Good morning. My name is Sofia, and I will be your conference operator. All lines have been placed on mute to prevent any background noise. This is Liverpool's second quarter 2025 earnings call. There will be a question and answer session after the speakers. Opening remarks and instructions will be given at that time. Today we have with us Mr. Gonzalo Gallegos, Chief Financial Officer, Mr. Enrique Griñan, Investor Relations Officer, and Ms. Nidia Garrido, Investor Relations. They will be discussing the company's performance as per the earnings release for the second quarter 2025 issued last Monday, July 28. If you did not receive the report, please contact Liverpool's IR department, and they will email it to you, or you can download it at its IR website. To ensure focused discussion, this call is for investors and analysts only, and we will be taking questions exclusively from them. Any forward-looking statements made during this earnings call are based on information that is currently available. They are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks outlined in El Puerto de Liverpool's most recent annual report. Please refer to the disclaimer in the earnings release for guidance on this matter. I will now turn the call over to Mr. Gonzalo Gallegos. Good morning, everyone, and welcome to our second quarter 2025 conference call. Although we achieved robust top-line growth, this quarter was shaped by a combination of key milestones and challenges that influenced our overall results. The recovery has been slower than anticipated amid mixed consumer confidence and ongoing uncertainty. We are satisfied with the progress of our long-term strategy, even as we recognize opportunities for further improvement. Later in the call, I will provide an overview of the successful closing of our Nordstrom transaction, along with a review of its immediate and mid-term effects on our financial statements. With that, let's begin the presentation. During the second quarter, consolidated revenue reached $56.4 billion, representing an 8% increase year- over- year, with retail revenue growing by 7.3%, our financial services revenue rising notably by 15.7%, and our real estate division increasing by 6.9%. Starting with retail, our commercial segment experienced a 7.3% increase in the second quarter, while this growth was mainly driven by strong results during our flagship sales events, Mother’s Day and Hot Sale. Father’s Day performance was somewhat below expectations. Mother’s Day, one of our most successful annual events, delivered solid results, led by home-related goods, cosmetics, and women’s and children’s apparel. Similarly, the Hot Sale event was a major success. As an omnichannel retailer, this activity involves both our online and physical stores, showcasing strong performance across categories, particularly in men’s apparel and accessories, children’s products, cosmetics, and home decor. However, calendar effects negatively impacted our results, including the absence of one weekend of promotional activity compared to Q2 2024. Additionally, the spring/summer sale was rescheduled by a week to help reduce the impact on profitability. Liverpool’s same-store sales increased by 4.7%, primarily driven by a 5.8% rise in average ticket, partially offset by the previously mentioned negative effects and a 1.1% decrease in traffic. Although sales are below our typical performance, we remain focused on factors within our control. Key highlights of our strategic progress include growth in cosmetics, home goods, and sports categories, solid e-commerce performance, and the startup of our new logistics hub. On the other hand, Suburbia same-store sales increased by 8.2%, mainly driven by a 10.2% improvement in average ticket. This rise is linked to a shift in product mix, with hardlines categories outpacing growth in apparel. Moving to margin, our consolidated retail margin for the quarter declined by 210 basis points to 31%, largely due to an extensive calendar of promotional events aimed at stimulating sales and effectively managing inventory levels. Additionally, unfavorable exchange rates, as well as tariffs introduced in Mexico in December 2024 on certain textile imports from countries without a free trade agreement, increased our import costs and posed further challenges. Rising logistics expenses, particularly those linked to the ongoing migration to our new soft lines logistics center at Arco Norte, also contributed to this decline. During the quarter, we incurred approximately $216 million in one-time relocation costs associated with this transition. From an operations perspective, we are pleased to report that approximately 70% of SKUs have now been migrated to the new facility, and we anticipate these transitional costs will return to normal levels as the operation achieves full stability. Total inventory increased by 22.6% overall. There are two different explanations for this growth. First, in Liverpool, inventory rose by 20%. This increase is driven by two reasons. Approximately half of the growth aligns with the overall sales increase, reflecting normal inventory needs and in line with the inventory reduction plans we shared at the beginning of the year. Most of the other half results from advance in transit merchandise for the upcoming fall-winter season. This reflects a decision to accelerate some imports to help mitigate potential delays and ensure timely receipt of seasonal goods. We're expecting transit inventory levels to normalize during the third quarter. Secondly, in Suburbia, inventory grew by 40%, mainly driven by a slowdown in store openings, increased market share in certain categories, rising import costs, and a high baseline from the beginning of the year. While the level of obsolete inventory remains within normal ranges, monitoring and control efforts are ongoing. We're confident in our promotional plans for Q3 and expect inventory levels to normalize by early Q4. Now, moving to e-commerce, our omnichannel strategy continues to deliver strong results, leading to an almost 24% year-over-year increase in total GMV. Liverpool's digital share has increased substantially, reaching 33% and surpassing the significant 30% threshold, and also reflecting a substantial 440 basis point improvement. Additionally, monthly