Organizacion Soriana SAB de CV

BMV:SORIANAB

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon, and welcome to the Organización Soriana First Quarter 2021 Earnings Conference Call. With us today is Mr. Rodrigo Benet, Chief Financial Officer; and Ms. Claudia Gonzales, Head of Investor Relations, who will be discussing the financial performance of the quarter, along with a summary of the latest news of the company. [Operator Instructions]

Now I will pass the call to Mr. Benet. Please go ahead, Mr. Benet.

[Rodrigo Córdova, executive]

Thank you very much. Good morning, everybody, and thank you for joining us for this conference call. As you already know, since 2020, we have been living completely atypical situation as a result of the pandemic COVID-19, which began in March of last year, where we had a very positive result caused by the panic buying due to the uncertainty provoked by the COVID itself. As a result, we will make a comparison between this quarter and the first quarter of last year. The company closed with a decrease of 10.3% in total revenues, reaching MXN 34.7 billion, for the main application or effects that we expect were the following.

First of all, the extraordinary growth in same-store sales that we had in March of 2020, that obviously provoked very complicated comparison basis. Second, one less day this year due to the leap year that we had last year. Also, we have to take into consideration that as of today, we have 15 stores closed permanently that have been shut down in the last 12 months, but obviously, it's also affecting the comparison basis. Something that we already mentioned in the previous conference call is that we continue with the impact in the real estate revenues caused from the discount granted to our letters. And also the support that we are giving to them. And obviously, the decrease in the commercial rent expenses that as of today, we have 11% decrease in the last months. And finally, we also have an extraordinary income on land that we sold in 2020, which is also affecting the comparison basis.

Basically, if we consider these fixed items represent close to 80% of the difference that we have in the last year. Obviously, the most important is the difference that we have in the sales of March 2020. Even though the growth in most of our formats was affected by all of these causes, it's positive and important to point out that our store format with a higher focus in upper, socioeconomical classes and business sectors like City Club is showing a much better positive performance. Actually City Club is reaching an increase of 6.6% in same-store sales in comparison with last year.

No matter that last year also, we had an important increase of 7.3% in this first quarter. So we are seeing a completely different performance depending on the socioeconomical level in which our stores are focused. If we talk about commercial divisions, it's important also to point out that we are really starting to see important changes in the clothing department performance that actually last year was pretty affected and this year starts to show a small recovery in the month of March that actually was close to double digit. So obviously, that double digit, we have to understand that is coming from a very easy comparison basis. So it's not something that we can say right now that it's a complete change in the trend. But at least we are seeing that the things are turning more positive in departments like clothes that is a high-ticket item, and probably is a representative that the people start to have -- start to be more comfortable in the way in which we are dealing with the socioeconomical crisis.

Regarding our e-commerce business unit, it's very positive to inform that we continue showing important growth. And in this quarter, the sales increase is -- same-store sales is [ 817% ], and more than [ 1,100% ] in number of orders. We are really satisfied with the results that we are achieving, and we have been able to provide our customers more easy ways to do the shopping by different alternatives. No matter that we are also aware that our customers not always have access to digital media. So we continue offering our services by store phone numbers. That actually is one of the main sources to give home delivery to our clients. Also, the call centers continue working very successfully.

And obviously, the web page. Obviously, the Soriana app as well as the third-party apps like Rappi and Cornershop platforms continue to be a very important source of new clients. And we anticipate that we will continue working with these third parties to continue promoting the home delivery service of Soriana.

No matter, we continue working on our own platform. Actually, we are forecasting that in the second half of the year, we will launch the new home delivery and e-commerce platform, Soriana. I'm talking about a new app that we are pretty sure that we will deliver a much easy interaction with our clients with new features that we are pretty sure that will make an important intensity in the sales and the client satisfaction.

Also, as part of our strategy of strengthening the knowledge of the clients during the quarter, our loyalty program, Recompensas Soriana continues contributing with the results of the company, in which actually, we have a growth of 260% in the special promotion divisions. These are the promotions that are -- as we talked in previous conference call, we are targeting specific clients with personalized promotions. Still the base of clients that we are approaching with this target in promotion is slow. It's something that we just have this year that we start doing that.

