Good day, everyone, and welcome to today's Organización Soriana second quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note, today's call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to CFO of the company, Rodrigo Benet Córdova. Thank you very much. Hi, good morning, everyone. Thank you for joining me in this conference call regarding the second quarter results. I would like to begin with general comments regarding the start of our most important commercial campaign, Julio Regalado. That this year we use the slogan, "Lo Regalado Te Llega," mainly referring with our new e-commerce and delivery service. Basically, this campaign started the last week of May, and on this occasion, our bet was invest in advertising through mass media across the country, like every year, but also with a high impact in other channels like social media, through principal platforms like Facebook, Instagram, TikTok, and YouTube, which have been positive for our omni-channel strategy and very important channels to engage with the new generations and future clients. This media strategy, we consider, has been a strong mechanism in order to transmit all the benefits that this campaign of Julio Regalado has to offer to our clients and the public in general. Due to the economic circumstances and considering the new purchasing power of the population, mainly because the effect of the high inflation that the country has been suffering the last two years, in this year, we decide to adjust the promotional mechanism in order to offer promotion at a category level instead of a single product, which has been favorably accepted. Also, by adding pricing schemes directly on price, like a second product at 50% discount or direct price reduction. Basically, in order to give another kind of promotion, not only a multiple promotion, but also a promotion in direct price, considering the effect of the inflation and probably the expectation that the purchasing power of our clients already have. As a result of the above mentioned and the efforts made in the previous months of April and May with the promotional season of spring break and Mother's Day, we closed the second quarter of the year with a 6.6% increase in total revenues and 6.4% in same-store sales. At store format level, Soriana Híper and Soriana Súper closed with a good performance, where Soriana Súper specifically reached a double-digit increase in sales since both store formats are working with a very aggressive commercial plan in which we are making improvements in product catalog within physical and the running stores. These changes are in response to the shopping behavior of our customers with a regional focus plan, where we have reached a double-digit increase in areas like the Pacific, Southeast, Northeast border, and Gulf of Mexico. Also, we are boosting our private brands in all the divisions and having a double-digit increment in sales in the division of groceries and prepared foods, and also considerably improving the results in perishables in comparison with last year. Regarding Soriana Mercado and Soriana Express store format, we continue strengthening the participation of our loyalty program, Recompensa Soriana, by offering the best product basket at the best price of the market, resulting in an increment in the participation of our private brand in a double-digit growth, and also increment of the same store sales in regions like Mexico City, Pacific, and Northeast. Basically, the line division of general merchandise, groceries, and prepared foods are the ones that are having the best performance in these two store formats. Last but not least, City Club, our membership club format, continue delivering outstanding results, and during this quarter, maintaining the lead in increase of traffic and its base of members grew 21%. Regarding sales, showed a constant double-digit growth despite of the challenges that we have faced regarding logistics, product shortage worldwide, and the effectation in delivery volumes. At a division level performance for City Club, groceries and perishables are the one with the best performance. Commercially speaking, the stores continue working in enhancing its product catalog in all divisions and working prominently in boosting the private label offer. Particularly, private label in this quarter had a growth of 28% in terms of sales. All of these positive results were achieved thanks to the right communication and negotiation with our suppliers and by offering our clients different types of products and alternatives, particularly increasing the participation of institutional business and individuals who already reach a participation of 52% of the base of members in our City Club. Moving on regarding our digital business, it's essential for Soriana to continue investing and growing in the e-commerce channels. Therefore, we reiterate our commitment to continuously working in offering a sales platform that will provide each time a better omni-channel experience, including a hybrid product catalog that includes same-day deliveries in supermarket items, as well as a scheduled deliveries option for the extended catalog, achieving an unparalleled shopping experience that offers great security and reliability to our customers. As a result of the above mentioned, we are pleased to confirm that through our digital channels, that includes soriana.com, the app, and external platforms like Cornershop, the number of orders shows a growth of 42% compared to the second quarter of the previous year. In terms of