Good morning to all participants, and welcome to Grupo Comercial Chedraui First Quarter 2024 Conference Call. Participating in the conference call today will be Mr. José Antonio Chedraui, CEO of Grupo Comercial Chedraui, Mr. Carlos Smith, CEO of Chedraui U.S.A., Humberto Tafolla, CFO, and Arturo Velázquez, IRO for the company. We will begin the call with initial comments on Grupo Comercial Chedraui's first quarter financial results by the company's CEO, Mr. José Antonio Chedraui. Good morning to all, and welcome to our presentation of Grupo Comercial Chedraui's first quarter 2024 results. We are pleased to announce that Grupo Chedraui's first quarter results were positive. Our employees' dedication and hard work in providing our customers with the best quality products at the most affordable prices are reflected in our results. As such, we continue to gain market share, improve our margins and profitability, and generate healthy levels of cash flow. Also, I am pleased to announce that in January, we were recognized in Mexico by Profeco for having the lowest average price for the basic product basket during the fourth quarter of 2023. In the U.S., we witnessed growth in customer count across all our banners, especially at El Super and Fiesta, due to the attractive prices offered on perishables. We have continued to strengthen our sustainable strategy during the past 12 months. As part of this process, and to ensure a strong partnership with our private label suppliers in Mexico, we began in 2023 to implement SMETA audits, Sedex Members Ethical Trade Audit. These audits verify work standards, health and safety, environmental performance, and ethics of our suppliers' operation. Currently, around 50% of our suppliers have undergone these audits, with the aim of reaching 100% compliance by 2024. We will now review the financial results for the first quarter of 2024, starting with the highlights of our consolidated results, continuing with the performance of each region, and ending with a summary of the financial results. Please, let's review slide four. In the first quarter of 2024, there was a market share increase in Mexico, while the El Super and Fiesta banners in the U.S. excelled. These successes offset the impact of a 7.8% peso appreciation against the dollar, resulting in a 0.6% sales growth. Excluding currency effects, sales would have risen by 4.9%. U.S. sales comprise 50% of total consolidated sales for the quarter. Higher labor costs in Mexico and the U.S. were offset by efficiencies and cost control efforts in both countries, resulting in an EBITDA increase of 5.7%. If we exclude the currency impact on Chedraui U.S.A. operations, consolidated EBITDA increased 10% compared to the first quarter of 2023, while consolidated EBITDA margin increased 43 basis points to 8.8%. On slide five, net income continued to post double-digit growth. In the quarter, net income totaled MXN 1,984 million, a 23.8% increase compared to the first quarter of 2023, and represented a four-year compound annual growth rate of 38%. A higher EBITDA and a decline in interest expense due to lower bank debt contributed to this favorable result. Profitability, measured by return on equity, stood at 18.8% and represented an 88 basis point increase compared to the first quarter of 2023. In the following slide, we will review operations in Mexico and the U.S. On slide six, in Mexico, Chedraui's same-store sales have exceeded inflation level for 15 consecutive quarters, growing in the first quarter by 9.4% compared to ANTAD's 7.6%. Our customers continue to prefer the value proposition offered by Chedraui through its various store formats. An essential element of this value proposition is our loyalty program, MiChedraui, which continues to strengthen our customer experience. We witnessed a 20% growth in the total number of customers enrolled in the program during the last 12 months. MiChedraui also offers clients special promotions tailored to their preferences. On slide seven, as a result of strong same-store sales and a 2.1% increase in our sales floor area, sales in Mexico were 11.3% higher compared to the first quarter of the previous year. In addition, EBITDA grew 17.4%, as operating leverage and strict cost control mitigated the impact of higher labor costs. EBITDA ended at 8.7% of sales, which is a 45 basis points improvement versus the prior comparative quarter. In the next slide, slide eight, we will review the highlights of our real estate division. Our occupancy rate in the real estate division increased to 97.5% from 95.7% in 2023. Sales continue to show positive trends, with an 11.6% increase compared to the same quarter of 2023, amounting to MXN 348 million. Over the last 12 months, 11,658 sq m of leasable area were incorporated, representing a 2.7% annual growth. Finally, EBITDA increased 4.8% and represented 59.9% of sales. Now, I will turn the meeting over to Carlos Smith, CEO of Chedraui U.S.A., so he can comment on our U.S. operation. Carlos, please go ahead. Thank you, Antonio. Please turn to slide nine. Our employees' dedication to excellent customer service, along with our compelling value offerings and effective store remodeling initiatives, drove higher customer counts, notably at our El Super and Fiesta banners. However, Chedraui U.S.A.'s consolidated sales were affected by reduced government assistance funds, which had bolstered results in 2022 and early 2023, as well as cautious spending from inflation-affected customers seeking value propositions. As a result, our same-store sales this quarter declined by 0.9% in dollar terms, while total sales increased by 0.4%. As Antonio mentioned, Chedraui U.S.A. sales were negatively impacted by exchange rate fluctuations, which caused decline in the first quarter compared to the previous year. On a positive note, El Super and Fiesta achieved nearly double-digit same-store sales growth, fueled