Good afternoon, everyone. Welcome to Organización Soriana's first quarter 2026 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 2026 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 so as to prevent any background noise. At the beginning of the Q&A session, we will provide instructions on 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.
Good morning, everyone. Thank you for joining us on this conference call. We will discuss the results of the first quarter of the year. Starting with the total revenue, the company generated MXN 12.4 billion during the quarter, representing a 2.4% decrease year-over-year. We ended the quarter with 832 stores in operation, followed by the closure of eight units as part of our company-wide efficiency and profitability plan. In respect of the performance of our store format across the country, we would like to highlight the strong performance of the super format, which is characterized by a more focused SKU assortment and a reduced general merchandise offering, which aligns well with the current consumption trends. The strongest sales performance for this format was recorded mainly in the states of Quintana Roo, Jalisco, Sonora, Nayarit, and Tabasco.
Regarding our digital channels, during the quarter, we achieved a 23% growth in digital sales, along with a 22 increase in the number of orders, reflecting continued customer adoption and engagement across our online platform. Moving on to our real estate business. That is an important part of the income. We closed the quarter with an occupancy rate of 90.5%, representing a 6% increase year-over-year and a total revenue of MXN 860 million. These results were driven by commercial synergies with fast-growing national brands across multiple sectors such as gyms, coffee shops, restaurants, and apparel retailers. Through these partnerships, we were able to accelerate occupancy by successfully renegotiating these terms and strengthening the commercial collaboration with key strategic partners in all the stores nationwide .
We're also very proud to report the continued progress in the consolidation of our private label strategy. We remain focused on delivering, developing new products, and expanding shelf space for both domestic and imported brands. This initiative has shown consistent growth year-over-year and currently represents 14% of the total sales, almost one point more than last year. Brands such as Quality Day and Valley Foods continue to deliver double-digit sales growth and significantly outperform the national brands. This trend has a positive impact not only on customer preference and loyalty, but also in the gross margin expansion of the company. Also, as a very important part of the strategy and in terms of customer engagement, our loyalty program, Soriana Ya, now accounts for a little more than 50% of the sales from identified customers.
These clients will change 70% more items per ticket and have an average ticket size of 60% higher than non-identified customers. These results clearly demonstrate the value of the exclusive products and promotion offers to our loyalty program which is getting more important day by day as part of the strategy of the company. Profit for the quarter. This line reached MXN 9.9 billion, representing a 24.7% gross margin with a 7% increase compared to the same quarter of the previous year. Mainly driven, among other factors, by a non-recurring income such as land sales, and insurance recovery. Also are very important because of improvements in the operational synergies, both in stores and in distribution centers, and also because the progress in commercial negotiation increases the membership and also increases the membership sales in our format City Club.
In this regard, the increase in gross margin partially offset the 17% increase in the operating expense versus last year, which resulted in MXN 7.6 billion, representing 80.8% over the revenues compared to the 15.7% in last year. Mainly, this increase reflects the double-digit minimum wage increase in the entire country, and that is something that is happening for several years in a row, with a growth in revenue in the same comparable way.
As a result of all these changes, EBITDA for the first quarter reached MXN 2.8 billion, representing a 10.1% margin and a 1.10% increase year-over-year. Also, the net financial cost for the quarter amounts to MXN 502 million, representing a 20.6% year-over-year decrease, mainly driven by a reduction in the area of debt balance, which results in a 52% decrease in the financial expense. Mainly with this, the net income for the quarter reached MXN 834 million, representing 2.1% over the same period and a 19.4% year-over-year increase.
On the Associated Companies, we are pleased to report that our financial services partnership with Falabella closed the quarter with almost 1 million active customers, 109 service modules, and a loan portfolio that surpassed MXN 6.5 billion. On the other hand, Sodimac continued to perform favorably with 15 stores in operation and a solid positioning across the country. Regarding the CapEx, during the first quarter, we invested MXN 538 million, primarily focused on maintenance and equipment replacement to enhance customer comfort. This investment supports improvements in the store navigation, safety, self-checkout equipment, and, very importantly, continues with the remodeling program of the stores.