sales, an increase of more than 30%. By region, our e-commerce business have a better performance, particularly in Mexico City, the state of Mexico, Nuevo León, and Veracruz. This improvement is a result of the constant work both in technological and commercial areas. In the product side, we are increasing by 1,000 the number of products in our catalog. In the technological, we are improving our technology that is allowing us to reduce, in a very considerable way, the time that we take to make the final delivery to the client. In this regard, and also listening to our customers, we have been taking important changes. During this week or quarter, we have progressed in customer satisfaction, in specifically this business line, with a growth of 35 points in the first quarter of this year based on the Net Promoter Score methodology. Due to change in people's lifestyle, we understand that time is a very sensitive and important factor for our customers, which is why we keep working in reducing delivery times up to 30%. Right now in Mexico City and its metropolitan area, we can say that all the deliveries are in less than 1 day. Now, passing and talking about the loyalty program that comprises Soriana, this quarter we continue with a positive trend in terms of adding and enrolling new customers to our base, which has grown at 29% versus the same quarter of last year. With intention of continuously offering a greater shopping experience to our clients, in recent months, we have been redesigning the value chain, mainly the way that we work with our suppliers, and being stricter in terms of product quality and fulfillment in order to bring an offer to the next level, specifically in the division of fresh produce and in the lines of fruits and vegetables. Going directly to the numbers and going down to the P&L line, you can see in the other income that basically we closed the second quarter with an increase of 6.6% and in a cumulative term of 10.9%. This increase outstands the participation of our real estate business that continues recovering occupancy, showing an increase for the quarter of 8.2% and 15.6% for the first half of the year. Therefore, the company's total income of the quarter reached MXN 41.7 billion, which represents a 6.6% increase in comparison with the same quarter of last year, and a 7.1% increase for the first semester. Talking about the gross profits, this item reached MXN 9 billion in this quarter, which represents a 21.7% margin, with an increase of 8.7% versus last year, with a positive impact due to better commercial terms and improvement in working capital management. As a result, gross margin expanded by 40 basis points over last year. Regarding the operating expenses line, it showed an expansion of 40 basis points, reaching MXN 6 million, which represent a 14.4% of our income and an increase of 10% versus last year. This increase in operational expenses is mainly attributable mostly to the cost of personnel and due to a higher investment in maintenance in order to improve the operation in our stores and provide a better customer experience. Also, the lines of advertising and the cost of water supply were impacted. As a consequence of the variation just mentioned and the efficiency obtained at a gross profit level, EBITDA of the quarter closed with an increase of 6%, reaching an amount of MXN 3 billion, which represents a margin of 7.3%. On the other hand, regarding the financial items, net financial costs closed with the quarter in MXN 584 million, showing a decrease of 2.9% versus the same period of 2021. After the close of this second quarter, the company has a total debt of MXN 13 billion, that represent a decrease of 22% against the balance of the last year and go in line with our reduction plan. Finally, net income reached MXN 1.1 billion, equivalent to 2.8% of our income, with an expansion of 50-60 basis points, and represent an increase of 34.7% versus the same quarter of last year, and in a cumulative, a rate of 15.2%. Moving on to discuss about the progress made with our partner, Falabella. First, let me share with you that Soriana continues delivering very positive results in terms of total sales increase of 45%. This outstanding result is supported by the opening of three stores in the last 12 months, and from the good performance of its digital business, in which especially focus has been given to delivery times. Also, increases in traffic are shown even in cities where there is not a physical store, thanks to our greater e-commerce coverage. In the following months, we expect to open two stores in which we will invest a little more than MXN 350 million. In the other business, talking about the financial business with the credit card Falabella Soriana, this business is also growing. At the end of the quarter, more than 570,000 cards have been used in total, and we already have 155 models in operation. By the end of the month of June, the credit portfolio equals more than MXN 2 billion. Finally, let me update you with our expansion plan for this year. In the past month, we inaugurated a store combo in the city of Tapachula, Chiapas, in the south region of the country. These two stores, a Soriana Híper and a City Club, were very well accepted since the two formats arrived for the first time to the city, and as of today, are delivering incredible results. Also, we will continue with the process for opening another 4 units expected for the last quarter of this year. As well as we are continuing working on those big box stores that