by a notable rise in customer traffic, attributed to their competitive pricing model and perishable offering. Smart & Final sales were hindered by decreased government assistance, impacting the average transaction size. However, we anticipate Smart & Final's performance to rebound in upcoming quarters, driven by various sales initiatives, including enhancing the range and quality of perishable departments. Please turn to slide 10. In the quarter, EBITDA decreased by 3.9% due to the 7.8% appreciation of the Mexican peso against the U.S. dollar. EBITDA margin increased by 38 basis points, representing 8.4% of sales. In U.S. dollar terms, EBITDA grew 4.3%. This is explained by continued operational efficiencies and expense control in all banners. It is important to note that the combined EBITDA margin of El Super and Fiesta increased by almost 100 basis points compared to the previous year. We are on track with our debt reduction plan by paying down $10 million in Q1, ending the quarter with a debt balance of $472 million. That is all for our report on the U.S. operation. Thank you, Carlos. We now turn to the consolidated financial results on slide 11. In the first quarter of 2024, consolidated sales amounted to MXN 64,841 million, a 0.6% increase year-over-year, as Chedraui U.S.A. sales were impacted by a 7.8% appreciation of the Mexican peso. Excluding this translation effect, sales would have grown by 4.9%. Gross profit rose by 0.4%, driven by a 19 basis point improvement in gross margin. Operating expenses, excluding depreciation and amortization, decreased by 1%, despite increased labor costs, due to operational efficiency and cost savings. Consolidated EBITDA increased by 5.7% to MXN 5,722 million, reaching 8.8% of sales, up 43 basis points from Q1 2023. Excluding currency translation effects, EBITDA would have grown by 10%. Financial expenses dropped by 10.5% to MXN 1,066 million, attributed to reduced debt, foreign exchange impact, and increased interest earned from a favorable cash position in Mexico. Moving on to consolidated net income. For the quarter, it increased 23.8% to MXN 1,984 million, and represented 3.1% of sales compared to 2.5% in the first quarter of 2023. Finally, please move to slide 12. Due to a positive net cash balance, our financial leverage in Q1 of this year decreased to -0.10x from 0.18x in the same period last year. This improvement stems from our ability to generate free cash flow and the prepayment of Chedraui U.S.A.'s debt over the past 12 months. The year-to-date CapEx invested reached MXN 1,793 million, which is equivalent to 2.8% of sales. Now, if you allow me, we will move on to the question and answer section. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Bob Ford with Bank of America. Please proceed with your question. Thank you. Excuse me. Good morning, everybody, and, and thanks for taking my question. Antonio, in your results letter, you comment on strategies to improve the profitability of Smart & Final, and, and I was wondering if you could provide some additional data, or detail, in terms of what you're testing, any likely changes to the value proposition, needed investment in infrastructure or the point of sale, and, and the timeframe we should be thinking of, to implement. Thank you. Good morning, Bob. If you allow me, I will let Carlos answer your question. He's completely aligned and clear with the strategy that we're putting in place at Smart & Final. Of course. Carlos, can you hear us? Apologies. Hello, Bob. Thank you. Yes. So Bob, one of the key strategies we've had at Smart & Final is to convert Smart & Final from a what's known as a fill-in trip to a primary shop, right? There's two really key components in order to do that. One of them is that we need to expand and lead with our perishable categories and lead with price. Something that, as you know, we do very well across all of our banners and something that we've really done well over the five-year journey at [audio distortion], and I think you can see some of those results materializing. We really want to lean into our perishable categories. We want to lean in and establish a better pricing position in the market. I think those things will continue to attract more frequent shops, right? In addition to that, Smart & Final, although it's been around for 150 years, our customer count is very, very steady, okay? And one of the things that we need to do is expand the customer base at Smart & Final, that's known Smart & Final for a very long time, starting out as a, let's call it a restaurant depot store, et cetera. And in 2008, we expanded into the extra format that carries perishables, right? But none of the previous owners in the private equity world were really committed to spending the money on a long-term advertising campaign to go out there and really tell the story of who Smart & Final is, what we stand for, and what the value proposition is. So we've been working for months on putting together a very aggressive, robust, comprehensive advertising campaign that we will be launching at the end of May and will run through the end of December. So we've reevaluated the way we connect with our consumers. As you know, the weekly flyer in the grocery business is a very common practice. It's very relevant in certain formats. We're not quite sure how relevant it is in the Smart & Final format, but we need to go out and tell our story in a different way and connect with the consumer in a different way to reintroduce Smart & Final, and show the market what we've done since 2008, where it's not really the Smart & Final that you knew before, that only sold, you know, items for restaurant supplies or kitchen gadgets, et cetera, right? We're very, very bullish on what we're doing in terms of this campaign. We, as I've mentioned, we launch at the end of May, and we are very excited with what would come. We need to expand