Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX)

Earnings Call: Q4 2020

← View all transcripts

Feb 18, 2021

Good morning, and welcome to WALMEX twenty twenty one. On behalf of Walmart Mexico Central America, I would like to thank you for joining us in this event and to be interested in our company. I would like to give you some notifications. English translation available. Click on the icon of the world. Rename yourself. Own of participants will not be able to remain in the event. Use the Q and A box to ask questions at any time. We will answer them at the end of the sessions. 4Q 'twenty earnings materials available at walmex.com. During the presentations, we will be addressing these materials. Now I would like to ask you to read what is on your screen. These texts and the presentations will be available in our website, walmex.com.mx, at the end of the event. This is today's agenda. Our CEO, Guillaume Lourin, and our CFO, Middleton Brand, will talk about our 4Q 'twenty and 2020. So we'll have a break, and then we will have the strategy of the company. After the presentations, we will have a break, and then we will have the q and a sessions live. So I would like to pass the floor to our CEO, Gil Ureiro. Good morning to all of you. I hope you and your families are safe and well. Thank you very much for joining us at our Wilmox Day twenty twenty one. This year, we're going to have a slightly different event than what we've had in past years. In addition to being virtual due to the circumstances we experienced, we wanted to link the event with our fourth quarter report, which we'll probably seen earlier today. The team and I will be presenting the strategic plan for the future of the company. But first, I would like to talk to you about the quarter and the year 2020. I'm going to I would like to start by talking about our associates. Words can't express how proud we are of each one of them. They are taking care of our customers and members during these unprecedented times while providing an essential service. And thanks to their hard work and dedication, today, more than ever, we are fulfilling our proposal of helping people live better. On our WALMEX Day twenty nineteen, we shared with you our plan to transform our way of working with four goals, to continue to put our customers and associates always at the center of our decisions, to work in an agile way, to use data to support decision making, and to foster an end to end view. This way of working was essential for us to adapt to the new circumstances and to remain productive and close to the stores while working remotely. In face of the uncertainty, our associates keep us moving forward. Besides serving our customers, they are managing the business effectively and progressing on the execution of our strategy. Given the level of disruption we've seen in the environment since the pandemic began, we set five priorities to guide our decision making, and I would like to give you an update on the progress of each one of them. The first priority is to support our associates in addition to providing the necessary protective equipment so that they can do their work safely to show our appreciation. More than 23,000 associates in vulnerable conditions were granted permissions to be absent with pay. We granted special bonuses in the second and fourth quarters for associates in stores, clubs and distribution centers. We changed the payment frequency of their salary from biweekly to weekly so that associates can have a quicker access to their earnings. We provide a transportation allowances to distribute center with difficulties access. We extended a discount to all associates to buy everything they need in stores and online, and we enable a medical phone line to support the health and well-being of our associates and their families. These measures remain in place, and we are constantly looking for ways to continue to support them so that they can take the the care of themselves and our customers. The second priority is to serve our customers. We transform our stores and and the way we operate to serve our customers in the safest and most hygienic way possible, From installing protection glasses at the checkout and marking safe distance in high traffic areas to providing dedicated delivery and pickup slots to customers in vulnerable conditions, we have been adapting to their habits and their conditions of the environment, always following the guidelines of the authorities. We have kept our supply chain operating at full speed to be able to offer everything our customers are looking for. In addition, we are further reinforcing our everyday low prices proposition, keeping the lowest prices on the more than 300 items in the Los Des Enciles program. Our customers have appreciated this effort and have rewarded us with their preference. The third priority is to help each other, including the communities we serve, our suppliers who have been our great allies, the tenants who lease space in our stores, and federal, state, and local authorities. We have responded in different ways to meet of each one of them. We donated 130,000,000 pesos to fund the COVID nineteen temporary center, which provides medical care to patients in the health care system in Mexico City. In collaboration with other organizations, we supported more than 45,000 people affected by COVID nineteen, donating 33,000,000 pesos through a gift card program. We also donated 250 tons of food to more than 22,800 seniors. We know it has been a difficult time for our small suppliers too, so we decided to support them, reducing payment terms to seven days, expanding our factoring program, and offering a digital training program designed for micro and small business who have been affected by contingency and who need support to understand the digital world as an alternative to address the crisis. We also waive rent for our small tenants and work with them to hire to their employees during peak demand. The fourth priority is to manage the short term effectively, financially and operationally. This includes our cash and inventory position. You saw our quarterly report earlier today, and Milton is going to address this point later. And the fifth, to continue to implement our strategy even amid the crisis. Everything that happened in 2020 led us to accelerate our strategic agenda, and this is why today we're here to present to you the new chapter of our strategy. I am very proud of what we have achieved as a company in recent months, especially on how our associates have dealt with the situation. Now I leave you with Milton. Thank you, Guy, and good morning to everyone. Thank you for joining us today in our Wilmex Day twenty twenty one. This year, we proved our business to be resilient, to constantly innovate, and to work with discipline in order to win our customers' loyalty while delivering results. In 2020, the circumstances require us to work remotely, yet closer and more integrated than ever with our stores, clubs, and distribution center associates. I am very pleased with how our associates are embracing agile as a way of working, with our progress in omnichannel, and with how we managed to keep our customers and associates at the center of all our decisions. Being true to our purpose of helping people save money and live better, now all our formats have an omnichannel offering that allow us to make things easier for our customers and help them stay safe during these unprecedented times. Let's review the fourth quarter and full year results. I'll start with Mexico. During the 4Q, total revenues increased 5.98% during the full year. Throughout the year, we worked with our suppliers to continue to provide the lowest prices to our customers through programs like Los Essentiales. We were able to expand our price gap by 50 basis points and to expand gross profit by 20 basis points for the full year. In terms of expenses, in the 4Q, we saw higher growth than in the rest of the year, primarily because of three reasons: we saw higher personnel costs as we decided to pay another gratitude bonus to stores, clubs and distribution center And we increased the provision for performance bonus to show our appreciation for all the hard work our associates have done this challenging year. Number two, we caught up with construction, remodel and maintenance work that we couldn't do earlier in this year given the restrictions. And number three, we incurred extraordinary expenses to keep our customers and associates safe. However, when we look at the full year, I am quite pleased with how the team managed to keep the operating discipline despite the high expense environment we experienced. Excluding onetime effects, expenses as percentage of sales were quite similar to 2019 levels. All in, underlying 2020 results were positive. Operating income grew 9.5%, 150 basis points ahead of total revenue growth, and we were able to maintain our double digit EBITDA margin of 11.4%. Now looking at the details of the quarter. We delivered growth based growth across regions, formats and categories. During the quarter, same store sales increased 4.96.7% for the full year, which led to an eleven point one percent two year stack. All regions had a positive performance. The North and South regions delivered the highest same store sales growth, followed by metro and center regions. Sales in the metro region were softer during December as operating restrictions increased and selling some categories, such as toys or wines, was temporarily prohibited. Regarding formats, Sam's Club continued to post the highest same store sales growth, followed by Bodega, Walmart and Superama. Important to note how Bodega's sales trend improved significantly versus previous quarter's performance. As customers are reacting to the pricing actions we've taken and our omni proposition is starting to gain traction. Looking at the same store sales by category, food and consumables and general merchandise posted the highest growth driven by in home consumption. El cine resistible event and holiday sales. It's encouraging to see that the apparel division resumed growth and posted a positive result after several quarters on negative territory. While SSS growth continues to be strong and sustainable, e commerce contribution to total sales growth is accelerating. During the year, contribution increased 5x versus 2019, reaching two sixty basis points. Looking only at the 4Q, e commerce contributed three forty basis points to total growth. E commerce sales growth was 171%. Both in the quarter and for the full year. E commerce sales represented 5.1% of sales during quarter and 3.8% during the year, 2.5x the penetration we had on 2019. On November, we reached our monthly sales historic max month for general merchandise in on demand. It's encouraging to see the potential we have on the omni space as the market evolves. We will focus on service levels and on providing the best shopping experience. We believe it is critical to continue investing to improve our omni value proposition in order to win our customers' loyalty. Ignacio and Christian will talk about our plans going forward. We have been able to outpace the self-service and club's market measure by Antad for six consecutive years now. In 2020, we sequentially expanded the same store sales growth, GAAP and versus Antep, reaching a six sixty basis points GAAP during the quarter and a 130 basis point GAAP for the full year. Our everyday low price proposition continues to gain strength, and our efforts to operate with discipline and continuously improve our service