But it's very clear that we are achieving very good results. And again, we are achieving a 260% growth on this. This will be part of the strategy going into the future, continue getting to the knowledge of the client as the main value proposition and continue growing the base of clients that we can target directly with the specific promotions. Obviously, all of this is, thanks to our strategic alliance with dunnhumby. That actually, this quarter, we're just starting to using a new algorithm, called [ Relevant Promotions ]. That is the one that is helping us to make this personalized promotions to the client and start to drive traffic to the physical and also to the e-commerce stores.

Finally, on this about e-commerce, we continue launching initiatives in order to obtain greater synergies from our alliance with PAYBACK, in which we are targeting promotions in order to bring stores for new customers from another PAYBACK partner. This is also very important. They have a lot of partners that have clients that right now are not currently clients of Soriana, that we are making a more intense use of that database in order to bring clients from other PAYBACK partners to Soriana stores.

I'm -- also something that actually in the last week, we made some communication to the market. And it's important to mention is that in the first quarter, we started an alliance with Mercado Libre. What an alliance. We have a couple of several more working on that. But this first quarter is the first one in which we make a public announcement about that and start to make more promotions, which basically will start to be part of the Mercado Libre platform in the marketplace platform. Mercado is the biggest platform marketplace in Mexico.

The initial assortment is consignment of more than 4,000 items in categories like dry food, home care, pet items and self-care. We are expecting that this year, we will be growing that commercial proposal in order to reach 10,000 items. Also -- and with the hand of Mercado Libre besides of this official online stores, we are also -- we also launched a commercial alliance with Mercado Pago, in which the customers of Mercado or the clients of Soriana will be able to pay with Mercado Pago in our physical stores using QR codes, naturally also in the e-commerce platform. So we think that this kind of -- new kinds of payment is something that particularly young population is adopting very fast. We want to have Soriana the state of the art technology in payment methods. It's something that -- I mean, we just had last couple of weeks, but we are having a very good feedback on this new alliance.

Moving to and regarding the gross profit, this one reached MXN 7.7 billion, which represents a 22.2% margin and a decrease of 8.9% in comparison with the first quarter of 2020. However, there was an expansion of 30 basis points. This was mainly because of Soriana shrinkage management. As we talked in the past, we still see some space to continue to be more efficient in the management that we shrink. And obviously, a better business administration that we have also to mention it was partially affected by the negative impact on the real estate business.

With respect to the operational expenses, this line closed the quarter MXN 5.2 billion, representing a 15% over the sales and a decrease of 6.4% in comparison with last year. This is the result of the continuity that we have given to the Control Expense program that actually already have more than 18 months that we put it in place and basically all the expenses line, advertising, traveling expenses, packing, energy basically everything that is giving very, very good results. And it's part of the way in which we are trying to make a partial offset of the decrease in the gross profit. Particularly, we are really, really glad to mention that we continue with improvements in the energy cost reduction that is, as you remember, is the second most important expenses line.

And we continue with our sustainability commitment with the society, with Mexico, with the planet. So no matter that we know that right now, there is a lot of knows about the energy and the sustainable energy. We continue betting on this. We think that this is a long-term commitment. So the company continue investing and working on being more efficient and increase the use of sustainability.

As a result of these variations, the EBITDA of this first quarter of the year closed at MXN 2.8 billion, which represents a margin of 8.1%, an expansion of 40 basis points and a decrease of 6.5% in comparison with the same quarter of last year, mainly the explanation of the decrease is because of the lack of sales again last year, particularly, again, because the difficult comparison in the month of March. And the main explanation of increasing the margin is mainly because the optimization that we have up level of gross margin, particularly promising and the very, very good management of expenses line.

Regarding the financial items. Net financial cost closed at MXN 546 million. That mean a decrease of [ 4.27% ] against the same period of last year. And particularly, this is the result of our reduction of [ 18% ] in the debt balance as well as a result of a better interest rate as part of our program of refinancing and optimization strategy of all the financial items. Basically, that allows that our net income reached MXN 960 million, that equals to a 2.8% over the sales and implies an increase of [ 8.8% ] increase in comparison with the same period of last year.

