect.