Good morning. Welcome to Cencosud 3rd Quarter 2025 earnings conference call. Please note that all attendees are currently in listen-only mode. We will open the floor for questions after the presentation. Discussing 3rd Quarter 2025 results today will be Rodrigo Larraín, Chief Executive Officer; Andrés Neely, Chief Financial Officer; and Irina Karamanos, Investor Relations Director. Statements made today by the company may include forward-looking statements. These statements are subject to risk and uncertainties. They may be influenced by future events, including changes in macroeconomic conditions, political developments, legislation, and operational factors that may include Cencosud's future performance. The company undertakes no obligation to publicly update or revise these statements, except as required by law. Please note that no part of this call may be recorded in whole or in part without the company's prior consent.
The earnings presentation accompanying this call, which includes additional information, is available on the company's website in the Investor Relations section. Please note that this call is being recorded. With that, I will now leave you with our CEO, Rodrigo Larraín. Rodrigo, please go ahead.
Thank you, Andrés. Good morning, everyone, and thank you for joining us today. We began 2025 by launching a new strategic plan that marks an important transformation and a decisive investment in Cencosud's future. Our goal is to become a simpler, more agile, and more integrated organization powered by technology, data, and artificial intelligence to drive efficiency, innovation, and differentiation across our businesses. Building on our 60-year legacy, this transformation strengthens our ecosystem as a platform designed to serve our customers extraordinarily at every moment. During the quarter, we advanced the implementation of initiatives to simplify our structures, streamline processes, and strengthen our competitive capabilities. These actions involved extraordinary expenses that weighed on the quarter's results, but they are fundamental to building a more efficient and profitable company for the long run.
Among the highlights in the United States, we completed the acquisition of the remaining 33% of The Fresh Market, reaching full ownership and full alignment with our long-term plan. The transaction was funded through a local bond issuance in Chile under historically competitive conditions, demonstrating our financial discipline and long-term vision. The Fresh Market team continues to consolidate the performance of the 12 new stores opened in the last 12 months, focusing on operational efficiencies and format optimization, while strengthening its positioning in the market. We are proud of The Fresh Market team for being recognized as the top grocery store across all categories by USA Today's 10 Best Readers' Choice Awards. Colombia delivered its strongest growth since 2022, driven by the implementation of a renewed business plan, format differentiation, and store reopenings such as Jumbo Limonar in Cali.
Brazil, undergoing a strategic transformation with format and store adjustments, hosted its first positive same-store sales in more than a year, reflecting sharper execution and portfolio optimization following the divestment of Breda stores in Minas Gerais. In Chile and Argentina, we advanced with the execution of the productivity plan, which generated temporary expenses, while continuing to strengthen private label, retail media, and e-commerce. Peru maintains solid growth. We're also accelerating organic expansion through new store openings and projects in our shopping centers division, which continues with strong performance. Looking ahead, we see great opportunities as we execute our transformation plan. We are confident that the steps we're taking today will enable Cencosud to lead change, strengthen profitability, and continue delivering exceptional experiences to our customers while creating long-lasting value to all our shareholders.
With that, let me hand it over to our CFO, Andrés Neely, to walk through the quarter's performance numbers.
Thanks, Rodrigo. Good morning, everyone. Let me start by highlighting some of the key events of the quarter. First, as we already mentioned, we completed the acquisition of the remaining 33% of The Fresh Market. To finance this transaction, we successfully issued $7.5 million in bonds in Chile, which were met with strong demand and historically low spreads, a clear reflection of investors' confidence in our credit quality. In Brazil, we closed the Breda transaction, completing the transfer of the remaining stores in Minas Gerais and further optimizing our portfolio and concentrating our presence in key regions of Brazil. This quarter, we also advanced in the implementation of the productivity plan, which had extraordinary expenses on the quarter's results of CLP 45 billion.
We also continue to expand our footprint during the quarter, adding nearly 4,000 sq m of new sales area, including two new Santa Isabel stores in Chile, a Prezunic in Rio de Janeiro, and the reopening of Jumbo Cali under a new premium format. As part of our retail ecosystem development, we launched new digital capabilities with a new Jumbo App in Colombia and an AI-powered search engine in Jumbo, Chile, while Cencosud Media expanded its footprint with new in-store screens added across Chile and Colombia. Our private label sales reached record penetration level of 17.9%, with launches of new products both in food and non-food categories. Finally, in Chile, we launched the first Expo La Cava Jumbo, inspired by Expo Vino in Peru and implemented also in Argentina, highlighting our premium assortment and fostering customer engagement. Moving on to the financial results of the quarter.