levels are allowing us to gain our customers' loyalty. Now I'll talk about the results in Central America. Top line growth continued to be softer in the region given the macro environment and the restrictions in place to contain COVID nineteen pandemic. The team made a great job launching campaigns such as Numenodo Campion and reinforcing our pricing positioning to drive sales. Despite the price investments, we worked together with our suppliers, and we're able to maintain a 24.2 gross profit margin in the region. I have to say, I am very pleased with how the team managed to keep expenses under control in such challenging times. We were able to achieve 10 basis points of expense leverage during the year despite the additional costs incurred due to the pandemic. It is an example of our commitment to cost control and discipline. As a result, EBITDA margin expanded by 20 basis points in the year. Looking at the performance by country, we continue to face a challenging environment, yet we are managing to grow ahead of the market and to gain share in most of the countries. Nicaragua and Guatemala managed to grow sales, while in El Salvador, Costa Rica and Honduras, sales were softer. As the effect of the pandemic with its opening restrictions and hurricanes affected those countries more severally. I'd like to highlight the omnichannel progress in the region, which allowed us to serve our customers amid these unprecedented times. It's amazing how the team stepped up to the challenge and provided essential service to customers. Flavio will speak about our plans for the region later in the session. Moving to the new store growth. We continue to invest in Mexico and in Central America despite an uncertain environment as we believe in the long term potential of the region. We are resuming new store growth at a faster pace. Following authorities' guidelines for construction and making sure conditions are safe. We opened 37 stores in the 2020. During the full year, we opened 82 new stores, 63 in Mexico and 19 in Central America. These included two new Walmart Express stores, which had amazing results on their opening month. We are very excited about the potential of this format. For the year, new stores contribution to total sales growth was 1.5%. Last year, we were not able to implement our investment plans as we expected to, but we managed to make strategic investments to better position our business while continuing to generate returns. We invested ARS16.7 billion, 43% of the investment was allocated to the remodeling and maintenance of existing stores, 27% to the opening of new stores, 16% to e commerce and technology, and 14% to the logistics network redesign. As we shared with you on previous quarters, we decided to shift our investment focus to omnichannel, automation and technology projects to accelerate the implementation of our strategy. In summary, I am very pleased with what we achieved in the year. We were able to serve our customer, to take care of our associates, to give back to the community, to progress with our strategic agenda and generate returns for our shareholders, while we managed to grow the top line and maintain profitability. That would be it for the 4Q and 2020 results. Now let's talk about our plans going forward. Our financial framework will remain consistent. We will focus on four levers for value creation. First is quality growth. We will continue to drive growth based, profitable and therefore sustainable growth across the different formats, regions and categories, leveraging the e commerce momentum and previous investments. The second one is an everyday low cost mindset. We continuously launch and search for new productivity initiatives to leverage expenses. Our capacity to save and be efficient is what gives us the flexibility to invest and continue positioning our company. The third, strategic capital management. We continue to optimize our working capital and to invest in high return projects. Number four, these should translate into value creation for our shareholders. Talking about the everyday low cost mindset, we continue to focus on productivity and expense control. In 2021, we will implement projects such as workforce management program through which we will change the way of working of our associates at STORE by reducing layers and friction, while we empower them and provide the necessary digital tools to make their jobs easier. Another example is smart standing, where we will review and optimize the expenses of the company line by line through a sustainable program. We will also step up our efforts in terms of automation and digitization. We share with you plenty of examples of what we're doing in our stores during the omni tour, self scanning stations, the backroom unloader or the Fresh app. The savings that we generate will be reinvested into our customers' and associates' value proposition. Our financial strength becomes increasingly important at these times. Operating cash flow generation has increased annually 9.2%, and we will continue to focus on further improving our cash position by managing the business in a disciplined way so we can continue to invest and generate returns, which leads to the next point. We are committed to delivering consistent returns to shareholders while investing for the future. Yesterday, the WALMEX Board of Directors agreed to recommend a proposal to shareholders for an ordinary dividend of MXN 0.9 per share and an extraordinary dividend of MXN0.73 per action per share. Total dividends add up to MXN1.63 per share payable in two installments, one in November and the other one in December 2021. We expect the proposal to be approved in the Annual Shareholders' Meeting to be held on 03/23/2021. We are also generating returns in the form of capital gains. For the last five years, every year, our stock price has reached a new maximum despite the volatility in the environment. In closing, Walmart is evolving and preparing for the future. We will continue to invest and innovate. Our business is resilient. And by operating with discipline and becoming more productive, we will be able to deliver results as we transform our business. We will keep a strong cash flow generation that will allow us to invest and build a business that is even more prepared to face future challenges. I would like to say thank you to all our associates. You have stepped up to the challenge, and you are making it possible for families to safely get what they need while positioning our company to win. Thanks again for your for joining us today. Good morning to all. And, again, thank you for joining us at our Womax Day twenty twenty one. Today, we are here to share with you our new long term strategy. In my presentation, I will focus on Mexico, and later on, Flavio will present Central America's strategy. Last year, we had planned to hold our annual event with analysts and investors at Medina's new omnichannel distribution center. Due to the circumstances, we had preferred everything necessary to do the event virtually. But during those days, the World Health Organization declared the pandemic and began to see a significant level of disruption in the business. So we made the decision to focus 100% on the serving of our customers and cancel the event altogether. Before we start talking about our future plans, I would like to use some of the material from last year's presentation as a context for today. In 2019, we delivered what we promised, and we continued to build a resilient and innovative business to delight and meet the expectations of our customers, associates, shareholders and the communities in which we operate. But this is not a surprise. Throughout our history, we have proven resilience in our business and our ability to constantly innovate to deliver results. Since Sam Walton's time, we've always put our customer at the center of our decision. Sam Walton used to say, if we don't listen to our customers, somebody will do. And that philosophy continues to permeate through our company. Over twenty years ago, we launched the concept of everyday low prices in order to help Mexican families live better. And since then, we have continued to innovate. But the world's moved every time or faster. In the last five years, we've made strategic decisions regarding our portfolio management, which have allowed us to focus our energy in our core business, which lead to an 8% of CAGR. We launched small store prototypes in all our stores in all formats, which allow us to improve capital efficiency. We've expanded our presence to over two fifty cities in Mexico. During this period, we opened four forty two stores, which is equivalent to more than half of our main competitors' stores count. We opened the two thousandth Bodega. We achieved historic growth records versus our competitors, surpassing ANTAG by almost 1,200 basis points. And we were able to keep the gains and market share. We have improved the profitability in Central America by 200 basis points. We started the redesign, one of the most robust logistic networks in the country. We have opened and expanded over five distribution centers to continue growing with the quality in the country. Additionally, we have automated our existing distribution center to further improve our efficiency. We have strengthened and escalated our online platform. We have equipped the stores with over 1,000 pickup locations and around 900 kiosks. We opened a marketplace where we have over 1,300 marketers or sellers to expand and reach. We launched a payment platform prototype, which will enable us to connect and enhance our ecosystem in the future. We opened our first inclusive store in Mexico, both for customers and associates. We launched an associates value proposition. We improved the variable compensation scheme to better reflect the performance of our associates. We have promoted 26,381 associates, 49% of which are women. We changed the dress code, implemented flexible hours, and increased the maternity and paternity leave. Thanks to everyone's effort, we became the largest company in Mexico by market cap. We have built a resilient business prepared for the future. Have despite the circumstances, we have not stopped innovating, investing, growing and generating returns. Most importantly, we have built trust with our customers, associates, suppliers and communities where we operate. In summary, through all these years, we have proven resilience and capacity. And we have built the foundations and have prepared for the future. We were able to grow in an accelerated fashion, and our openings are more efficient. We spread our price gap to meet our value proposition to save to believe better. We also beat an omnichannel business with on demand, and we are prepared to accelerate marketplace and one key markets. We continue on creating shared value and building trust with our stakeholders, customers, associates, providers, communities, business partners, shareholders. It was a year without precedence in all sense, a year of stories of challenges, of learnings, a year that suddenly set the before and after of several industries, including ours. The pandemic changed the way our customers shop and interact with us. It generated structural changes in retail and acceleration of digital adoption in several areas, from online shopping to payments and paperwork. We are fortunate to operate a business that allows us to be even closer to our customers and to learn from them every day. The evolution of the market and in the way our customers shop accelerated the implementation of our strategic