El Puerto de Liverpool, S.A.B. de C.V. (LIVEPOLC1) Earnings Call Transcript & Summary

Good morning. My name is Elena, and I will be your conference operator. [Operator Instructions] Welcome to the second Liverpool Day. [Operator Instructions] Any forward-looking statements made during this presentation are based on information that is currently available. They are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks outlined in El Puerto de Liverpool's most recent annual report. Please refer to the disclaimer on the web page for guidance on this matter. I would now like to turn your attention to a brief introductory video. [Presentation]

Now I would like to turn the call over to Mr. Graciano Guichard, El Puerto de Liverpool's CEO, for some opening remarks. Mr. Guichard, you may begin.

[Foreign Language] Good morning, everyone. Thank you for coming to our second Liverpool Day. And just as a quick intro, 2020 was a year where we all fought for survival. In our case, we became leaner, we became faster and we became more agile. In 2021 and the first Q of 2022, our goal has been to maintain and even increase that momentum. To do more with less, to do more with less cost, to do more with less inventories. And today, our presentation is focused just on that, on all those new projects, all those new initiatives that we feel are going to keep transforming our company, making El Puerto de Liverpool more relevant to our customers, allowing us to continue growing both in the revenues and in profitability. The team that is presenting these initiatives to you today, you already know them, they were here last year. I only have 2 new introductions to make. Carlos Marin wasn't here last year, he is a General Manager for the Liverpool brand since January 2021; and Alejandro Melgar, who is the new General Manager of Suburbia, he began on December 2021, just a few months ago. So having said that, I'm going to pass the presentation. And in case you have any questions, we are all going to be here at the end. Thank you very much.

So good morning, everybody, and thanks for joining us today. If you go to the next one, please. Last year, in our Liverpool Day, we presented our ecosystem strategy. Today, we are excited to share with you the progress we've gained in this third year of execution. Next one, please. As you might recall, we shared with you the aspiration of wanting to be in the first screen of our customers' smartphones. When we say in our slogan that we want to be a part of your life, we really mean it. And we mean not only on your physical life, but also on your digital one. We know we need to be on our customers' mobile to be where our customers do shopping research, where they get inspired, where they transact and get services among the others. Next, please. We also shared that our strategy would be built by leveraging our key strengths. The first one are key brands; the second one, the loyal customer base that we have; and that in this year, we've grown to be approximately 15 million unique traceable customers. Knowing and understanding our customers allows us to try to anticipate their needs. As we also shared, we also have our financial services capabilities, where half of our sales are done with our own credit cards, thus creating a very powerful virtuous cycle. It is also worth noting that significant participation of our cardholders in what we call our PIF, which is a monthly subscription, which provides peace of mind by packaging insurance assistance services and extended warranty among others. The fourth strength is that we see our store footprint as a competitive advantage. And finally, our wide assortment and portfolio of exclusive and private label brands. It is important to highlight that multi-category customers buy up to 4x more. Next, please. And finally, in this slide, you will be able to, again, see the summary of our strategy. You might recall that we shared our vision of becoming the top shopping option for Mexicans with 3 key objectives: first, growing an e-commerce; second, strengthening our omnichannel capabilities; and third, increasing the stickiness or frequency of transactions and interactions. Last time, we shared our key initiatives to reach these goals and some key enablers required. Now in this presentation, we want to share the progress we've made in some of these key areas. So to start, let me turn it over to Carlos Marin, who will share how we are leveraging our stores as a competitive advantage and as a cornerstone of our omnichannel strategy. Carlos?

Thanks, Mauricio. Good morning, everyone. I'm Carlos Marin, Liverpool General Manager, and I will talk about the omnichannel strategy we have. Next. First of all, we have the store at the center of our strategy. For the foreseeable future, it will continue as the main sales channel. We have a great footprint, better than anyone else. We see the store as a place for differentiated experiences and services, to having the best possible assortment in a frictionless environment. Integrating the store to an omnichannel strategy brings us operating efficiencies and the possibility to use them as fulfillment centers. We will talk about our footprint and about the store as an experience center, a service center and a fulfillment center. Next, please. As we can see in this slide, just as an example of the 2 biggest cities in the country, our stores are strategically located close to economic segments we target. If there is population outside of our service ratio, most of the times are lower segments than the one we focus on. We just showed 2 cities, but it is the same for the whole country. So I believe we have an advantage that no one else has. If we do things right, we will be able to serve almost the entire country in the same day or next day basis. Next, please. Well, as I just mentioned, the physical channel remains a big part of our total sales, but the digital channel is growing rapidly, either with our dot com sales or via the extended catalog. For 2020, during the pandemia, online sales more than tripled. And it was natural that with all the stores opened, it was going to drop a little in 2021. But the basis, as you can see, is now much higher. The extended catalog also shows good growth with the sales we make with establishing the stores. Remember, around half of our point of sales are mobile, where we can show the extended capital of our products and other products of the marketplace. Next, please. We see the store as an experience center. We know the customer expects a differentiated experience when they come to the store. That's why we are working shoulder to shoulder with our most important partners and brands, to get experience to the next level. We have great spaces with great brands, such as Nike, Apple, Samsung or Disney, just to mention a few. For example, as you can see here, we have the Disney store inside our Liverpool stores, where customers get access to the same products they will get at the theme parks; or with Nike, we have the biggest space in Latin America at our satellite store. This obviously has to go hand in hand with great service from our sales force. Next is, we also use our stores as service centers, and I think this is very, very important. We want to offer our customers more services via stores and not just transaction. We want them to feel comfortable, listened to and taken care of. We have a project called value-added services, where we map all type of services, our customers would like to have at our stores. For example, we have our interior design service, where customers can access professional designers. It doesn't matter if it is a big or a small project. The beauty experience, where people can get for a haircut to a facial treatment or simply getting their nails done. We're transforming our multimedia spaces to offer geekhelp, a service where people can solve problems, mainly with their laptops or cellphones. And we're working also really, really hard on the personalization of services and products. Through the last years, we have been evolving from a simple in-store operation to an omnichannel operation. It doesn't matter where the customer is buying, they can get access to all the benefits of shopping at the Liverpool system, whether they buy in the store and want their products delivered to their home or buying online and want to pick up in the store and all the possible combinations. As we can see next slide, please, using the stores as fulfillment centers gives us many advantages. First of all, delivery time. Nation day, same day or next day delivery as well as Click & Collect within 2 hours. Research optimization, while we have the staff and infrastructure in the stores, so the [indiscernible]. Cost reduction in terms of logistical efficiencies and inventory turnover. As our logistics team will mention, deliveries from the store are significantly less expensive than deliveries from the distribution centers. In order to achieve this, we have sales recognition from our -- for our sales force, so they can promote any product in the ecosystem. It doesn't matter if it is in the store or not. That also represents higher income for them, and they become sellers of extended catalog and the marketplace products. Last, the customer service we can give in our stores for in-store and online sales, I think, is great. We give digital customers the peace of mind that they know where they can solve their problems if they are not completely satisfied. Many of these -- those customers call our contact center, but some of them prefer to have face-to-face interaction. Let's remember that the Liverpool brand represents reliability for most of the Mexican customers. Next please. Well, in this omnichannel strategy, Click & Collect has a very important role. During the last years, this has been evolving fast and continuously. But this evolution allows us to implement, for example, flash deliveries, where customers can pick up their products in less than 2 hours. Antonino will comment more on this. It is important to mention that multichannel customers are much more profitable than single-channel customers. For example, digital customers when in the store, they make additional transactions. For example, 20% of our customers that go to pick up something at Click & Collect end up buying something else. And more than half of customers that make a return end up making a purchase. Next one, please. Well, in order to be able to reach what we have mentioned, we needed to do some store improvements in terms of renovations and innovations. That required investments and a lot of work, but we feel comfortable with these changes in all of our stores. For example, we relocated Click & Collect modules to main store entrances and developed in-car pickup and drive-thru delivery options for customer satisfaction. We also redesigned the warehouse space on sites for consistency with the strategy as we can see in the products in the next slide. Well, we also implemented a new position in the stores called the omnichannel leader, who is responsible for verifying that all processes involved are being followed currently. Here, you can see some examples of it that we can collect them right through just as we have in the stores. Next, please. Well, all of what we have been talking about couldn't be true without a good inventory management. It's imperative that we have our inventory as close as possible to where the customer is buying it. That is why we are working and investing a lot of resources in the planning, assortment and allocation projects. It has the objective of providing our products wherever and whenever the client needs them, either physically or digitally, through a technological platform called, o9. In simple words, speaking of any single category, planning will tell us how much to buy with long-term visibility; assortments, what to buy based on attributes performance; and allocation, for where to send it. All of these using advanced analytic capabilities and artificial intelligence, providing us the chance to make this test not only based on the past, but on the forecast. We are being very ambitious in this issue and plan to start using the fresh modules during the following weeks. And the complete implementation will take place during this and the next year. And now Edwin Serment, our Head of Logistics, will give some more details. Thank you.