Despite the challenging retail environment, we continue to grow across markets, with sales increasing above inflation in four out of six countries. Consolidated revenues rose 5.1% or 6.1%, excluding the inflation adjustment in Argentina, with growth in Chile, Argentina, the U.S., Peru, and Colombia. In Brazil, sales declined around 10%, mainly reflecting the sale of the 54 Breda stores. Online sales grew nearly 12%, with four out of six countries reporting double-digit growth year-over-year. Adjusted EBITDA reached CLP 288 billion for the quarter, excluding the inflation adjustment in Argentina, representing a 15.6% decrease year-over-year.
The decline mainly reflects the temporary effect of the extraordinary expenses associated with the implementation of the productivity plan, which had almost CLP 45 billion effect on adjusted EBITDA, as well as higher general expenses in Chile, margin contraction in Argentina due to lower inflation compared to last year, and the integration of Macro. Excluding the extraordinary expenses, adjusted EBITDA decreased 2.5%, with adjusted EBITDA margin of 8.2%, excluding hyperinflation adjustments. The margins improved across our other markets, excluding Chile and Argentina, remaining in the double digits in Peru, high single digit in the U.S. and Brazil, and with all businesses in Colombia showing improved profitability.
Moving to the next slide, we issued, despite the results of this quarter, our accumulated distributable income has increased over 41% year-over-year, driven by lower impact of the inflation adjustment in Argentina, which was partially offset by the increase in general expenses and taxes. During the quarter, we issued local bonds in Chile, replacing the put option in our short-term liabilities with new long-term debt. This strengthened our amortization calendar, with the next maturity now scheduled to 2027. We had a slight increase in our net leverage, reaching 3.5 x. Excluding the one-off of the productivity plan, net leverage is 3.4x , while our cash position stood at $670 million at the end of the quarter. Most of our debt is US dollar denominated and hedged through currency swaps.
Considering the bond issuance during the quarter, along with our U.S. assets and cash flows, our net U.S. dollar exposure decreased to 5.8% from 14.7% as of June 2025. With that, I'll hand it to Irina Karamanos to discuss country performance and the progress of our strategic priorities.
Thank you, Andrés. Good morning, everyone, and welcome to the call. Let's look at our quarterly results by country. Starting with Chile, revenue increased 2.6% year-over-year, with all divisions contributing to growth. The main drivers were strong online sales in supermarkets, which grew over 10%, and solid performance in the department stores, where same-store sales increased over 7% despite a shorter winter season. E-commerce overall rose 7.8%, reflecting continued progress in our omnichannel strategy and consistent with broader market trends. Adjusted EBITDA declined 23.7%, mainly due to expenses related to the productivity plan, along with higher general and labor expenses. Meanwhile, our shopping center divisions expanded margins by 104 basis points, supported by solid brand income. Excluding the effect of this quarter's extraordinary expenses, which on the country level amounted to CLP 21.7 billion, adjusted EBITDA in Chile declined 13.1%, with adjusted EBITDA margin of 10.1%.
Moving to Argentina, revenue increased 57% in local currency and more than 50% in Chilean pesos, driven by a strong performance of Jumbo and integration of Macro stores, as well as an increase of the private label sales, resulting in 140 basis points market share gain in supermarket market. Private label continued to gain traction, with penetration up 354 basis points year-over-year. The decline in adjusted EBITDA reflects gross margin compression and general expenses growing above inflation. In addition, expenses related to the productivity plan, which totaled CLP 20 billion at the country level, also contributed to the decrease in adjusted EBITDA. Excluding these expenses, adjusted EBITDA decreased 11.4%, with adjusted EBITDA margin of 5.2%.
In the United States, The Fresh Market revenue grew 5.1% in US dollar and more than 8% in CLP, supported by the opening of 12 new stores over the past 12 months. The business achieved double-digit online sales growth for the second consecutive year, and since Cencosud's acquisition in the third quarter of 2022, online sales have increased 76%. Adjusted EBITDA increased 6.6% in US dollars and 9.5% in CLP, with a margin expansion to 7.5%. I will repeat it again, we are very proud for The Fresh Market's recognition as a top grocery store across all categories in the USA Today 10 Best Readers' Choice 2025.