requires a sales floor organization in order to convert the remaining space into greater GLA for our business, real estate business. So you can expect that we will continue announcing the reduction of sales floor for all our hypermarket format. Also, right now, we are in the process to make 5 major remodeling in 5 of our main hypermarkets that we are expecting to end by before Christmas season and take advantage of the high sales of the Christmas season for these four stores. Without further ado to comment, this is the end of my intervention. If you want, please join us to the Q&A session. Thank you very much. At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may withdraw your question at any time by pressing star 2. And once again, for your questions, that is star and 1. We'll take our first question from Antonio Hernández with Barclays. Please go ahead. Hi, good afternoon. Thanks for taking my question. The question regarding the City Club format, are you seeing any type of shift in consumer trends? I mean, maybe consumers because of the inflationary environment and because of the nature of this business may be trading down in terms of packages or in terms of private labels? Thanks. Sorry, we have some problems in the communication. Can you repeat the question? We only hear about that you are asking about the performance of City Club? Exactly. About the performance of City Club, but not for CTP, and seeing any type of consumer trend down into smaller packages, maybe, into private labels. No. Well, basically, we can say that probably the most important source of City Club is coming from the base of membership. I think that in the first quarter of the year, we announced that City Club already surpassed 1.2 million members. Something that is having a tremendous success is that basically every month we continue with a double digit growth in terms of new members. We can say that probably the reason number one of the good performance of City Club in the last three years, because we have already three years of double-digit growth in City Club, is first of all that every month, more people trust in City Club to pay a membership because they are seeing a great value in the membership. Secondly, yes, you are right. Private brands, particularly in City Club, is one of the most important sources of growth. Particularly we have private brands that in so many cases have a different strategy than the private brands, like in Soriana, that is just entry-level private brands. In City Club we have a partnership with some suppliers in order to develop very high quality private brands. Probably, one of the important programs that we already have, we have a specific alliance with the government of Canada, in order to have a very close relationship with supplier spaces in Canada that are working together with our commercial area to develop specific products for private brand labels of City Club, and to give not only private brand, but exclusive brand for Soriana and for City Club that is giving good results. We can say that this private brand is very important in City Club, and we have to think that the private brand in City Club is not only entry level, it's also high quality private brand that help us to maintain the loyalty of our customers. Okay, thanks. Just a follow-up, could you remind us of what's your private label penetration in both City Club formats and Soriana formats? Yes. Basically, we can say that in the formats that have the highest penetration is Soriana Mercado, Soriana Express, that is high teens%. In the mix of the other formats is a little more than 10%. Okay, thanks a lot. Have a great week. Take our next question from Camila Azevedo with UBS. Please go ahead. Hi. Good afternoon. Thank you for taking my question. We were wondering if you can comment about the same-store sales performance by region, so North, Center, and South, and perhaps the same-store sales by type of merchandise and format. Thank you. Sure. Well, basically, in general, the performance is very similar across all the regions. We can say that particularly in the first quarter of the year, we had a lower performance in the north part of Mexico that obviously in our case is important because it's one of the regions that contribute the most to our sales. Right now, we can say that still the north part of Mexico have a little lag against the other regions, but in general, very similar. If we talk about divisions' performance, basically, perishables is going very, very good. Groceries is going really, really good. Right now, the category of the line of categories in which we are having a lag in the performance is non-food? Non-food groceries. Abarrotes, no perecederos. Basically, that are the ones that right now have a lag in the performance against the other line categories. Okay, thank you. We'll take our next question from Ulises Argote with J.P. Morgan. Please go ahead. Hola, Rodrigo. Just a follow-up here on private label. You commented on what the current share is, more or less, but can you give us any color on how does this compare to last year or how you have seen this evolving over the last quarters? Then the second question that I have was any color or any extra details that you can give us on what drove that lower tax rate that you had during this quarter? Thank you. Sure. Well, basically the first one about the performance of the private label, basically again last year, I'll give you a little more color. Particularly Soriana Mercado and Soriana Express already have also, this will