active users of the Liverpool Pocket app increased by 17%. Suburbia also showed robust digital growth, with its digital share of sales rising to 8.6%, a 180 basis point increase, while its app monthly active users expanded by almost 25%. Kiosks now account for 2.3% of total sales, achieving a 71% increase compared to the same period last year. In our marketplace, we experienced significant growth, reaching 21.6% versus last year, with an impressive 30% increase in June and reflecting a significant step up from the level posted in Q1. To give some perspective, in the third quarter of last year, we launched an initiative to align third-party products more closely with the Liverpool core offerings, aiming to enhance clarity and improve the overall shopping experience for our customers. As part of this effort, we streamlined our product selection, which resulted in a reduction of SKUs. This allowed us to focus on higher demand items and deliver a more coherent and seamless shopping journey. Special emphasis was placed on categories such as cell phones, women's and sports shoes, mattresses, and other furniture, and newborn items. In addition, we enhanced our services and support for our sellers, including improvements in logistics and other administrative areas. These changes allowed us to see an inflection point in performance during the second quarter. We are encouraged by these early results and look forward to maintaining and building on this momentum in the months ahead. Our fulfillment channel showed that click and collect made up 42% of total orders. Additionally, almost 55% of Liverpool soft lines deliveries were completed within two days, demonstrating our ongoing commitment to speed and efficiency in delivery. Turning to financial services, revenue increased by 15.7% year- over- year, primarily fueled by a strong 13.2% growth in our credit portfolio. Currently, growth in our financial revenue exceeds that of our retail segment due to a growing cardholder base, increased adoption of our own credit cards as the preferred payment method, particularly on our e-commerce platform, and a rise in off-house purchases. Our total cardholders grew by 6.7%, surpassing the 8 million milestone for the first time and marking a significant achievement in our ecosystem. I'd like to take a moment to highlight that later this year, we will celebrate the 100th anniversary of Liverpool's credit business, making these milestones a fitting part of that historic occasion. Additionally, Liverpool's internal payment methods reached almost 53% of sales, representing a 210 basis point improvement, while Suburbia's internal payment share rose by 180 basis points to reach 35%. NPLs ended the quarter at 4% flat, a 42 basis point increase. As we have indicated before, this rise is in line with our expectation and demonstrates our internal approach to gradual risk expansion, supported by effective risk management practices. During the quarter, we adopted a more conservative approach to our overall coverage ratio, increasing it by 50 basis points to 9.9% of the gross trade portfolio. Additionally, our bad debt reserve remains robust at 2.7x the NPL balance. Accordingly, we recorded a provision for credit losses of $1.6 billion, representing a 56% increase compared to the previous year. This increase was driven by growth in our credit portfolio, as well as the previously mentioned rise in NPLs and the more conservative coverage ratio discussed earlier. Importantly, despite the substantial increase in reserves, this impact was offset by a corresponding increase in revenues from our financial services segment. Given our cumulative credit loss provisions to date, we now expect full-year NPL provisions to increase between 30% and 35% relative to our 2024 full-year figures. Importantly, this increase does not alter our guidance for the NPL ratio at year-end, nor do we anticipate a reduction in profitability, as we expect to set high provisions with increased income within the same segment. Moving to real estate, our division's revenue increased by 6.9%, primarily driven by improved lease spreads and the expansion of net leasable area. This growth was supported by expansion across various shopping centers, most notably the previously announced addition of a new wing to our Galerias Metepec shopping center, which added 55,000 square meters, effectively doubling its original size. The slight decline of 40 basis points in overall occupancy to 93.6% is directly attributable to the increased leasable space. Given the factors discussed, our consolidated gross profit margin for the quarter declined by 140 basis points. This decrease is primarily driven by a reduction in retail margin, partially offset by a higher contribution from financial services, which improved the overall profitability mix. Operating expenses for the quarter rose by 12.4%, primarily driven by increased costs related to minimum wage adjustments, impacting both our internal payroll and labor-intensive services provided by third parties. Additionally, we made seasonal investments in marketing and, as previously noted, further strengthened reserves for non-performing loans, all of which contributed to the overall increase in expenses. Quarterly EBITDA reached $8.6 billion, representing a 7.1% decrease year- over- year, leading to an EBITDA margin of 15.3%, 2.5 points lower than last year. Regarding non-operating items, two additional factors impacted our P&L. First, we faced higher financial expenses following the $1 billion bond offering completed in January, and additionally, part of our cash position was allocated to the Nordstrom transaction, which reduced interest income. Second, currency translation losses related to our dollar-denominated cash holdings. Accordingly, consolidated net profit after tax was $3.3 billion, reflecting a 47% year- over- year decrease. Turning to capital expenditures, our investments in Q2 reached $2.1 billion, bringing the cumulative investment to $4.2 billion. These funds are primarily allocated to strengthening our logistics infrastructure and renovating our existing store network. Compared to 2024, CapEx decreased by 18%, primarily driven by the investment in the Altama Tampico shopping mall made earlier last year. Our cash flow from operations for the quarter was a positive $2.1 billion, mainly driven by our strong operating profit and the gradual normalization of our inventory position. As previously announced, our net debt to EBITDA ratio has changed following the Nordstrom acquisition. Nevertheless, we continue to maintain a strong financial position, ending the quarter with $9 billion in cash and a healthy net debt to EBITDA ratio of 0.96x. We are proud to showcase an important achievement for our company. On May 20, El Puerto de Liverpool, along with certain members of the Nordstrom family, completed the acquisition of Nordstrom Inc. for a cash purchase price of $24.25 per share. Shareholders of Nordstrom immediately before the closing also received a special dividend of $0.25 per share, as well as a dividend of $14.62 per share for the current quarter. As a result of the transaction, Nordstrom shares were delisted from the New York Stock Exchange on May 21st, taking the iconic retailer private. Following the acquisition, El Puerto de Liverpool owns a 49.9% equity stake, while the Nordstrom family holds the remaining 50.1%, establishing a strong partnership for the future. For Liverpool, this transaction involved a new investment of $1.23 billion, in addition to the close to $300 million invested in 2022 to acquire our original 10% stake. This investment was funded through a combination of internal resources and external financing. The latter was secured in mid-January via the successful placement of $1 billion in senior notes. This debt offering included two tranches of $500 million each, with maturities of 7 and 12 years. From a risk management perspective, the principal of these notes was hedged, resulting in a weighted average rate of 10.34% in pesos. This acquisition aligns with our long-term strategic objectives and is supported by several key factors. Most importantly, we expect a sound and sustained return on our investment over time. It also provides geographic and currency diversification, generating hard currency cash flows through dividends. Additionally, we see potential for collaboration in areas such as e-commerce, advanced analytics, logistics, private label development, loyalty programs, and customer services. Furthermore, this partnership broadens our access to brands and opens doors to new and promising opportunities for our portfolio. For the February-April 2025 quarter, Nordstrom performance showed a 3.4% increase in total net sales. Adjusted EBITDA margin improved by 280 basis points, reaching 6.4%. Net income for the period was $49 million, a significant recovery from a $39 million loss in the same period last year. Liverpool's share of Nordstrom earnings contributed to $144 million this quarter. This amount accounts for the contribution for May from the closing date to month end. Since Nordstrom follows a different accounting calendar than Liverpool, we plan to report Nordstrom's results with a one-month lag, except for December, when we expect to include the full monthly results within our fiscal year. Consequently, our Q4 results will reflect a four-month contribution from September to December. We are currently in the process of reviewing the acquisition accounting entries under IFRS 3, with completion anticipated in Q3. This, along with our proportional share of acquisition-related expenses, will be incorporated into our financial statements as soon as available. The main changes you should anticipate in our P&L are driven primarily by three factors: equity accounting adjustments, acquisition-related costs, and interest expenses, reflecting changes in our debt position following the transaction. Looking ahead under the equity method of accounting, we anticipate recognizing a benefit of approximately $210 million, representing 49.9% of Nordstrom's net income for June to December. This benefit already includes a portion of the estimated $80 million in acquisition-related expenses. Lastly, as previously announced, while interest expenses will be incurred from the $1 billion bond issued in January, our interest income will also be reduced as we use part of our cash to fund the transaction. On a cash basis, we will benefit by dividends received from our investment. For perspective, dividends collected through June represent $9.2 million, and we anticipate to receive approximately $17 million during the second half of the year. Regarding corporate governance, Nordstrom's new board of directors consists of seven members. Three are appointed by Liverpool, three by the Nordstrom family, and one independent director who is appointed jointly. Decision-making requires a majority of votes, which must include at least one vote from Liverpool and one from the Nordstrom family, thereby ensuring balanced influence and fostering collaboration in the company's governance. We are thrilled to partner with a highly respected and trusted brand like Nordstrom, benefiting from their strong 120-year legacy in the US retail industry. We also extend our best wishes to our partner, Nordstrom, as they assume the roles of co-CEOs. Their proven leadership will be crucial to the ongoing success of this iconic brand. Moving to recent events, we are pleased to announce that we have surpassed 80% occupancy in the new wing of our Galerias Metepec shopping center, marking a significant milestone in this expansion. With a total investment of approximately $2.7 billion and spanning almost 55,000 square meters, effectively doubling the size of the existing mall and allowing us to expand the Liverpool store by over 4,000 square meters, this development offers a highly attractive array of fashion and entertainment options. The two wings of the shopping center are now connected through a new selected culinary journey, which enhances the overall visitor experience. We believe this strategic development will generate long-term value and foster a more diversified and appealing tenant mix within our portfolio. We continued our expansion with six new Liverpool Express units, bringing our total to 52 locations. We also opened two new Suburbia stores, one located in Acapulco and the other one in Aguascalientes. On June 10, we announced the termination of our distribution agreement with BYD. This strategic decision allows us to further strengthen