Moving into Brazil, in Brazil, revenues declined 10.7% in local currency and 6.3% in CLP, mainly due to the sales of 54 Breda stores in Minas Gerais and a weaker food retail environment across the country. Same-store sales returned to positive territory during the quarter, growing 0.4% and showing sequential improvement and also signaling a gradual recovery in comparable store performance. Adjusted EBITDA increased 37% in CLP, reflecting the income from the sale of the remaining 22 Breda stores during this quarter. In Peru, we delivered strong revenue and margin growth, supported by solid performance across divisions. Revenues increased 2.1% in local currency and almost 12% in CLP year-over-year, driven by same-store sales growth of 4.7% in cash and carry segment, supported by strong B2B sales, and by almost 28% year-over-year increase in online sales, reaching a penetration of 7.5%.
Adjusted EBITDA rose 8.4% in local currency and almost 19% in CLP, achieving an adjusted EBITDA margin of 12%. This is a record level for a third quarter. This performance was mainly explained by year-over-year margin expansions in the supermarket and financial services divisions, partially offset by high energy and admin-related expenses in the shopping center division, as well as marketing expenses ahead of phase two opening at Cenco La Molina. In Colombia, we delivered both top-line and profitability growth across all business units. Revenues increased 8.5% in local currency and almost 15% in CLP year-over-year. All business units posted year-over-year sales growth, supported by same-store sales increases of 6% in supermarkets and 23% in home improvement, along with online sales growth of almost 13%.
Adjusted EBITDA improved versus the same quarter last year, with an EBITDA margin expansion of 148 basis points, driven by high profitability in supermarkets, shopping centers, and home improvement, partially offset by expenses related to the productivity plan implemented during the quarter, which at the country level amounted to CLP 3.1 billion. Excluding these expenses, adjusted EBITDA margin was 2.7%. Moving to the advances in our strategic pillars, I will start with private label performance across the region. Private label sales reached record penetration of almost 18% this quarter, up 118 basis points year-over-year, with total sales of $681 million during the third quarter this year. The strong growth was supported by innovation and brand development.
We launched more than 20 new products under Cuisine & Co's new American Dream line, and we're proud that Cuisine & Co was recognized as the top brand in the Total Brands 2025 study in Chile. In the non-food category, Robust line is gaining momentum with 12 new products added during this quarter, which will further strengthen the value proposition of home improvement stores. Moving to the next slide, during the quarter, we also continue to expand our physical footprint, adding nearly 4,000 sq m of new retail space for three store openings, mainly in Chile and Brazil. In real estate, we also added 18,000 sq m of new leasable area, including the new Easy in Villarica and the expansion of Cenco Limonar in Colombia. Moving to slide 21, just a quick update on our sustainability agenda.
We continued working on our circular economy initiatives, preventing nearly 20,000 tons of waste through recovery and donation programs. On the social front, we're proud of our initiatives promoting youth employability and female entrepreneurship, as well as our healthy eating program in Peru, developing partnership with various NGOs. These initiatives are helping us create shared value across the region and strengthen our connection with the communities where we operate. We also closed the quarter with important recognitions. We've mentioned some of them already, but just the key ones for Fresh Market and the U.S. Today's Best and the Total Brands Leadership Award for Cenco Malls and Cuisine & Co and Innovation Awards for our shared services center.
With this, we conclude our prepared remarks, but before moving on to the Q&A, I'd like to remind you all that Cencosud will hold its 2026 Cenco Day on January 14, 2026, in Buenos Aires, Argentina. We are really looking forward to welcoming many of you there and sharing our plans for the year ahead. Now we'll open the Q&A session. Andrés, back to you.
Thank you, Irina. We will now open the microphone chat box for questions to our management team. If you would like to ask a question, please use the raise hand feature. The first question comes from Héctor Maya from BTG Pactual, and we have already five people on the queue. Héctor, please go ahead.