that very steady customer base, and we're gonna continue to work on the things that we're really, really good at, at Chedraui U.S.A. and Chedraui Mexico, which is our perishable offering, our value proposition, and pricing. So we think the combination of perishables, pricing, and a new way of connecting with the market will bring a positive trend to Smart & Final. Not to mention that, as you know, the EBT issue still lingers. We're seeing the light at the end of the tunnel. In Q1, EBT sales dollars were down 50% versus Q1, 2023. But that's cut down in half in April, and we expect that to be cut another 50% probably in May, and towards the middle to third, fourth week in May, we should be back to a normalized EBT world. So- Carlos- Sorry for the long answer, Bob. No, no, no. It's, it's a very comprehensive one, and thank you for that. I just wanted to make a couple follow-ups, if I may, and that is, you know, how should we think about perishables and pricing from a CapEx, you know, gross margin, and expense ratio perspective as you implement? And then, you know, I'm sorry, I call these SNAP benefits, but I know it's probably massively incorrect, but, you know, this reduction, how much of that, you know, what's the impact on same-store sales that are simply coming from a reduction in these, these benefits to lower income folks? Yeah. You know, it's massive, from the standpoint of a format like Smart & Final, because if you've got a very stable customer count, right? That's growing, let's say 1% year-over-year, the tailwind that we had with EBT was, it was massive because we, remember, we sell 30% of our business is in what we call club and business items. And those are multi-pack, high price point items that customers tend to shy away from in an environment like we have today, where the EBT dollars aren't there. You've got a very, very cautious inflation sensitive consumer. So most of the sales that we've given up are related to business and club items, not necessarily the household consumer. So that forces us to switch a little bit of our merchandising in the stores to a more value, more of a value merchandising strategy, but you can't alienate those key consumers that are coming in and still buying all of the packaging goods, the 150-count eggs, et cetera. So yes, it's had a massive impact. Now, on the flip side, if you think about El Super and you think about Fiesta, they also experienced a significant drop, but our customer count increases have been tremendous in those formats. As consumers begin to trade down and seek retailers with strong pricing positions and obviously, our strength in perishables, well, folks are really buying essentials, and that falls right into our wheelhouse. Gotcha. And then again, as you move into perishables and pricing and really lean in, what does that mean from a CapEx gross margin and an expense perspective at Smart & Final? It's nothing in terms of CapEx, Bob, because the infrastructure is in place. It is just a cultural shift, right? Where we lead with perishables and not necessarily with the center store. Gotcha. Our team is doing a tremendous job of switching this cultural focus, but it's not easy. I mean, it's, you know, you've got a company that's been around for 150 years that has tremendous strength in what they do in the center store, which we don't want to lose, but we want to take advantage of these, these, you know, our, our, our footprints, our stores that are tremendous and have an incredible offering. And, you know, it's, it's really nice to walk into some of these stores and, and see these tremendous, fabulous produce departments. And remember, and remember, the more produce we sell, the better, right? Yeah. We have higher margins in produce, right? Of course. So that's what we wanna do. We wanna lean into those perishable categories. You're gonna find it with the mix, it sounds like, right? ...There's a funding from mix, and you're seeing some of that funding already in our results, where, yeah, we are investing in price, and volume is up, but dollars may be down. But we are committed to it. We're not shying away from it. We know that there is gonna be, you know, short-term pain for long-term growth. Exactly what happened at Fiesta. If you recall, I'm kind of repeating this, my comments from early stage Fiesta. No, it makes perfect sense. Thank you so much. Our next question is from Rahi Parikh with Barclays. Please proceed with your question. Hi, thanks for taking my question, and congrats on the results. Just some follow-ups on that. Would you say that the Smart & Final target consumer is therefore more mid to higher end, and the other U.S. formats target low to mid income levels? And also, how is the competition for Smart & Final? Do you see competitors gaining share, or is this just, are the results fundamentally from lower spend from the target market, as you mentioned, the difference, and I think it was year-over-year. Thank you. I have a follow-up as well. Thanks. Yeah, the results at Smart & Final really related to average ticket. And the majority of that average ticket, as I mentioned, is coming from a drop in business and club items. So we're very clear where it came from, right? A little bit different consumer for sure, right, in Smart & Final. Now, we have to remember, the majority of our stores are in California. California is 40% Hispanic, and we know how to market to the Hispanic community. We love the idea that we can have a Smart & Final be a relevant format across different demographic groups. We have very successful Smart & Finals that are in affluent areas. We have very successful Smart & Finals in middle income, mid- to mid-high income levels. We have stores that do very, very well in the inner city. So that is a very attractive component of the Smart & Final format, that we can really lean into different areas. And together with the strength of the Smart & Final private label program, the quality is superb, the price points are terrific, and it's very, very relevant across all these consumer groups. From a competitive standpoint, I think you understand that Smart & Final is a hybrid concept that competes with traditional supermarkets as well as club stores, and our pricing is fantastic. And our gaps are very, very good against the traditional supermarkets, and we're getting closer and closer on... Well, when it comes to competing against the club format, our pricing on key items is on par, and slowly the basket gets better and better as we really lean in on understanding what key items may not be priced as aggressively as they need to be, and we work on that and continue to improve every day. Awesome. No, sounds good. And just to follow up, what percentage of Smart & Final revenues, I guess, come from private label? How much private label are you selling there? And also, I know you said, like, you're maybe changing your Smart & Final, a couple of the items to be more focused on households. Are there any specific categories, not club versus households, but category verticals within your Smart & Final that you see have an interesting shift in volume? Anything you can pick up that's interesting on certain verticals within Smart & Final? Yeah, thank you. So private label sales at Smart & Final are about 30% and across three different labels. First Street is our primary label. It represents about 85% of the private label sales, and it is a label that we are slowly integrating into our other two banners with a tremendous amount of success. In addition to that, you're seeing some First Street items in Chedraui Mexico with a lot of success as well. And this is an area where we are very excited about once we launch, once we're fully operational in our new distribution center in Rancho Cucamonga, where the full assortment of the private label will be available to our different banners. So, we're excited about that. We think it's got a tremendous sales potential, and obviously, that comes with an improved margin. So excited about that. Now, when we talk about the leaning into the household customer, let's say, our assortment is very, very targeted to both the business customer and the household customers. What we want to lean into is this perishable concept, so that the household customer begins to see Smart & Final as a first option. So instead of going to Smart & Final to stock up on center store item, we want households to think about, "Hey, I need milk, I need eggs, I'm going to Smart & Final. I need produce, I need tomatoes, I need cucumbers." That shopping behavior creates more frequent trips, and that's what we're looking for. Okay, awesome. Thank you so much for the clarification. Our next question is from Kevin Gavala with UBS. Please proceed with your question. Hi, and thank you for taking my question, and congrats on the result. First, could you please elaborate on the competitive dynamics you see in Mexico versus a year ago, and perhaps share the same-store sales by region? And if I may, the second one would be on your latest thoughts regarding inorganic expansions within the Hispanic division. Thank you very much. Thank you, Kevin, for your question. Well, on the competitive dynamics, we see a very competitive market in Mexico, but we have been able to manage and grow over our underlying comparable sales by region, in every region. I think the value proposition of Chedraui has been proving again that it's sustainable. The regions where we grow the most, still the north, the northwest and the south, but very close now, following the metropolitan area and the center of Mexico. We were able to grow over 9% same-store sales, where we have been able to sustain customer growth. We grew by 4.5% customer growth, and ticket, we were able to grow 5%. So, even though we recognize competition in Mexico, we have been able to sustain our growth in every region and to gain customers, and to increase ticket. So about the growth of the Hispanic market in the U.S., we're very bullish. We know we are doing great, but maybe Carlos can comment on that, which I think it's very important for our strategy. Yes. Thank you, Kevin. Well, our Super and Fiesta formats, as we've mentioned before, are back on a organic growth mode. We're gonna be opening four Super this year, another Fiesta that's opening this summer in the northern part of Dallas. So we're super excited about Fiesta getting back on a growth trajectory, which it hadn't been on for many, many, many years. So we're gonna continue to do that. Our real estate team is very active in the market today, but as you can imagine, we are always very open to evaluate existing opportunities in the market. I think that with all these tailwinds that we've had the last few years, folks have been very bullish on their formats. But as we encounter a more cautious consumer with normalized pre-pandemic EBT levels, we're going to be entering, and we already are in, we're in a more promotional environment where market share gains are going to be important. People are going to start thinking about whether they wanna exit the business or not, and I think that will present, hopefully, some interesting opportunities for us. As you know, our balance sheet is very strong and, we're in a position to evaluate a lot of different things. Super clear. Thank you again. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing comments. Well, I just wanna thank everyone for joining. I think that the future looks very bullish for us. We believe that the opportunity that we have in Smart & Final, Carlos have clearly expressed what we're doing, and we feel that we'll be showing positive numbers very, very soon. So thank you, and I'll be talking... We'll be talking to you at the end of the second quarter. Thank you again. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.