Greetings, and welcome to the Grupo Chedraui third quarter 2022 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Antonio Chedraui, who will begin the conference. Sir, you may begin your presentation. Good morning. It is a pleasure to be with you today at this conference to discuss Grupo Chedraui's results for the third quarter of 2022. In this third quarter of the year, we achieved excellent results in an environment of high inflation. Customers recognize our value proposition, which is based on low prices and supported by proper assortment of products and customer service. In Mexico, we grew above the rest of the market for the eighth consecutive quarter. In the United States, we continue the integration of our banners while managing to improve profitability due to our operational and financial discipline. With this, we face the end of the year with the determination to continue creating value for Chedraui and its shareholders. If you allow me, we will review the results for the third quarter of 2022, starting with the relevant events of the period, continuing with the performance of each region, and later, we will review the consolidated financial results. Please go to slide four. In the quarter, we achieved 16.2% growth in same-store sales in Mexico, far exceeding the 10.7% growth of ANTAD in the same period. These results confirm our differentiated and winning value proposition. This is the eighth consecutive quarter with growth above the rest of the market. Regarding profitability, we achieved an expansion of 54 basis points year-over-year and increased EBITDA from 8% to 8.6% in the quarter. Please go to the next slide to see the result of the U.S. operation, which also achieved outstanding results in the quarter. The Hispanic division grew same-store sales by 11% in dollar terms, with EBITDA growing 51.4% due to solid organic performance and the consolidation of Smart & Final results. The EBITDA margin increased 115 basis points from 6.6% to 7.7%. Moving on to slide six, Chedraui's total sales grew 23.4%. However, total sales excluding the Smart & Final results grew 15.2%. EBITDA increased 37% and 84 basis points during the quarter and represented 8.3% of sales. This result confirms the company's ability to achieve sustained profitability growth. On the next slide, you will see that net income grew 63.7% this quarter due to the consolidation of last year's acquisition, the solid financial performance of all operating banners, and a reduction in financial costs due to the company's lower debt level. Regarding leverage, due to our ability to generate cash flow, we were able to reach a net debt to EBITDA ratio of 0.42x in the quarter, which compares favorably with the 1.26x reported in the same period last year. Now we will continue with the results by region. Please go to slide eight. In Mexico, we achieved same-store sales growth in the quarter of 16.2%, far exceeding the result reported by ANTAD of 10.7% for the same period. This result comes from the recognition of our customers of Chedraui's strong value proposition. Sales for this division reached MXN 25,384 million, equivalent to a 15.8% growth in total stores. The difference between same-store sales and total store growth is explained by an extraordinary wholesale in 2021. From a geographic sales point of view, the south and southeast of the country continued to grow above the national average, highlighting strong sales in the tourist areas in which we operate. We also experienced a significant sales increase in the center and the metropolitan region of Mexico City. During this summer, we executed the promotional campaign, Por TI, with outstanding results. In this quarter, we added eight stores, increasing net openings to 17 in the last 12 months, equivalent to an increase of 0.2% of sales floor for this division. During the quarter, we launched the Supercito Selecto concept, opening three stores in upscale neighborhoods in Mexico City. This is consistent with our belief that both the Selecto concept and the Supercito format will drive growth for the company. Year to date, 2022, we opened 11 Supercitos in Mexico City and Veracruz. On the next slide, you will see that the EBITDA of Mexico increased 23.6% in the quarter, reaching MXN 2,174 million. Due to strong sales as well as an operational and financial discipline, we achieved EBITDA expansion of 54 basis points, which is above the expansion target of 10-15 basis points for the year. Regarding the real estate division, we exceeded pre-pandemic income levels by registering MXN 297 million, equivalent to a year-over-year increase of 18.6% with an increase in EBITDA of 15%. Next, Carlos will comment on the performance of Chedraui USA. Please, Carlos, go ahead. Thank you, Antonio. If you may, please turn to slide ten. During this quarter, total sales in the United States grew 28.9%, reaching MXN 39,077 million, which include the consolidation of Smart & Final. Note that the one-year anniversary of the Smart & Final acquisition occurred during the quarter. Despite the high inflationary environment in the U.S., our three Chedraui USA banners performed very well. Same-store sales at our Hispanic banners increased 11% in dollar terms, continuing the trend of outstanding results and reflecting the continued strength of our business model. Our sales strength is not only attributable to increases in average ticket, but also healthy customer count increases across all banners. We are also pleased to report that we are resuming the process of opening new stores at all banners with expected new stores in 2023 at both El Super and Smart & Final. Please go to slide 11. EBITDA in the U.S. grew 51.4%, reaching MXN 