Hola, Rodrigo, Andrés, Irina, buenos días. Thank you very much for taking my questions. The first one, regarding the productivity plan, could you please expand on the details of the key initiatives implemented from it in Chile and Argentina? Also, if you could please repeat the breakdown of the CLP 45 billion effect by country and category and the expected savings from this now that the plan was executed. That will be the first one. Thank you.
Hi, Héctor, how are you? Thank you for your question. The productivity plan is also part of the new strategic plan that we have developed and launched from the start of this year. Basically, the plan is focused on making the company more efficient and competitive. Historically, we have been working on a more decentralized structure that has led to duplicated functions across business units. This creates opportunities to generate synergies and efficiencies and make us more agile and strengthens our value chain. The productivity plan basically has to do with that and how we refocus our teams, our priorities, our resources, how we drive more synergies in the group, and how we review and improve our processes. On the other hand, we continue to recruit top talent and have made several internal promotions. It is not only reducing, let's say, labor, but reviewing processes.
The plan also considers recruiting top talent that has come into the company. In terms of the roughly CLP 45 billion of impact this quarter, it is mainly weighted in Chile and Argentina.
Got it. Thank you. Thank you very much. Very clear. If I may, on Argentina, we understand the evolving consumer dynamics show a promising potential, but at the same time, you continue to face certain margin pressures in the country. Could you please also share some details on the challenges persisting there and how could you tackle them? Do you expect that with the productivity plan, the operation in Argentina is now set to deliver an improving profitability? What would be a potential timing for that if that's the case?
The environment in Argentina has continued to be quite slow, right, in the last few quarters, but gradually improving. When you open and see the details, we have a shopping center business that is performing quite well and improving. That has to do with basically more occupancy and brands expanding their footprint in Argentina or entering Argentina. That is a very healthy dynamic. We see our supermarkets Jumbo performing very well depending on the regions and the economic situation context of the regions. Then you have home improvement, which I would say is the industry that is struggling more because of low investments in projects and constructions in home improvement. I would say overall, with an improving, gradually improving scenario and all the macro has been trending much more positive, the reduction in inflation too. I think Argentina is positioned to improve in the following quarters.
Excellent. Thank you. Thank you very much, everyone.
You're welcome.
Thank you, Héctor. Next one on the queue is Andrew Rubin from Morgan Stanley. Andrew, you can take the floor now.
Hi. Thanks very much for the question and all the color. My question is around Chile. Specifically, if we look at the margins, it seemed that we saw a deceleration across each of the retail businesses this quarter, even if we exclude the transformation expense. I know you mentioned some general labor expense in the prepared remarks, but I'm curious what changed incrementally in the quarter and what you need to see, whether it's this balance of growth and labor or otherwise, to get back to kind of more flat or expanding margin trajectory. Thank you.
Hi, Andy. I can answer that, and I have the rest of the team to complement if necessary. In Chile, I think it's a combination. We have seen pressures in labor costs and H&A more in general. That's a trend that is very clear. We also have to consider we have a very mild winter in Chile. All retailers have to get rid of seasonal inventory, and that has impacted also, I would say, the quarter. We've seen much more promotional activity, more and more retailers in general, more aggressive to drive sales. Consumption, I would say that has slowed down in the last few months. Part of it can be also associated with we have elections in the forthcoming weeks. We've seen more acceleration in October and the first days of November.
I think we're very prepared to have a stronger fourth quarter end of year, and we've been preparing the company for that. We have different actions and initiatives taken also, for example, in home improvement, a whole new seasonal assortment coming in for the fourth quarter. In department stores, we have been changing our technology, so that has had some interruptions in the process, and that's already completed. We have different things going on, a lot of things going on, I would say, that have put some headwinds in our numbers in the quarter, but I would say that's temporary. I don't know if Andrés or Irina want to go.
Oh, very complete. I would like to complement that the third quarter is, because of seasonality, also less profitable compared to the previous quarters and fourth quarter. If you're comparing margins in Chile to the second quarter, you have some of that impact too.
Okay. No, that's fair. That's all very helpful color. Thanks again.
Next one on the queue is Nicolas Larraín from JPMorgan. Nicolas, we can ask your question.