our core commercial offerings and focus resources on areas that deliver the most value to our customers. During these transitions, we are committed to maintaining high service standards and ensuring a seamless, uninterrupted experience for our clients. We sincerely appreciate the trust BYD has placed in us over the past three years, and we also wish to recognize our employees for their ongoing dedication and hard work. Also, on June 10, Fitch Ratings recently affirmed Liverpool's rating as AAA MEX and A1+ MEX, with a stable outlook alongside international risk ratings of BBB+ in local and foreign currency. Beyond our physical growth and transformations, we're proud to share some recent awards and recognitions for our achievements. El Puerto de Liverpool has been included in the Forbes Global 2000 for 2025, ranking 56th within the retail sector, highlighting our commitment to excellence and growing global impact. In the recent Corporate Sustainable Pools 2025 report by Roland Berger and Universidad Panamericana, we were recognized for excellence in corporate sustainability, positioning Liverpool among the top three leading companies in Mexico. For the third consecutive year, Mercotalento 2025 recognized Liverpool as a top company for attracting, developing, and retaining talent, securing first place in the self-service and department store category and 11th overall. We achieved a perfect score of 100 points in the Honor Corporate Integrity Index 500 report by International Transparency and Mexicans Against Corruption and Impunity, ranking among only 60 companies to do so, reaffirming our strong commitment to business integrity. Liverpool was honored with the E-commerce Award Mexico 2025 in the Fashion and Style category by the E-commerce Institute and the Mexican Online Sales Association, highlighting our leadership in online retailing. Finally, Moda's Fashion Map 2025 ranked Liverpool as the seventh among the top 10 department stores worldwide, recognizing our increasing competitiveness on the international stage. In conclusion, despite the challenges faced in Q2, we remain confident that our ongoing investments will deliver strong results, enhance our margins, and drive solid performance in the future. Thank you all for joining us today. We appreciate your participation. We are now ready to open the floor for your questions. We will now conduct a Q&A session. If you would like to ask a question, please press the Raise Your Hand button located at the bottom of the screen. If you are connected via telephone, please dial star nine. We remind you that all lines have been placed on mute. When it is your turn to ask a question, you will be unmuted. If you have placed yourself on mute, you will need to unmute yourself to ask your question. Our first question comes from the line of Ben Theurer. Please state your company name and ask your question. Yeah, hi, good morning. This is Ben Theurer from Barclays. Two questions, Gonzalo, and thanks for the presentation. First one on Nordstrom. Obviously, now that the deal closed, finally we can ask questions, hopefully get some answers. The very first one really is, I know it's early on, but you've had a stake of about 10% for a while. Could you share with us maybe some initial thoughts as to what you expect to get out of this investment in terms of like learnings, maybe back to Liverpool, and what you think you can contribute towards the JV with the family from Mexico into the U.S. in order to make this investment really worth the effort? That would be my very first question, and I'll have a quick follow-up. Thank you, Ben. I think there are some areas where we have identified potential opportunities. Liverpool and Nordstrom have some aspects of the business that are similar between each other. The things that we expect to get out of this partnership, first and foremost, is a strong return on the investments through growth and through dividends. On the Liverpool business, there are some areas of potential opportunities. Nordstrom has a very robust e-commerce capability. For perspective, their share of e-commerce is 40% of sales compared to the 30% that we have in Liverpool. There may be some best practices that we can share. Together with that, in items like advanced analytics, they generate a lot of data, and they have all these practices to exploit that data, similar to what we do. They have a full logistics development in the U.S., and we do in Mexico. Given the economic integration between the two countries, there may be some opportunities about the overall logistics, and maybe we can have some vendors providing services on both sides of the borders. There may be some opportunities there. They have private labels that they develop on their own, and they do a lot of this production in Asia, similar to what we do. They have a strong loyalty program, and we're in the process of relaunching our own loyalty program. There may be some pitfalls that we can avoid based on their experience. Quite frankly, the overall customer services, as you know, Nordstrom is renowned because of their customer service, and so is Liverpool. There may be some opportunities on collaboration. In the short term, we are benchmarking what they do versus what we do in order to confirm whether there is an opportunity. Those are the types of things that we're looking at. In terms of the overall merchandising, they have access to brands that we, at the moment, don't have access to. That may expand the opportunities to grow our portfolio. Those are the types of things that we expect to get out of these investments, Ben. Okay, perfect. A quick one. I mean, you've highlighted you've had a very good promotion period, with only Father's Day being a little bit on the softer side. As it relates to the Liverpool banner same-store sales growth of 4.7%, could you share with us how much of that was driven by traffic versus ticket, just given that there was so much promotioning in there? I'm wondering how the composition was, if you could at least maybe give a little bit of a guideline around that. Sure. In Liverpool, most of the growth was driven by average ticket of almost 6%. That was partially offset by some negative calendar effects and a 1% decrease in overall traffic. Okay, perfect. Thank you very much. Next