Almacenes Éxito S.A. (EXITO) Earnings Call Transcript & Summary

Good morning to everyone. Thank you for joining us today to Grupo Exito's First Quarter 2024 Results. Please note that this conference will be recorded. [Operator Instructions] I'm pleased to present today Mr. Carlos Calleja, recently appointed as CEO of Grupo Exito, and CFO, Ms. Ivonne Windmuller. We also have the general managers of all our operations, Mr. Carlos Mario Giraldo, General Manager of Colombia; Mr. Jean Christophe Tijeras, General Manager of Uruguay; and Mr. Ramon Quagliata, Geneva Manager of Argentina. Please move now to Slide #2 to acknowledge the note on forward-looking statements. Moving now to Slide #3, we have the agenda. We will start with words from our CEO, Mr. Mr. Carlos Calleja, to then continue with the financial and operating highlights of financial performance during the first quarter 2024, followed by conclusions. [Operator Instructions] Thank you for your attention. I will now turn the call over to Mr. Carlos Calleja.

Thank you, Maria Fernanda. I saw Chat say we have lots of echo. I just want to make sure that everyone can hear us okay. Did you guys see the message... All good... All right. Hello, everyone. Thank you all for joining us today. Super exciting for me, and first call with investors. And I was thinking it might be a good idea to share a little bit about our history as a family and as a company. Also talk a little bit about how we got here, how would have [ Grupo Calleja ] entered into Colombia and decided to acquire Grupo Exito. And I think it's important to talk a little bit about our purpose as a company as well as what plans we have going forward, a little bit about the future in the context of the opportunities and the challenges we are seeing. So I wanted to take this time to share with you guys. Grupo Calleja is a family business conglomerate from El Salvador, with operations in retail, real estate, finance, technology and energy in Central America. Our core business within the group is retail supermarkets, where we have accumulated over 8 decades of experience and established a strong market position. We are retailers, and we're passionate about what we do. Through Super Selectos, we are the leading supermarket in El Salvador and hold roughly a 60% market share compared to our direct competitors, including multinational companies. The group's values of integrity, quality and service have allowed us to connect with Salvadorian families and provide them with a differentiated shopping experience, focused on thing to find our customers through our extraordinary value proposition. Currently, Super Selectos operates 113 stores across the country, ensuring consistent standards of service, savings and quality across all branches. Additionally, our group plays a crucial role in the Salvadorian economy as the largest employer in the country with over 12,000 collaborators working under our roofs. We firmly believe in the potential of Salvadorians and all people and are committed to generating opportunities for their development in hopes of contributing to a more prosperous society. Furthermore, we contribute to many other sectors through our relationships with suppliers, enabling us to offer a wide range of over 30,000 products, both local and foreign, including 2,500 private label products. Through our cultivating opportunities program, which supports local farmers and producers, we have positively impacted the lives of thousands of Salvadorians, who now supply over 60% of our foods and vegetables compared to just 5% a decade ago. Super Selectos possesses a significant advantage in the market due to the unified brand, which it operates under. This allows us to be at the forefront of Salvadorians' minds when it comes to shopping, positioning us as El Salvador's supermarket. Additionally, and this is very important, our emphasis on efficiency has led to higher profit margins than our competitors, ensuring long-term sustainability. Our relationship with Grupo Exito and with Carlos Mario goes back 15 years when Colombian companies, including Exito, were looking to invest in Central America. They [ pasted ] their operations back then in [ SBC Spanish ], we clicked. And ever since, we have maintained a close relationship and open communication between both organizations. Grupo Calleja and Grupo Exito share a common vision. Both companies believe in the importance of having a purpose in what we do and working as a team to fulfill that purpose. In both companies, we look to build a differentiated value proposition that allows us to connect and successfully serve all segments of the markets we operate in. We also are committed to using our business as a tractor for economic and social development through our corporate social responsibility programs as well as the foundations we lead. There's an analogy I'd like to use to illustrate this differentiated value proposition. In Latin America, years ago, our people used to walk under paths to get around, then came the [ dirt ] roads. And now everyone hopes for and is asking to travel on well-kept paved roads. Latin Americans demands for quality service are continuously evolving as they should. And we believe that our value proposition must cater better than any other to those ever-evolving and more sophisticated demands because all Latin Americans deserve the best service near their homes near where they reside with their families. We do this through our extraordinary in-store experiences, our personalized customer service as well as other differentiating factors such as a larger variety of products and brands, including imported items and our high-quality fresh products in need. These are just a few things we do to go the extra mile. Our purpose as an organization, and this is very, very important, our purpose as an organization is to dignify the lives of the people we serve and work with. The purpose of dignifying the lives of Latin Americans is key, and we will work tirelessly to impact those lives positively while continuously creating great employment opportunities for the citizens of the countries we work in. In Grupo Exito, as you all well know, Colombia is our biggest operation. We are one of the country's largest employers, operating an immense multi-format retail and commercial real estate operation. Aside from this, we have an important investment in our credit card business Tuya as well as the country's leading loyalty program, Puntos Colombia. In Uruguay, we have a very successful retail operation with an excellent market share position and solid, really solid earnings. Out of the 3 retail operations, Colombia, Uruguay and Argentina, Uruguay is the most profitable. GDU as we call our operation in Uruguay is also one of the country's largest employers. In Argentina, we have an important footprint which we hope to grow for both in retail and real estate. Some people over the last few weeks, 1.5 months or so, have asked me if we plan on divesting Argentina. The answer is no. I was actually there 2 weeks ago and helped optimism among the Argentinian people as to the company's future. That said, no one has a crystal ball as to what will happen. But we are convinced that staying in Argentina and exploring growth opportunities is our best bet. The best way for us to do this is by bringing our Uruguayan and Argentinian teams closer together to lever each strength and create a formidable player in the Southern [ cone ]. At this moment, if this is possible, I would like to introduce Jean Christophe who heads up our operations, and Ramon, who heads up our operations, Jean Christophe in Uruguay and Ramon in Argentina. I think they might be connected. I see Ramon there. Hello Ramon.