Thanks, Carlos. Hello, good morning, everyone. I present you the top priorities that we have defined to improve our competitive advantage, which is the store from a logistics perspective. So next slide, please. First, we start with the people. We strengthened the omnichannel culture by integrating our processes with our client and user interaction focus to serve the client in a seamless environment with achievables to fulfill our delivery products. By user, we mean that any collaborator in the store can do this. The store is the backbone of a convenient business model for our clients. We have enabled different purchasing and delivery method capabilities that address the different needs for our clients. We also implemented logistic processes that have been incorporated into the functions of the store associates in a simple and clear manner. In addition to adjustments made in the certain physical spaces to meet demand, we also do local management's accountability, and this has been achieved. Last month, transportation probabilities have been diversified to meet peak and valued amount efficiency. As you can see, the lead-time delivery improves by 75% compared to the traditional model of delivery from our warehouse on the outskirts of the city. Second top priority is the inventory. With the incorporation of improved distribution capabilities, we are in the process of redesigning logistics processes to be efficient in either in the cross-store and work housing processes. We will expand our logistics infrastructure with PLAN and set up omnichannel fulfillment centers. This will give us the capacity to replenish 90% of our stores only in 48 hours. That same infrastructure is a growth platform for the initiative marketplace fulfilled by you. Today, we fulfill 92% of the products from the stores, and these initiatives are focused on making that model sustaining. The third top priority are the digital initiatives. We defined delivery radiuses that will relate to our clients' delivery preferences and the inventory availability. With this, we enabled transportation capabilities and offer the option of flash deliveries. Flash deliveries now represents 12% of our total deliveries. Next slide. And PLAN. We are going to implement PLAN, Plataforma Logística Arco Norte, in 2 stages. We have started the first phase with our control operation. And right now, we're in the process of moving the big-ticket product category operations. The immediate benefits are increase of our warehousing capacity by 188%, also a 152% increase in processing capacity. We will have quality control benefits, 70% above what we are right now. And our lead time will have an improvement of 14%. Also, the cost of processing there will have an improvement of 14%. We will complete our transition by September of this year. And for Phase 2, PLAN will operate at the central node of our logistics network, as it will consolidate the operations for all the approved products. It will be integrated with a network of 7 omnichannel fulfillment centers that will allow us to be closer to the demands. We intend to start operations by 2025. Next slide, please. Our competitive advantage is getting stronger. In the past 2 years, we have accelerated the evolution of same-day and next-day deliveries, either to home or in our Click & Collect node. Our ambition is to reach 47% share of deliveries by the end of 2022. This way, we improve our customer shopping experience with our omnichannel model and highly competitive delivery channels. We do it in a convenient way for our clients, because with the store, we achieve flexibility as our clients in a very comprehensive way. And our competitive advantage reduces logistics costs to come in order to consistently offer our clients free shipping. And next slide, please. Now we will present to you a video. [Presentation]

And now I will hand the lead here to Antonino Guichard. Thank you.