Talking about this financial items. Also important to point out that at the end of the first quarter, the total debt of the company was [ MXN 22 billion ] that represent an important increase of 18% against last year, a reduction of 25% in the net debt. Likewise, we continue maintaining the CapEx of the company under control enough to face the operational needs of our stores and for our partner, Falabella -- in Falabella branch.

And as a result, during the quarter, we have invested MXN 700 million, which out of that amount of money, probably half of them have been designated to the JV with Falabella. Remember that we continue with the growth of Sodimac. And the other part basically goes to the model in stores and to IT investment.

Talking about this, actually, about the JV with Falabella, important to point out that we already have significant business in operation in the Soriana Mercado business. We are really happy with the response of the client, no matter that is a format that implies a high-ticket item. We have -- I think that the Soriana Mercado have managed the crisis much better than what we expected. And actually, in this first quarter, showed an increase of 24% in revenues. We believe that is something really positive considering that we still have some effects in the wallet and in the pocket of the Mexican fund.

In addition, the financial business already has 155 branches in the Soriana stores with a wallet of more than 260,000 clients. And we continue to promote and to strengthen the link with the promotion of the Soriana stores in order to make more attractive every day the Soriana Falabella credit card. We are also very happy with the performance of the portfolio. We are not having important roles in the nonprofit loans. So we can say that, in general, the 2 JVs that we have to -- with Falabella is going according to the budget to the original plan. And actually, we can say that it's going a little better than what we expected.

Basically, I think that with this, we cover the main items about the first quarter results. Obviously, we can go to the Q&A session in order to answer any doubts that you can have. Thank you very much for your attention.

[Operator]

[Operator Instructions] Our first question will come the line of Antonio Hernández from Barclays.

[Antonio Hernández Vélez Leija, analyst]

Actually, 2 questions. The first one is, could you give us an update on opening [indiscernible] that you're planning for the rest of the year? Second question would be regarding real estate revenues. I mean you're not facing, I guess, lockdowns anymore. But I guess that vacancy levels are still quite weak. So if you could provide us a little bit more on your expectations and numbers that you expect there.

[Rodrigo Córdova, executive]

Sure. Well, first of all, about the openings, we are expecting to open 5 stores this year. We know that these are not very big number to an organic growth plan. But again, we are pretty convincing inside the company that the main opportunity that Soriana has is not to open more land area. The big opportunity is to increase the sales per square meter. Basically, these 5 units that we are planning to open is because we already have compromised the set -- we have compromised to open a store in some -- the major part of these cases doesn't belong to Soriana, and we will rent it. So the investment is lower. And our strategic points that are already mature, that is a good option to open the store book. We will continue focusing more in the model in stores and investing in IT. Regarding the second question -- and basically, the major part of the opening will be in the second half of this year. Right now, we are working on the construction and the equipment process.

Regarding the real estate revenues. Unfortunately, in addition to the impact that we have because of lockdowns that will give to our benefit, obviously, is much lower than last year, but still we continue to give some support particularly in company that have more premises in our stores. Also, we have to note that the occupancy of our real estate business is still very low. Right now, like 79%, almost 80%. But we have to take in consideration that historically Soriana had an average occupation of higher than 91%, 92%. So still, we have an important gap against 2019. The idea is that probably this year, particularly the first quarter, we have continued with this impact, but we believe that probably by the end of the year, not in an average, but at the end of the year, we can close with an occupancy of close to 84%, 85%.

It will be at close to 10 points lower than 2019. What I mean is very clear that many small companies and small businesses in the country suffered a lot with the crisis of COVID-19, and we are doing our best. Probably the positive point is that we are not seeing that the trend -- the downtrend continue. We are already seeing that the numbers are more stabilized and very positive. In the month of April, in final days of March is the first time in several months that we already start to receive more requirements for new spaces than requirement to close the store or to close the spaces. So already, the trend starts to wind up again. So basically, that is the expectation that we have on this in business for real estate.