agenda and led us to rethink our long term plans. And I dare to say the future of our company looks more exciting than ever. We've evolved significantly from a store based business to an omnichannel business, and now it is time to optimize performance and create a winning omni lead ecosystem in Mexico. The new strategy can be summarized in this flywheel of mutual reinforcing capabilities and assets. But what is exactly a flywheel? I can't find the exact word in Spanish. Is it steering wheel? If we look it up in the its meaning in the dictionary, a flywheel is a revolving wheel that is used to increase a machine's momentum, thereby providing greater stability to reserve power for when you need it. And that is precisely what our flywheel is trying to do. As it seems, it creates power and momentum of investment that we can put back into the business and make the whole machine even more efficient. Let's see it by parts. Our starting point is solid. We have a healthy brick and mortar business that has delivered growth based profitable and sustainable growth for many years and a double digit EBITDA margin. Our focus will be to win in discount. The discount market in Mexico is large and offers space to continue growing, especially through the formalization of the market. We have a unique position in this segment, thanks to Bodega, a recognized and efficient vehicle that has accompanied our customers for over sixty years and nowadays is the largest retailer in Mexico. It is necessary to evolve together with our bodega customer and to deepen the execution of the value proposition. We will seek to further expand our price leadership together with our suppliers. In addition to significantly reinforcing the price gap, we will be much more intentional in terms of price points. We will continue to work on our assortment. And in this regard, our brands will become even more relevant as we will seek to expand its share about 300 basis points in the next year. Our brands will be key to keep our customers' preference while balancing pricing, investment and profitability. Another important aspect to winning discount is to continue to strengthen our fresh offering since this category is fundamental in the purchase decisions of the bodega customer. We have progressed with the projects we have shared with you before, such as the centralization of the meat and bakery of Perishable three sixty, but there is still a lot to do. The flexibility of bodega's format and prototypes will help us to accelerate new store expansions. We have developed new prototypes such as Mibodega Urbana that, together with the redesign of our logistics network, allow us to reach places that we couldn't reach before and to bring our low price value proposition to more families. Winning primary destination in brick and mortar is the foundation to live in omni. Two years ago, we shared with this with you in this same event our decision to compete in ecommerce from our field, leveraging our strength, leadership in groceries and our stores. Today, I can say that I am very proud of what we have achieved in this regard with the evolution of on demand. Today, we can deliver the same day our customer place their order 52,000 groceries, consumables, and general merchandise items from eight hundred five eighty six of our stores of all formats, Walmart, Walmart Express, Sam's, and Bodega in 70 cities. Thanks to our capabilities, we can deliver everything from regular weekly grocery orders to orders as complex as a combo of popcorn, microwave and an ice cream. By doing so, we have managed to win the purchase frequency and scale our business significantly while keeping the lowest prices. In 2020, online sales grew 171%, and simultaneously, we improved NPS and profitability significantly. On demand will continue to be a critical part of our omnichannel offering, and there's still much to do in terms of service level. Going forward, we will seek to significantly accelerate extended assortment, primarily in general merchandise and apparel. We know that our customers are looking for a wider assortment when they shop online, and we're here to serve them. We're going to strengthen the 1P and the marketplace operations to expand our reach to more categories and customers. We will start with the local marketplace and develop cross border in the midterm. To become leaders in omni, we need to invest significantly in growth capitalists, among them technology, logistics and talent. I'm talking about these going forward. Walmart and Sam's are going to play a key role in our plans. We will prioritize the omni transformation of stores and clubs. Later on, Ignacio, Dolores and Christian will tell you in more detail about our plans. There are natural adjacencies to our omni business that will allow us to solve customer pain points. Imagine being able to create a digital connection with the more than 5,000,000 customers who visit us every day, offer services such as connectivity or credit so that they can buy high ticket items, and that every time they interact with us, we get to know them better and serve them better. We identify those services around the shopping experience that our customers value the most, and we are already making progress on these fronts. We launched the mobile virtual network operator, Bait, to provide connectivity services for our customers, and we have now 300,000 users who can tap on their phones at 2,500 stores or using cashing. We also launched our cashing as an MVP, and we've learned from our customers' response. Now we're preparing to scale the product. We are hiring talent, building the technology and developing use cases that will expand customers' access and loyalty, developing ecosystem that will also translate into new sources of revenue. We have a big opportunity in advertising. We launched our media business in 2019, now called Walmart Connect. It's growing fast, and results are encouraging. In a few minutes, Blaise and Beatriz will talk to you about our plans. These new revenue streams paired with productivity and automation projects and the everyday low cost mentality, will allow us to reinvest in the business to provide a unified, engaging experience inside and outside the stores. Sales service business is the foundation of everything, and we'll continue to invest in it to develop the ecosystem. To execute the long term strategy, there are four enablers that we need to focus on: customer centricity, technology and data, logistics and talent. Having customers at the center of our decision is going to be critical to achieve our ambition. Customer at this center is our north star, and we have made several changes to our structure and way of working to reinforce it. Just over a year ago, we launched our customer experience factory with the intention of never stop hearing the customer's voice. In addition, we have evolved our customer satisfaction indicator and will continue to work to make it the driver of our actions. There is still much to do about technology and data. The good news is that we are part of a global company that has collected learnings from different markets and situations. We will seek to leverage this strength as much as possible. Logistics is one of the enablers where we will invest the most. Our network has been characterized as a competitive advantage, and in recent years, we have invested significantly to keep this advantage. Only in 2020, we opened three new distribution centers, and we started the construction of two more. Going forward, we will continue with the network redesign, now with an even more omnichannel approach that adapts to the future needs of the business. From my perspective, the most important enabler is talent. The new shape of our business is taking requires new talent and different skills and also requires a change in the mindset of our associates. I am very proud of the team we have. I dare say that we have the best operators and merchants in Mexico. We will continue training our associates in the use of data, in the agile methodology and fostering an entrepreneurial mindset. Thus, the business will increasingly focus on the needs of our customers. We want Walmart to continue to be that place where our associates can be themselves, where they can learn, grow and have fun. To achieve these, we will continue to implement the associates' value proposition and transform our talent to further strengthen our most valuable asset. This new strategy requires us to evolve the focus of our investments to drive omnichannel growth. In 2021, we expect to invest 22,200,000,000.0 in Mexico and Central America. We will allocate 40% of the investment to the remodeling and maintenance of our stores. It's critical for us to keep our store space up to date with omnichannel capabilities to drive traffic and for our associates to have a safe place to work and our customer and members a safe place to shop. Investment for new stores will increase by 18% versus last year. With this level of investment, we expect the contribution from new stores to grow to remain between 1.21.5%. Investment in logistics will represent 25% of the total. As I mentioned earlier, we have several projects on the pipeline, and there is still a way to work to complete the redesign of our network. 10% of the funds will be allocated to e commerce and technology. Remember that in addition to investing directly in these concepts, we are also leveraging technology developed in other countries where Walmart operates. This certainly position us as one of the companies in the sector that investing the most in technology. We can see how the distribution of capital has evolved, adapting to the needs of the business. A few years ago, a large part of the investment was dedicated to opening new stores. Back then, we only had home delivery service in Supayama, and we were just beginning to build our extended assortment operation at Walmart. Going forward, we're going to significantly increase investments in logistics and technology. We are also going to invest in new stores and in modernizing our existing stores to grow accelerate omni growth and to build the foundation of the ecosystem. In the coming years, the level of investment will be higher than in recent years. Between 2022 and 2024, investment as percentage of sales will be close to 4%, then it will return to current levels. The level of investment and the transformation of our business gives us confidence that we will continue to grow and generate significant returns. As a result of our strategic choices, as our growth profile will continue to evolve, In the past years, we focused on growing through new stores and building the foundation for omni business. Going forward, omni and ecosystems will be the main drivers of growth. In 2015, we shared with you our goal of doubling the business in ten years. This new strategy will accelerate growth, and we believe that we can double the size of the business in less time. Accelerated omnichannel growth, the change to our way of working, the talent we have developed and hired, and the capabilities we have built give us confidence that we can continue to evolve our business and that we will build in the near future a customer centric ecosystem anchored in our core business. It will certainly be challenging as the pandemic, it is not over and economic conditions are not the most favorable. But it's right now that we become even more important to our customers. We will continue to work to serve their needs, to take care of our associates and to continue to develop a resilient customer centric