Thank you, Edwin. Hi, everyone. Hope everyone is doing well. It's my turn now to talk to you about the data strategy and what we're doing so far. As Mauricio Braverman mentioned before, we successfully implemented 7 sites, 2 apps, all under the same strategy, allowing us to grow faster, move faster and technology -- implementing new technology in all our platforms and all our brands. We have launched the past year, the Suburbia app. And also we're launching the Banana Republic site in the next couple of weeks. This will be our eighth site, as mentioned before, running under the same e-comm platform. Can we go to the next slide, please? As Edwin mentioned, we have the ability now to do flash deliveries. Flash delivery for us means the same day delivery or next-day delivery. Now we're able to join our customers' location with the closest store inventory. This, as mentioned here in the pictures, will allow the customer to know exactly if the product is able to arrive today, next day, or if he chooses to do Click & Collect deliveries, it will be in less than 2 hours. All these with real-time inventory while the stores are open and operating. Also part of our strategy mentioned is growing our assortment. Can we go to the next slide, please? So for us, it's very important to continue to grow our product offering. Mainly, we are buying department combining with big data analysis, and with the new business model of marketplace, we have been able to grow tremendously our growing assortments in the past years. Despite the pandemic numbers, we were able to grow 38% last year, and we're aiming to have tremendous growth in the upcoming 5 years. Now talking about base assortment growth, I will talk to you about the marketplace. Next slide, please. As you know, we launched our marketplace model in 2019 with major building blocks to do. This is our past 2021 performance, which I would like you to take step by step. First of all, and most important, we grew our customer base by 123%. Also, we were able to grow with tremendous talents, finding the right talent, decorate talent, and keeping it operating with us. It's very important for Liverpool. We have now almost a 60-people team working only to grow this business model. We've also implemented a new quality system, which has allowed us to have 97% order acceptance from our sellers, 96% ordered deliveries on time. We were also able to do some building blocks that will take us to the next level. We have launched, as mentioned by Edwin, the Fulfillment by Liverpool model, focusing on our delivery capabilities, especially with big ticket items, allowing Liverpool to deliver what he does best, our big ticket. We also are able to integrate all data with a 4PL manager, giving the customers the ability to find whatever they want -- they're products and where they are. We have also implemented an API capacity so the seller and Liverpool are completely automated. And finally, we also launched a stock-out model, allowing us to be able to mix the seller inventory with Liverpool's inventory, and this will reduce completely the stock out option in the store, which means our sellers and vendors are now mixed together. So our sales team will always have inventory to sell. So marketplace now represents almost 50% of liverpool.com. We have over 50 sellers now selling with big ticket items fulfilled by Liverpool, and we grew our sales 53% regarding past year. Also, we were able to grow 58% in orders. And these orders, 8% were done through the store, which represents around 20% of sales were done with the seller app in the store. And of all those orders, 25% were delivered by Click & Collect within the stores. We were able to grow 85% new sellers, we were able to grow 97% our active offers. And we were able to increase 91% our active sellers, allowing this business model to grow tremendously. And we foresee it keeping this way for the next couple of years. Next slide, please. Talking now about our e-commerce performance, I want to talk to you a little bit about how we've been doing. Well, we have grown tremendously in session growth, comparing 2020 and 2021 despite the pandemic and the tremendous growth e-commerce had worldwide. Also, it's very important to mention that we have grown our month active users year-over-year over almost 15%, now having around 9 million active users per month. Next slide, please. Talking about customer acquisition, it's very important to mention that this is the company's customer acquisition. We had a steady growth from '18 to '19. Then, well, due to the store closures and the pandemic, we lost about 20% of customer acquisition. However, during the past year, we were able to turn it around. We grew 23%. And now we are expecting to grow almost 11% in commerce acquisition and continue that trend. All of this -- next slide, please. All of this is going -- is doing with our personalized omnichannel experience. We have to return the mom-and-pop shop offer to all of our customers. They want to feel confidence that Liverpool will always be there for them. So as mentioned before, we have implemented a personalized experience, all under one ecosystem. Can you go to the next slide, please? We have an omnichannel order history now. We are able to mix what's happening off-line with online and mix it all together, and now you have it in your hand, in your pocket. We have personalized content through all of our customer database. We have now e-ticket options, which will allow you to have, in your app, all the transactions you've made. So you can do follow-ups, you can do maintenance, you can do installations, all under one hand. We've implemented wallet. We've implemented personalized monedero electrónico all through the app. And now we have a personalized coupon holder. We also have the geolocalization to anticipate deliveries, and this allows our logistics platform and our sellers platform to give better and faster performance for our customers. And finally, we've implemented a hyper personalized experience, meaning that we are now able to have more than 90% of our database having a personalized experience. And if we can go to the next slide, which means, how are we doing? And these are just a few examples of how, through mid-season sale, Vente Especial, which was a couple of weeks ago and our 48 special sales a couple of weeks ago, everybody had a different experience, regarding on what our algorithm [ returned to us ] on the probability, that you will find the best assortment for you in Liverpool. And this has been already implemented leading to instrumental increase in sales. Following the worldwide trends, can you continue -- next slide, please. We've implemented also live shopping. As you know, especially in the Asia market, live shopping is very, very important and very trendy. We have implemented here. And what is live shopping? Live shopping means that somebody is -- an expert in the product, either our buyers or our sellers are going live on our platforms, selling the best assortment that we have and how it works and how can you continue to improve your product buying. We already have on Facebook and social media more than 86 days of viewing time, and we continue to invest in this project and tropicalize it into Mexico's market. All of this strategy has been giving us, next slide, please, our expectations of how digital GMV sales will grow. So we're expecting to grow 33% this year. But as you can see here, we continue to grow our forecast and continue to be on a heavily increased sales trend. So now I will turn it to Santiago de Abiega, our General Manager of Financial Services.

Hello, everyone. It's good to be with you again. I'm going to give you a quick overview of an update of all of the products and services that we are developing on our financial services offer. Can we go to the next slide, please? Okay. This chart, I'm sure you've seen it before. On the first ovals that we have here, it's everything that we already have, and we are in the process of developing and increasing the number of services and products that we are offering our customers. As we saw on our last meeting, we have the Monedero Digital, which I'm going to give you an update; credit on-us, which is all our private label cards with all of our different payment plans that we have; then we have the credit of-us, which is the co-branded cards, the personal loans, which is something that we are testing today; and the insurance business, the distribution of insurance in which we have whole variety within our offer that we have today. On this last oval, regarding this one and all the products, these new products that we want to offer our customers, all I can say right now is that we have been working on it, and we have had significant progress. Hopefully, once we have something more concrete, we will be able to communicate it pretty soon. What are the benefits of developing all of these financial services offer? Well, the same way that you've heard from my colleagues of all of the development that we have on our ecosystem and our marketplace on the commercial side, well, we want to do exactly the same thing on the financial services by complementing the ecosystem of El Puerto de Liverpool. So obviously, this is also going to help to increase the frequency of the business that we have from our customers. Obviously -- and this is going to give you more information on the customer. So this way, we will have this information to offer different commercial -- offers to our customers. And obviously, also leverage all of the omnichannel presence that we have within this financial. We can go to the next one. Now I'm going to give you some example of the things that we've talked before and the new things that we are doing on the financial services. And we have -- we talked about the bill payment hub. Well, we launched this in -- nationwide in November of 2021. And it is beginning to get more and more important, even though it's still not too big. But as you can see, we're having -- these past months, we're having close to 15,000 transactions and close to MXN 10 million in transactions by paying -- these are actual screens that we have on our app. So you can directly pay your bills which charge to your Liverpool credit card. Next one, please. Okay. I also wanted to share with you these new products. These are very, very small today, but we started testing them in some stores. We have a secured credit card. This is a department store card that allows the applicant to begin or to refer their credit history. So customers -- even customers that have a bad credit history, they can apply for these cards and start creating the new or repairing the new credit history. And this allows us to go to a segment of customers that in the past, we were not giving credit to. We announced this test, this pilot test in October 2021. Today, we are in 29 stores. We are refining the product. We are learning from it, but hopefully, we will start rolling out these 2 more stores. Then we also start testing pilot test on Livercash, which is cash loans. They are based on the line of credit of our customers, on the credit card, with installments of up to 24 months. We launched this in November 2021, and this has become something very interesting that we are learning from it. And hopefully, we will be launching it nationwide pretty soon. Next one, please. We also talked on our last meeting about credit online, the applications that we have online with the digital channels. And today, the results are very good. Today, we have had 57 -- over 57,000 new accounts generated, originated by this channel, which is, on these past months, it has represented 14% of all of the originations of the company. Today, this is our #1 origination channel. By June 2022, what's next? We are going to introduce the biometric authentication. So this means -- because today, all of these new applications that we are originating through this channel, these 57,000 accounts, they have all been for customers that do have information on the credit bureau, what we call the [indiscernible] on the credit bureau. By June, we will be able -- with this biometric authentication, we will be able to originate accounts for customers that do not have information on the credit bureau. So we believe that this is going to increase substantially the number of accounts that we are going to be creating through this channel. And also in June, we're going to be releasing the instant virtual card, which this means that you do the application online, you get your card immediately. And you can just start shopping at that moment digitally, or you can go to the store and also start shopping with your e-wallet. Next one, please. Then we also talked about the Monedero Digital, which is -- Monedero Digital, just to remind you, is the Liverpool digital money. And today, we have -- we launched it in June of 2021. Today, we have close to 0.5 million active Monederos. The purchase amount that we had with these Monederos is around MXN 300 million, which most of these transactions, we've had them done online, 84% of the transactions that are being done with the Monedero, are done online; and the other 16% are being done in-store with the e-wallet. So this is very important for us also because this allows us to get information from customers that probably were not transactioning with our credit card, and we do not have that much information. So this way, we can get information from mostly all of our customers. Next one, please. And I think this is my last slide. We also talked about crédito al consumo, which is our non-revolving consumer credit, with an initial campaign, with biweekly installment plans. We call this the [Foreign Language] mini payments. And this is designed for lower-medium and upper-lower segments for the acquisition of goods. This also -- this product also allows us to get to a segment that also before, we were not giving credit to. And customers that -- what they want to have is the certainty of what the fixed payment is going to be within the next month or biweekly payments. So today, we have -- I think, it's 21 stores that we're doing the test pilots. By the end of this year, we're going to have a rollout to 80 more stores. And by 2023, we hope to have all 190 stores with this offer. We are doing this in Suburbia right now, which we believe that there's -- where we have this segment of customers. And we are also working to have the automatic down-sell and up-sell of all of our products. So we can offer in Suburbia. There is a card, we can offer the department store card, and we can offer the [Foreign Language]. And then we -- the [ apart model ], which we -- is customers that go and they start paying their goods without taking them home until they finish paying. So we also get information from these customers. And once we see that the customers they take their goods. At that point, we can start doing up-sell for these customers. We are also thinking next to offer also the secure cards here to the customers of Suburbia. So these are only some examples of the things that we are working on, the things that we are offering, in order to complement the financial services offer and ecosystem. And I think that's it on my side. Thank you very much. And Alex, you're next.