Hi. Thank you, Andrés. Good morning, everyone. Thank you for the time. Thank you for taking my question. I had two. The first one is on the efficiency plan you mentioned. I just wanted to understand if you see this as maybe as a first phase, so we could have maybe another turn of efficiencies throughout the year, or you think that with the level you have achieved now on the third quarter, the company is good to go into next year? My second question is on Peru. We're seeing very good numbers coming from basically all banners over there, very strong performance on the margins and on growth. Wondering if you are planning maybe stepping on the gas and expanding there. We know there's a lot of space to grow in food retails. Cencosud has a very solid reputation and footprint there.
Just interesting to understand how you're thinking about growth in a particular geography. Thank you.
I could take the first question, Nicolas, and let the team respond about Peru. The new strategy that we launched has a time horizon of five years. We have a lot of work to continue doing on the new operating model that we believe will bring us a lot of synergies, agility, and prepare the company to become much more competitive in the next decade, I would say. We will continue making progress on the strategic plan, and I cannot rule out further adjustments as we adapt to the evolving also business needs. I would say that, again, we continue to recruit top talent too and make several internal promotions. Any workforce adjustment is made very cautiously and only when necessary, with a priority also in reskilling, redeployment, and leveraging technology to minimize impact on employees.
Yeah. Taking the second part of your question, Nicolas, for sure, Peru has shown a very strong and solid performance quarter over quarter. We have put on the margin more focus on new investments in Peru, but you need to remember that the lead time of those investments takes some time. Probably as we move forward, we will be announcing new projects in there. What is already coming, as we mentioned, is the second phase of Cenco La Molina, which is improving its performance according to the normal maturity of these kinds of projects. Our supermarket performance has been, in terms of margins, very strong. We have deployed several initiatives of productivity, which we are also taking to the rest of the portfolio. With this, I finish.
Our performance and the performance in general in the Peruvian market is kind of isolated from what's going on on the political side. We're seeing a very strong momentum in that market.
Perfect. Thank you, Rodrigo. Thank you, Andrés.
Thank you, Nicolas. Our third question comes from Felipe Aliyena from Santander. Felipe, the floor is yours.
Hi, everyone. Thank you for taking my questions. I have two related to the productivity plan. I'm going to fire them first, and then I can go with the third one, which is related to financial expenses. Going back to the productivity plan, how much savings do you expect from the changes you implemented in this quarter? Second, regarding the CLP 45 billion one-off related to this plan, was this mainly severance payments, or was there something else in here?
Hi, Felipe. How are you? I would say most of it is from severance. All the other changes that we're doing, we consider it much more part of the operation. This is mainly severance. In terms of savings, this plan has a payback of roughly one year.
Okay. Understood. My last question is regarding net financial expenses, like I mentioned before. You had higher financial expenses for like CLP 20 billion related to the factoring of credit card coupons from Argentina's retail financial business, according to the financial statements. Thank you, Irina, for that. My question is, is this something recurring, or was it more like a one-off thing for this quarter?
Felipe, I can take this one. I would say there are two things in financial expenses. The first one, we have a higher short-term debt, mostly to fund our changes in the value proposition in some countries related to our working capital adjustments. The other is what you mentioned that has to do with the financial expenses in Argentina. We see this more as a temporary condition, but has to do with the higher financial rates that we are seeing in that market during the third quarter.
Understood. Thank you very much.
Thank you, Felipe. Wellington Santana is next one on the queue. Wellington, you can ask your question now.
Hi. Thank you for taking our questions. I have two on my side. The first one is on Macro integration. Just want to understand if you are beginning to leverage, scale, or realize synergies and how should we think about it. I just want to understand how were sales trends in October and the expectations going to the holidays across the main markets for you. Thank you.
Hi, Wellington. Regarding the Macro integration, this is a process that has been ongoing for several months now. It is concentrated on bringing all the processes of Macro to the Cencosud platform. This is a process that takes several quarters. It is very technical and has some complexities. It is still early to see some impacts of the integration of that business in our platform. For sure, we are sharing some best practices, and we are starting to see some momentum, but it is still early. Probably during 2026, we will see with more clarity the impacts of the Macro integration, especially in terms of profitability. We are already seeing the impact of the new sales we added with this business, but in terms of profitability, probably 2026 will be more clear. Sales in October.
Probably after the elections, we are seeing on the margin a better consumption in Argentina, but it is still a slow market. We keep our optimism with Argentina, as we have several times mentioned in the past, and we are putting a lot of focus also in improving our value proposition in the different banners that we operate there.