Hello Carlos.

I see Jean Christophe, [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

That's okay. Those are our 2 team heads in Argentina and Uruguay, both with an incredible experience in retail and a passion for the business. [Foreign Language]

[Foreign Language] to greet you all from Argentina. [Foreign Language]

Now I'd like to talk about the challenges we are facing and the opportunities we are seeing. In terms of challenges, first off, I want to say we are committed to addressing them head on. We are of the mentality that opportunities exist in each crisis, but only if one works hard in realizing that. For that, we must understand well where we are situated today and what challenges lie ahead. Everyone here is aware of the challenging environment and tough economic conditions currently in both Colombia and Argentina. Carlos Mario and Ivonne will speak to this more in the financial part of the presentation. That said, I want to emphasize that these challenges have moved us to focus intensively on finding the best way to navigate the current economic situation, so as to come out of this environment stronger than when we went in. For that, we have to transform the company into a leaner, fitter and more dynamic organization. This objective is something that we have spoken about at length and started working on with management in all 3 countries over the past weeks. In our business, there are 3 big levers you need to work on and execute well to obtain good results. One is top line sales; 2, gross margins; and 3, costs. Sales, you want to push out, gross margins, you want to grow as well, and costs, you want to push down. To do this, the work needs to be constant and you can never be satisfied with the results. We like to say in our organization and in our family, we have to do things better today than yesterday and tomorrow better than today. If you do this consistently, the results will come. That's important. You have to do this every day. In terms of sales, we are working with our team and our suppliers to better leverage the potential of our entire store platform. Through more assortment of products and consumer goods and offering more savings with a super dynamic high-low strategy, which is where our experience comes from. We want people to be able to buy all their grocery necessities within all our stores while maintaining our textile and entertainment categories just as strong. We want to be closer to our suppliers and quicker to market. That way, we can get a step ahead of our competitors. We are also working on simplifying our brand and format structure to both increase same-store sales and create efficiency in costs. The idea in Colombia is to migrate the entire platform under the Exito and Carulla brands. We did a pilot of 2 stores recently, and the results have been very, very good. In terms of margins, we feel we have a healthy gross margin, but regardless of working closely with our suppliers to find ways to bring more savings to our customers without diminishing our margin. To do this, we are negotiating dynamic high-low promotions with the full support of our suppliers. We firmly believe in the importance of having collaborative and close relationships with our suppliers and have reached out to them over the past few weeks to find the best way to navigate together through the economic headwinds we are all facing. The relationship with our suppliers with that group of stakeholders and the collaborative form which where we look at it, we look as a differentiation factor as well in the way we do business. That's important to match. In terms of costs, I want to be very clear. We are building towards becoming a leaner organization. In a sense, the job entails taking a corporation and transforming it back into a lean, agile and efficient company while retaining top talent. Right now, there is work being done both on the organizational structure, making it leaner as well as simplifying processes, which in turn will facilitate our cost-cutting objectives. This is the toughest part of our job, but also where we see important potential for strengthening the business and eventually lifting margins. We are also actively working on capturing value across all the countries we operate in, including El Salvador, with the teams working across borders on getting the best conditions for everything, from the purchase of refrigeration equipment, ACs, display cases, shelves, IT, to maintenance, digital marketing and service contracts. In [indiscernible], we are looking at it all. Like I said, our family business experience is rooted in best practices with regards to cost structures, margins, go-to-market strategies and overall financial results. The idea is to use that experience in helping to strengthen Grupo Exito. Well, that was my part of the presentation in terms of sharing introductory message with you guys. Hopefully, this will give you a better sense of where we come from and how we're looking at things and where we want to go. Here, I want to pass it over to Carlos Mario so that we can begin the next part of the presentation and start looking at the numbers. Thank you.