business with a great capacity to innovate. This new strategy will translate into shared value creation for our customers, associates, communities, shareholders, suppliers, business partners and for the planet. As a company, we want to use our scale to help. Our goal is to become a regenerative company. To achieve this, we will contribute to Walmart's global commitments to be a net zero emission company and to help protect, manage and restore 50,000,000 acres of land and 1,000,000 square miles of ocean, both 2,040. We will collaborate with the Walmart Foundation globally to combat the loss of natural resources that threatens the planet. We have robust programs to achieve our goals, such as Resticla Mania Evolutiona that help us to promote a circular economy avoiding degeneration of waste, or the Higaton project that seeks to reduce the emission of greenhouse gases in the supply chain. We will continue to focus on creating trust and share value for our stakeholders using our strengths to help people live better and preserve the planet. We have made significant progress on environmental, social and corporate governance matters. I would like to highlight that we are 75% ahead of our zero waste goal. More than 90% of our suppliers are small and medium sized companies. And last year, we promoted more than 11,500 women. There's still a lot to do, but we are on the right track to be a better company in these aspects. Before closing, please let me introduce our management team. Christian Barrientos, COO for Mexico Milton Brand, our CFO Flavio Coccini, CEO for Walmart Central America Ignacio Caride, in charge of ecommerce Dolores Fernandez Loebe, CMO for sales services. She just joined our team after a vast career in merchandising. Most recently, she held the CEO position of our operations in Argentina. We are very excited to have her in our team. Gaston Winston, in charge of real estate, Beatrice Nunez, in charge of growth and technology, Eduardo de la Garza, in charge of people, Adriana Velasquez, in charge of compliance Alberto Sepulveda, in charge of legal and corporate affairs. In closing, I would like to summarize the key messages. Customers appreciate our evolution and are rewarding us with their loyalty. We have three priorities: win in discount, lead in omni and develop ecosystems. We will step up investment in a disciplined, thoughtful manner. Our ability to transform the business and focus on the customer gives us confidence that we're following the right path. Now I leave you with Ignacio, Cristian, and Dolores, who will give you more detail of our omnichannel strategies. Thank you, and good morning for everyone. 2020 was an unprecedented year for our customers, member and members and associates. Before the crisis, we were already seeing an adoption of pickup and home delivery service in all our formats, And the COVID-nineteen pandemic significantly accelerated this change retail industry was undergoing. We experienced radical changes in shopping habits, which accelerated our omnichannel business. During the first month of contingency, the number of orders we received tripled, which challenged us to build capacity and to accelerate the implementation of our strategy. The investments we made in the past and the operating model we developed allow us to respond quickly and to provide an essential service to Mexican families in this new normality. Let us tell you everything we did. In order to meet the expectations and needs of our customers in on demand, we increased by 40% the number of slots available for delivery or store pickup. We hired over 27 picker 2,700 pickers and doubled the capacity of the last mile. We also adjusted our apps and website to give special attention to vulnerable people. In addition to these immediate response actions, we accelerated several projects. We launched home delivery service in two sixty five Sam's Club and Bodega Arena units and accelerated the implementation of this service in about 60 Walmart and Suparama stores. Doing so, we doubled our ability to deliver thousands of items on the same day from our stores. We already have five eighty six units in 70 cities providing this service. Another initiative we accelerated was our crowdsourcing model for picking and delivering in nearly 30 stores. This decision helped us to serve our customers in a seamless way during the high demand generated by the contingency. We also made great progress on extended assortment. First, in order to give access to a detailed offer to a large part of the population in Mexico, we launched bodegaureda.com.mx website with our general merchandise catalog and reached more than 1,100 kiosks. This has been very well received by our customers as the average ticket is most 8x higher than in the store. Second, we upgraded our marketplace technology, and by doing so, we were able to increase 8x the number of products available, enabled by more than 1,000 sellers. Finally, we managed to expand the coverage of our logistics network with a new fulfillment center dedicated to e commerce and two new omnichannel distribution centers. Altogether, we have five distribution centers from which we operate our extended assortment. With these new omnichannel solutions, we managed to maintain record service levels at the most important online events of the year, which are hot sale and El Pini Resistible despite the increase in demand. In relation to payments, our conversion rates increased by 200 basis points, thanks to the investment in machine learning technology and a close collaboration with the country's main financial institution. And speaking of talent, a very important milestone of which we are very proud is the incorporation of 45 associates with disabilities in our call center who work remotely from home. These associates account for 9% of the total team. Our aspiration is that at least eighty percent of the new hires are people with disabilities. As you can see, we made good progress in 2020, and we managed to grow 171% online sales, which is equivalent to growing 2.5x versus 2019. E commerce accounted for almost 4% of our total sales in Mexico, something we didn't think would happen soon. Importantly, as we accelerated growth, we also implemented several actions that enabled us to improve profitability and build a healthier business. But this is just the beginning. E commerce share in Mexico, even after the pandemic, is 6%, way below countries with more mature operations, so much remains to be done. We need to continue listening to our customers and solving the main pain points they have during the shopping experience. In this regard, we are leveraging the transformation that we started two years ago to continue working in a collaborative agile and data driven way through all the areas that support shopping experience, e commerce, merchandising, operations, financial solutions and logistics, among others. Our ambition is to become the leading omnichannel retailer in Mexico. Our goal is for omni to reach a double digit share in our business by 2024. As Guy mentioned, to achieve this ambition, we will focus on three pillars: strengthening our on demand strategy number two, accelerating extended assortment and number three, investing aggressively in three of the growth catalysts: technology, logistics and talent. During the presentation, we will go into more detail for each of these three pillars. We will start with on demand. As Guy mentioned, a few years ago, we decided to change the focus of our strategy to further leverage our stores and everything around them so that we could bring an appealing value proposition to our customers and members. So we created the on demand strategy, which has been very well received by our customers and has been the vehicle to win the shopping frequency. On demand is a key element of our omnichannel strategy, and we will continue to strengthen this service from four fronts. The first one is to continue developing actions to further improve the customer experience. That's the reason why we are going to accelerate and strengthen our crowdsourcing model, leveraging our Spark technology. This model is very relevant because it gives us the flexibility to serve our customers faster without sacrificing efficiency. In 2021, we will increase the share of these services by leveraging around 150 Walmart and Walmart Express stores in the highest population density areas of the country's major cities. The second is to continue listing thousands of items to offer with same day delivery at the lowest price, the huge variety that we already have in our stores today. Imagine being able to receive everything from pantry items to clothes, toys, a TV, or a refrigerator in just a couple of hours. The third front is to expand our capacity to offer on demand service to more Mexican families. In 2021, we will enable this service in more than two seventy stores to reach a total of eight sixty units nationwide. These delivery points add up to our 20 distribution centers to offer thousands of items and a frictionless shopping experience for our customers throughout the republic. The fourth, last but not least, is a project that we are very excited to share with you. In line with our mission to help Mexican families save money and live better, we created Walmart Pass, a subscription program that within a few months will allow our Walmart and wall Walmart Express customers to make unlimited orders with no delivery cost for a monthly or annual fee. This initiative is being of several benefits that we will be adding in favor of our customers. Walmart Pass is a great step towards the connection and the bond we have to with our customer in order to strengthen their trust in our services. As you can see, we have made a lot of progress in on demand, but we still have a long way to go. It's very encouraging to see the potential of this business. Now let's talk about extended assortment. When our customers shop online, they look for a wider assortment and differentiated products to meet their needs in different moments of their lives, even more frequently now in this new normality. With on demand, we lay the foundations for winning in frequency. Through the extended assortment, we want to reach more customers with a much larger product offering. We will accelerate focusing on three key elements. The first one is to strengthen our omnichannel category strategy, which will allow us to know what merchandise our customer is looking for and what is the right channel to serve them with the right price and the level of service they expect. For example, everyday items that our customers want to receive in a matter of hours will be available from our stores. More specialized items that do not require urgent delivery will move through our own distribution model or through our marketplace, depending on the extension of the catalog and the rotation of the items. With this strategy, we will capture various synergies and leverage of our stores and logistics network while improving the shopping experience. With this strategy, we will capture various synergies and leverage our stores and logistics network while improving the shopping experience. The second is to expand the assortment and accelerate the seller base on our marketplace. We will multiply the current offer 5x, leveraging both domestic and international products and strengthening the brand assortments we offer. To complement, we will build the foundations for the cross border model. The last element that will support the accelerated growth of our extended assortment is the pickup model. You have