[Operator]

Our next question come from the line of Vanessa Quiroga from Crédit Suisse.

[Vanessa Quiroga, analyst]

I have a couple of questions. The first one is if you can provide more details of what drove very high other income this quarter. And also to get more details about the partnership with Mercado Libre. What it entails in terms of client data, who owns this client data and what CapEx or investments do you expect to make in -- as part of this partnership?

[Rodrigo Córdova, executive]

Vanessa, I just want to check that I understand. Well, the first question is about the other income. The difference, the important difference that we have, mainly the other income have 2 very important factors. The first one is related to the real estate business, because mainly the -- all the things that we already talked about is support to small premises and increasing the occupancy. And second one the important difference against last year, which in 2020, we sold an important land reserve that we doesn't have this year. Basically, that are the 2 main things that explain the other income details.

And regarding Mercado Libre, no, we are not expecting to invest CapEx. We basically, the most important impairment was mainly in time in order to connect all the systems, talking about the Mercado power initiative and also the marketplace initiative. But no, we are not investing money. This is not something that required CapEx. Basically, those require an important effort in IT. And basically, that's all.

[Vanessa Quiroga, analyst]

And about the client data. I mean, how you're going to manage the client data? Do you get any information?

[Rodrigo Córdova, executive]

Yes. Obviously, it's really important to have this, not only the knowledge, but the ability to work to exploit the client data. It's something that right now we are working on. But to be honest, right now, the most important initiative to explore the client data is with the loyalty program of Soriana and that is right now the focus that have the internal and they don't only see. Obviously, we will use our e-commerce platform and the third-party platform, not only Mercado Libre, but also the information that we can obtain from the other third parties platform to use that information. As we already do with -- like an example with PAYBACK.

But right now, the main focus is to, first of all, use the information of the loyalty program of Soriana. And basically the reason of that is because the main business is on that, that we already have all the information, just that in the past, we doesn't use that information. But it is something that is considered within the strategic plan. It's just that it takes time.

[Operator]

Our next question comes from the line of Rodrigo Alcantara from UBS.

[Rodrigo Alcantara, analyst]

Congratulation on this partnership with Mercado Libre. So I have a couple of questions here, if I may. So the first one is regarding inventory management. So as you will be a seller, right, in theory, you will own the inventory, right? So -- but this will be stored in Mercado Libre's distribution center? Is that the correct way to read the logistics?

Also, the second question would be any sort or any sense on the take rates that this agreement may imply for you?

And the third one would be, in case of any discounts or shipping subsidies, how are you going to share discounts with Mercado Libre? If you could elaborate a bit on the economics of this partnership would be amazing.

[Rodrigo Córdova, executive]

Sure. Well, first of all, as you know, yes, we are a seller in the marketplace of Mercado Libre, but we manage the inventory. We -- the final mile of the delivery to the client is not done by Soriana, it's done by Mercado Libre. And obviously, we have a lot of agreements on that. And the way to manage the promotions and the relationship with the client, pricing strategy, price parity to the stores, to the website of Soriana and things like that.

But as you know, also Mercado Libre is a public company, and all of that agreements are not public. So I cannot comment very detailed about that. I think that what is the main focus and the message that we want to give to you guys and to all the market is that Soriana have a lot of experience because in the past we had [indiscernible] Falabella into doing important alliances. Like an example, the one that we have with [ Morelos ] in a couple of stores in Soriana.

So Soriana have a lot of experience to take positive things about third parties and make synergies with them. But I think that is a characteristic, particularly from -- for Soriana inside the full detailed sector in Mexico, probably we are a company with more strategic alliances or partnerships that give a lot of value. We believe that, particularly with Mercado Libre, we are giving a lot of value to the client. If Mercado Libre that -- probably we have some clients that we share that can go to Mercado Libre platform or to Soriana platform. But there is a lot also of clients that doesn't go to Soriana website or Soriana app, but go to Mercado Libre platform. So it's a way to attract new customers.