Thank you, Carlos, and welcome all to this call. I'm happy to be here as General Manager of Colombia, and I'm going now to Slide #6, where we will highlight some of the results of the first quarter. In the first quarter, at consolidated level, we sold COP 5.3 billion with a decrease of 3.3% in pesos, mostly impacted by the exchange rates comparing Colombia with Uruguay and Argentina. When we exclude the FX impact, there was an increase in sales of 7.9%. All the 3 countries were in positive grounds. Colombia growing by 2%, Uruguay 7.6%, and Argentina 228%. Our recurrent EBITDA came to a margin of 5.7% at the consolidated level, decreasing 22% in Colombian pesos and 14% when we exclude the FX impact. There was a net loss of COP 37,863 million, given 3 main impacts. The first one, the financial costs, the nonrecurring expenses and the share of profits of Tuya where we have 50% of the business. There was a free cash flow generation positive, up COP 291,000 million. I would like to highlight under the numbers, first, the difficult consumer demand in Argentina and Colombia. In the case of Colombia, given the materiality for the consolidated results, I have to say that when you look at official data, February to February 12 running months, the whole retail had a reduction of 4.7%. We have a focus in the following things as Carlos was saying, first, strengthen the commercial strategy to impulse the top line. And here, it comes first with a gradual store portfolio optimization around Exito and Carulla. We are going to advance in more than 40 of these consolidations this year where, at the moment, we have done 5. And this will be, I would say, the main emphasis in the following months, the first sensations are positive and the first numbers are very positive. The second one is having a richer assortment of products for all our customers so that our brands and our stores will be the full solution, especially in food for any customer in Colombia, having, as Carlos said, a very strong, high and low strategy and adding to this the unbeatable portfolio of products. As you probably heard in the press conference that was done some days ago, we started with around 500 products, unbeatable products of private brands, and that has been for some years and very successful. It now represents around 12% of our food sales. Now the innovation is that in collaboration with our suppliers, we added more than 500 products of leading national and international brands. And this is very important because it creates a big, big advantage for our customers that can buy the main brands in Colombia and of multinationals at unbeatable prices. That means that it ensures the lowest price in each city. And if for some reason, it's not there, we corrected within 1 week. The cost efficiencies also come, and we are already engaged in that in going to a linear structure and the back-office reduction to create this result has already started, especially at the Colombian level. Omni-channel continues to be a priority, as in the 3 countries, it represents 11.2% of our sales and in Colombia, a top 14.6% share. Our real estate business continues to perform in a very positive way, and Viva Malls had a continuous growth at a constant recurrent level. It had 8.4% increase in revenues and 16.6% increase in EBITDA. At the governance level, the dividend distribution was with a payout ratio of 52% and 7 new Board members were named at the last general assembly. Let me go to Slide #8 to speak about Colombia specifically and the top line performance. Food had a very positive performance of 5.8% growth. If you compare it with the last full inflation that we know for the quarter of 1.7% increase, it is more than 4 points above the food inflation in Colombia. And this is reflected in volumes. Volumes grew by 3.1% and tickets by 4.3%. Really the impact that we're seeing, the negative impact is in the basket size. Given the current situation in consumer, they are coming more frequently, they are buying more times, but their basket size is lower at this very moment. When you ask about our 2% increase, then what was the negative impact? The negative impact came in nonfood, it is normal in these economic cycles that the consumers delay the purchase of things that are not really needed at that very moment. Of course, we continue with a very important position, both in electronics and in textiles. And we believe that as economy improves and the credit becomes more dynamic, the access to credit, this is going also to improve our nonfood performance. Let me go to Uruguay. Uruguay, there is a very stable economic and political country situation, attracting a lot of investments. There are some people even saying increasingly that Uruguay is like a small Switzerland between Latin America, it is probably one of the most stable countries, a very positive commercial dynamic of Grupo Disco in the quarter with total sales growing by 7.6%. That is 380 basis points above inflation. This is a result also of a better-than-expected tourism summer season. The summer season in Uruguay is normally end of December, January and February and also a very good effect of our Fresh market portfolio and conversions that now account for 62% of the total sales. In Argentina, sales increased by 228% that is below the CPI, which came to 287%. The results impact the Colombian figure because of the foreign exchange impact that we saw there. As you know, at the end of last year, we had near to an 80% devaluation, which, of course, has a materiality in the first quarter sales results. Real estate continues to perform very well, and we have a high occupancy rate of 94.4%. And a very good development is that our cash and carry strategy in Argentina, which adapts very well to the needs of the consumer is growing constantly, and now the stores of cash and carry represent 18.5% of our total retail sales in that country. Going forward to Slide #9, we speak about the performance in Colombia by segment by brand. Exito in Food grew by 5.9%, compensating the reduction in the nonfood. As you know, the nonfood is basically focused and concentrated in the Exito brand. As a total, the sales in Exito grew by 1.5%. Carulla was the best growing brand, growing more than 6%, impulsed by food with a growth of 7.2% and omni-channel sales growing more than 27%. The low-cost segment had a total growth of 4.2% with food having a dynamics of 4.9%. Let me go to speak about omni-channel performance in Slide #10. We had a total omni-channel sales of COP 550,000 million with a growth of 7.9%. The share of Colombian omni-channel came to 14.6% and in food 13.7% with a growth of 21%. We came to 5.5 million orders delivered to the Colombian households and our apps, which are a high priority, the apps of Exito and Carulla grew during the quarter at 43%. Misurtii, which is an app B2B going to the mom and pops, especially, multiplied sales by 2 coming to near [ $6 million ] in the quarter. This is a high potential growth for the future given the importance that the mom and pop market has in the consumer goods in Colombia, more than 40% share of the consumer goods market. Going to Slide #11. Let me speak about real estate. Real estate in Colombia remained with a strong occupancy of 97.6%. This is very important because it's an occupancy level, which technically is almost no lack of occupancy, and it is above what we had before [ pandemic ]. As a total, in Colombia, we have today 788 GLA in 33 assets. Of this, our joint venture of Viva Malls, where we have 51%, represents 71% of the total GLA with the 17 most important assets. The recurring revenue consolidated had a slight decrease of 0.6%, but this is mostly impacted by foreign exchange effect coming from Argentina. If you exclude that, we grew recurring revenue in real estate between Colombia and Argentina at 11%. Viva Malls revenues grew 8.4% and EBITDA 16.6%. A big event happening is the introduction of IKEA 17,000 square meters into Viva Envigado, our most important shopping mall. This will be opening at the fourth quarter of this year, and this will drive Viva Envigado be a shopping mall with around 130,000 square meters of GLA, making it the main shopping mall in all Colombia. These are the highlights for the results of the quarter. And now for the financials, I will give the turn to Ivonne Windmuller.