3,014 million in the quarter, representing 7.7% of sales. EBITDA margin grew 115 basis points, exceeding the expansion target of 40 basis points. The El Super format continues to perform well, achieving EBITDA margin of 8.7% in the quarter. Fiesta EBITDA margin increased 125 basis points year-over-year to 6.5% of sales, and we remain on track to meet our 7% EBITDA margin target by 2023. EBITDA at Smart & Final reached MXN 1,717 million, representing 7.7% of sales. We continue to identify and realize synergies at Smart & Final and our other banners as we enter year two of our integration process. As we've mentioned previously, our operating foundation in the U.S. remains strong, and we are eager to leverage our healthy performance into growth opportunities. Thank you, Antonio. Thank you, Carlos. We turn to the consolidated financial results on slide 12. In the third quarter of the year, we recorded consolidated sales of MXN 64,758 million, 23.4% higher than the previous year. Excluding the consolidation of Smart & Final, we achieved growth of 15.2%. Gross profit increased 28.2%, reaching MXN 15,168 million in the quarter. This represented gross margin of 23.4% and an expansion of 87 basis points year-over-year. With respect to operating expenses, we strictly controlled all business lines and recorded MXN 9,780 million of expenses in Q3, which is equivalent to 15.1% of sales. The company's consolidated EBITDA increased 37.3%, reaching an amount of MXN 5,388 million in the period due to the excellent performance across all regions. This resulted in EBITDA expansion of 84 basis points to 8.3% of sales. During the third quarter of 2022, financial costs reached an amount of MXN 1,286 million, an increase of 6.6% compared to the same period of the previous year. This increase, which is lower than the growth of the operating income, is explained by the debt prepayments that the company has been making over the last 12 months. Net income for the quarter increased 63.7% versus previous year, reaching an amount of MXN 1,467 million with a margin on sales of 2.3%. This result shows net income growth in the last two years of 119% and demonstrates the company's ability to continue to improve profitability. Moving on to the next slide, financial leverage decreased from 1.26x at the time of the acquisition of Smart & Final to 0.42x in the third quarter of 2022, which demonstrates our ability to generate free cash flow. Finally, CapEx invested in the last nine months of the year amounted to MXN 3,587 million, which is equivalent to 1.9% of sales. On slide 14, you can see the debt breakdown at the end of September 2022. The company recorded net debt of MXN 8,422 million. All debt is in US dollars and is primarily associated with the Smart & Final acquisition. Now, if you allow me, we will move on to the question-and-answer session. Thank you. We will now move to question-and-answer session. If you have a question, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two. Please hold while we poll for questions. To ask a question, please press star one. An informational tone will indicate your line is in the queue. in the queue. To press star two, if you'd like to remove yourself from the question queue. If a participant uses multiple equipment, it may be necessary to pick up your handset or press star two. Please hold while we poll for questions. Our first question comes from Robert Ford with Bank of America. Please go ahead, sir. Hey, good morning, everybody, Antonio, Carlos, and congratulations on the quarter. Hopefully, you can hear me. The audio all of a sudden really deteriorated for me. But Antonio, I was wondering how you're thinking about your price gaps in Mexico, particularly as it relates to Bodega Aurrerá and Walmart concepts. In terms of your outperformance with ANTAD, was that across each of your geographies or driven by your South and Southeastern exposure? Then you also don't tend to talk much about e-commerce, but I understand you've made some platform improvements and are cross-listing with marketplaces. Can you touch on how you're thinking about e-commerce in Mexico and how that part of the business is trending as well, please? Thank you. Thank you for your question, Bob. Well, we have been able to sustain our price gaps against Bodega Aurrerá. Our Chedraui formats that compete against Bodega have been efficiently using the pricing strategy that we have used in the past, and it has worked pretty well during the quarter. It is important to say that during this quarter, we also introduced an aggressive campaign named Por TI to compete better against the promotional activity of the summer. That produced good sales growth in almost all of the regions. Yes, we have been able to beat ANTAD not only nationwide but throughout every region. Of course, the touristic areas grow faster and stronger than the rest. During the quarter, we have been able to grow double-digit in every ANTAD region. Regarding e-commerce, well, we changed our system, our platform. We have been struggling with the new platform. Fortunately, we use a third-party operator associates that allow us to use the traffic better and push it towards the third party until our platform is working properly. We believe that before it went in November, we would be ready with the platform as we projected. I don't know if I answered your question, Bob, but I guess it's what we are. No, no, it's very helpful, Antonio. Thank you. If I could just follow up with one question on the U.S. Carlos, you know, big improvements at Fiesta. Can you talk a little bit about what's behind the margin strides and how you're thinking about subsequent opportunities in that part of the