So we believe that this will be very, very important for Mercado Libre and for Soriana. We are seeing that with companies like Mercado Libre, we can have a lot of alliances, like an example, the other thing will be Mercado Pago. So we are really happy to work with Mercado Libre. And I mean, like we work with other third-party companies, again, say like Falabella in some time [indiscernible]. And we believe that this kind of JV adds value to our value proposal. Basically, this is the detail right now I can share with you guys basically.

[Rodrigo Alcantara, analyst]

Should know -- I completely understand. Rodrigo, just for example, let me rephrase. For you at Soriana, do you have like any specific target, let's say, in terms of GMV, e-commerce that you can -- that you would expect to achieve as a result of this partnership? That would be it.

[Rodrigo Córdova, executive]

Not particularly as some part of this partnership. So that basically is a result of all the efforts that we are making in e-commerce. If we remember, we do start before the prices. To your point -- just give me a second.

[Operator]

All right. The next question...

[Rodrigo Córdova, executive]

No, no. Just give me a second -- just to show you -- to give you the specific data. But before the COVID-19 crisis, we used to have -- the participation of e-commerce used to be really, really low, less than 0.2% of overall sales. We closed the year 2020, close to 2% of overall sales. And we expect that probably for 4 more years by the end of 2025, that will be close to double digits. So we have important expectation about this business. Again, not only because the JV or alliance with Mercado Libre, but because all the things that we are making.

[Operator]

Our next question will come from the line of Ulises Argote from JPMorgan.

[Ulises Argote Bolio, analyst]

A couple of questions here on my side. The first one, just to check, the guidance you provided for that mid-single-digit same-store sales growth for the year. Do you still see that as being reachable? And then the second one, I wanted to get any thoughts or any comments that you might share with us on potential impacts from the outsourcing reform, if any impact there for you guys?

[Rodrigo Córdova, executive]

Sure. Well, regarding the initial guidance that we talked about, mid-single-digit, call 5% in same-store sales, it's obviously that the first quarter makes a little -- things a little more complicated. But to be honest, it's something that in the budget have been already considered. I mean -- and we made the budget and the guidance of 2021. We know that the first quarter will be really, really complex, again, mainly because of the very high sales that we have in March of last year. But we are not changing the guidance. We believe that it's still possible to achieve a 4%, obviously, it's more complicated.

But I mean, we believe that have a -- we still have a lot of space to continue working on. Probably that is important to point out that it's something that if you are watching on TV or listen in radio, signs a couple of days, we launched a very aggressive campaign in which we reduced the price of more than 10,000 products, 10,000 important SKUs. I mean -- and what important is to note, I mean, [ 5% item ], which will reduce the price in a very, very important way.

We have invested an important amount of money on that, and I'm talking about hundreds of million pesos in the notion of prices. But it's very, let me say, atypical reduction in prices. This reduction in prices is completely data driven, in which we are taking advantage of the technology of the information that we have on the capabilities of dunnhumby. And also on the capabilities that right now the e-commerce business. Because right now, it's much more easy to track and to make sure the competitiveness of the company against the competition in real time, SKU by SKU. So it's not a massive reduction in terms of -- it's not -- generally side the percentage of reduction, it's a very typical reduction in more than 10,000 items, again, companies that are driving, in which we are pretty sure that we will completely shape talking about competitiveness, Soriana. But we will stand up in front of our competitors in a much aggressive way. So we are expecting important response in the following months.

And we are also really happy because we can do that. Because we have, first of all, efficiencies in the gross margin, like the shrinkage, efficiency in the growth management. As you know, actually, we are increasing the gross margin. So we believe that we have a space to make this kind of investment to be more aggressive to try to recover same subsidiary.

And about the second question about the outsourcing, obviously, have an impact. I mean, I'm not talking about particularly economic impact that is probably that we have an economic impact, but important thing right now and which we are working is to be design the way in which the company has to be structured. As you know, right now that we have more visibility about -- which is the final specific reaction of the loss, we can aspire us to take the first actions. It's something that we will take us a couple of weeks, which we have the rates, specialized rates in terms of labor specialties advisors helping us to do this. It will require important changes.