Thank you, Carlos Mario. Good morning, and thank you for joining us today. I will be presenting the financial results of the company for this first quarter. Let's continue on Slide #12 to review the operating performance. In Colombia, as previously presented, net revenues for the quarter at COP 3.9 billion that grew 2.6%, thanks to the consistent performance of the omni-channel, food sales growth over yearly food inflation, growing volumes despite a slowdown in consumption, the recurrent real estate operation and other complementary businesses performance that were partially offset by a base effect of development fees and property sales. When excluding this nonrecurring base effect, revenues grew 3.5%. Quarterly gross margin at 21.5%, 107 basis points below last year, reflected the price investment for commercial activities and the base effect of property sales and administrative fees, accounting for 67 basis points of margin loss, compensated partially by the positive real estate recurring performance. SG&A grew 5.9%. This below inflation despite a minimum weight increase at double digits and impact of other index expenses such as property tax. This was achieved thanks to the ongoing cost control action plans and efforts that amounted around COP 42,000 million during the quarter. Colombian recurring EBITDA for the quarter at COP 177,111 million, decreased 24.2% and with 4.5% rate reflects the impacted sales performance, the inflationary pressures in cost and expenses, partially mitigated by the positive contribution from the real estate and other complementary businesses as well as the strong action plans in cost and expenses. Uruguay for the quarter with a top line that decreased 10.7% in Colombian pesos with the exchange rate effect. In local currency, a positive top line evolution of 7.6% with same-store sales growing above inflation in almost 2 [ percentage ] points, driven by a strong tourism season and the performance of the Fresh market stores. Gross profit in local currency grew 9.6% above revenue growth and reached a rate of 36.2%, improving 67 basis points, thanks to the solid sales evolution and the increased share of the Fresh market stores. SG&A grew 12.7% in local currency, impacted by labor cost increase and one-off impact from a lease contract fee. Recurring EBITDA for the quarter at COP 122,404 million increased 5.7% when excluding FX effects and with double-digit margin of 11.1%. When excluding the onetime lease cease effect, EBITDA at 12.1% margin, improving 20 basis points. The Uruguayan operation remains as the most profitable business unit in the group. Argentina, with its result in Colombian pesos is strongly affected by devaluation showed net revenues that grew 226% in local currency but decreased 33.9% in Colombian pesos. Sales performance, reflecting a slowdown in consumption, compensated by the real estate business contribution with solid occupancy levels. Gross margin at 32.8% reflected the higher share of the cash and carry format that reached 18.5%. SG&A grew above sales growth in local currency, impacted by labor cost from wage increase and partially compensated by the efforts in cost controls. Recurring EBITDA for Argentina and in the quarter reached COP 2,598 million, and decreased in local currency 9.5%. At consolidated level, net revenues reached in the quarter to COP 5.3 billion and decreased 3.3%. When excluding FX effect from the international operations, net revenue grew 7.9%. During the quarter, the 3 operations showed a resilient sales growth, thanks to the consistent commercial strategy, the omni-channel share improvement and other revenues with positive contribution driven by the performance of the recurring real estate revenue. Gross margin reflected a slowdown in consumption, the price investment for commercial activities to improve the sales dynamics and the higher base effect of the nonrecurring real estate revenues in Colombia. In terms of SG&A, consistent focus on action plans in cost and expenses across the 3 operations, partially compensating the inflationary pressures in wages, other index expenses and one-offs. The first quarter closed with a consolidated recurring EBITDA at COP 302,113 million with 5.7% margin, decreasing 22% and a 14.2% decrease when excluding FX effect. Going to Slide 13. The group net result for the quarter with a loss of COP 37,863 million, reflected the consumption trend, inflationary pressures and devaluation from international operations. The negative variations compared to the first quarter 2023 are: first, lower operating contribution from Colombia and Argentina and the devaluation affecting the Uruguay operation. Second, higher nonrecurring expenses related to the restructuring process, closing of nonprofitable stores and other fees related to SEC and CVM reporting; and third, an impacted net financial results by higher interest payments due to higher structural debt and revolving credit lines in use and an FX effect in Colombia with impact in hedging results. As a compensation, we have the following effects: positive deferred tax due to higher fixed fiscal losses and lower income tax, lower minority interest from affected performance in Uruguay by devaluation and a better share of profit by lower net losses from the financial business, Tuya, and positive contribution from Puntos Colombia performance. While on Slide 14 regarding the cash and debt position of the company, we would like to highlight a positive free cash flow of COP 406,000 million with cash generation of COP 291,000 million, thanks to the improvement in working capital by reducing inventories in 4.7 days. Cash generation despite sales slowdown and pressure in expenses with a strong focus on investment optimization and prioritization to guarantee liquidity and cash protection amidst the consumption environment. Net financial debt with a positive variation of COP 183,000 million despite interest rate pressure and higher gross net debt level. Gross debt increased by COP 305,000 million due to new line to cover the share increase in Grupo Disco in Uruguay and use of additional revolving lines, compensated by the planned debt maturities. Moving to next slide, to the conclusions on the financial and operating outcome of the quarter, we had a resilient top line performance with net revenues that grew 7.9% when excluding FX effect, reflecting the slowdown in consumption and effect on real estate revenues, to highlight the food sales growth above food inflation in Colombia and Uruguay and the increasing omni-channel share with positive contribution. The consistent and strict cost and expenses action plans compensated the inflationary pressures along the Colombian operation to grow its expenses below inflation. Actions and control at working capital level led to an improvement in inventories and therefore, a reduction in net financial debt and a free cash flow generation despite the impacted operational results. Thank you for your attention. And now I give the call back to Carlos Calleja for his conclusions.