be the second year that basically almost have a growth of double digits in the past against the previous month. And it's gaining an important market share in the total sales of the company in the total sales of the format. So again, particularly Soriana Mercado and Soriana Express. In the other formats, we are also seeing as a strategic value to continue developing the penetration of the private brand. We are working very hard to have more categories, line categories, in which we can offer private brand products, and not only private brands, also exclusive brands, products. Like how it's happening, like an example in the wine selection, in which is not particularly a private brand, they are exclusive brands that we are working really hard in order to introduce it to our value proposition. But we can say that in general, the whole company is growing double digits basically every month in private brand performance. And again, it's part of the bets that the company is doing as a differentiation against our competitors. Basically, that's it. Secondly, about the differentiation in the tax rate, basically you see is that we have an important change in the trade taxes. Basically, that is what is making the change against the same quarter of last year. Basically that positive impact out of the trade taxes is basically about some accounting items that we have last year that have an accounting effect and not a tax effect. Basically is that the main difference that is helping us in the deferred tax line. Okay. Thank you, Rodrigo. That is very helpful. Just to follow up there on the taxes. Going forward, should we kind of expect, given that change, certainly the recognition of deferred taxes to see lower effective rates? Or should we kind of continue, kind of modeling and thinking on the levels that we used to have before? You have to remember that last year we see an important increase in the tax provision because remember that we have to pay taxes. The tax authority considering an income all the liabilities that we have with no cost multiply it by the inflation. The problem is that last year was the third one in which the country had an inflation in a number that we are not used to. In 2021, in which for the first time in 20 years, 30 years, we start to see inflations above 5%, 6%, 7%. We have an important effect in which is not an accounting income, but it's a tax income. Basically what is happening all these years that when you compare to last year, we start to have a more comparable base. Basically we have also other items that are again in previous years used to be tax income but not accounting income. That will be separate. In going into the future, the comparative base will be more regular. If you remember, last year even we have a total tax rate of more than 35%, even higher than the statutory rate. What we are expecting is that going into the future, that will continue going down and it starts to be more normalized, more in the lines of the statutory. Okay. That is perfect. Thanks so much for the color, Rodrigo. We'll take our next question from Luis Willard with GBM. Please go ahead. Hi, Rodrigo. How are you? Just wanted to pick your brain and see what you think about the execution and the potency of Julio Regalado. I mean, it seems it has not been yet a material differentiator for your top line for the last several years, as opposed to what we used to see with Temporada Naranja years ago. What do you think are the drivers behind this? And specifically the new approach that you mentioned, you're carrying out this year's edition. Has it made a material difference so far? That's my question, Rodrigo. It's a good question, mainly because it's a reality that we actually have in this year. We have to make a change in the Julio Regalado scheme. Basically related with the purchasing power of our clients. I think that all of us will know that, I mean, we already have two years of very high inflation. We can say that if we have inflation of two years, the purchasing power of a lot of our clients are reduced in more than 16%. When you think that Julio Regalado basically for several years is a promotion based in multiples, three by twos, if you start to think that or we can think that is more difficult for our client, make a volume purchase of items, again, the non-food groceries, like a deodorant or a shampoo of six samples that obviously you cannot pay a very good price. But when you have an effect, a reduction of 16% just of inflation in your purchasing power, the promotion starts not to be so attractive. Actually if we want to divide the second quarter, we have an excellent April, an excellent May, and we have at the first half of June, in which we are already talking about Julio Regalado. We have a decreasing and a poor performance that was recovered in the second half of June. This first half of Julio Regalado in June is because of that, because we have to make adjustments in the promotion, and that is why we make more reduction directly in price. That is why, as I commented in my first intervention, we start to use more the second at 50% than a three by two because we are seeing that right now in certain categories, particularly the non-food groceries, the multiple promotions are not having the same effect as in previous years. Makes sense. Again, inflation, when you are talking about two years of inflation higher than 7%, has an impact in the behavior of the client. I don't know if with this I give you more color about the changes that we have and that we have