Lastly, we are pleased to share that we have now completed 11 months of operation with our strategic partner, FAZT, an alliance aimed at building the most important ultra-fast electric vehicle charging network in Mexico. This initiative displays a strong growth potential in the electric vehicle market, while also reinforcing our commitment to environmental responsibility. Currently, we operate 23 stations across major cities in the state of Nuevo León, Morelos, Mexico City, and the State of Mexico. Hoping that this information provided will be useful, basically, we conclude our intervention, and we can go to the Q&A session. Thank you very much.
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 Ms. Irma Sgarz from Goldman Sachs. Please go ahead.
Yes. Hi, Rodrigo. Thank you for the comments. I have two different questions if I may. If you, firstly, if you could just talk a little bit about how you're thinking about the outlook for the remainder of the year. Obviously, tough start to the beginning of the year in terms of same-store sales, and we're still generally seeing a soft environment. Just wondering sort of when you think about you know, a FIFA World Cup in the second quarter and perhaps some easier compares along the year. Sort of how do you think and how you reposition or how you position in terms of pricing and inventory for the coming months and quarters? Secondly, on the gross margin, you obviously had a good improvement in the...
I know there's a couple of different drivers of that. If you could also talk a little bit about the sustainability of gross margin and the opportunities or the potential headwinds that you could see to that. Maybe, sorry if I'm extending myself, but maybe a third question. Just in terms of labor costs are obviously a continued pressure. Maybe help us just think about what you can do to mitigate those pressures, especially in the context of reduced workweeks and continued minimum wage increases.
Obviously, there's some methods on the self-checkout side that you talked about, but yeah, just if you can talk about sort of the different initiatives that you have and where it could potentially limit the labor cost increases, too. Is that sort of still high single digit for the remainder of the year or potentially higher? Yeah, I think those are the three questions. Thank you.
Thank you, Irma. Nice to see you again. Well, first of all, in terms of the same-store sales for the year, basically, we are not changing the guidance that we said for the last part of 2025. Basically, we are really conservative. We are expecting something around 4%. Obviously, the first quarter was not what we wanted. In general, as you mentioned, we see some specific events that could help us to accelerate the same-store sales. Obviously, the comparative base for, in our case, is easy. We also had a very good performance in same-store sales last year, so we are expecting that we can accelerate the rate on that.
Basically, the soccer tournament for Soriana will be doubly important because it's also at the same time as the Julio Regalado. That is the most important commercial campaign that we have, and it's something that all of you know . We are preparing something special in order to combine Julio Regalado with the World Cup. We believe that we are much better prepared for this Julio Regalado than last year, particularly in terms of not only of the promotional aggressiveness but also in terms of efficiency in logistics and working capital.
Probably something that you have seen in the last, particularly in the last six months, is that the company has important improvements in the working capital and much better management of the working capital cycle, and it's something that we expect that we can continue fully , which obviously has an important benefit in the free cash flow. We are expecting to have a much better summer season this year. In terms of the gross margin, as you mentioned, Irma, we have specific events, non-recurring events like the sales of some part of the reserved land of the company, and some recoveries from insurance. We also have recurring items that are helping the gross margin, like the reduction in the shrinkage.
Important to mention, it's across all the logistics chain of the company, not only in the stores, but also in the sales, and even in the shrinkage that we receive, something that we call higher shrinkage that we receive from the suppliers. The company has invested very hard in having a much better logistics process from the receipt of the product from the suppliers to the delivery in the stores. We are seeing positive results. We still see space to continue reducing the shrinkage. It's not in the goals that we internally set. You can expect that we can continue with a little, a couple of basis points more improvement in the gross margin.
What we believe is that we have to invest part of that expansion in the gross margin into the sales, to accelerate sales. No matter that mathematically speaking, Irma, we feel comfortable with the competitiveness of the company. The perception of the client is still very far away from the point that we want. We have to continue investing in price, but also in publicity, and in perception, in order to gain that market recognition that is right now something that we don't have. Yes, we believe that we can maintain the gross margin levels, but something that is for sure we will do is continue investing in price. Obviously, the market is not easy. We have seen an important reduction in terms of economic factors along the country.