Thank you, Ivonne. Thank you, Carlos Mario. Yes, I think it's important to mention before wrapping up and passing this over to Q&A, that in terms of the acquisition and the change of control, Grupo Calleja is super enthusiastic in terms of the opportunities that lie ahead. We're well aware and we're very realistic people, pragmatic people, and we come from that background of the challenges that lie ahead. But like I said, we believe that through hard work, teamwork and constant work, we can get through this challenging period and come out stronger. And we're laser focused, laser focused in terms of what we have to do and the way we want to do it. There's a clear strategy, which has been built to boost the top line. I don't want to go into more specific detail, we could attend to it in Q&A. But basically, what we're trying to do is leverage the enormous potential of the sales platform we have. Colombia is our biggest market, and it's the market with most potential for growth, in our view, right now for Grupo Exito. We have an incredible platform that we can build upon. And that's the focus of our investment so that we can grow same-store sales. Aside from that, we're working very closely, and we've been very well received by our suppliers in terms of making our store assortment wider and reaching those categories and battling in every category in terms of grocery, the market share, so as to grow the top line sales and grow [indiscernible] market share, which is one of the key indicators that we follow in the group, and that's important to mention market share for us is something that we look at. In terms of the optimization of the portfolio, we have incredible brands. For example, in Colombia, Exito and Carulla I mentioned are the core brands with huge top-of-mind levels. And not only that they are loved brands, love marks, which are valued and followed by the Colombian population, we see enormous potential in migrating the other brands underneath those 2 umbrella brands and strengthening our value proposition, while at the same time, creating efficiencies in the organization and in the cost structure. Lastly, I would like to say that we're laser focused as well on cost-cutting initiatives. Like I said, it's the most difficult job we have, but we are assuming responsibility in terms of working on that and getting to levels where we feel the company is stronger each day. So we're committed to that, creating that leaner, more agile, more nimble, more competitive organization. I think with that, maybe we could open it up for Q&A, which is always important. Thank you everyone for being with us.

[Operator Instructions] We have a question through the chat... Is Leonardo [ Roterdo ]. He would like to know about the simplification of the brand in Colombia, clearly Carulla and Exito brands that Mr. Calleja mentioned when discussing the challenge of the company.

I think the best way to illustrate this is through a case study of an example, which we just recently executed. As you know, to give some context, our 2 strongest brands, Leonardo, are Exito and Carulla. Exito is part of Colombia's culture and part of Colombia's identity. So we feel in the thesis was based on that idea that Exito is a brand and a value proposition that dignifies the lives of Colombians with its service. It's also something aspirational for Colombian population. And by migrating storage, which are currently not under the Exito earlier brands to those brands, we feel we can attract more customers not only because the value proposition in itself is greater, but also because people who aspire and be appreciative of having the opportunity to have an Exito near their home. Like I said, we're based on the idea that every Colombian and every one of our customers deserves the best service, the best quality near their homes. So I'm going to ask everybody to speak more in detail about these 2 case studies, but we transformed 2 Surtimax stores in the last 1.5 months into Exito stores. And the results have been surprising in the positive sense. I mean we expected positive results. And I don't want to make the mistake of trying to put a flag and say that this is the way it's going to go going forward. But those results have been very, very positive. And the feedback, not only in the numbers of sales and the way sales lifted, the feedback from the customers and the way they were received in these communities where Exito was not situated was very positive as well. So maybe Carlos Mario can talk to us about those 2.