business? Yeah. We had great margin expansion really at all three banners, but in particular at Fiesta, as you saw. We're being very aggressive with our negotiations. We are improving our perishables, and that's helping. We've had great customer count increases of over 8% in the quarter at Fiesta. Our pricing position is very aggressive. As you know, we, you know, we compete with H-E-B, Walmart, Kroger in those markets. You know, they keep us very sharp in terms of our price positioning. I think the team's done a really good job of getting aggressive and driving perishables helps. Good for you. Thank you both very much, and congratulations again on the quarter. Bob, in terms of growth in that area, yes, as I mentioned in my comments, we're looking at new growth opportunities for El Super and Smart & Final but also Fiesta. It may not be in 2023, but we're looking for opportunities that may come up. Now, and if you think about like this, now that you mentioned growth, with this potential merger of Kroger and Albertsons, how are you thinking about divestitures and geographies? There's probably gonna be a lot of sloughed off real estate that creates opportunities for you. Are they in geographies that are interesting for any of the banners? The overlap that Kroger and Albertsons have is very strong in Southern California and in Texas, as well as other markets. Just specific to us, and we'll just have to see how it plays out. We're gonna be very picky and you know see how this plays out. Great. Thank you very much. Thank you. Our next question comes from Juan Pons with Brookings. Please go ahead, sir. Hi, thank you all for taking my question. Good morning. Regarding the government price pact, PACIC, what are your thoughts on the impact grocery stores can have, and what initiatives is Chedraui implementing? Thank you for your question, Juan. Well, as you know, we signed the PACIC commitment. It has been going on throughout the whole summer. It's just an extension of it. The government asked for a reduction of the whole basket of 8%. The initial PACIC was MXN 1,129, and our price has been moving around 14% under that basket. So, to achieve the 8% that the government asked for the second period until February, actually we have to do nothing. We were already under that 8% that they were asking. Now they have been offering the possibility of opening imports for the PACIC products for the signers of the commitment. Well, we are trying to find possibilities on certain items that we think will allow us to introduce those products in better prices than the ones that we were acquiring in Mexico. Definitely, it's just an addition of a new period of the same initial PACIC, a little bit more aggressive, but with no effects to our strategy. Great. Very clear. Thank you very much. You're welcome. Thank you. Your next question comes from Sergio Matsumoto with Citigroup. Please go ahead, sir. Yes. Hi. Good morning. Thanks for taking my question. Carlos, just to go back on the U.S. store openings, you mentioned. I think you mentioned in the prepared remarks starting in 2023, but it might be a multi-year thing. My question is, what changed there, perhaps in terms of competitive landscape? Just because, when I look in the past, usually for El Super and the other banners, the store openings have been quite low before. What gives you the confidence this time that things have improved in such a way that you would feel comfortable opening new stores? Thank you. Yes. Hi, Sergio. Really, I wouldn't say that there's any material changes in the competitive landscape. Fiesta, El Super, and Smart & Final all have geographic holes that we think are important to fill. The accelerated pace coming up is really due to the stage at which we're at in terms of integrating the acquisitions that we've made. In 2018 when we acquired Fiesta, we talked about this during the analyst calls. Our focus was really on integrating Fiesta. We're in a very good spot there, as you've seen with our results. You know, recently we just cycled through the first year of integrating Smart & Final. The integration of Smart & Final has been quicker. We still have a lot to do, but as I've mentioned in my remarks, the operating foundation that we have today presents us with a very strong launching pad to be able to continue to grow in all three banners. Understood. Thank you. Thank you. Your next question comes from Antonio Hernandez with Barclays. Please go ahead, sir. Hi. Good morning. Thanks for taking my question. Congrats on your solid results. My consideration regarding the real estate business, you've been posting better results in terms of profitability and in terms of the different trends that you're seeing for the rest of the year and the coming year. What are your expectations there in terms of leaseable area, in terms of profitability? What are your expectations? Thanks. Thank you for your question, Antonio. We are experiencing a recovery on the real estate division. We are in the last month, we reached pre-pandemic numbers on sales and on the same square meters. We're happy with that. It has not recovered 100% because parking lots still are under the 2019 numbers. We believe we are getting there. The cinemas have been struggling. They are still under 30% below 2019 numbers. That particularity has been creating the parking lots. On the other side, on the rent side, we are reaching pre-pandemic numbers, so we are happy with that. On the profitability-wise, we have been able to increase prices. We are on the pre-pandemic margins at the moment. We're just missing the parking lots income that we had on the pre-pandemic era. Okay, perfect. Thank you. Your next question comes from