In some regions, we are seeing a decrease in foreign investment. In some regions, we are seeing a decrease in the generation of new employees. Particularly in some regions, we are seeing a decrease even in tourist activity. We for sure have to maintain the competitiveness of the company as one of the main pillars of the strategy. Finally, going to your third question about the expense and the labor cost. Yes, we are really worried. We have several years, you know, the first year that we have a double increase in the minimum salary.
That obviously can not only affect those positions that have a minimum salary, but also affect the whole company because create an upward factor that increase or make or put some pressures to increase the salaries at all levels, not only in the basic levels. It's very hard for the company to leverage an increase in labor costs of double- digits. Remember that basically, labor cost is the most important expense of the company, almost accounts for 80% of expenses. For sure, it's something that is really hard to leverage with growth in the gross margin and expense so important like the labor. To be completely honest, the feedback that we have for the federal government is that, at least in the period of President Claudia Sheinbaum, the increases will continue.
Obviously, we believe that it's something positive for the country, for the population, to have an increase in the minimum salary. An important part of that minimum salary is supposed to come back again to sales in basic products. We are a company that is in a very defensive market, with very basic products. But in the short term, it creates pressure. What we are doing, apart from all the strategies that we already talked about, is the self-checkouts, which basically right now are on the way to implement around 600 more self-checkouts in the company, which have an important saving in terms of personnel. We are also developing some efficiency in the sales.
Again, in all the logistics processes in which we are increasing the use of technology to decrease the use of personnel, particularly to make all the audits and all the safety checks to make sure the shrinkages, to make sure the accuracy of the products, to make sure the accuracy of the packages that we send to the stores. All of that is moving to a more technological approach that is also helping us to reduce personnel. I think that last quarter, I also talked about some efficiency that we are seeing in the human resources department. This is like an example. In the past, we used to have around four people here in the headquarters who were in charge of making all the registers of the personnel.
Remember that we are a company with more than 8,000 people, with a turnover higher than 50%. We have to hire a lot of people every month, and that requires a lot of administrative process. In the past, all of that process were do it centrally via the equipment of four people. Right now, basically everything is doing by artificial intelligence with two people. We've had an important reduction in the rate; people are just in that process. Just to give you an example, also in the stores is not only the self-checkouts, but we are also implementing something that we call multifunctional personnel, in which the same people can develop different duties or tasks along the day.
Probably in the morning is backstage of the store, and in the afternoon is in the cashier line. Obviously, that sounds like something very easy, but even though there are legal aspects that you have to take care of before doing that, or something, some issues that we have to fix with the unions because at the end of the day, that person at least belongs to some unions and they are hired for a specific task. I mean, just to give you a sense of all the things that we have to change in order to find and to implement efficiency in order to reduce the impact of labor costs. Yes, it's something that at least we see that the following three years we will continue with that and we have to find ways to be more efficient. I don't know if it sounds.
Yes.
Clear enough with the answer.
Thank you very much. I don't know if I can, maybe just add, in the other income line, if you could just clarify, as you mentioned earlier, there was a land sale. Was that capital gains , or was that associated with land sale or with insurance?
It's another income line, and it's from when we sell the reserves. Obviously, with the recognition that we make, it's only the profit, not the sale of the land. It's just the profit that we have for the land. The major part is coming from efficiency in the gross margin, but we also have some non-recurring items like that one and the recovery of insurance. Thank you. Sorry, can you hear me?
Our next question is from Mr. Ricardo Mancilla from GBM. Please go ahead.
Hi, Rodrigo. Thank you for your time. I had two questions, but they were already tackled. One of them regarding the income statement of MXN 509 million in other income. Also, on the gross margin expansion. Already pretty clear. Thank you.
Thank you for joining the conference, Ricardo. Thank you very much. Anyway, if you need some other information, just send us an email, and it will be a pleasure. Thank you.
