Grupo Comercial Chedraui SAB de CV
BMV:CHDRAUIB
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Grupo Comercial Chedraui SAB de CV
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Welcome to the Chedraui conference call for the results of the second quarter of 2020. With us are Mr. Antonio Chedraui Eguia, CEO of Grupo Chedraui; Mr. Carlos Smith Matas, CEO of Bodega Latina; Mr. Humberto Tafolla Nunez, CFO of Grupo Chedraui, and Mr. Arturo Velazquez, Head of Investor Relations of Grupo Chedraui. Our speakers will present the results for the second quarter of 2020. [Operator Instructions]
As a reminder, all forward-looking statements on this call 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 Grupo Chedraui's most recent annual report.
At this time, I will now turn the conference over to Mr. Antonio Chedraui Eguia. Please go ahead.
Thank you. Good morning, everyone. It is a pleasure to be with you today at this conference to discuss Grupo Chedraui's 2020 Second Quarter Results. The second quarter of 2020 was marked by the need to adapt our store operations in order to address the new challenges our industry is facing due to the spread of the COVID-19 virus, both in Mexico and in the United States.
It is important to highlight the commitment and effort of all of our employees that together with the support of our suppliers, maintaining the operations without interruptions, opening all the required protocols to guarantees the health and safety of our customers as well as our store teams.
I will go over the highlights of the quarter. We have consolidated sales growth of 15.3%. Same-store sales growth in Mexico of 3.1% and 9.6% in the U.S. in dollar terms. Consolidated EBITDA growth of 19%. Consolidated net profit growth of 60.8%, net bank debt reduction of MXN 1,778 million. CapEx invested in 2020 of MXN 1,227 million.
Now I will proceed with the financial results of the quarter starting with sales. In the quarter, total consolidated sales grew 15.3% to MXN 36,409 million. In Retail Mexico, we achieved total sales growth of 4.3%, with the same-store sales growth of 3.1%. This result is reflected of -- on the one hand, the difficulties we have faced, especially in the tourism-dependent areas of the south of the country, where we have a very important presence; and on the other, an extraordinary sales result in the metropolitan area of Mexico City, where our value proposition has great acceptance by our customers.
It is important to also mention the outstanding result of the team in our omnichannel operation, which during this quarter achieved a participation of 4.6% of total sales in Mexico. We believe in the importance of offering the same shopping experience to our customers by any means they decide to use. And that is why we will continue improving the service we offer.
In Mexico, during the last 12 months, we incorporated 13 net with a sales flow growth of 1.7%. Due to the shopping centers and nonessential business closures for an extended period during the quarter, we carried out temporary arrangements to provide rent relief to our tenants. Therefore, our income in our Real Estate division showed a reduction of more than 44%, which totaled MXN 150 million. With regards to leasable area, we added a little over 10,000 square meters in the last 12 months, which represents 2.7% growth.
On the gross profit, in Mexico, we continue with our price aggressiveness, and we were able to maintain the gross margin in this division without any impact. Additionally, in the U.S., we saw solid improvement in our perishable departments of Fiesta, which on a consolidated level, allowed us to achieve a gross profit of MXN 8,212 million, representing 22.6% of sales and growth of 16.5% versus previous year.
On the operating expenses, regarding these expenses, we have kept a strict control over expenses in all divisions, which allowed us to grow expenses at the same level as sales, which, in turn, mitigated MXN 153 million in safety-related COVID-19 expenses as well as the effect of the U.S. division, which operates with a higher expense ratio as a percent of sales than Mexico sales. For the quarter, operating expenses grew 15.3% to MXN 5,475 million, representing 15% of consolidated sales.