question comes from the line of Renata Cabral at Citibank. Please ask your question. Hi, everyone. Thank you so much for taking my question. My question is related to Arco Norte. Regarding the overlap costs from the existing distribution centers, how do you see these expenses trending down into next year? When do you expect these full efficiencies from the Arco Norte to materialize? My second question is, last quarter you gave some overview about the conclusion of the project, just to understand if the timeline is still in place to have a lower impact on the fourth quarter this year in terms of expenses. Thank you. Thank you, Renata. We are happy with the start of this operation. For perspective, we have now migrated about 70% of total SKUs from the previous warehouse to the new warehouse. Even though we have had some challenges, the overall timeline remains on track, and we are happy with how things are going. In terms of one-time expenses, we anticipate about $1.2 billion of one-time expenses, and out of those, about $500 million are already reserved. The amounts that are reserved are related to potential people expenses and write-offs on assets on the previous warehouse. The rest are the expenses related to operating on two warehouses simultaneously. Up until June, we have posted a little over $200 million out of those $1.2 billion, and that is slightly below our original expectation. We feel pretty confident that the actuals will be in line or slightly below the $1.2 billion that we anticipated. We are not anticipating those one-time expenses to go into our 2026 P&L. In terms of the stabilization of the new operation, we expect to achieve a stabilization around September or early October in order to be ready to cope with the high demand of the fourth quarter. We expect to derive operational efficiencies somewhere next year. As you can imagine, this is a very complex project. We expect 2025 to be focused on the startup and the stabilization of the operation. Once the stabilization point is reached, we intend to focus on efficiencies, and we expect to derive some of the benefits of those efficiencies throughout 2026. Very clear. Thank you so much, Gonzalo. Thank you. Next question comes from the line of Andrew Ruben. Please state your company name and ask your question. Hi, Andrew Ruben from Morgan Stanley. Thanks very much for the question. I'm curious to dig in a bit more on the sales trends. We saw that both banners lagged the ANTAD index for the quarter, whereas the past handful of quarters you guys had been above. I'm curious what you see driving that divergence. The related question, it seems like some of your commentary on kind of macro and consumer conditions was incrementally negative, and I'm curious how to reconcile that with what we're seeing for the industry, which was a quite strong 12% growth for the quarter. Thank you. Thanks, Andrew. Let me start with a sales comparison versus OnTod. Our sales growth for the second quarter was somewhat below the OnTod average. This mainly comes down to two things. Liverpool's numbers, which were impacted by having one less promotion weekend, and that we rescheduled our summer sale for a few days. Last year's OnTod figures were relatively soft, and we believe some of our peers posted somewhat low numbers, which affects the overall comparison. That said, our cumulative sales growth still looks strong and is actually a bit ahead of the OnTod growth. This quarter's numbers don't tell the full story, and we don't think they are indicative of our overall trajectory. Now, talking about the consumer, as you know, the overall environment is a bit uncertain, and we're certainly noticing customers are becoming more selective about where they spend. For example, in apparel, over the past few weeks, the products that have shown weaker performance are those we know are relatively low discounts. In contrast, seasonal and clearance items are moving pretty strongly, which is a positive sign, especially considering our current inventory position. In that environment, we think we will have to focus on the things that we can control, like good customer service, plenty of inventory, and great merchandise, because they will be very important throughout the second quarter. We're encouraged for the results, particularly in some categories like cosmetics, home goods, and sports. All of those are backed by our solid e-commerce performance that, as I said earlier, had a very strong quarter. That's all very helpful. Thank you. Thank you. Next question comes from the line of Robert Ford. Please state your company name and ask your question. If you have placed yourself on mute, you will need to unmute yourself to ask your question. Thanks. Bob Ford, B of A Merrill. Gonzalo, in your prepared remarks and your response on synergies, you excluded developing Nordstrom or the Rack or other off-price concepts in Mexico. How should we think about those possibilities? With respect to just sales in July, can you discuss the trend month to date and maybe how you're thinking about merchandising strategies over the balance of the year and any inventory exit plans you may have? Thank you so much. Thank you both. At the moment, we are not planning to bring the Nordstrom brand to Mexico, not in the full-line format, nor in the Nordstrom Rack format. That is something we, on paper, it seems like an obvious discussion. However, it's a very complex discussion about how to bring value into the market and capital allocation and a number of things. It is a really complex discussion. At the moment, we have no plans to bring either of those two brands to the Mexican market. On the other way, we're not thinking on exporting the Liverpool brand into the U.S. Now, talking about July, let me start by saying that July numbers are not entirely comparable, given that we rescheduled the summer sale for a few days. The peak of the sale is still to come in early August. Having said that, July sales have been somewhat soft. As I said, the products that have shown weaker performance are those with no discounts or with relatively low discounts. Given that seasonal and clearance items are moving very strongly, that's good because it provides an opportunity to clear our inventory. With about 10 days remaining in the