Appreciate it.
Thank you very much for your question. Our next question is from Mr. Héctor Maya from Scotiabank. Please go ahead.
Hi. Thank you. Thank you very much for taking my questions. Could you please share an update on private label penetration, if possible, by store format? Also, just a follow-up, of course, on margin expansion out of the initiatives that you are implementing so far, just to understand which out of those would be the most promising for year-over-year?
Sure. We're really happy with the performance of the private label. As I mentioned, the total company already represents like 14%. It is still far away from the objective. Particularly, we have specific targets for some format. Like an example for Mercado and Express, we aim to achieve close to 20% in the medium term, I mean, in a three-year , four-year period. Still, we are far away. Right now, like an example, Mercado already accounts for almost 16.5%, 16.6% the private brand. In the low-income sector, the private brands have a higher penetration. We're still with plenty of room to continue growing.
Something that is also important to mention is that our private label strategy is not only for the entry-level private brand. We also have a strategy for commercial brand level and for premium private brands. In general, at this point, if you ask me which is the one with the major success or the highest performance, Valley Foods is not Precíssimo. Precíssimo is a private label that we use for entry-level products, and Valley Foods is more for commercial level or even the Valley Foods brand , which is a luxury private brand. In general, this medium class or commercial level and premium level private brands are the ones with the best performance. It's obviously something that takes time because we are trying to find better suppliers all around the world.
Actually, an important part of our sourcing is not from Mexico. It's coming from other countries. The chocolate is coming from Canada. The peaches is coming from Greece. A lot of fruits are coming from Spain, from Portugal. That obviously helps us to show the client the very high quality, and this aspirational factor to our clients that is helping us and is helping to position the image of Soriana in medium classes and high- income classes. But obviously something for the long-term. It's part of the strategy. It's a key. Not only part, but it's also key. It's a key part of the strategy, and we will continue trying to increase the participation of the private brands.
About the efficiencies in the gross margin, right now, we can say that there are four important things that are helping us to increase the gross margin. First of all, the simplest thing to explain is the non-recurring item that I already talked about that. That is something exceptional that happened once. The second thing to talk about is the improvement in the shrinkages. Again, in the distribution center, but also in the stores. Number three, obviously the private brands. Every time that we increase the private brands, we gain not only loyalty, we gain also margin. Remember that in general, our private brands have something between 15%-25% more gross margin than the commercial brands. So it increased.
This acceleration in the sales of the private brands is also helping us in the gross margin of the company. Obviously, also very important, the negotiations and all the improvements in our commercial relationship with the suppliers are helping us, and it is starting to deliver results, not only in the gross margin, but also in the working capital. I think that in, general, we are still far away from the objective, but we are on the right track to change the performance of the company.
Thank you. Thank you very much. Very clear. About being far away from the objective, what would be the timeline of that objective? Medium-term? Much more for the longer term?
Well, particularly an example for the private brands, that objective is a five-year objective. So it's a medium-term. Medium long-term.
In terms of efficiencies and improving the gross margin?
Well, the improvement of the gross margin is already there. Just this quarter, we have more than 200 basis points of increase in the gross margin. What is the most important thing that we lack in the resources to convert into higher sales? To be completely clear, I think that the most important issue in our P&L is sales. We have to talk about sales per square meter and the performance against our competitors, and that is also related to the perception of prices, the perception of quality that I talked about at the beginning of this conference.
It is not only about having the right price, but we also have to have the right perception, and that is something that you cannot achieve in just one year of good prices. You have to work through several years in order to gain that perception. It's something that right now Soriana doesn't have, and we have to continue on that. On the other hand, like an example, in terms of quality, this private brand is helping us to deliver to the clients a better image of quality in our products, but it's not something that will happen in six months. All of these strategies that we have already started to see some improvements reflected in the numbers in the P&L. In order to see an important change, it will take years, not only months.
Excellent. Thank you very much. Very clear. Thank you very much.
Thank you very much for your question. Our next question is from Ms. Gabrielle Allen from Goldman Sachs. Please go ahead.