Depreciation and amortization during the second quarter of 2020. Depreciation expense grew 7.1% in relation to the same period last year and reached an amount of MXN 975 million. EBITDA. During the quarter, consolidated EBITDA grew 19% to MXN 2,737 million, representing 7.5% of sales. In Mexico, we were able to achieve the same EBITDA margin as last year, reaching MXN 1,386 million and the margin over sales of 7.1%. The decrease in our Real Estate division income affected its EBITDA generation and show the robust [ 50.9% ] reduction to reach MXN 76 million. During financing cost -- during the second quarter of 2020 financing costs increased by 5.2%, reaching MXN 792 million. This consolidated increase repaired a reduction of Mexico's average debt versus the same quarter as last year, mitigating the increase in financial [indiscernible] due to a higher exchange rate.
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a consolidated net profit growth of 60.8% versus previous year, reaching MXN 681 million, with a margin over sales of 1.7%.
Now Carlos is going to talk about the results in the U.S. division. Over to you, Carlos.
Yes. Good morning, everyone. Thank you, Antonio. In the U.S., after experiencing strong sales towards the end of
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We continued with positive results in the second quarter at both banners. Sales at El Super reached MXN 9,624 million, representing 32.2% growth versus previous year, which includes the effect of the exchange rate. Same-store sales grew 8.9% in dollar terms during the quarter. At Fiesta, same-store sales grew 10.6% in dollar terms, reaching MXN 7,247 million, also impacted by the exchange rate. EBITDA at both banners in the U.S. was very strong during the quarter. At El Super, EBITDA grew 57.3% versus previous year, reaching MXN 853 million, representing 8.9% of sales.
At Fiesta, EBITDA grew 77.3% over the previous year, reaching MXN 422 million, representing 5.8% of sales. Total EBITDA in the U.S. increased 63.4% to MXN 1,275 million, representing 7.6% of sales. The exchange rates used to convert the quarter's financial statements were MXN 23.21 for the income statement and MXN 22.97 for the balance sheet. These rates are 21.4% and 19.8% higher, respectively, to last year. Thank you, Antonio.
Thank you, Carlos. Finally, before we go to Q&A, financing and expansion. By the end of June 2020 the relation of our net bank debt to EBITDA ended at 1.267x, totaling MXN 10,540 million, with a reduction of MXN 1,778 million versus previous year. CapEx invested during the term MXN 1,227 million.
Now if you allow us, we will proceed to the questions-and-answer section. Thank you.
[Operator Instructions] The first question is from Mr. Antonio Hernández from Barclays.
My question will be actually regarding the U.S. operations where, of course, you outperformed. Could you share more light in terms of competition in terms of online presence in both formats and overall, like what are your expectations given the solid results, both in terms of profitability and sales in the region?
I think this one is for Carlos. Please, Carlos?
Sure. In terms of our omnichannel presence -- our online presence in the U.S., the only banner that has a relationship with Instacart, which is a third-party operator, is El Super. We're about to launch at Fiesta some time during the third quarter. Typically, that side of the business has been not very significant for us. We spiked during the April month to approximately 1.2% of sales, and we're currently stabilized at approximately 0.6% of sales. We are relatively bullish about Q3 and Q4. We're seeing some continued strong performance at both banners during July, and we think that the environment is pretty fertile for some positive results for supermarket operators in general.
Our next question is from Mr. Luis Willard from GBM.
Congrats on the results. I'm also asking about the U.S., Carlos. I mean Fiesta specifically as a result of the strong sales performance, basically right back at the margin when you purchased Fiesta or actually maybe even higher. But I mean as this level of sales normalizes is in the next, I don't know, say, a year or something, how do you see margins in both in El Super and Fiesta performing? And do you think margins like this are sustainable? Or should they come to a lower level, something like that?
Well, thanks for the question, Luis. I think you've seen the history of where we've been and how we've been performing and the trends that you've seen. I think, you've noticed that El Super has been performing very, very well for quite a while now with a very strong mature presence that continues to grow, and we continue to leverage our OpEx. You also noticed that the gap is still significant between both banners, which tells you how much of an opportunity we continue to see on the Fiesta side. This has been an opportunity, as I mentioned during the last call, to reintroduce the Fiesta brand in that market. We have laid the groundwork with a lot of work on the operating side, on IT, our purchasing programs, and we're beginning to reap the benefits of that, but we still think that there's a tremendous opportunity continue to even improve the margin side on the Fiesta division.