But I can say in forward this, internally speaking, requires a lot of work. It's a matter of the fact that we will have to change literally thousands of people in the way in which the companies that pay to this guy. So we are paying a lot of effort internally in Soriana, in all the areas, in the human resources, in the legal area, even in the IT system, [indiscernible] very easy, but it's completely different. If we used to have a service company that paid a rollout. And right now, the work payments have to be paid by the main company, by Soriana. We have to quantify and change completely the system. There are -- the main company of Soriana, [indiscernible] Soriana, that one was a company that was not designed even human resources, legally, an initiative in an IT prepared to pay to make -- to manage the pay roll, so it's important change is the one that we are making right now. In order to measure and to say, which will be or could be the final economical impact, we will take some time -- a little of time to kind of comment on that. But initially, it's very complex and a lot of work that we have to do right now.

[Operator]

Our next question will come from the line of Bob Ford from Bank of America.

[Robert Ford, analyst]

Rodrigo, when you look at the price investments that you're making right now, how much of those are being funded by lower shrinkage vendors, or whatever you can do on the data analytics side? And already, you must be seeing some price elasticity with respect to just average basket sizes. Could you comment a little on the initial response as well, please?

[Rodrigo Córdova, executive]

Yes. Again, like any important reduction or important campaigning in reduction of prices, it requires the effort from different tags. For sure, something is coming from the shrinkage, for sure, something is coming and it will be compensated by the very good management of the expenses that we have. Obviously, something will come from negotiation with the suppliers. And others will be funded or financed by the gross margin of the company. At the end of the day, both, we will not feel uncomfortable, if I have to decrease the gross margin, or if that is the price increase across board. We are completely sure and completely focused that the gross profit has to come first of all because of the sales, not because of the gross margin. So we need to invest part of our gross margin to achieve that gross profit coming for more space, we will do it.

We believe that we have a space to do. Again, I think that the gross margin of the company right now is very healthy. And -- but we even can't have even more efficiency in our -- in the logistics management and the shrinkage management and the cost of press. And I mean other sources of efficiency that we will be using to finance this investment plan. Right now, the first image that we have about [indiscernible] is that it's something that is priority #1, some -- is a fact with the new technology and with the new capabilities of Soriana to analyze data. If the data is very convinced that we are not the most competitive. And that in the last 12 months, we lose competitiveness against our main competitors. And that is something that we just cannot allow to happen.

We will defend with all our energy and with all the money that we have and all the people effort and everything, the competitiveness of the company. So this is a company-wide option, Soriana will defend its competitors. Right now, we are not in shape. But we will put the company in shape very soon. And that is the reason why, I guess, if you pay attention to the TV advertising and radio advertising and media, you would see that Soriana reduction massively both in pack and data driving way, the price of thousand items. To build the perception book, it will take time. It will be very -- it will not be easy. We are not expecting that in just a couple of weeks, the client response, perception takes time. So this is the first step that we have to take to recover that perception of low prices.

[Robert Ford, analyst]

Fair enough. And can you talk a little bit about your plans for Sodimac this year, maybe a little bit on operating trends and any additional conversions or new openings?

[Rodrigo Córdova, executive]

Sure. Basically, as we already announced, we are expecting to open 3 Sodimac this year. Actually, we are seeing some opportunities in which we can probably see -- we can accelerate the loss in the path of opening. We are really happy with the performance of Sodimac. In all the stores, we are having important same-store sales. In all the stores, and this is also important to mention in the newly opened, we see that we are provoking reaction in the clients. Unfortunately, we are also provoking reaction in the competitors. We are seeing basically all the people start to react in terms of promotion price, things like that. But obviously, that was something expected. But at the end of the day, in Sodimac, we are not only competitive, but also we have differentiation. A very important thing is that we differentiate from companies. So things like the assortment that we do have the opportunity to go into Sodimac. Obviously, we focus in the professional and the companies and the hard part of the store.