Hi, my question is for Oliver. Thank you.
Hello.
Thank you. Thank you very much. Our next question is from Mr. Miguel Ulloa from BBVA. Please go ahead.
Hi, Rodrigo, Claudia. Thanks for the time. Three main questions. If you provide some color on the store closures and what you expect going forward? The second one would be around negotiation. I see a slight decrease. Is this something that we should look into in the coming quarters as well? The final question would be the land sale. Is this something that you are expecting to continue in the near future? Thank you very much.
Sure, Miguel. Well, going to the first question about the store closure. We already did eight closures. As part of the efficiency plan of the company for this year, we are planning to close 12 more. So for the whole year it will be 20. In addition to that, we are implementing a reduction in the sales area of around 60 stores for this year, particularly hypermarkets that, as you know, Miguel, in the past we used to open very big hypermarkets of around 9,000-10,000 sq m sales area. Right now, we are opening a new hypermarket, probably the average is 5,000-6,000 sq m of sales area. There are plenty of stores that are very big , given the conditions and requirements of the client nowadays.
What we are doing is, on one side, making this store closure program. On the other side, the reduction of the sales area. That area that we take from the reduction is converted into the real estate business , which is very profitable and grows the company, and actually even complements the value proposition for the client, creating extra traffic to the store. In general, we see this strategy as a very helpful one for the company, and we will continue with this over the years. Point about depreciation.
Yeah, in general, we are seeing particularly related to investment in systems and other assets , and we believe that the periods of amortization and depreciation of those assets are the right ones. We made some changes to that. We are not seeing an important change in that. Basically, what you are seeing right now is what you can expect going into the future. Finally, remember, Miguel, the last question was about
Land sales.
The land sales. Well, no, this was like a little special because it was the sales of a whole store that we closed probably seven years ago. That is not something frequent. What is a little more frequent, Miguel, is spaces that we are not using the total land of the store. Something that we call, sorry for the translation, sobrantes. In some cases, we don't see like a very attractive real estate in that part of the land because it's not on the front of the street. It's not even facing the main highway, the main corridor.
We are willing to sell those kinds of things. We will continue with that, but it's not very important. It's just a small space of the total land of the stores. In general, we are not seeing this as a recurring thing. Actually, right now, the land portfolio of the company, the land reserve, amounts to approximately 45-50 stores that we already have the land. The idea is to use that land reserve for the following year's opening plan.
All right. Thank you.
Thank you, Miguel.
Thank you very much for your question. Our next question is from Ms. Irma Sgarz from Goldman Sachs. Please go ahead.
Sorry to come back onto the line. I just wanted to clarify. You had mentioned earlier the one-off effects of land sale, the capital gains on the land sale, as well as the insurance payments. I was wondering, when I look at your press release and the income statement specifically, there, or the P&L, there's a line under other income and expenses, and we see a positive MXN 509. That obviously helped the EBITDA margin this quarter. Is that what reflects those two effects? Or initially, from your initial remarks, it sounded like it helped the gross margin. I was wondering what it is that we're seeing reflected in that MXN 509.
No, no. Basically, the land sales, the profit obtained from the land sales is around MXN 18 million. You see the other income just below the sales. It's in the top line, Irma. The amount that you are seeing that is basically below the operating income is more related for operative and accounting issues that are not part of the day-to-day operation. Particularly, this amount that you are seeing is related to the cancellation of a liability of the personnel. How do you elaborate on the liability of persons of the-
Those labor liabilities, yeah.
Exactly.
Great. Okay, perfect. Thank you so much for clarifying.
Don't worry.
Thank you very much for your question. That was the last question. We will now hand over to Mr. Rodrigo Benet Córdova for final comments.
Well, thank you very much for your question, for joining us o n this conference call. Again, if you have any other questions or information requirements , please send us an email or call Claudia or me, and it will be a pleasure to respond as soon as possible. Have a very good weekend. Thank you very much.
Organización Soriana would like to thank you for participating in today's conference call. You may now disconnect.