Thank you, Santee. Can we move to the next slide, please? So good morning. Today, I would like to share our value proposition that will be our main strategy and focus for the following years. This strategy is customer-centric and will help us improve the overall experience in the omnichannel journey, leading us to achieve our profitability, goals and set the basis for the future expansion. Next slide, please. So we are working to improve our store layouts in order to offer a better customer experience with friendly adjacencies that will support the journey in our stores. In addition, we will develop a clear signage strategy of the departments from our store entrants and across all the touch points of our customer. The offer of branded services will be visible for everyone to achieve a comfortable and easy way to navigate the sales floor. The next, please. To improve profitability and the customer shopping experience, we are redefining our store clusters to be clear about which departments or categories we will offer per location. We will work towards building a clear definition of what brands we have per store, so the customer has a coherent and appealing offer of our products. We will strive to have profitable brands for the business and attractive for our clients without losing focus that our core business is our private labels. We will continue with our guideline proposal by defining the right locations and categories that we can offer per store with a clear signage and supported by digital tools to offer an extended catalog and thereby make physical spaces more efficient. We will maintain healthy inventory levels aligned with objectives to deliver a great store experience and reduce promotional activities. We will seek to maintain our business model with the best possible product and competitive price proposals to promote full price sales. And finally, all our efforts are customer-centric. The next slide, please. We will continue with our growth plan in the coming years by opening close to 15 stores per year. In order to support our value proposition strategy this year, we are going to invest in remodeling and improving some of our existing stores. The next slide, please. We recognize customer service as a key part of the value proposition. So we are working intensively with the team to offer a friendly and timely service with an omnichannel approach. We will continue to promote our app and digital strategy and complementing with kiosks at our point of sale. So we'll offer an extended catalog in certain categories and be more efficient on our sales floors. So thank you for your time. And now I will turn it over to Zahie.

Thank you, Alex. Good morning to everyone. This is Zahie Edid, the HR Officer, and it's a pleasure once again to be here with you to share what we have been doing and what we are expecting to do in the terms of ESG. So next, please. Last year, we had the opportunity to share with you the cornerstones of what will become our sustainability strategy, La Huella de El Puerto Liverpool, footprint that we are seeing here. During 2020, we mainly defined the goals and set the route to achieve results in our sustainability model. Next, please. Today, we are glad to share the ESG results in our integrated annual report 2021. It's decided to focus on our individual stakeholders and bring an integrated view on our contributions to the global agenda and the SDG’s goals. We invite you all to take a deeper look into our annual report by scanning the QR code that is in the screen. And I want to underline that it is the first report that aligns with the GRI Y and SASB standards. Next, please. Today, we want to bring you an overview of the ESG goals in the coming years by topic, okay. So let's just start. Starting with an environmental standing point, we have set ambitious goals for 2040. First of all, as we work on decelerating climate change, we are committed to attaining net zero emissions on our Scope 1 and in Scope 2 greenhouse gas emissions. We will do this by cutting back on fossil fuel consumption for our operations in the coming years, integrating electric vehicle solutions to our distribution fleet as well as searching for clean and renewable energy sources on a national scale. In terms of waste management, we want to improve our capabilities for recycling in-stores in order to be able to prevent waste output comparable to 100% of what we generated in 2020. Finally, we are committed to reducing water consumption, increasing water treatment and integrating our capacities for rainwater capture to achieve water balance. Next, please. In the social dimension, education is one of our top priorities. We see this as a chance to connect with the communities and emphasize that well-prepared people face in a different way the challenges in life. Towards 2030, the goal is to reach more than 100,000 beneficiaries on skill development programs via our online university and benefit social integration. On the other hand, gender equality will be on the agenda. Our main purpose is training women in middle management to accelerate their development. Topics like communication skills, improving talent management, innovation, networking and making decisions with data will be reinforced to empower and develop talent. We strongly believe in an open talent culture out of a gender quota, but giving the same opportunity and recognition for women. Next, please. And finally, in terms of governance, we defined important commitments by 2030. One is centered in our responsible sourcing program, which is oriented to develop our strategic suppliers and collaborate with them to add value to the chain, to all the value chain. The program encourages audited suppliers to guarantee human rights, labor practices and environmental compliance wherever they operate. And the second goal is to promote sustainability with our commercial partners, developing more sustainable collections and products. By 2030, we'll be labeling 100% of sustainable attributes of all the products in the catalog offer. Next, please. With all of these commitments, we want to show you the way we want to make a difference in our business to achieve a more sustainable future and be close to the community and serve our customers every day, anytime, anywhere. Thank you for your attention, and now we go with Enrique.