Luis Willard with GBM. Please go ahead, sir. Hi, Tonio and team. Thanks for taking my question, and congratulations on the results. Tonio, as inflation continues to persist and assuming that eventually the consumer in Mexico might start being hurt a bit more by it, do you feel the need to adjust your commercial offering into becoming more promotional just as you did it this quarter, and especially thinking about 2023? That would be my first question. Hi, Luis. Good morning. If I understood well, you're asking me that if our customer reacted to more promotional activity during the summer. If that is, yes, reacted positively, because we wanted to be able to compete against the promotional activity driven by two of our main competitors in certain areas. It reacted very positively. On the other hand, we sustain our pricing strategy and the price gaps against our competition. Basically, on the price side, we see Bodega Aurrerá as our competition, and we have been able to sustain the price gap without hurting the margin. That's because we've been able to rotate inventory better. Therefore, we take less markdowns, and that has been allowing us to inject more price aggressiveness without hurting the gross margin. That's what we have been able to do. Thank you, Tonio. Yeah, no, I was thinking, I mean, yes, of course, about the quarter, but also, I mean, thinking about 2023 and if the consumer gets a bit more tight on their income due to inflation and/or a potential slowdown in the economy. Do you feel the need of being more promotional, just as you did this quarter, I mean, to boost sales? We're not seeing that need at the moment, but for sure, if that comes, we would be able to become more aggressive. We have the cost structure on the expense side and the efficiencies on the inventory management that would allow us to become even more aggressive. We're not seeing that at the moment, but we are prepared if that comes to the market. Great. Perfect. That was very clear. If I may, a second one on an unrelated topic. Do you see any opportunities of using the volume of purchases that you have in the U.S. to bring to import products that are, I don't know, only available in the U.S. To further differentiate your formats in terms of product offerings? I think that's a huge opportunity. We're starting with it. Smart & Final has a great private label that it's 30% of Smart & Final sales. That private label has been successfully merchandised on the Smart & Final stores in the Northwest, the 17 stores that we operate in Mexico. With that experience, we have been introducing the private label into other regions of Mexico very successfully. It's a great opportunity not only for the Selecto stores, but also for the rest of the stores, because price-wise, it's also very, very competitive. It's an opportunity that for sure you will be able to see that in the future of Chedraui in Mexico. Awesome. Thank you, Antonio. Thank you. Thank you. Your next question comes from Joaquin Ley with Itaú BBA. Please go ahead, sir. Hi. Good morning, everybody, and congratulations on the results. Antonio, just when I look at your payables as days of cost, right? I see that they drop sequentially in year and year. If I relate that to the performance of your gross margin, I wonder if you're using your cash position to anticipate payment to suppliers in exchange for better commercial conditions. If that's the case, if you could elaborate what's the opportunity ahead in terms of strengthening your competitive position or increasing gross margin? Thank you for your question. Well, the reduction that you see in the balance sheet comes more from the integration of Smart & Final because it's not completely financed as we have in the rest of the formats in the U.S. and in Mexico. It's something that we will work towards that. With the excess of cash that we are generating in Mexico, yes, we have been able to negotiate some prepayments to the vendor with a benefit that we're not recognizing in the gross margin. We are recognizing those benefits in the financial cost so that we have a clear differentiation of the commercial strategy than the financial benefits and not lose any gross margin possibilities. Yes, we have been using that, not as much as we could. We think we could increase that, using that extra cash to prepay short-term payments with financial benefits that with new increases of rates becomes a very interesting business, also for us. It's coming more from the Smart & Final integration, what you can see in the balance sheet, Joaquin. Okay. That's clear. Thank you. Thank you. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from Rodrigo Alcantara with UBS. Please go ahead, sir. Hi. Hi. Good morning. Thanks for taking my questions. Just have two quick ones here, if I may. First, if you can comment on the performance of your private label brands in Mexico. I guess. Particularly being benefited by the inflationary environment. The second one is also and you commented that you will resume openings in the U.S. which is great, right? In Mexico, what are your plans there? In that perhaps you know exploring or you've been traditionally more focused on the south, right? The south part of Mexico. Any plans of going increasing your penetration in the north perhaps? Any plans about expanding the JV with Smart & Final in Mexico? Those would be my questions. Thank you. Thank you for your questions, Rodrigo. Private label in Mexico, it's very important for us. It's 8% of our sales. We have two brands in Mexico. One is the traditional Chedraui, which is a price-driven brand. The other one is the Selecto brand. We're using the Chedraui brand to focus on price and price