already heard us that we have stores ten minutes away from 85% of the population in the main cities, and this proximity to the customer is a very valuable advantage for our omnichannel strategy. We will try new things such as the ability to operate Ponte Gaudron Express stores as pickup points and leverage the technology developed at Walmart International, such as our customer service tools and mobile check-in, to offer a seamless service. The third element to achieve our ambition to be leaders in omnichannel is to continue investing heavily in technology, logistics and talent. We will continue to invest in technology that improves the shopping experience of our customers, both in stores and in our digital channels. In addition, we will continue to improve our internal processes and innovating solutions such as product scanning, transport assignment and route optimization, among others, that will allow us to simplify and speed up the way we serve our customers. We will also integrate the ecosystem that Tim mentioned earlier with our different platforms so that our customers can make use of all the services in all easy and seamless. Later, Blast and Viatris will tell you how we are connecting the verticals of our ecosystem through solutions like caching and bait. A great advantage that we have as a global company is that we can leverage and exchange the best practices from other more advanced markets in terms of technology such as The United States, China, India or Canada, which allow us to implement the best technology in less time. As Guy mentioned, in the coming years, we will significantly increase our investment in logistics to accelerate omnichannel growth. The redesign of the network is aligned with the category strategy that Ignacio talked about, and it is a key element to achieve our ambition. To give you an example of the potential we see today, moving a large item, for example, a lawnmower from the distribution center in Mexico City to Oaxaca that is more than 450 kilometers away cost us, on average, nine times less than doing so via a courier, and we can deliver it five days earlier. How will we achieve that? Leveraging our logistics network that visits and delivers over three and a half million boxes every day to our stores. We will ship e commerce orders to our own fleet at the lowest cost. Again, this is how we transfer the benefits of our actions to our customers. We have a great challenge before us, and it requires specific skills and a growth mindset. We are training our people to deal with this new challenge. In conclusion, I would like to leave you with the main takeaways. We have the ambition to lead in omnichannel. We will continue to strengthen on demand while accelerating extended assortment. We will invest in growth catalyst, technology, logistics, and talent that will lead us to fulfill this ambition. Thank you. Now I leave you with Blas Caravallo, who is going to introduce you to our financial solution ecosystem. Good morning. My name is Blas Caravallo. Thank you for joining us in this session. I would like to talk about my background. I've been working in the ecommerce industry in Mexico for fourteen years, and for the last eleven years, we focus on fintech, specifically in digital payments. It is an honor to be able to participate in building the Walmart of the coming years, where the financial solution ecosystem is priority and strategic. In 2019, we shared with you our ambition to connect digitally with our customers so that we can get to know them better and, by doing so, be able to serve them better. With that goal in mind, we launched Kashy as a minimum viable product. And over a year, we tested different features, such as in store merchandise payment or utility bill payments. Despite being a simple product, we learned a lot about what our customers are looking for and what they value in these type of products. Testing cash, it confirms our customers' need for low cost financial services and greater flexibility. In Mexico, only about 54,000,000 adults have access to a financial product, and the percentage of men is greater than women. We see a clear need in the industry and in our customers, and we believe our assets puts us in a unique position to create a leading financial ecosystem in Mexico. We have over 2,600 stores in the country, where an average of 5,000,000 customers visit us every day. We recently upgraded our nearly 28,000 points of sale. Now we have flexible technology that allow us to read QR codes and adapt much faster to our customers' needs. We have gained their trust. They know our brands that they have accompanied them throughout their lives. Based on the learnings from Kashy, in 2020, we focus on building the foundation that will allow us to escalate the product. We put together a team of experts with many years of experience in the development of digital payments, wallets and financial products in Mexico and other countries. We also took big steps in the implementation of technology. We hired a team of developers based at Walmart Labs in India. In addition, we built data analytics capabilities to better understand our users. We also started to combine Kashy with other verticals in the ecosystem. For example, today, our customers can top up bait using Kashy without having to go to the store. Each vertical plays a specific role in the ecosystem, and the combination of these verticals anchored on the omni business is what makes the Walmart ecosystem unique. Our role is to provide digital financial solutions to help Mexican families live better. In the next eighteen months, we will focus on building products that facilitate the financial inclusion of our customers. We have some launches for 2021 that will be very well received by our users. Number one, we want our customers to enjoy a completely contactless experience when visiting our stores, allowing them to pay through Cashi with their credit card or debit card, vouchers and even cash balance. Number two, we will also enable cashing as an online payment method on our e commerce platform so that customers who do not have a financial instrument can use it to pay online. This is going to be a great enabler for omnichannel sales. Number three, we're going to launch a disbursement model for business and suppliers through which will they be able to distribute resources directly to users via Cashi. Imagine that a supplier wants to run a promotional campaign or wants to offer a discount. Through Cashi, they will be able to do it in a direct and efficient way, and our customers will benefit from it. In order to add more features and value to a product, we will soon enable an open loop through a strategic partner with a leading financial institution. This way, our customer will have access to a bank account that will allow them, among other things, to send and receive money both in Mexico and abroad and to access consumer credit. I am very excited about the opportunity ahead of us. To finalize, I would like to highlight the main key takeaways. We have the ambition to become a leading financial solution ecosystem. Number two, our assets and capabilities position us uniquely to achieve so. Number three, we are building the foundation to move faster in the future. Morning to you all. I am Beatrice Nunez, chief of the growth and IT office. As Guillain Blas already mentioned, our ambition is to create a customer centric ecosystem attached to our core business driving end to end solutions and using agility as our way of working. We are eager about the progress we have reached so far, and we are confident that this transformation will help Walmart drive its long term aspiration and continue to improve the lives of Mexican families. Particularly, in the last year, we decided to accelerate the creation of new sources of revenue, which were prioritized and will be delivered in waves. The Walmart ecosystem is a network of solution that focus on what our customer needs, which will be driven by our strength, our core business, enabling a unique advantage to solve our customers' pain points and improve their shopping experience. Today, I am proud to talk about two verticals of our system, advertising and connectivity, which complement each other and leverage on the vertical of financial services, which Blaise already talked about. In Walmart, we have the scale of our physical stores and the purchasing data of our customers. No one knows Mexican customers better than we do. So we have defined a mission that will help us drive our corporate ambition, become the leading media platform in Mexico by helping brands connect with our customers more often and more meaningfully. During 2020, we have managed to integrate and develop an offer focused on two branches. Number one, our reach. By adding up our traffic in physical stores and digital channels, we become a national mass media. Number two, our knowledge about the customer. Knowing what the customer buys gives us a unique advantage over any other player. With this approach, we achieve an omnichannel advertising annual revenue growth close to double digits, and we work with more than 200 brands who believed and invested in our media. We would like to share with you some of the examples we built together with our advertisers and to give you an idea of the great potential Walmart has in becoming the leading communication platform in Mexico. The first example I will I want to share with you is when we understood the change in behavior and habits of our customers. We addressed that our customers were cooking more at home because of COVID-nineteen contingency. We launched an omnichannel and innovative multi brand and multi format campaign. The objective we defined with our advertiser was to introduce their products with our customers in an easy and fun way. When the customers arrive at Supercenter or or Suprama, first, we switch in their ears and sides with audio and screens so they crave for a new recipe. Next, when they walk around the aisles, we send a text message to their phone or email with the tips for the recipe. In addition, the ingredients had a QR code that when scanned, directed them to our blogs, taste and style, where they could find more recipes. And with a single click, they could find all the ingredients ready in their walmart.com or supanama.com cards. The resulting sales for these products were spectacular. In Supanama, they grew 196 and in Supercenter, 95% during the period of implementation. We also invited our customers to our live stream and virtual unboxing during toy season, driven by our data understanding to offer them the perfect gifts for the per for them and their families. We even took them virtually to the Alejandro Fernandez concert sponsored by the brands. We are very motivated with the 2020 results, and we will now tell you about the plans of the future, which are fully focused on the needs of the advertisers that seek to achieve high double digit revenue growth in advertising, becoming their first choice in their marketing strategies. Some of the key actions of Walmart Connect for 2021 will be: number one, to expand digital capabilities, including sponsored searches, digital content with tailored offers at the right time, digital segmentation and automation platform capacities. At the same time, we will innovate in store advertising spaces to improve the experience of our customers. Now I am going to talk about our other vertical, connectivity. I have the opportunity to share the progress of Page, our multi format mobile at home Internet connectivity service. In Mexico, connectivity