Thank you, Zahie, and good morning to everyone. Now I'm going to close the presentation. Now we have to move on to the most interesting part, which is, of course, a Q&A section. So very quickly, the next slide, please. As you know, we had a very, very strong first quarter this year. It's worth to highlight, and I'm sure you're well aware of that, that the comparison year-on-year was relatively easy because last year, during the first quarter, we had a significant number of our stores, particularly in the central part of the country, closed during the first basically 45 days. But after saying that, I would like to point out at March, which was more of an apples-to-apples comparison, was also very strong for basically all our business units. In this couple of slides, I'm going to share with you, I'm going to compare against 2019. That's a pre-pandemic to, I'm sure that this gives you a more color on what the performance that we had in the first Q looks like. So for Liverpool, Liverpool continues to perform very strong. Same-store sales growth against again the first quarter of 2019 was almost 25%, which is big. Obviously, the total revenue for our company in Q1 was a little bit about MXN 32 billion. That was 17% above the same quarter basically 3 years ago, pre-pandemic. Digital sales, as you saw, were basically flat in terms of sequentially against the previous 2 quarters, around 20%, 21%. But again, I would like to stress the fact that it's -- this is 3x the share that we have in 2019. Retail gross margin also performed very well. It was 32.6% during Q1, and this was almost 300 basis points above the same period 3 years ago. So as you can see, all the numbers look very, very strong. The next slide, please. Our NPLs continued to perform very, very well. We closed March with an NPL of only 2.4%. And this is a little bit less than half of what we had 3 years ago. Again, we continue to be surprised by how good this KPI is performing. In terms of EBITDA, we posted almost MXN 5 billion of EBITDA in this quarter. This was a growth of 67% against the same quarter 3 years ago, and EBITDA margin of 15.3% was also record high, was 450 basis points above what we had 3 years ago. And finally, the net profit that we posted in Q1 was MXN 2.2 billion, and this was a little bit more than 2x what we had in Q1, not only in 2019, but also you see our Q1 in 2018, we also see basically that net profit is 2x ahead. And finally, I don't have a slide on that, but we also saw very strong results in all our KPIs marketplace Antonino covered, grew 41% year-on-year, came very strong. In terms of logistics, our Last-mile delivery cost decreased 7% year-on-year. Our delivery times improved 25% year-on-year. Click & Collect, which as Edwin pointed out, is very, very important for us, reached 31% share in Q1. Again, it's still below the pre-pandemic level, perhaps recovered significantly. And finally, during this Q1, the same day and next day deliveries increased almost 90% and the ship from store deliveries more than doubled against the prior year. So as you can see, these are very strong numbers across the board. And then, we will move now to the Q&A part. Thank you very much.

[Operator Instructions] Our first question comes from [indiscernible] from Credit Suisse.

It's Vanessa Quiroga from Credit Suisse. It's mainly about logistics. This is a part that has surprised us more positively in the last few quarters on how Liverpool has been able to consistently reduce delivery costs since traffic started normalizing also at the stores and sales started recovering. So I would like to understand better your expectations going forward regarding a further reduction in delivery costs that you are expecting, especially when Arco Norte becomes fully operational. And also, if you could give us a picture of flow example of how your logistics will change before and after the full planned project?

Yes, Vanessa. Thank you. Let me first talk about the economics, and then I will pass the mic to Edwin to give you a flavor on how Arco Norte is going to change, Arco Norte and also the fulfillment centers are going to change our network. But first, in terms of the delivery cost. There are -- I think that the 3 main factors that have helped us in this first quarter of this year. The first one is that you see our digital volumes, the share was basically sequentially stable, but comparing to year what we saw a 16% reduction in the digital GMV. Because as you pointed out, the stores were open, and we are basically having a more of a normalized shopping experience. So that, of course, helped in terms of the delivery cost because there were less lines to serve. The other 2 factors are Click & Collect. As I pointed out, Click & Collect is now running at 31%, and this is significantly above, of course, of what we have the prior year when the stores were closed for the first 45 days of the first Q. And finally, also the [ origin ] that has helped a lot is the ship from store. I mean ship from store, as I pointed out, is basically 2x above what we have in the prior year. So that also what we see is that the last mile cost of direct shipment from the store is basically like 60%, 65% below what you have to pay when you don't have this kind of delivery method. So I would say that those are the 3 things that have helped us. And looking forward, we are expecting a significant increase in the digital GMV for the latter part of the year. Now that things are more apples-to-apples and hopefully, we're not expecting to see any store closures, we're expecting, you know that digital GMV will close at around 28% for the full year. So since we started the year with only 21% we're expecting a significant pickup. And as Antonino pointed out, this translates into almost a 33% increase year-on-year for the GMV. So that will put pressure on the delivery cost. And the other thing that is going to put pressure on delivery cost this year is that we will have an overlap of the Arco Norte project is starting up and it's going to be ramping up gradually to finalize, as you know, the movement from Huehuetoca to Arco Norte by July, August of this year. So we basically, during the first 6 or 7 months of the year, we're going to have like the operation simultaneously [ Huehuetoca ] and Arco Norte. So that overlap will cause to translate into several million dollars of additional logistic expenses. So that will also put pressure for the latter part of the year on the logistics expenses. Now I'll pass the microphone to Edwin so he can give us some color on the store network or part of the logistics network. Go ahead, Edwin. Thank you.

Thank you, Enrique. And Vanessa, I will try to answer your question in a very simple way. The stores are the advantage. So every time we sell in the stores, we need to replace the inventory. So the whole network is focusing mainly in stores as the advantage. Then the core of the logistics is going to be Arco Norte and the fulfillment center operating at full capacity. So we will handle the inventory in collaboration with the buying office. The buying office is going to experience with the support of the new capabilities of distribution with [indiscernible], they will have the ability to reserve a small amount of inventory so we have to demand, so that will put us in a very advantaged position. We will do the replenishment through the fulfillment center or Arco Norte. And in the peak seasons, we will balance the volumes heavily in part of the volume to the fulfillment center in order to maintain the stability in the level of service and the costs obviously is highly reduced because we have the proximity of the stores, and moving the merchandise in a bulk way to the long haul way to replenish the store is way, way much less cost -- it cost less than doing the last mile delivery. So I hope I can answer your question.

Yes. I mean, I think I wanted to contrast, like compare and contrast between how you are working today in terms of backlog of how that will flows throughout your logistics infrastructure now compared to what you expect it to be with plan? And then also a follow-up...

I'll chip in on that one. Our logistics was built to deliver merchandise to the stores. So basically, we had a distribution center, which had a cross-dock and what it did is to deliver the merchandise to the stores, and that was it. So now to what we have today with the e-com is that we have to take that merchandise outside of the store, and if it's on the same city, it works really well. It's -- as Enrique said, it's about 1/3 of the cost if you do it through a distribution center. But the problem is, if that merchandise is going to be delivered outside of that city. There we have a problem because I have to take the merchandise out of [ media ] let's say. I have to bring it back to Mexico and then I have to send it to wherever this is going to be delivered. So what we're going to do is we're working first on the range of matter, which is the planning, assortment and allocation structure. That will help us have the merchandise closer to where we expect it to sell to the customer with artificial intelligence. So the flow is now going to change. We're going to have some of the merchandise kept on Arco Norte. This is 2024. But remember that what we opened in Arco Norte today is big ticket. In 2024, we're going to open softlines. So we're going to keep some merchandise in Arco Norte. We're also going to keep some merchandise on the 7 regional distribution centers. And the store is only going to have what it needs to sell in the next, let's say, 1 week. So we can -- with this distribution center, we can deliver to the store replenishment in less than 48 hours. In most cases, in less than 24 hours. So what we're going to do is we're not going to ship the merchandise before. We're going to keep it. So that's going to help us reduce markdowns. It's going to help us increase sales because we're going to have the merchandise where the merchandise is selling better. It's going to help us increase the inventory turnover, and it's going to help us deliver faster to our customers. So that's the logic behind Arco Norte and the 7 distribution centers.