What I would say is that in these 2 cases, there were 1 store in a small city outside of [ Medigene ] and 1 in the [ ComunaTrese ], a very popular place in [indiscernible]. Both went to the Exito brand, adding a small focused portfolio of nonfood products and growth has succeeded for the moment after some months, more than 35% as an average. We believe that it has to do with the strength of the brand that came together also with an enrichment of the portfolio. It did was not only change in the sign, but changing what was the value proposition for the customer inside. Looking forward, we see Colombia for this year, more than 40 transformations, and we believe that in the following 3 years, hopefully, too, we will be able to execute the full portfolio of transformations. Of course, we have to learn, of course, the consumer will give us some reaction of what he loves and what we can do better. And according with this experience, we will strengthen the value proposition in the transformation.

I just want to add that for this to work, we have to do it alongside other drivers in our strategy such as an amplified product assortment across Exito and Carulla as well as an aggressive high-low strategy as well as doubling the amount of unbeatable prices. By this what I want to say is we have a colleague in the corporation who used the word massify, and I like that word, to massify our value proposition and make it accessible to all Colombians, regardless of the banner, that means that Exito, which hadn't been, say, these 2 communities, which are communities that are very focused on getting bang for their buck, as we say, or getting excellent prices because of the necessity to be able to live within their budget. Exito with this strategy, with the high low, will be able to attend to those needs. And our promotions, our high-low strategy, will be a driver of traffic to these stores. And the idea, the objective is everywhere, there's an Exito store or one of our stores in our portfolio, which whether it be Exito, Carulla, that be the store of destination for that community. So the focus right now is to invest in the current platform. And like Carlos Mario said, I think there's 40 or so projects, but there is 140 stores that we can work on, and we plan to work on above and beyond this first phase. So it's 40 within the context of over 140 stores that we can do this.

We have a question from Felipe from [indiscernible]. He would like to know about how we're planning to improve working capital while increasing the assortment in the stores? Where is the trick, what is the sales? And he says about the call and the interesting explanation of the strategy and the background of the Calleja group.

That's an excellent question. And it was something that we discussed as we were building the strategy. And the way to do that best is to do that hand-in-hand with our operations team, but hand-in-hand with our suppliers as well. And there's been an incredibly rigorous process in terms of selecting the assortment that we are putting into the stores. We're not just putting any product into the stores. We're choosing those products, which we know and the market knows, and our suppliers know will be well received and will move off the shelves. The idea here is to keep our commitment to managing a healthy inventory level in terms of days inventory, but also bringing a value-added assortment in terms of a greater assortment of products, which will help us through sales. So [indiscernible], as we say, speak concretely. The idea is to bring products which sell into the stores, not products which stay on the shelves. And we're doing that through regular risk analysis, data-driven decisions, hand in hand with our suppliers. We've already been doing it for a couple of weeks. I'm not saying everything is perfect in terms of every product flies off the shelf. But everything is working in our favor and the numbers are working well. There's nothing that we are seeing that makes us want to stop doing this. Now I should be completely honest, this is a change to what many retailers think is the right strategy. But we are about differentiation. That's what's made us successful in our history. There may be some retailers and we know of them who right now are cutting assortment. But that's okay. When we hear that people are cutting assortment, we're happy. We're going in another direction, looking to differentiate our value proposition through a greater assortment of highly sold and wanted products.

I would like to add financially that with most of our suppliers, we have terms of payment that are longer than their inventory. So if you add some assortment and that assortment has a good rotation, it should have not only a neutral but even a positive impact on the final working capital fee.

And it's actually one other positive note. When the industry is telling suppliers, listen, we're cutting this portfolio, we're cutting this portfolio. When one retailer comes to them and says, listen, times are tough. We want to be the best platform. We want to drive growth for you, drive market share for you. We want to sell more of your products in our stores. They're very happy. So they're willing to invest with us in order to move those products as well.

Okay. So we have a question from [indiscernible] also from [indiscernible] group. He would like to know about the CapEx plan that the company has and the capital allocation for the coming years. He also wants to know what is the plan regarding the listing of the company? Exito is now listed in 3 stock exchanges, which was partially used for the acquisition of Grupo [indiscernible]. What is the plan ahead? Should we expect a follow-on for Grupo Exito or any mechanism to boost price formation?

With regards to CapEx, I just want to say something and then I want to pass it off Carlos Mario and Ivonne and then we can go back to the delisting question. But with regards to CapEx, as with everything, we are laser-focused. And by that, I mean, we are counting the pennies and making sure that each investment is well done and goes to where it needs to be. The idea is a change from, like I said, a corporation into a company. It's no longer, you start the year, there's this budget, and we have to exit the CapEx. Everything is being looked at throughout the year to make sure that the investments are going to where they need to be going in order to drive top line sales and make sure that we are results-driven and we look at the bottom line. I talked about market share being an indicator that we like to look at. The other indicator that we like to look at is net income, and that's very, very important. So I don't want to say it's I think there's a term where like 0 budget CapEx mentality because there is a strategy, we know where we want to go, but we're reviewing every investment as we go to make sure we're negotiating the best conditions for that investment and that it makes sense for the business. But we are of the mentality and this is important that you need to invest to grow. We believe you need to invest to grow, and we are not stopping investments. We are focusing investment, like I said, on the platform, on the platform, which has enormous potential.