represents a basic need for Mexican spending and achieves annual revenue growth consistently. Having this in mind, we address that the strength of our core business enables clear advantage in terms of sales and distribution capabilities. So we have a strong opportunity to become the leading mobile virtual operator in Mexico and be a digital inclusion accelerator in the country. Our mission, aligned with our business principle, is deliver the best connectivity at the best price to help our customers live better. Given the current situation and the new normality during June and July 2020, they provided thirty days of free and unlimited connectivity in order to support the community, which allowed us to be one of the main virtual operators in terms of new customers' acquisition during that period of time. This new business requires a better understanding of our customer and an agile management. Today, we have reached over 300,000 users, and we offer a beta in more than 2,500 stores and clubs in our four formats. This exponential growth was driven by focusing all time on the customer, mainly on the three key aspects that we included in our value proposition. Number one, low prices. Beta is our best prepaid offer in the country with unlimited connectivity service, data, voice, and SMS for only 50 pesos per week or 200 pesos per month, including nationwide and international coverage. Number two, great coverage at maximum speed. We provide a 4.5 LTE experience and even reach small cities that did not have coverage. Number three, your purchases connect you. For every purchase made in our stores, your our customer will be rewarded through our app, MyByte or me MeByte, with additional megabytes to stay always connected. Customers with limited resources have the desire and need to be connected, and we know the limitation is the price of the connectivity. True to our purpose, save people money and help them be better, we are offering connectivity at a price the customer can afford and benefits from their purchases at our stores. By enabling our customers' connectivity, we are opening a universe of possibilities to add them to Walmart's omnichannel ecosystem and solve their friction points. Paid focus for 2021 is the following: Accelerate new users' acquisition and reach triple digit growth Build a digital connection ecosystem by implementing new sources of revenue by enabling handsets, home Internet, value added services, and data monetization. And it allow us to provide access to connectivity bundles such as handsets, connectivity, service, and credit, or electronic devices attached to home Internet and entertainment services will make Bait a unique offer. We are very excited about Bait. Our customers recognize this effort. We are ready to roll it out and to continue gaining our customers' loyalty. Finally, I would like to highlight the following points. Number one, we have unique advertising capability to connect advertisers with our customers more frequently and meaningfully. Two, connectivity opens a universe of possibilities to bring our customers into Walmart's omnichannel ecosystem and to resolve their pain point. And number three, this is just the beginning. We will be exploring new revenue streams and opportunities in our ecosystem aligned with our strategy. It was a great pleasure to share our results with you, but even more important, how we are going to build the future and how we're going to improve the lives of Mexican families. Thank you very much. Good morning. I am Flavio Cotini, CEO of Walmart Central America. Today, I will talk to you about our operation in Central America, and I would like to divide my presentation into two chapters. First, I will talk about the results we reached within the challenging context of last year. Second, I will share with you how we are preparing to serve our customers, drive sales growth, expand faster and achieve greater cost and capital efficiencies, all these supported by the simplification of our company and our mission. We save people money and help them live better. The pandemic has been like an endurance race, a marathon, in which we have to be resilient and capable of capitalizing on opportunities in the region. In this long distance race, we focus on building trust with our customers, associates, suppliers and communities in which we operate. In order to achieve so, we implemented several measures to take care of our customers and associates. For example, before having the first cases of COVID-nineteen in Central America, we leveraged lessons learned from Mexico and our operations in other markets that were already being affected and implemented strict prevention protocols to look after our customers and associates, which were recognized as best practices in the sector. We also used our scale to help affected communities by donating three forty three tons of water and food. The trust we managed to build as well as our growth presence in the region were key to navigate this challenging environment and to deliver our results. Within this in mind, we started from a fundamental fact. With significantly affected purchasing power, our customers are even more focused on buying essential products. We understood the needs of our customers, and as a result, we adjusted our commercial offer with focus on essential products for all categories as well as solutions to help our customers adapt to the pandemic. For example, products that enable home office or that allow them to exercise. Always with our customers at the center of our decisions, we adjusted our commercial activities to make them last longer and allow our customers to benefit the most from each one of them while promoting social distancing protocols. Likewise, it became essential to accelerate productivity and efficiency initiatives to continue investing in our consumers' value proposition. One of them was implementation of over 600 self scan stations in more than 160 stores, where up to 20% of the transactions are going through, improving productivity and customer experience and also promoting a contactless environment, which is much safer. On the other hand, we continued to work with our suppliers to increase the number of retail ready packaging products, generating more productivity at the point of sale and reducing product handling. In the middle of this marathon, the pandemic has symbolized we never lost sight of the fact that many of our customers, due to health restrictions, needed other options to do their shopping. We turned the challenge into an opportunity and enabled on demand and pickup to continue providing essential service now online. Our omnichannel proposal has been well received. Just to give you an idea of the potential, e commerce sales already represent 1% of total sales. And in some stores, the penetration has reached 20% of the sales. Amid economic uncertainty, we continue to invest in the region and took our everyday low prices proposal to more families in Central America, opening 19 new stores under strict sanitary protocols. As a result of all these initiatives, our proposal and our customers' loyalty, we managed to increase our market share in almost all the countries. At the regional level, we grew our market share by more than 200 basis points. Despite the incremental costs associated with the pandemic, we continued our efforts to simplify and improve productivity and efficiency of our operation, promoting everyday low cost that allowed us to leverage expenses by 10 basis points versus last year. The efficiency generated in the operation has allowed us to increase our price gap, serve our customers and keep improving our profitability year over year. Sustainable expense leverage enable an EBITDA margin increase of two twenty basis points in five years. So far, we have talked about our actions and results of 2020. Now I would like to talk to you about our plans going forward. Our priority remains consistent, keep our customers and associates at the center of all our decisions. Therefore, our strategy going forward will focus on two pillars. The first will be to continue to grow with the bodega and discount formats through our everyday low price value proposition and new stores. We will continue to enhance our fresh offering, increase our private brands penetration and improve our price perception. The second pillar will be to continue simplifying our business to offer a simple and fast shopping experience to our customers, which is also simpler to operate for our associates, translating into cost reduction. Thanks for joining us today. And before I leave you with Pilar to start our Q and A session, I would like to close today's presentation with these takeaways. Our customers and associates are our priority, and we will keep them at the center of all our decisions. Going forward, we will continue to focus in the bodega and discount formats, and we will continue to simplify our business based on everyday low cost proposal to keep serving our customers through our value proposition and enabling an even more profitable growth. Now let's go back to Pilar. Thank you. On our platform, our own platform, of being part of the third party platforms. And the question is, what are the advantages that we see in doing so, long term advantages, or why we have this strategic decision of stop using third party apps? Ignacio? Yes. I think that important point here is key. We need to maintain connection with our customers. And as well, just working with these third party apps, we lost that connection. And what we want is to build a business for the long run. And for this, it is very important to get to know and to know what our customers are doing. On the other hand, the omni business is the center of our strategy. This allowed us just to gain frequency. We are leaders there. And while we don't have any interest in sharing this with other platforms or other services. And we have an important aspect. We we are part of this end to end process from trading products, from the stores, and then the distribution. With this, we're gonna be able to have more efficiencies to have as well more profitability, and this may be translated to our to our customers. Those benefits can be translated to our customers when third party apps, they generate any overload or any overcharge of 30% or even charging more for the delivery because that way they have to look for profitability. So for us, I think that it's even more important to be the owners of the end to end process and to be able to translate this lower price to customers. The next question is asked by Bella Clark from Conghest, and it's about our stores. It's in English. So it says Do you see potential for downsizing either store price or number of stores? How flexible are you in downsizing your store base? Thank you very much, and thank you very much for these questions. So part of leading this sales of Square Meter, it's about a constant revision of the productivity of our footprint. So in this aspect, the first thing that I would like to say is that twenty fifteen from this moment, we've only reviewed five downsizing in some stores that were opened a long time ago. And, yes, they were a little bit long, but only that was done in five stores. I think that the pending adjustments are minor. What is going to happen, and in fact, it's happening right now in an accelerated pace, is not exactly about the size, but how these spaces are managed within the stores from all of the omnichannel business. There is a lot of things going on regarding new stores that now are born omnichannel with all of these