promotion, and if the current sales trend persists, we expect a similar percentage of obsolete merchandise as last year at the end of the summer sale. Talking about the inventory exit and the implication in margin, we expect the margin to bounce back in the second semester. There are a number of reasons for that. Number one, we're comfortable with how things are going within Liverpool inventory. We don't expect the second half of the year to be as promotion-heavy as the first half. Second, the current exchange rate is working in our favor, in the sense that we have a number of imports not only done directly, but also through our vendors. The exchange rate should help improve our margins in the coming quarters. Third, last year we experienced some delays with imported merchandise, but we don't expect that this year. That should also help the overall performance because we have the merchandise available earlier. Sales vary. Sales even in the second quarter, sales vary across categories like cosmetics and home goods and sports. Taking everything into account, we expect inventory in Liverpool to normalize during the third quarter and in Suburbia at the beginning of the fourth quarter. Talking about our return margin, that we currently have a contraction of about two points versus last year. We expect a margin decrease of around 25 basis points in the second half, which means that our average margin for the year will be roughly 100 basis points below 2024. Very helpful, Gonzalo. Thank you so much. Thank you. Next question comes from the line of Irma Sgarz. Please state your company name and ask your question. Hi. Thank you for the opportunity to ask a question. I was hoping to just get a little bit of follow-up on both the Nordstrom as well as on sort of the macro outlook. Maybe starting in Mexico initially, just in the context of an environment where the consumer is near-term a little bit weaker, how are you thinking about risk-taking in your consumer finance operation? I saw you obviously took your coverage ratios up from a perspective of taking a conservative stance. I heard your earlier comments about provisioning for the full-year expectations, but just in terms of when you think about approval rates and portfolio growth into the next two quarters, I'd love to hear just how you're thinking about your risk appetite and cost of risk. The second question, just regarding Nordstrom, it'd just be helpful if you could lay out a little bit more of from through the board perspective. On the back of the second quarter results, how you're thinking about the outlook into the second half of the year. Any type of feedback on the actual operational results would be incrementally helpful. Thank you. Thank you very much. Let me start with the overall economic outlook on our overall risk. At the moment, we feel very comfortable with the risk that we are taking. As you know, since last year, we have made a deliberate effort to take on more risk. Our intention is to return to levels similar to what we had in 2019. For perspective, our current 4.0% of NPLs ratio compares to 5.6% in the second quarter of 2019. We believe we still have a lot of room to grow our risk appetite without incurring in an NPLs ratio that is a concern. The way we see it is we're based in customer segmentation. Customer segmentation that is done at the customer level works in two ways. One consists of continuing our strategy of portfolio growth with high-value customers and with customer segments that are attractive for our credit business. For those customers, we continue offering products and overall credit offerings that are attractive to them. On the other hand, we have another set of customers that may be showing some signs of deterioration on their credit profile. That's why we countered some of the segments where we're expanding credit with the loss provisions and some other practices in their riskier profiles. We feel comfortable with the risk we have taken on. As you've seen, the overall growth of our financial services business has been really strong. Even though the loss provisions are high, we're offsetting that with additional income, so it's not hurting our profitability. Our intention is to continue building on that success to grow more the financial business that provides a higher profitability than our retail business. It helps us with the overall profitability mix. Also, given that our own payment methods continue growing, the investments and the growth in our credit business also helps our retail business. The intention is to continue driving higher credit appetite to support both of our business segments and more or less to return to the 2019 levels. The second question regarding Nordstrom, you were asking about the overall board composition. We have three board... The new board has seven directors, three appointed by Liverpool, three by the Nordstrom family, and one independent director that is appointed jointly. We have 50% participation in all the key decisions. The major decisions require at least one vote from Liverpool and one vote from the Nordstrom family in order to ensure this parity in decision-making. From an operational standpoint, we expect to continue the strong plans Nordstrom management had during the first semester of the year. We expect to continue with those very strong plans, and we are encouraged by the results up until this moment. Thank you. Perhaps, if I may, it would be helpful if we at some point of the investment community had a chance to dig into that in a little bit more detail, just being a private company. There's less information now available, but we can follow up maybe offline. Thank you. Okay, thank you very much. Our next question comes from the line of Antonio Hernandez. Please state your company name and ask your question. Hi, good morning. Thanks for taking my question, Antonio Hernandez from Actinver. Just a quick one regarding remodeling in Suburbia. How far away are you in this plan, and how did that contribute as well to the strong same-store performance, at least outperforming Liverpool? Thanks. Thank you, Antonino. We are committed to provide an enhanced shopping experience for the Suburbia customers. We have invested in the last few years around $500 million in CapEx to renovate a number