to make in Julio Regalado. Well, I think that was clear. I mean, that's perfect, Rodrigo. Thank you. We'll pick our next question from Rodrigo Alcantara with UBS. Please go ahead. Hi, good afternoon, Rodrigo. Hope you're fine. Just curious here, I mean, we have talked a lot about, you know, private labels and what the strategy that you're implementing the campaign. Just curious here, your thoughts here on, I mean, at the end of the day, you're still like the second-largest retailer in Mexico, right? Just curious here, what's like the core strategy or how should we understand the core strategy of Soriana in order to, you know, reaccelerate, you know, same-store sales? I mean, taking the same-store sales above the benchmark of the past. I mean, those like in those years that we were used to in the past, you know, when you just actually reported above benchmark. Just curious here, your thoughts about the general strategy of the company, you know, going forward. If you can comment about that would be helpful. Sure. Basically, we can talk about four pillars or core strategies to improve our same-store sales. Actually one of them is one of the important reasons that not justify but improve the difference against some of our competitors. First of all, as you mentioned, it will be private brands. That is basically one of the strategies that make the most sense for Soriana. In terms of no matter that we are the second largest food retailer in Mexico, the difference against our main competitor is still very important. Obviously, they will have an advantage in terms of volume purchasing against us. Develop and grow private brands that make a differentiation and increase loyalty is one of the ways that we have to have a better defense against the purchasing power of guys like Walmart. Secondly is price. I think that this is something that we have several months talking about that. For Soriana, something that would change two years ago is that the price is not something negotiable. Again, if we have to reduce gross margin, we will reduce gross margin. We know that we doesn't have the gain or the winning perception of price in the country. We are really aware that in some areas, the number one in perception of price is Chedraui, and we have to speak nationwide is Walmart de México. There is no other way that be completely sure of our competitive strategy to gain the positioning in the minds of our clients to be cheap. We will continue investing in price. Price is also the other pillars of our strategy, in which again, we will not negotiate the competitiveness of the company. Number three is catalog of products. We know particularly in the big cities, because we have spent a lot of time in market research, in which our clients still say that we doesn't have the all the products that they want, particularly medium socioeconomic levels, in some areas against La Comer, in some areas against H-E-B. We are working really, really hard in terms to have the right catalog product. Actually, as part of the strategy, we just create an area and basically it separates it from the purchasing area in order to assure that we have the right catalog working in-store and both online. First of all, we have a specific strategy to develop regional suppliers because we know that we have an opportunity in areas like Guadalajara, that is a very big city in which our participation is still very low against the share that we have in that city. Mainly, one of the important components is that we also have the specific regional catalog. We are working on that. The same happened in the south part of Mexico. Have a strong catalog growth and specifically talking about a regional strategy is one of the lines that we are following. The other is talking specifically for general merchandise and clothes department is that we just start to develop our new area of import products. Actually, we are in the process to open offices in China in order to have a much more important presence on that part of the country. Obviously, we have several years making important purchases in Asia. We want to take that to the next level. In so many cases, even take advantage of the experience that our partners have on that, partners like Soriana and partners like Panarela. Finally, this is a very important component of the same-store sales, is that we have to continue investing to grow the participation of e-commerce. Right now, the e-commerce is probably the most important source of same-store sales for our competitors. Remember, for Soriana right now, e-commerce represents close to 2%. For our main competitors, that percentage is higher than 5%, 6%, or even 8%. If you consider that in that business, the same-store sales are in the summer months in total of triple digits, obviously have a important effect in the same-store sales of the whole company. Just to give you a simple example, right now, the same-store sales we can see in our e-commerce business is more than 30%. If instead of have a participation of 2% of our sales, we have a participation of 8% of our sales, that is something that happened in one of our competitors, the same-store sales of the total company will be completely different. Basically, there are the four most important things in which we are investing. Basically all of them, the four of them are going around the loyalty program strategy, in which we are every month using better information of our CRM in order to improve these four strategies that I already commented. No, that's very clear. Thanks for the update