prototype and the conversion of the spaces within the stores. A lot of things that customers see and some other things that happen at the background and is related to better efficient use of the space and the allocation of the space to all of these omnichannel capacity regarding pickup, kiosk, and that is order processing spaces that will they happened in all of these stores. Now in relation to the spaces to grow, we still see as in Mexico and in Central America that there are some spaces to grow and logistic expansion as well open some spaces to grow and warmer spreads as well opens market for us in such a way that in the terms of the space and as well in the sizing of the stores, I would say that we don't see any concerns. Right. Thank you very much, Gaston. The next question comes from Ravi Jain from HSBC. And it's on investment, he says. I think that's a question for Milton. Thank you very much for this question. So we've been investing significantly in the last years in our omnichannel capabilities, and we were able to do this maintaining our margin through a lot of operational discipline and different productivity actions while we continue growing our business. And that's why we would like to continue for the next years in an unstoppable way with implementation of productivity actions and as well improving our processes and with optimization of technology to digitalize and to automate auto stores, clubs and DCs. Additionally, as it was mentioned by Guy, we have the benefit of being part of a global company and to have access to best practices in technology that countries with highest prices have developed, we're going to bring those technology practices according to the need to maintain our operational costs low. In the long term, our strategy of investment is going to continue promoting sales and position our company for the future success that would allow us to maintain a leading growth in the market. Thank you very much. The next question is from Alan Alanis from Santander, and he asks, the reach of your strategy is huge and it's outstanding. If I understood correctly, everything is addressed to the product. So my question is, how do you think in any strategic way on how to offer services, and what would be the reach of the services that you're gonna be offering in the future? Alan, thank you very much for your question. We see these very carefully, all of the opportunities that we have in services and product. And each opportunity, they are called as vertical. That's how we create our strategy. And we have huge possibilities in products and in services, but we have to establish priorities. We can now do everything. And, of course, if we have in order to have a strategy, I to define what I'm gonna be able to do, what I'm not gonna be able to do, and I'm gonna be doing better. So first of all, we take into consideration the first pain points of our customers. And the thing that we had is the skills to offer an efficient and a competitive solution in this pain point. Additionally, we started looking at the connection of one vertical to the other vertical or trying as well just to have these lanes or connected verticals as cash and bank. They are connected. So we have a list of priorities that we're gonna be implementing. Today, we decided to establish what we are doing about cash and body, but there are so many other possibilities. And as well, we are benefited from some other business units of Walmart, and in particular, Walmart US, and as well in some other places that they are doing some other things. And we are learning and will be benefited from their learnings and their technology. There are so many things to come. Unfortunately, today, I will not be able to tell you these other opportunities, and it's gonna be about products and services. Perfect. Thank you very much, Guy. We have another one from HSBC about wallet, and it says To partner with a bank or banks to offer financial products in 2021. And what is the plan to extend the use of cash to stores other than Walmart? Can you help us answering this question, please? Thank you very much, Ravi, for your question. And there are several functionalities in smart closed loop that we are thinking about, and we would like to enable and would add a lot of value to our customers. For example, we're gonna enable CashIt just to make an online payment method in our place. And besides all of these use cases, we want to provide some other features and functionality that are relevant for our customers with an open loop model. We are doing this, and we are launching this for the midterm. And as well to add to this functionality and value to the product, we are working in an strategic alliance with a financial institution that, well, we are gonna be telling you this once we have all of these defined. Thank you very much, Lars. Next question is about Bite. We have a couple of questions. For example, Guadalupe from Credit Suisse asks, are you are partnered with a telephony company to provide Byte? Anue asks, if Byte has service in The US and it's the case, what would be the network that it's using? Thank you very much, Guadalupe Anue. Yes. We partner with Altan Redes that operates a shared network. They provide the infrastructure network and some other businesses. Our partner has the experience of the technology in this aspect. As in roaming, the package that we offer in Mexico includes the roaming for The US and Canada, and we operate with the agreements that our partners have to provide these services. Perfect. Thank you very much, Betty. And we have another question from HSBC about Walmart Pass. Pricing, expected date of launch, and what are benefits will the subscription program have in addition to food delivery? Okay. I wanna tell you a little bit more about this. Walmart Pass is a subscription program through which customers, they may have these unlimited deliveries for free or home delivery for free, just paying an annual payment or a monthly payment. Now as per the price in this moment, we're trying with different sizes of baskets and different prices to define the best option for our customers when it's launching. And we're gonna inform about these prices once we finish these tests that we are doing with friends and family. But we are finishing those values. Now as per the catalog, right now, may be able to receive all of the products of groceries and general merchandises that are available in the on demand from their houses from Suprama or Walmart or in the midterm Walmart Express. After that, we're gonna be adding some other formats with Bottega and Sam's, but in this moment, they are not included. And, initially, we're gonna enable these for on demand, and the extended assortment is gonna be done in the next interaction that is gonna be planned for the future. And lastly, regarding benefits, initially, we start with a subscription for these free delivery. And as we launch this program, we're gonna be adding even more benefits. But up to this moment, everything is gonna be planned for a second stage. Thank you very much. Now we continue with this omnichannel business. We have a question from Bank of America. What do you think about the experience, the user experience in the store as we have an increase in on demand ecommerce? Or you wanna continue leveraging the stores for deliveries, or we have a dark stores role in high density areas? I think that we have two questions in one. The experience of customers at the stores, what we want to do with omnichannel business is to have a great experience. It doesn't matter if they do that in the store or in our apps. We want our customers to have the best experience if they decide to go to the pickup point or if they decide to go to the store or receive that at their homes. And that's what we want to do, to build the best experience for them. In Mexico, we have more than 2,600 stores. So up to this moment, we want to leverage from those stores to build all of the distribution network. Right now, we have more than 587 stores offering home delivery. This year, we're gonna increase up to 200 stores more to reach a little bit more of 800 stores. I think that it's it's very important. Now with this, I don't want to say that we're not thinking about the possibility to build dark stores in the future, but we don't think that it's a necessity because right now, these stores, they are distributed throughout the country. So we're gonna be ten minutes away, 85% of the population in the major cities. What we are doing is in those stores, in these larger stores, we are building a house system where they are going to provide service to a higher area. And from larger stores, we are gonna be servicing some areas where we have, smaller stores, but it's a little bit more complicated to operate due to the volume and the size that we have. And I think that it's now even clearer in the short term. We don't think that we're gonna be opening dark stores unless it's necessary in some areas. Thank you very much. We have another question from Alvaro Garcia from Beta Giroir Doyal. He says the question is for Guy, and it's about his perspective of the long term growth or the growth algorithm as it is said in English. It seems that it was yesterday when I was in 2016 when you presented the three three one. So what's your growth for the future? Hello, Alvaro. Thank you very much for your question. I agree with this. It seems that it was yesterday, but as well we've been working very hard during these last years for this delivery. What has happened in the last years is that we have an acceleration of the future that we think that it was going to happen, in particular since last year when we had an acceleration. If we think about our three three one strategy and the evolution, During six years, we started with brick and mortar. And for six years, we've been growing in those stores more than untapped. Six years in a row, quarter by quarter, we've been growing more. And we believe that we're gonna be able with all the things that we invest in our stores, the investment in our assortment, in prices with these differentiating prices. We think that we're gonna be able to continue growing above the market in the future. And, well, it it partially compensates the success that the growth economy as a whole has been smaller than the growth that we consider with these strategies three three one. If we migrate to new stores, we've been able to achieve we always say that it was about growth and then to have this indication of the market that we are gonna have space to grow with new stores and to continue investing with this. And that's what happened. But the new stores, they are different than the previous stores. They are more omnichannel, modern with just to be adapted to what customers require. And this is going to continue today. And moving forward, we need to make decisions. And we made a decision that continue investing to the existing stores and continue adapting it in regards of omnichannel. It was more relevant to accelerate even more the creation of new stores. We're gonna continue investing in new stores when I don't think that we will now continue growing at 3% with new stores. And this is more that it's gonna be compensated with the best performance that we've had been having in comps and as well what we are being able to achieve in omnichannel and e commerce. So we are gonna have a difference there, and we wanna continue growing. We have a huge opportunity in Mexico in informal market and to grow there. And that's why our strategy is the growth priority that we have