But it's really sure and pretty evident that the soft part of the store we have a much better value proposition than our competitor. And this is what we believe and that is the obvious one standard in the entrance of the stores. We have a specific services that we are the only one, like an example, the department of painting is completely different the way in which we manage the painting department against Home Depot. We have our own production of painting inside the store. But we are much more efficient in terms of inventory, but also in terms of the quality of products that we can offer to our clients. Basically, we can do any kind -- any type of paint -- any color that the client want that is practically impossible to Home Depot to match that because they have the physical [ abilities ] of painting. We have services to the professionals like the rent of equipment, things like that, that only Soriana has. Obviously, the financial proposition with the hand of Falabella.

So we are really happy with because basically, we are seeing that Sodimac not only is a competitor that is putting pressure in the market and showing to the clients that there could be better options in terms of price. But also, we have important things that differentiate from our main competitor. That is asserting new value to the clients. And that is, I think, the reason why, again, in the first quarter, we have a same-store sales of more than 20%.

[Robert Ford, analyst]

And when you talk about possibly accelerating the path of openings, I mean, what kind of magnitude should we be considering?

[Rodrigo Córdova, executive]

No. I mean, don't take it wrong. I'm not talking about 10 more stores in this year, probably we can open a couple of more stores this year. Basically taking advantage of the land reserve of Soriana, all the stores of Soriana but it's 1 or 2 more stores at the most.

[Robert Ford, analyst]

Okay. And these would be adjacent to existing locations, somewhat of a power center.

[Rodrigo Córdova, executive]

Yes, we can say that the priority #1 is always open next to a supermarket. Again, it's concluded not only in Mexico but in all the countries that Soriana operates. And every time that store is next to our supermarket, the performance is much better than only stand-alone.

[Robert Ford, analyst]

And how are you thinking about Sodimac in terms of e-commerce?

[Rodrigo Córdova, executive]

Well, actually, it is very -- something that we are very proud of, is that normal that the company is still a small company, only fixed cost. If you go to the website, it's impressive, the very good performance at the website that Sodimac has. The long tail strategy that having in the web space is also very amazing. Obviously, Sodimac on that is taking advantage of all the experience of Sodimac international or global Sodimac. So it's growing in an important way, still the percentage of participation of Sodimac e-commerce like what's happening in Sodimac is very low. What is growing in a very, very important way. And obviously, what we have designed right now is how we can take advantage of the logistics and the lines of Sodimac now or the funds of sales of Soriana to help to increase the e-commerce capabilities of Sodimac.

[Operator]

Our next question comes from the line of Rafael Romero from GBM.

[Rafael Romero, analyst]

I had a follow-up question. I believe at the beginning of the call, you mentioned about same-store sales by format, particularly City Club. I think here, well, it was a growth of 6.6%. I think you mentioned another format. I just wanted to dealt deeper into sales by format. And if you have any kind of outlook or sequential recovery at this time?

[Rodrigo Córdova, executive]

Yes. Basically, what happened is that -- what's particular and strong in City Club is that because the characteristics of the format is more focused in medium classes to [ high-end ] family. Basically, we just say [indiscernible] platform and high item [indiscernible] that kind of format. And that socioeconomical level is now -- is performing much better than low income sectors.

In Mexico, basically, when we analyze the [indiscernible] of the company [indiscernible] very, very good performance. Obviously, we have made an addition and very important changes in various propositions. Actually, remember that City Club team is completely new. And the CEO of City Club has less than [indiscernible].

Also the commercial director has [indiscernible]. Actually, incentive this strategy is to guiding from [indiscernible] we have now [indiscernible] long-term membership. So it has [indiscernible] membership. We're focusing completely in terms of long term to make [indiscernible]. PAYBACK we've done a [indiscernible] in the capital growth, but basically, we can see that City Club has more than 18 months, basically all the months showing [indiscernible].

Talking about dollar format, basically, the performance is very similar. The main difference from very specific things, as an example, a market and market [indiscernible] that we seek later [ in costs ] to achieve all of that kind of time. So the performance against the complete portfolio of the company. I would like to [indiscernible].

[Operator]

I'm not showing any further questions in the queue at this time.

[Rodrigo Córdova, executive]

Okay. Well, again, thank you very much for joining us on this conference call. And obviously, if you have any other questions, please send us an e-mail to me or to Claudia, and we will be very glad to respond to you as soon as possible. Have a good week.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.