I would add to what Carlos is saying that speaking in the short-term CapEx in Colombia, it is going to be focused on the transformation of the different brands into Exito and Carulla being consistent with the strategy. #2, in the Wow and Fresh market, what we have decided is not to make only full store transformation, but to measure those value propositions in Fresh market and while that have been astonishing that have been absolutely winners and taking them to different stores portfolio so that we can accelerate more the good results that I'll give you some examples. All the food proposition to eat within Exito and Carulla has been very successful. So we will advance in that. In Carulla, the bread value-added proposition, our organic bread and different kinds of bread will be taken to other stores. At Exito level, the boutiques of Arkitect and Bronzini are an excellent example. And the way we have teamed with our liquor and beer suppliers to give an experience within the stores, both in Exito and Carulla will also be taken. So this will take part of the CapEx. And in Uruguay, as you know, the Fresh market proposition has been absolutely a winner. So we will have continuity and continue with this advance.

We have a question from...

So should we do the delisting thing. Yes, in terms of that, what I can say is, as in every decision, we are looking to see what's best for the company, not only in the short term but also in the middle and long term and what's best for the investors. No decision has been taken in terms of delisting, it's being analyzed. And at the moment, we do take a specific decision or if we have more priority or visibility or with regards to timing, more information, we would be communicating that responsibly to all of you.

Okay. In line with that answer, we have a question from [ Julian Restrepo ] from Davivienda Corredores. He would like to know if Grupo Calleja is interested in increasing the volume of transaction of the share or even to increasing in some way the share price?

I think with regards to the share price, and Carlos Maria spoke to this in the general assembly that we had, we acquired roughly 87% of the shares. I think there's roughly, I'm not going to be exact, but maybe roughly 1% in the U.S., roughly maybe a little less or more in Colombia and the remaining shares in Brazil. So in terms of liquidity in New York and in Colombia and in terms of the ownership in Brazil, it's very limited, right? So I think you have to put that into context with regards to share price and how much it can drive share price. What I can say is that we want to drive sales. We want to drive earnings. We want to drive market share. We want to drive results, and that's where our focus is right now.

Julian also has a question about the focus of Exito [indiscernible] and he would like to know what would happen with SurtiMayorista, Surtimax and Super Inter brands?

Will you repeat that?

Julian wants to know about what is the situation, what is the future for the brands, SurtiMayorista, Surtimax and Super Inter, taking into account the focus of the companies of Exito and Carulla brands.

That's being analyzed now. Obviously, as you grow the strength of 2 brands, relatively other 3 brands, we'll have to go in the other direction. It's not that we don't appreciate those brands over the role they've played in the past, but the focus is as in migrating the stores underneath the Exito and Carulla brands. So necessarily, that means that those brands through the course of this migration, which isn't going to happen just in 2024, it will probably take, I think Carlos Mario said, maybe 2 years, but we're going in that direction. That said, product assortment, high low strategies, those are [indiscernible], that means those are across all platforms, even before we changed the flag on some of those stores. We're not waiting to paint the store a different color to implement those strategies, which we're hoping to grow revenue and results from.

We now have a question from [ Daniel Duarte Ortiz ], the analyst of BTG and he would like to know about the thoughts of Exito's operation in Argentina. Do you consider this unit to be a core asset? Are you considering to reshuffle and perhaps streamline the portfolio of launches where Exito operates?

It's a great question. I'm super [ inflated ] by not only our operation in Argentina but by Argentina as a country, we've made 2 trips down in the last couple of weeks. And like I said, no one has a crystal ball, but what I sense in that country is that people are optimistic. Obviously, there's a lot of pain because of the reforms, but surprisingly, people seem to be willing to withstand that pain and they're giving benefit of the doubt, at least an important part of the population is to these initiatives that are happening. And I think it would be irresponsible for us to start thinking about jumping ship from Argentina. And that's why I said when people ask us about whether we're thinking of getting out of Argentina? Right now, we are not thinking about getting out. We are trying to get to know the business better. Ramon is doing a great job there, trying to navigate a difficult situation because, obviously, the reforms are affecting consumers. That said, I'd like to say Argentina is a sleeping giant that if it receives the right medicine, it could really, really take off. And if Argentina takes off, it will be something like hasn't been seen in Latin America in a long time. I'm not staying that that's definitely going to happen. But I'm saying that, that's an option of what can happen, and that's in a mix of things that we are studying. So to your point, no, we are sticking to Argentina. We are working with the Argentinian team. And what we're doing, which is new and I think important is, we are bringing Jean-Christophe and Ramon and their teams closer together and we're looking at the Southern Cone as a unit, let's say, why? Uruguay, we have more than 50% of the market, and we have an incredible retail operation, really focused in supermarkets, but 2 great hypermarkets as well. Customers love what we're doing there. We have incredible format and really excellence in terms of supermarkets. And Uruguay is right across the rear from Argentina. 2 weeks ago, we flew down to Montevideo nearby some of the Argentinian team up across the river, we worked in Uruguay. Then we went back to Argentina, worked in Argentina to see what we can build in Argentina to strengthen Argentina for a potential growth of Argentina. We've met with investors, real estate investors, people who would be willing to, if Argentina gets rolling, invest in real estate and help us with our expansion in Argentina. So no, we are focused right now in making Argentina and Uruguay, a stronger, more united unit and growing the businesses.