in new stores is gonna be in bodega. In the bodega format that is gonna continue growing, they need new stores just to continue gaining market share in the informal market. So we're gonna continue investing there. On the other hand, in the previous strategy, we didn't have ecosystems. And ecosystem has played an important role and not only in growth, but as well in profit. And it's gonna compensate with any mix that we have with this just to move to ecommerce. So I think that the strategy, it's an evolution of a previous strategy, and it's a strategy that in order to have a strong omnichannel business, we need to have a strong brick and mortar business. If we don't have a strong brick and mortar business, we're not gonna have a strong omnichannel business. And in order to have a strong ecosystem business, we need to have a strong omnichannel business because the ecosystem because the ecosystem is centric in our omnichannel business. It's gonna be using all of the benefits that we're gonna be having on omnichannel and the number of customers and the relationship of trust that our customers have with our brands. So this is a new opportunity, and it's going to bring this possibility of having profits to compensate because, of course, we know that this omnichannel growth costs money. And we are very happy. We are very passionate of doing what we have in our strategy, and we are sure that this is going to work and it's going to provide positive results for our business. Perfect. Thank you very much, Guy. Okay. So we have another question about Central America for Flavio that he is connected from Costa Rica. He's from Barclays. And the question is, could you provide more detail about the initiatives for Central America to recover the level of sales? Good morning. Thank you very much for this question. As I said before, we're going to maintain here, we're to maintain customers at the center of our decisions. We're going to continue growing it with the Bottega and discount format, promoting our everyday low price proposal, and we're gonna continue strengthening the fresh offering and growing as well with our private brands and to continue improving the perception of prices. This year, as I show during the presentation, we gained 200 basis points in the total regional market. As the different countries, they just stopped with these restrictions of the COVID and the economy to start accelerating, and in particular, key sector for the region as tourism unemployment and to have a reactivation of employment employment and to strengthen the purchasing power of consumers, I think that we are gonna experience a faster recovery. Thank you very much, Villar. Thank you very much, Flavio. So now we have one regarding e commerce from Rodrigo Echegaray from Scotiabank. Rodrigo asked, what is the percentage variance among performance for Walmart and Suprama, approximately 80% of the orders are on demand for the home delivery service, and 20% is click and collect, our people using our pickup system for Bodega Aurena. As we land this the service, met last year, this is like, 80% of the orders are picking up in the picking up locations, and only 20% is delivery. So the format is changing and opening. For Sam's, it's a little bit fifty fifty with the delivery versus pickup. Now regarding crowdsourcing, right now, we have the model in 28 stores, between twenty eight and thirty stores of new stores. And the idea is to expand it to over 150 stores with on 2021, and we are trying three different models as of as picking delivery and one end to end, which is picking plus delivery, which is the crowdsourcing is going to be doing the end to end process. So this is what we still on looking on what is the best way to operate, and maybe we are operating the three models at the same time, depending on the stores. So what crowdsourcing allow us is we offer different types of services. For For instance, deliveries in less than ninety minutes, and we are currently not offering, but it allow us to be more efficient. But we are very, very happy with everything that we have done so far, and that's why we will start doing the rollout in those stores that make sense. Thank you. Now we have a question regarding Bodega by Tiendo. Thank you, Pilan. Thank you very much. During 2020, in the format of Bodega, one of the big priorities was to reinforce the Bodega value model, which is the proposal of the business. So this has brought a lot of good benefits, especially in the fourth 4Q because the format grew faster than the first two quarters. So this year is also increasing a lot. So we have had four good quarters product from the different investments, the value proposal. And so we were able to have a considerable leap there. Now those boxes that we are focusing on is three of them. The first one has to do with the competition, the price perception and the price gap. That's where we are still on winding up this gap before our consumers and these improved considerably during 2020. Also, we have the prize campaign of the Mimoraya. It is the number one campaign in Mexico. And then also regarding the competitiveness, it has to do with our own brands, which are growing versus the commercial brands, and this gives us the perception of economy and this is very valuable by our consumers. Then we have the omnichannel, where we are developing omnichannel solutions for all our customers aiming to provide a more complete purchasing experience, frictionless and access with a wider assortment at the lowest prices. So then the strategy, as you know, at kiosk has been well received by our customers, and we'll continue on expanding our assortment. And we will also open some Bodega Express stores to be used as pickup. Then the on demand that we didn't have at the beginning of the pandemic, we currently have 100 stores that are that have these service. In 2021, we will go from 100 to two seventy additional stores so we can serve the peaking services. Then the third focus that in Bodega has to do with expense control. You know these flywheel. These expense controllers for a business like the one with Bodega is essential. And transformation has been also a key element that has allowed us to reinvest our savings in a better competitive position. Digital tools such as the fresh apps, as we mentioned before, with transformational products of the process. All these transformation help us and is going to allow us to have significant savings in the future to continue on investing in this format. Thank you. Thank you, Christian. We have other regarding ecosystem. We have been asked if we can provide a little bit more detail on how we are connecting that with cashing and how this is going to work to digitalize our customer. So Guy is going to start, and then I will pass the floor. So they are making me work this time. So when we put together our strategy, the bottom of this strategy is to know our consumer in more detail, understand what are the consumers' pain points and to fix them. So we made the decision to understand what is actually happening with this customer and how can they evolve for the omnichannel business. So Enrique, for instance, he deals with reinforcing the pricing strategy and to understand what is what we can help our customer with. So we have a lot of information, but we haven't used it as we could. So we start with the business of understanding our business better. And we are investing in data, which is another vertical that we did not get into too much detail, but it is very valuable to understand the behavior of our customer. We also created the tribes, and our suppliers mirror these tribes in their structure. And we were capable to receive the information that our suppliers have from the from our customers and to understand them better. So we knew that that, e commerce grew not as much as it did during the pandemic. So the customer didn't have Internet, for instance. The customer had smartphones, but they were not connected. They didn't have any payment methods. So we were saying, okay, if we want to serve our customer better and we can and we are able to address these two items, we can create BITE and BITE and Cache. So verticals have to speak to each other very interestingly. So through the transformation, we were we got to know our customer better in the physical stores through Kashy with Bite or Bait. It provides a lot of information regarding the behavior of the consumer. With Bait, it's not only that we are addressing a pain point from the consumer to avoid using e commerce, but it's also we're providing him with some benefits. He didn't do that before, but now we will also get some get to know them better. So we have a data structure of the customer, and we know them better because we know their, telephone and Internet data. And with Kashy, also, we get to know their data better. We also sorted out the issue of not having a payment method, but while knowing them better and to understand what is what they buy in the physical stores, what is what they buy in ecommerce, how they pay for these, where or what do they use to pay for these things, and with, and also telephoning. So this is the flywheel that we used before, this ecosystems and having the flywheel. With this, we will be able to find out about more pain points and to create a trust for the customer to trust that we understand what they're living for and for them to live better. Thank you, Guillain Betti. I believe we still have time for another question. We have Irma from Goldman Sachs. Let's address the first one. We are always thinking about everything that we build using for the marketplace suppliers as well. But the sequence, the logic sequence is first being used by us, and then once we feel comfortable how it's working, that's when we start opening it. One example of this are the pickup locations. The pickup locations is we get items from our distribution centers to be delivered to our customers, and that is also enabled for the suppliers at Marketplace. If the customer decides to pick it up at a store and this is coming from Marketplace, the supplier sends it directly to the store, and we deliver it to the supplier, to the with the seller. With the logistics that we will put in place to send the merchandise more in a more economic fashion, as presented before, this is the same flow that will be enabled for the marketplace sellers at the right time. And our fulfillment services as well, at one point, we will be starting offering fulfillment by Walmart. This is planned to be developed in the following years. Now regarding profitability, this is a balance. We are in a growing momentum, especially growing our extended assortment, but we are also trying to balance the margins in order to do these the best way as possible. So we do have a path to profitability with a lot of actions that is helping us to become more efficient. We mentioned before using our own logistic networks, starting rolling out different omnichannel distribution centers using our stores. All these allow us to operate in a more efficient fashion, and it continues to keep on accelerating while we care of the bottom line of our store. So we are reaching the final part of our event. So thank you very much for joining us. Yi, thank you very much for being interested in our company and the presence that we have in such a hard time because of all these technology, issues that we still have. We're trying to do it the best way as possible. Take care of you and your families in these difficult times. So thank you. Thank you very much.

• Earnings release
• Slides