That's amazing here. Yes. And just a follow-up on your Click & Collect and shipping from store. What's your target in terms of where you want a Click & collect to be as a percentage of total e-commerce and also what percentage for shipping from store?

As I mentioned, we intend to achieve 47%, and this is based on the customer preferences and we have the inventory allocated right now.

Also the figures were for this year. Those are our goals for this year. I think like long-term, we envision that Click & Collect hopefully goes back to the high 30s, low 40s that we had before the pandemic and that ship from store will eventually in the next several years, grow to 30% or so of the overall delivery. So hopefully, we'll have like a 65% of our lines delivery using this competitive advantage methods.

Our next question comes from Ulises Argote of JPMorgan.

So one question here. You spoke about incrementing the credit offering and a bunch of new products that you're rolling out. So anything that you can share there kind of priority wise across those initiatives, maybe something on the time line that you expect. And the second part of that question also kind of relates to the NPLs. So those levels have been quite low. How does this play in your overall strategy? How much of a push can we expect on you guys becoming more aggressive towards expanding the credit portfolio in the short midterm, once again?

Thank you, Ulises. I'll take advantage that we have the expert on these 2 questions that we have Santiago, of course, here. So Santiago, you want to take these 2?

Yes, Enrique. Thank you, Ulises. Very good questions. I'm going to start with the second question first regarding the NPLs. And I can tell you is that, yes, we are surprised to see the levels of NPLs that we have today. But nevertheless, let me tell you that even in the worst times of the pandemic, we never lowered our acquisition rates or the approval rates that we had, we maintained them. Obviously, we got less accounts because obviously, we had our stores closed and people as they didn't apply for. At the beginning, we didn't have the online application, but our approval rates, they have kept the same. And actually, let me tell you that these past months, we've seen higher approval rates even than the ones that we had prior to the pandemic. Today, we're having approval rates between 40% and 45% on our portfolios. Definitely, I think one of the reasons is that, unfortunately, with the pandemic, we lost a lot of the bad accounts or the most riskier accounts and the write-offs had an important increase during last year, especially on the second semester of the last year, and that made the portfolio very clean. So that is why today we have these levels of -- actually, we closed with 2.1%. Definitely, we do believe that we cannot maintain, and actually, we don't want to maintain these levels of NPLs. And we expect by December to have 100 basis points higher. So we expect to be closing around 3.1% versus the 2.1% that we had in December. And we feel very comfortable with this because we are seeing right now the entry rates that we have, the early stages that we have on our buckets that we can see that they are even better than what we had expected on our budget. So we do believe that we can achieve this 3.1%. Nevertheless, even though we are seeing this increase in obviously balances and this increase in NPLs. The loan loss reserve, which is what goes directly into the P&L. It is still going to be, we believe, 35% lower than the one that we had last year. I don't know if that answered your question regarding NPLs.

Yes, it did.

And yes, we have a lot of things that we are doing to increase the portfolio, to increase the portfolio profitability. If you look at accounts, we are expecting to originate about 1 million accounts, which is pretty close or even a little higher than what we originated in 2019 before the pandemic. Obviously, in -- we've been working a lot in line increases, we're going to be doing over 1 million line increases this year, which is much higher than -- even than what we had prior to the pandemic. Also overdrafts, overdraft is something that we've been working with our systems in automatic overdrafts that customers that can go beyond their credit limit. That's also very important, and that is giving us a lot of new sales. And we have been working with all of our risk models. We have today 20 risk models, and all of these models are being -- they don't have more than 1 year. So -- and these had have been already adjusted to this new situation. So these are behavior models and acquisition, origination models and collection models. So we do believe that this is also going to help us to retain this growth of the portfolio. And your first question regarding these new products that we want to introduce. Unfortunately, I cannot give you that much more information. And as I mentioned, all I can tell you is that, yes, we've had substantial progress with this. And -- but today, we have some agreements that we are negotiating. We are in this process. What we do hope that within the next 1 or 2 months, the most is that we will be able to give you more information on this.

And guys, another question, if I may, I think this one a bit quicker, but I think Carlos was talking around that metric on, 88% of the consumer within 9 minutes from the stores. So is this on the larger cities? Or what's the detail around this metric just to understand that a little bit better.

Yes, Carlos, do you want to take that?

Yes, Enrique. No, I would say it's on a national basis, on a national basis. Obviously, in the big cities, it's much less than that because the stores are located in, let's say, 3 or 4 kilometers from most of our target consumers. But I would say it's on a national basis.

Our next question comes from Luis Willard.

It's Luis Willard from GBM. So I have a couple of questions. Maybe I'll start with the longer one for Graciano. I mean, after a couple of years challenges and learnings from everybody. I mean what would you say Liverpool as an organization learned so far? And especially how much better prepared do you think the company is to face the next 10, 15 years? That will be the first.

I think we learned a ton. You learn a lot when you have pressure, and 2020 was really, really a tough year. But what I think we learn the most is we need to move faster. We have to move faster in 2020. And we have kept that speed. We also learned to do a little bit more with less. For example, a good example is the margins. You see the margins today. And the reason we have good margins from Q1 of 2022 is because we have less inventory. And we learned to work with less inventory due to both the pandemic and also the scarcity of products we've been seeing, and that led us to better margins because we have less product in excess that we had to markdown at the beginning of this year. So we've implemented agile technology process, the way of working with sales, which we didn't use to have before the pandemic. And also, what we learn is something that is not -- we didn't talk about it today. But when the pandemic began, we didn't fire anybody and we kept paying the payroll every month. And also we see most of our vendors -- not my vendors, my salespeople make money out of commission. We gave them a bonus even though they were not selling. And also we kept paying our vendors throughout the pandemic on time, which not everybody did. So what I -- what we learned also is that having those values and sticking to the values on the toughest time paid back, for example, we've had the less turnover in terms of people that we have in the -- that we had pre-pandemic and the last year. We also have, I would tell you a better response from our personnel. And also now that we have scarcity of the products, the vendors prefer to sell to Liverpool than to anybody else because they have the confidence on our brand. So we learned a ton of things, and I think we will have to stay on this top for a while to tell you all of them. But I would say, values is one, also moving fast and becoming cleaner. Those are the most important. How we're going to see Liverpool in the next 15 years? I don't think that today planning for 15 years is doable. Maybe 5, 3, but 15 is too much. And I would say that's going to help us change the company. The company you see today is not the company you're going to see in 5 years and it's not the company you're going to see in 10 years because the world is evolving too fast.

That was very insightful. If I may, another one. This is a bit more faster. So if I got it correctly, well, first, can you share with us the level of penetration of sales or SKUs that you currently have available for same day and overnight?

Antonino, I don't know if you can take that one.

Perfect. Luis, how are you? Yes. I think I didn't explain it correctly. What we have is real-time inventory combined with where the customer is. So it depends where you are located physically and the closest store to you to get to real time or next same-day deliveries. So it's up to where the customer is. Let's say, for example, if I'm close to the Polanco store in Mexico City, I have available for same-day delivery, all the inventory from the Polanco store. I don't know if that answers your question, Luis.