So great results, but we're not satisfied. We think that there's continued opportunity for us.
[Operator Instructions] Our next question is from Mr. Andres Ortiz from Crédit Suisse.
My question is related to -- regarding the tax rate that you posted this quarter. It's roughly 30% versus 32% a year ago. Is this related to the strong performance in the U.S. operations? Or what could you -- what was the driver of this improvement in the effective tax rate?
Andres, this is Humberto. Thank you very much for your question. I'll take this one, if that's okay with you, Antonio. Sure. It's mixed. Basically, it's the bigger participation in the U.S. So that's our main driver in lowering our tax rate. I don't know, Andres, if you want me to explain a little bit more or if that is more than enough. Basically, we're maintaining both tax rates for both countries equal as last year, but the bigger participation in the U.S. is helping us.
[Operator Instructions] Our next question is from Mr. Miguel Ulloa from BBVA.
My question would be aging current conditions and your expectations for the second half, especially in Mexico given the circumstances and how things are evolving in the south and probably in the touristic areas.
Miguel, can you repeat the question, please? I didn't hear it well. It's about...
It's about the conditions in the market, what are your expectations in Mexico for the second half, please?
Okay. Well, in Mexico, I would say we have different conditions in the different regions where we operate. As we have been saying, we have a big presence in the south, particularly in the Caribbean area where we have a lot of tourism that has been affected. But we see some recovery in those particular areas in July at the moment. So we hope that we can recover growth there. We have a big presence in [indiscernible] areas where our sales were really affected. Now on the other hand, we also have big presence in the metropolitan area of Mexico City, where we have experienced growth and continued to grow quite strong double digit. So we feel that if the touristic areas recover, our numbers in Mexico will be return to what we expect in terms of same-store sales growth. At the moment, July shows already a recovery our -- being able to grow our sales in Mexico, close to double-digit number.
Okay. That's very helpful. And a follow-up, if I may, it would be regarding inventory levels. Do you feel -- do you need to be more promotional, especially in apparel or something that is moving slower at this point in time? Or do you feel pretty confident that you have the right assortment in inventories for the next season?
I think we have been very efficient in focusing on the inventory we will need to meet our sales projections, recognizing that some categories would be affected. I think we did an extremely good job. And we are prepared for the next season, and without the risk of excessive markdowns because we were able to react on time to this situation. In fee, we'll prepared really well for the coming months. The inventory -- the seasonal inventory that we project it's pretty much in line to what we think sales are going to show. So we -- at the moment, we think we're well prepared here.
Our next question is from Mr. Luis Willard from GBM.
Antonio, in Mexico, do you see consumers becoming more price-sensitive in all the geographies? And if that's the case, what do you think of your pricing levels versus other supermarkets? And also maybe hard discounters and wholesalers?
Thank you, Luis. We are experiencing different situations depending on the region. On one hand, we see the high end consumers, the consumers we have basically in our selected stores less sensitive to price than they were before. Probably part of the situation that these consumers are not being able to or have not been able in the lockdown to go to restaurants, probably are being more indulgent in the products and the categories that they are willing to buy in our supermarkets. That's on one hand. But on the other, the low-income consumers are more focused on the basic items and very, very sensitive to price. So we're seeing, I would say, different ways of our consumer, and we expect to continue that during the lockdown. I think that our low-income formats are going to benefit from these price sensitiveness of the customer. And I think it's going to be even more focused on price in the future because they will have probably less buying power or buying capacity in the future.
[Operator Instructions] That was the last question. I will now hand over to Mr. Antonio Chedraui Eguia for final comments.
Thank you. Well, I just want to thank everyone for joining our conference. And please keep safe, and I hope to be back talking to you with our team in the next coming quarter. Thank you very much, and keep safe.
This concludes the conference call. Thank you very much for your participation.