Now we have a question from [ Diego Sabalo ]. He's working with [ Robeco ].

Maybe just to clarify for investors, it's important. In terms of Argentina risk, and this is something that you may be wondering. So what we've spoken about with Argentina, Ramon and his team is Argentina is cash flow positive. Argentina has resources. Argentina can grow. It also has incredible assets in terms of real estate. I don't know the numbers exactly, but maybe Ivonne can get us to those numbers later I can send them to, but hundreds and hundreds of thousands of square meters in GLA. And the idea is that Argentina will grow Argentina. No one's thinking about right now sending dollars into Argentina. I just want to be sure what we are sending into Argentina is our experience, our know-how, our team who wants to help from Uruguay, from other countries and helping Argentina out, which I think is a very smart investment in a smart way to support Argentina.

So the question comes from [ Diego Sabalo ] from [ Robeco ]. He would like to know if there are more best practices from Calleja Group that we would like to implement? And any positive surprises that you've seen after we have started supervising the company?

I'll take the first part and then maybe you can remind me of the second part. So I think, obviously, it's inevitable that the way we're looking at this company is from a perspective where our history in Grupo Calleja brings our criteria. So I think every way we're looking at this company is impacted by that. And we believe we have to be humble and understand that there's no one perfect model, and there are strengths on both sides of this transaction. There are strengths in El Salvador and El Salvador, modesty aside, is a world-class operation in terms of results. And we feel we can bring sort of our best practices in terms of cost structures, efficiency, differentiation, in El Salvador, we've been competing with the biggest retailer in the world for, I think, roughly 15 years, and we've been able to hold our own, not only that, we've been able to grow and grow our leadership position in our market share throughout those 15 years. So obviously, yes, we're trying to bring that with us. That said, there's incredible talent in Grupo Exito that we're super happy with and working with, and there's stuff that's flying north as well from Colombia, from Uruguay, and from Argentina in terms of best practices and know-how. So I would say there's a fluid movement of best practices of talent in terms of things we've learned and knowledge going both ways.

The second part of the question is that if you have found any positive surprises that you have seen after you have started supervising the company?

I think surprises is an interesting term. We've known Exito for 15 years, right? I think the acquisition has ratified important things for us, for example, the quality of the team and the people, the [indiscernible], the spirit of the company and the level of identification by the team with the company. And that, to us, is important because that's where we come from a family business where [indiscernible] the spirit of service, a sense of urgency, those are important to us. And so as being part of a family. And we found that here. And I think that's been really, really, really nice to receive.

The next question comes from [ Maurice Sebastian ] BBVA. He would like to know about the capital structure of the company. If there are any [indiscernible] to pass along in full or part, the debt that [indiscernible] took to purchase the shares of Exito.

There are no plans for that. In terms of the acquisition finance for the transaction, yes, no. The transaction was structured the way it was, and I think it was good because it didn't put any pressure on Exito. And Exito right now is being worked on by an entire team of people, the 3 of us here and many other people to make it every day more efficient, stronger, more profitable and the fact that it doesn't have that debt on it, lets us all breathe a lot easier, obviously. So there's no current plans to put any debt on. I don't think it'd be a smart move either to me. I mean the cost of debt in Colombia through the roof, right? And even though it's coming down a little by little, we're hoping there's still a long way to go in terms of how far it can go.

Okay. Thank you. There is no further questions at this time. So I will now turn the call to Mr. Calleja for closing remarks.

Well, everyone, thank you again. In closing, I want to say that although I'm the CEO of Grupo Exito, I'm also a member of the Calleja family, a family which has made a significant investment in Colombia, Argentina, Uruguay and in Grupo Exito. Basically, an all-in bet, all-in bet. As you would say, we are all in on Grupo Exito. We did this because we are convinced that Exito will turn out to be a good investment with good returns. We are also aware that to achieve a good return, there's a lot of work to be done and that this will take time. As CEO, my interests are aligned with those of all investors, both family and minority investors. And I'm committed to working tirelessly together with my teammates. As a team, we are committed to ensure our company's sustainability and success going forward. We have a long-term view. The idea is that the company will be bigger and stronger than ever, 50 years, 100 years down the road. We here, probably none of us on this call, we won't be able to see it 50 years down the road, maybe some of us will, but our kids and our grandchildren will and that's the idea. So thank you all. It's been great to share this first earnings call with all of you and look forward to the next one.

So this concludes today's conference. Thank you for participating.