Yes. Perfectly, Antonino. So you would say that you're basically perhaps in the most relevant stores, as you mentioned, Polanco [indiscernible] the big cities. You're close to having most of your, let's say, 80-20, 20% of the SKUs are 98% of sales or EBITDA, or however you measure it already available on same day or overnight. So that means there's -- if you continue to hike same day penetration or overnight penetration, there's not going to be a material significant material incremental cost, if I explain myself correctly.

I don't think that is a high in that we still have opportunities in terms of allocating the products closer to where the customer is. So I think there we have a big opportunity basically with the project that Carlos shared some highlights of planning [ along with ] the location, the location part is where we're going to send the inventory. The idea is that we have a very high probability that we're going to be able to sell it to you the same day or next day. But again that today, it's still a big improvement area.

Our next question comes from Rodrigo Alcantara.

Can you hear me?

Yes, go ahead. Rodrigo.

Rodrigo Alcantara, UBS. The first question is quite interesting regarding the projects that you have on the digital fintech side, secured credit card, the cash project. Just curious to hear if you're partnering with any fintech company or with any start-up specialized in these or if you are developing digital projects on your own? And if that's the case, what would be the rationale of doing that? Just curious because looking at what others -- other retailers are doing partnering with fintechs, et cetera. And to stay on this topic on the credit side, Enrique, just curious, I mean, your NPL levels, I mean, whatever it happens, if it increase a couple of basis points more to NPLs, I mean, the reserve coverage that you have are quite good. So just curious if we may see for the remainder of 2022 perhaps further reversals or releases on the provisions for bad debt. That would be my question on the financial services side. And I have another one on the e-commerce and logistics, if I may.

Yes. Let me give you some perspective from my side, and then I'll pass it back to Santiago in terms of your first question on the fintech projects. The reason why, yes, the idea that we have is to partner with someone. And the rationale behind that is that we don't have -- we don't have any intention to apply for a banking license. So that's why we need to partner with someone. And as Santiago has pointed out, I mean, we are still not ready to give you additional information on that. But hopefully, we'll have something to share pretty soon. But that again is the most important reason why we need to work with someone besides us. And in terms of the NPLs, as Santiago pointed out, we are planning to close this year with an NPL of 3.1%. That would translate into a provision in our P&L of like MXN 1.2 billion. And as you saw, we basically had a reversal of close to MXN 300 million in Q1. So that means that for the rest of the year, we're going to charge to the P&L close to MXN 1.5 billion during the next 3 quarters. So we are frankly not expecting to see any more reversals flowing to our P&L for the balance of the year. And as you also pointed out, we closed March with a very healthy coverage ratio of close to 13% of our gross portfolio. The idea that we have that is that we will have still some uncertainty. But as hopefully this goes away, we are planning to reduce that coverage to something in the neighborhood of 8.1% -- 8%, 8.1% by the end of the year, which is more normalized. And so that's -- those are the details. Santiago, you want to provide any additional color?

Thank you, Enrique. No, I think you explained everything very well. Regarding the provisions, as Enrique just mentioned, yes, that is the reason why I mentioned that even though we're increasing our NPLs, that we were going to have less loan loss reserves on our P&Ls. And that is because we're going to be -- definitely there are 2 reasons. First, the number of -- the amount of reserve that we had at the beginning of the year, and then that we are going to be lowering the ratios, the ratios over the total balance. As Enrique just mentioned, today, we closed -- it is close to 11.3% of the coverage ratio that we have over the total balance of the credit portfolios. And yes, we're thinking -- we're lowering those to probably 8.2% by the end of the year. Even though the coverage ratios that we ended up last year on only the NPLs, which is all of the balances past due over 90 days, we closed over 5x the coverage on those balances not NPL balances, which by the end of this year, even though we're lowering the coverage on the total balance to 8.2%. We expect to have that coverage by the end of this year at 3x. So we do believe that -- and that is the reason why by lowering these coverages, we will be able to lower 35% the loan loss reserve. And regarding what you said about the fintechs. Yes, we're looking at. As Enrique just mentioned, for these new products that we want to launch, once that we're on the last over. Yes, definitely, we are looking at partnering with a strategic partner. And on the other projects that you mentioned, like the -- these new cards and the credit loans. And obviously, I didn't mention, but we also started looking at buy now, pay later. And in these cases, today, these tests that we are doing right now. We're doing them ourselves. We want to learn, we want to see. But definitely, yes, in order to grow and to launch it is the nationwide, yes, we're looking also to see if there's a fintech or a technology company that can help us kind of help us develop these products on a much efficient and faster way. I don't know if that answered your question, Rodrigo.

No, that was perfect. And then the second one, very quickly on the e-commerce and logistics. I mean the no shipping cost has been like your standard compared to your flagship, sorry, to compare to other e-commerce retailers. And just curious, as you're pushing more and more the fast delivery thing and trying to understand on the delivery times. Just curious if perhaps you may be charging delivery at some point in the future? Or you will continue with that flagship of not charging the delivery. But what are your thoughts on this regard?

Thank you, Rodrigo. No, we don't have any plans, frankly, to charge for the delivery, I think that ship -- flagship already in sales. This is competitively it's very, very hard to charge the customer. We are having -- with a free delivery even before the e-com arrival. That was -- I think that we have, I mean favor our customers. So we don't have any plans in the near future to start charging for the delivery.

Our next question comes from Andrew Ruben from Morgan Stanley.

Andrew at Morgan Stanley. I was hoping you could dive in a bit more on marketplace. I'm curious on your commercial strategy, how you think about selling other brands, how that competes with perhaps your first party and how you make sure you're controlling that end-to-end consumer experience. So really just more on the benefits and trade-offs as you continue to ramp up the marketplace would be very helpful.

Thank you, Andrew. I think that Antonino, do you want to answer that?

Yes very happily. Andrew, thank you for your question. Regarding our strategy, as mentioned in the Liverpool's Day, we are focusing on our marketplace on complementing our first-party merchandise. So that being said, what we've done in the past year is especially focusing on what we want to maintain and keep growing. And some complementary products that we are not specialized in selling. So that's our most specific strategy that we're following. And as I mentioned before, the other ones is that is very important is the stock-out project, which means that, let's say, for example, any brand, let's say, Adidas and our merchandising team buys 20,000 of the small-size shirt and then it finishes. Now we've implemented with some vendors an automatic system that lets them know and they have that shirt, that size turns on automatically online and it turns on automatically on the store app. So we never stop selling that product. So our marketplace is complementing our first-party sale. Our marketplace is also maintaining our first-party sales. So we reduce the stock-outs and we can give a better opportunity for our clients. I don't know if that answers your question.

Yes, that's helpful. And just a follow-up, if I may. You spoke about the loyal customer base, I think, 15 million unique. Can you talk about where you are in the journey of customer data, understanding the purchase behaviors, whether that's in-store, online, overlapping with financial services as well, just a better sense of how far you are along in terms of the loyalty benefits, customer data, things of that nature.