Thank you.
Joel Lederman from Itaú . It's next one on the queue . Joel, Please go ahead.
Hi. Thank you. Just a follow-on on the productivity plan. You mentioned that the payback is one year. How should I think about margins during 2026, considering that you have the implementation of the 40-hour bills in Chile and also the pension reform? That is the first one. The second one is just if you guys can give more color regarding the fourth quarter, how should we think about central sales and margins, especially thinking that supermarkets in Chile continue to be pressured by competition? Thank you very much.
Hi, Joel. Maybe I can start with your question. Regarding the payback of one year, what we can say, probably in Argentina, in the meeting that we will have next year, we will provide more color on the guidance for 2026. For sure, we expect this productivity plan to have a positive impact on the outlook for next year, but this is still early also because there are many things, moving parts that we will provide with more color on that occasion. We also mentioned already that we are seeing specific, I would say across the board, a solid performance in October, but again, still early on the quarter to provide some detailed guidance or color on what will be the fourth quarter.
Thank you.
I don't know if anyone wants to.
Thank you, Joel. Maria Ignacia from Credicorp is last one on the queue. Maria Ignacia , please go ahead.
Thank you. I wanted to ask also about the productivity plan. I know that we have ongoing pressures in terms of expenses, but the main pillar of the plan is to maintain the EBITDA margin levels on the long run, or is there any space to improve what we have been seeing for the past couple of years?
Hi, Maria Ignacia . Maybe I can also start with your question. The situation is very different in different countries. We see countries with a lot of room of improvement. This is what we are seeing already in Colombia, for instance. In Brazil, we see room for improvement, and also in the US, specifically in that market as the new openings start to mature and start to show a better performance. Argentina also, which is a different story. Specifically, we are still, as the inflation reduces, the impact of the revaluation of inventories will be lower, but we are deploying a series of initiatives to improve profitability there as well. Chile and Peru, we will always try to improve profitability, but we are seeing already strong margins in those two markets.
Thank you. Lastly, from my part, I know you said you can rule out any other effects from the productivity plan in the next quarters. Should we expect something in the same magnitude as we saw this quarter, or should it be minor effects?
No, Maria Ignacia , this is, again, part of the whole strategy that we're following. We cannot anticipate the magnitudes, but we will continue making all the decisions required with discipline to continue strengthening the company, the businesses, and gain synergies and improve in all markets. We cannot rule out something in the future, but this was a specific plan that had this impact and that was disclosed.
Okay. Thank you all.
Okay. Thank you, Maria Ignacia. We do have one last question from Alonso Aramburu from BTG. Alonso, you can unmute yourself and ask your question, please. Alonso, are you there?
Yes. Hi. I could not unmute myself. Yes. Thank you for the call. I wanted to ask a question about the US and the same-store sales growth, which was flourish this quarter. If you can provide some color on that, what trends are you seeing, and how is that also compared to the performance of the new stores? Are they in line with what you were expecting, better, worse? What are the trends we are seeing? We have seen some guidance from some US retailers in the fourth quarter being slightly more negative. I am just wondering what you are seeing there. Thank you.
Hi, Alonso. Yes, I think we're facing a softer consumption scenario in the U.S. Again, that's part of the natural cycles that we see in our businesses. It doesn't change at all our growth plans or productivity plans, but we've seen more soft sales in the past months. That's, I think, a reality. In terms of the new stores, on average, they are performing pretty much as planned. With 12 stores in the last 12 months, we have a few that are fully overperforming, others that are to put those on track. On average, it's pretty much working as planned.
Thank you very much.
Also, I would like to complement regarding the sales momentum in the U.S. that after the cyber attack that one of our main suppliers had, we kind of lost momentum, especially during 4th of July, which is a very relevant sales day for us. That kind of marked the trend of the rest of the quarter, impacting a very relevant day in terms of sales. That is also something to take into account. Secondly, when you compare same-store sales, remember that the American players, they tend to include online sales in their same-store sales. We do not include it. If you consider this 15% online sales increase within the same-store sales, the story would be quite different.
Perfect. Thank you for the clarification. Thank you.
I don't see further questions on the queue. If there are no more questions, we can conclude our third quarter 2025 conference call. Thank you all for joining today.
Thank you.
Thank you very much.
Thank you. Bye-bye.