on that, Rodrigo. Thank you. We'll take our next question from Marisol Andrade with Credit Suisse. Please go ahead. Hi, Rodrigo. Thank you for taking my question. I just have two quick questions. I just wanted to know about what to expect on SG&A coming forward. Should we still expect some increases in personnel to still impact the rest of the year results? Or should we see any type of normalization coming at the end of the year? My second question on organic revenues, just to what accounts are falling under this description? Just to understand the increase we saw this quarter. Yes, Marisol, we had a little interruption in the sound, but just to be clear, your first question is about what to expect on the cost of personnel expense line going into the future, and the second one give you more color about the other income line in the sales. Is that correct? Yes. Yes, that's correct. Okay. Well, about the cost of personnel, it's important to mention that it's not an increase that is coming from pressure in the cost of personnel. It's an increase that is coming because we are increasing the number of people in our stores. That is coming because as part of the strategic planning meeting of last year, something that we know as a lack or a disadvantage against our competitors, and it's something that you can do the math. If you divide the sales area of all of our competitors and Soriana against the number of people, you will see that we have the least intensity of labor. For us, it's something that we call intensity of service. We have to accept that in the last five years, we lose intensity in service. That obviously have an impact in the service and in the quality in which we receive our clients in the stores. Particularly in seasons like Julio y Agosto, in which we have an increase of the traffic and Christmas is something that we cannot allow to happen anymore into the future. Right now we are in the process to review all the number of people store by store. Obviously, if we have to invest in people because at the beginning, we have to do it and probably like an extra expense. It's the way in which we can recover market share and recover clients and recover the perception of service that we have to do, we will do it. It's like the price one. We don't care we have to invest gross margin in order to be competitive. Right now, if we have to invest in personnel because we have a lack of people in the store, and when a client goes to the store and they are not finding a product, also doesn't find personnel, we cannot allow that to happen anymore into the future. We will invest on that. The way that we are seeing is that the solution is not to reduce the numbers of personnel anymore. The solution is to sell, increase the sales and level as that expense. It's just that at the beginning you have to support the expense, and we will do it. Because again, the bet that the company is doing is not to reduce expenses, it's to increase sales. Talking about your second question, basically in our income, we have two important. I mean, we have different explanation of what integrates that number. Probably the most important is the profit, because we only register the profit of our real estate business. Also, we have, basically the other important business line is the financial division of the financial growth division, that basically on that line, we register accountably speaking, all the financial products and all the income is already only the income of other products that are not the typical grocery products. That was very helpful. Thank you. We'll take a follow-up question from Luis Willard with GBM. Please go ahead. Hi, Rodrigo. Thanks for the presentation. Just a quick one on your partnership with Mercado Libre. I mean, with Cornershop now doing the perishables, does it make sense for you to keep that window open for sales? If not, do you plan to switch it to someone else? The thing I mean, I don't want to talk about specific things about our competitors. In our case, in the partnership that we have with Mercado Libre, the thing is that we only have dry products because the strategy of the last mile delivery is done by Mercado Libre. When you talk about perishables, the last mile has to be done by the retailer because Mercado Libre doesn't have a chain of fresh products. In our point of view, if we have to make the last mile delivery, we prefer to invest all our personnel resources and money to do that in our own channels. Obviously, we are open to have space and to have presence and to have partnerships with other guys like Mercado Libre or any other name. Particularly when we talk about investing into the future to grow the fresh products, the perishable products, we prefer to focus the major part of our attention to develop our own channels. That doesn't mean that we are not open to talk with other guys to make something fresh or perishable products. Right now, we prefer that particularly in those two categories, invest the major part of our time in our own channels. Super clear, Rodrigo. Thank you. Once more for your questions, that is star and 1. We'll pause a moment to allow any further questions to queue. Okay. I think that we don't have any more questions. No matter if you have, in the future any doubt or something that you want to comment in further, please give me an email or a call, and it will be a pleasure. Have a good weekend, and thank you, again, everyone to joining us in this conference call. Bye. This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.