of stores. We have tiered or separated the renovations in three levels. We have some light ones that include fixtures and lighting and some other minor changes. On the flip side, we have major renovations for those based out of Mexico City, like the Suburbia that is in Parrock, in the south of Mexico City, close to the Plaza Universidad shopping center. We did that, a full renovation, and this is almost like a brand new store. It's really beautiful. For those based out of Mexico City, we invite you to experience that and to give us your comments. Quite frankly, we are finding that customers are surprised by coming into the new Suburbia. They are really different to what they used to be back in 2017. That's one of the reasons why we believe Suburbia same-store sales are doing relatively well. It's a combination of an enhanced shopping experience coupled with better merchandising and with a more clear separation between our own brands and clear signage. There's a lot of improvement in the merchandising, but also in the overall marketing and signage and the in-store experience. To strengthen the overall omnichannel experience, we set up some internet kiosks at the store, recognizing that a few of our customers may want to have an expanded catalog and to have an online experience at the store level. That's part of the renovations. If you take it as a single channel, the Suburbia kiosk is the largest store, and it grew like 70% during the second quarter. Just the sales out of the kiosks grew by over 70% versus last year. We feel very comfortable with the renovation plans we have in Suburbia, and we intend to continue that in the upcoming quarters. Thanks. I appreciate the call, and I'll certainly visit that store. Thanks. Thank you, Antonino. Our next question comes from the line of Julio Martinez. Please state your company name and ask your question. Hi, good morning. Julio Martinez from Zura Investments. I have two quick questions. Could you please provide us with more details regarding the increase in accounts receivables and inventory, as these have caused the cash conversion cycle to lengthen in days? What is the strategy to reduce this value in 2025 and 2026? My follow-up question is regarding BYD. Could you please provide more context and color regarding the decision to end the strategic partnership with BYD? Thanks. Thank you, Julio. Let me start with the asset increase, and there are two separate answers to that. In the account receivable front, that is something that we have deliberately worked to increase. The loan book had a $7.3 billion increase, and that's because we have benefited from a combination of things. Number one is the overall growth in our retail business, but we're also growing the participation of our internal credit cards as a preferred payment method in our physical channel, but most notably in our e-commerce channel. We are offering additional services like personal loans and a number of products rather than services that we have offered the customers. The combination of that allowed the loan book to grow by 13%. Now, regarding inventory, it's also a combination of items. We ended 2024 with a relatively high position, and we have also, from a cost standpoint, the import cost has increased because of new tariffs on textiles out of countries that don't have a free trade agreement with Mexico. That's another piece. We had a higher exchange rate or had a higher exchange rate, especially in the first semester compared to the first semester of 2024. We have had some growth in some categories, like in Suburbia, for instance, that have affected the overall inventory mix. The intention with the inventory, we had to separate Liverpool and Suburbia. In the case of Liverpool, the inventory growth is divided in two parts. About half of the growth in Liverpool is directly attributable to the growth in sales and is completely in line with the inventory reduction plans we set up back in January. The other half is concerning that last year we had some delays in some imports. We advanced some of the import processes to make sure we have the inventory on time this year. These merchandise in transit, we expect to normalize before the end of the third quarter. In the case of Suburbia, it's the same combination of items, and we have struggled to achieve a reduction similar to Liverpool because the overall size of the business is smaller and because we also have a slowdown in the expected store openings. That's why it has taken a longer time to normalize. Talking about BYD, we decided to terminate the distribution agreement, basically to focus on our core commercial offering and to devote our resources to the activities that add the most value to the consumers. In terms of our P&L, BYD represented about 1% or 1.5% of our total revenue. In profit, it was a very, very small benefit. When you look at, you talk about allocation resources and where we need to focus, we thought we could benefit from a higher focus on the things that we have shared about building or enhancing our logistics capabilities and continue growing our marketplace and our e-commerce platforms and to do store renovations and those types of things. We simply decided to allocate the resources to the activities that deliver the most value to our customers. That is why we decided to terminate this agreement with BYD. As I said, we were grateful for the confidence that BYD placed on us for the last three years, but it was a matter of resource allocation. Okay, thanks very much. Next question comes from the line of Daniela Bretthauer. Please state your company name and ask your question. Hi. Thanks for taking my question. This is Daniela Bretthauer with HSBC. I just wanted to follow up on the question of the gross margin to understand better the decrease in H1. You commented that you expect that to return, you know, to recoup some of the margin by H2, but that for the full year, you should still be down 100 bps. I just wanted to clarify if I got this correct. If you could break down, like you've been, it's been very helpful when you commented on like half was related to this and half to that. If you could do the same for the gross margin in H1, what happened there, and the ability to recoup that for the second half? Also, as part of this