aggressiveness. Most of those items are included in the PACIC basket. That's why we have been able to reach a very aggressive basket that has been moving an average of 14% under the price that the government defined. We will keep focusing on the private label and start using the Smart & Final private label in Mexico, that it's also a very value-oriented focused on quality that will allow us to complement the private label brands that we have in Mexico at the moment. It's a huge opportunity that we will pursue for sure. On the growth side, we have been open to consolidation and sustain our organic growth. We believe we can open organically 60 stores next year. We will focus on that. Keep our eyes open for a potential consolidation. We think there will be opportunities. On the JV, yes, we believe that it's the time to think about the possibility of bringing the Smart & Final format in other regions of Mexico. We have been talking with our partners about that possibility. We're exploring possibilities and yes, we think that we should pursue with that possibility that will allow us to introduce a new format that has been working really well in the northwest region of Mexico. That was very clear. Just to make sure it was just said 50 stores, right? 50. Sorry, I couldn't listen, well. The line was not very clear. Can you help me again with your question, please? Yeah, sure. No, just to confirm, you mentioned 50 openings, right? 50. For next year. Yes. Yes. Yeah. Got it. Also on the transition to the VTEX platform, you mention that it's already completed, right? On the e-commerce front. Yes, we're still suffering. We did the transition to the new platform, the VTEX platform. We are struggling, but we think we will be ready before El Buen Fin in November. Okay. That's clear. Thank you very much. Thank you, Rodrigo. Thank you. Your next question comes from Alvaro Garcia with BTG. Please go ahead, sir. Hey, good morning, gentlemen. Thanks. Thanks for the space. Couple of questions. One on Mexico. I'm not sure if you mentioned the Chedraui Supercito Selecto format in Mexico. I'm not sure if you've quantified what you see as a long-run opportunity. I'm assuming obviously Mexico City is a great starting point, given where the brand is there, but what other city do you see potential for it in? I'm not sure if you've mentioned that on the call already. Sorry if someone's already asked what you see in terms of runway there. My second question is for Carlos. On Smart & Final specifically, it's more of a strategy question on private label, but we were lucky enough to go visit a few stores. I was just curious how you think of how you set up the Simply Value brand and the First Street brand and the opportunities for each of those and how you segment those. I thought that was pretty interesting. Thank you. Thank you for your question, Álvaro. Well, yes, as you mentioned, we have now at the moment four Supercitos Selectos, three in the metropolitan area of Mexico City and one in Veracruz. It's a very interesting format. Actually, it's part of the Supercito format, but as every case in our formats, we focus the assortment towards the customer base that we service in each of our stores. It has a different assortment than the typical Supercito, with a better look and feel, atmosphere of the store. All four of them have been very successful, and it's a huge opportunity to expand to service that particular high-end customer that with the where real estate possibilities are not available. This format can reach that particular customer in an excellent way. In many of the metropolitan areas of Mexico, not just Mexico City. It opens the capabilities to service this particular customer without having to achieve a huge sales numbers that are not potentially possible in some areas of Mexico. We think it's a great idea that has been proven very successful. It's a new growth avenue for our company to service a customer that we already know and that we have been servicing very successfully in a different size format. Yes, we are very happy with this format. Carlos, maybe you can answer the private label in the U.S. Yes, for sure. Thank you. Well, as Antonio Chedraui mentioned, at Smart & Final, we do about 30% of our sales through our private label brands, which we have three. Simply Value, which would be our entry price point. First Street, which does about 70%-80% of all our private label sales. Then Sun Harvest, which is positioned in the natural and organic segment. Smart & Final's done a terrific job over the years of developing phenomenal quality products under these labels. When you get the quality and value connection, well done as we do at Smart & Final, the potential is enormous. Not only are we sending some of these items to Chedraui Mexico, you can also. First, you'll see First Street. You can also see a few items of Sun Harvest. We're doing the same in terms of pollinating these brands at El Super and Fiesta. A very important brand in the markets that Smart & Final is in, and we wanna leverage the strength of brand and the terrific value proposition that they bring to the table. Great. Super interesting. Thank you very much. Thank you. There are no further questions at this time. I would like to turn the floor back over to Antonio Chedraui for his final remarks. Please go ahead, sir. I just wanna thank everyone for joining our conference. I appreciate very much your questions. Just wish you happy holidays in the coming season, and we'll be back with you to speak and review the next quarter. We expect a great year closing, and we will for sure share with you the results in the next conference. Thank you very much and happy holidays to everyone.