margin question, I just wanted to understand the tariffs increase, the impact for Liverpool. It looks like, as you mentioned, your prices have gone up. Is that already a reflection of higher tariffs on apparel? If you could comment on that, I appreciate it. Thank you, Daniela. Let me go back to our margin. What I tried to explain is that even though our cumulative margin is, I'm talking about retail margin, our cumulative margin is about 200 basis points below 2024 first semester period. We expect our margin to bounce back. There are three reasons why I expect, we expect our margin to bounce back. One is that we're happy with how things are going with Liverpool's inventory. We are not expecting the second semester to be as promotion-heavy. The lesser the promotions, the higher the margin because we get more sales at full price. The second is the current exchange rate, that if it stays around the current levels, that also helps. The third is that we experienced some delays with some of the imported merchandise last year, and we don't expect that to be repeated this year. The combination of the three, we still expect to have a reduction in the second semester compared to 2024 second semester, but we expect that to be relatively low in the 25 basis points range. If you do the math between the two percentage points in the first semester with around 25 basis points on the second, the weighted average turns out to be around a 100 basis points reduction. Just to clarify, the tariffs didn't really have an impact on your margins because isn't the delay or the decision to anticipate merchandising sort of related to the tariff changes? They do have an impact because the overall import cost is part of the cost of sales. The higher the import cost, the higher the cost of inventory. Unless the price is adjusted, it eats into the margin. The tariffs that I'm referring to is that in late December of last year, there was a decree that was published by the Mexican government imposing temporary tariffs of additional 10% of various textile and apparel imports from the countries that do not have a free trade agreement with Mexico. Most of the tariffs we're trying to push into prices, and that's why we have some pricing increases in both Liverpool and Suburbia in order to make sure the cost structure is consistent to what we have done and we have agreed with the brands. There has been an impact in terms of the cost and in terms of the margin. However, we have recuperated part of that through selected price increases in some brands. Thank you. That's very clear now. If I may follow up with a question on your credit portfolio. If you mentioned that you believe that there is still risk appetite to increase the NPLs further. You mentioned a little over 5%, which was the level pre-COVID. You think that there is room to increase that. If that's the strategy, you may also have to increase the provision for bad debt. There will be, even though you are confident on your ability to recover some of the gross margin for H2, perhaps there is room for pressure on the EBITDA margin because of the way you're going to manage your credit portfolio. Is my understanding correct? Yes, yes, it is, you are correct. We still see room. Our intention is to return to pre-COVID levels. You're right, back in the second quarter of 2020, sorry, of the second quarter of 2019, our NPL ratio was 5.6%. That gives you a sense of how much space we have between our 4% flat versus this 5.6%. Our intention is to return to pre-pandemic levels, more or less in the range of what we saw in 2019. You're also correct, given the size of the portfolio and the current rate of growth in the portfolio, that's a combined effect from an NPL provision standpoint. If you grow the portfolio, say 10%, and you grow the NPL, say another 10%, then there's a cumulative effect where the NPL provisions grow by the combination of those two factors. What we're expecting is NPL growth, not the NPL, the NPL provision growth of around 20% during the second semester compared to the second semester of last year. If you compare the 40-something percentage growth that we have through June, and you combine that with a growth of around 20%, that provides the weighted average 30 to 35% increase that I mentioned earlier. Now, from an EBITDA perspective, that certainly puts some additional pressure on our EBITDA. At the moment, we are not changing our EBITDA margin guidance because we're expecting our margin to bounce back. Even though in overall expenses, we will have to absorb these additional NPL provisions, we expect to offset the NPL provisions through increased revenue in credit. For now, we're sticking with our original EBITDA margin guidance as we currently expect to be at the lower end of that range. Very clear. Thank you very much. Thank you, Daniela. Thank you. That concludes your question and answer session. I would now like to hand the call back over to Gonzalo Gallegos for some closing remarks. Okay. Thank you, everyone. If I can do a longer comment this time, we think sales through June are solid and ahead of anticipation. Inventory has been a challenge since Q4 last year, but we're happy with how Liverpool inventory is shaping up now. The current exchange rate is also helping us, and last year's import delays are not something that we are expected to see during this semester. NPLs are under control. The increase in NPLs was mainly because we deliberately were to take on higher risk. That's why we decided to strengthen the reserve, which seems high, but keep in mind that the loan book grew by $7 billion. The sheer volume of the credit business is very high too. Besides, we're offsetting that provision with more credit business, so it's not hurting our overall profitability. The only thing that's been a bit of a negative surprise is our margin, but we believe it will bounce back soon. Quite frankly, we're not too worried about the midterm health of the business. Right now, we're focused on the things that we can control, like inventory, margin recovery, NPLs, SG&A, to get back on track. Thank you once again for your time. We appreciate your interest, and we look forward to speaking with you on our next call. Have a great day. Thank you. That concludes today's call. You may now disconnect.