Yes, our 50 million customer base has grown. But also, we've been able to understand better our customers. So in previous year, our goal that we mentioned in the last previous Investor Day is to have being able to personalize each of our customer base up to 80%. The other 20% mainly is when our customer buys in cash, and we don't have that much information about them. And we are very proud to say that right now, we have around 55%, close to 60%. So we're ahead of our goal. We can identify 60% of our customer base. And that's what we're personalizing, and that's what we're focusing on. So as we continue to grow, we try to grow our database with better information from our customer. As Santiago mentioned, Monedero Electrónico is that is one helping us. But also, we're ahead of our goal. So I believe in the next couple of months, we will reach our 70% by the end of this year, and that will help us personalize and hyper-personalize, which is the new trend.

Thank you, Andrew.

Next question comes from Antonio Hernandez.

This is Antonio Hernández from Barclays. My question is regarding private labels. I mean, this is, of course, a huge appeal of Suburbia's and clearly a much lower penetration in the Liverpool format. But do you think that this could be a good strategy maybe, especially in the midst of inflationary pressure and supply chain constraints on some merchandise? Do you think this is feasible on Liverpool, as maybe also some consumers trade down?

Thank you, Antonio. Carlos, do you want to provide some perspective on private labels and the importance that they have?

If you want, I'll take it. I cannot hear Carlos.

Yes. Thank you, Edwin.

Private labels are really important in Suburbia, but what we needed on those private labels was to increase the margin, so that's what we are doing. In terms of inflation and supply chain, private labels will help us focus but also developing a countrywide vendor organization. We've been working with the [ carbonated steel ] and the [ carbonate steel ] with the different chambers of production to increase the availability of product in Mexico, being that private label or not. I believe private labels are more of a differentiator against our competition, which is Amazon and MercadoLibre and Walmart. I believe private labels' work are not going to -- that's not the defense against inflation or that. It's a differentiator we're going to have to increase both in Liverpool and Suburbia. And in terms of inflation, we are, as I said, developing a nearshore cost vendor base.

Can you provide more light on the [ accepted ] operation of Liverpool format?

On what? Sorry, I didn't hear.

The share that private labels have in the case of Liverpool. I think they were around -- in the case of our softlines, we're around 10% to 15% global share of private labels in the case of Liverpool. And as you know, in the case of Suburbia, we're talking basically around 2/3 of the softlines at Suburbia sales are private labels. That's more or less the shares that we have.

Hopefully, you can hear me now?

Yes, Carlos. Go ahead.

Thank you. Yes, Antonio, as Graciano and Enrique just mentioned, private label for us, for Liverpool, is an important part of our strategy. I would say one of our 5 or 6 main strategies. We are developing brand by brand. I think in a private label, there's a journey that you need to follow up. First of all, you need to have the correct product, then you need to be able to present it in the correct way in the stores and then make the marketing and letting the customers know that product. I think in most of the private label brands, we are in these second or third phases. So we are taking an integrated approach to start treating these private labels as it would be, as we will do with an external brand with a tone, a type of communication and marketing that represent the DNA of each brand. We have the DNA plan for each one of these brands. And we are doing this with all of them. Last year, we started doing that way with [ MAP ], our women's clothing brand, and sales more than doubled last year while we did this. This year, we are doing this with House. That is the home supplies brand that we have. And that's it that it's mainly focuses on [ juniors ]. That's the 2 that we are working this year. And last year also, we launch in furniture 2 important brands that is House in a furniture category and Casa [ Gora ] that is a high-end furniture with excellent results. So yes, absolutely, private label gives us some advantages in the situation we are living now.

Thank you, Antonio.

Our next question comes from Rodrigo Echagaray.

This is Rodrigo Echagaray from Scotiabank. A couple of questions, one for Mauricio. What is the main challenge you see today in terms of the digital transformation culturally speaking, but also from a technology standpoint? And the second question is for Zahie. What would be the main challenges that you face today in terms of recruiting and promoting a more diverse school of talent, especially for senior management positions?

Go ahead, Mauricio, please.

Thank you, Rodrigo, for your question. Regarding the challenges, I'll probably name 3. The first one is IT. We pointed out last year, transforming our IT department, it's a process that's still ongoing. We're combining new technology with older technology and ensuring a smooth transition and transitioning to an API, a more web services format, and services is something that is an ongoing practice as well as continue developing our talent in that area. So that will be challenge number one. The other one would be culture, which I think, as Graciano has pointed out, that our team has been very resilient and very adaptive to these new technologies. We've been able to get the right incentives and communicate properly how digital helps us all as part of our ecosystem strategy. So that's been evolving well. But so obviously, it's a big family and something that we continue working on. And I guess the third one is prioritization. As we transition more and more services into digital services, we obviously have a bunch of ideas, new products that we want to develop in different areas, digital, fintech, to name a few, and obviously, prioritizing between the different ideas and managing the backlog in an efficient and proper way, it's obviously a challenge that we're learning and getting better at. So hopefully, I answered your question.

Thank you. And thank you for your question, Rodrigo. I think that here in Liverpool our main challenges around attracting people is to show us how flexible we are. Right now, we are working on that workspace that show that we are committed to foster and strengthen diversity and inclusion in our workplace, okay. So mainly it's that. And then specific skills that we are needing. So right now, we are moving as well in the upskilling of our talent, internal talent. We strongly believe that we have the opportunity to bring elements across of all what we have learned in the last 2 years and help people to train them and grow inside, internally in the company. Okay? So we have as well the university, our virtual university, the UVL, and help to bring as well the formal studies that we bring to the middle management and help them know, what is specifically needed in the business units. I don't know if that's part of your question.

Yes. No, certainly, I mean, obviously, on the technology front, that's 1 area of opportunity, but also on the gender front, as you can obviously see, there's obviously a big opportunity. And I know it's not easy, but just wondering if there are specific actions in that regard. But I guess you mentioned a few. So thanks a lot.

Thank you.

I would add something on that question. I have 2 pictures on my office entrance. One is of the first Liverpool Directors' meeting, I don't know, it probably was '93 or '94, somewhere around there. And the second is the last year's picture. And what is amazing is business managers, it includes store managers. And on the first picture, there were probably 4 women. And on the last picture, we probably have somewhere around 40% deployment. So I think we've been moving well towards it. We don't have quota because we don't believe in it. We'll be giving the opportunity to the best person for the position regardless of gender, ethnicity, sexual preference or whatever. So it's not only gender, but I think we've come through a lot in the last 10 years.

Fair points.

Thank you, Rodrigo.

Our next question comes from Robert Ford.

Congratulations on the results. It's Bob Ford from Bank of America. How are you thinking about cross-border e-commerce competition, particularly as competitors like SHEIN assess opening up infrastructure in Mexico? And then, Enrique, you mentioned that you're averse to a banking license, and I was curious as to why. I have my suspicions, but I'd love to hear your views. And then lastly, how should we think about the balance of in-house software development and third-party applications? And maybe it would be helpful for me anyway, if you could touch on some of the more pivotal enabling functionality that we should look for, both in e-commerce and Financial Services over this year and maybe next?

Yes. Thank you, Bob.[ Nassal ], do you want to share your perspective on cross-border?

Sure. I think Amazon, MercadoLibre, SHEIN and a lot of other -- Alibaba in the future are going to do well in Mexico. They have a lot of catalogs, so it helps them and we have de minimis that are exempt from taxes, which is something we don't like because I don't believe it helps us play on a level playing field. But we've always had competition and competition helps us grow. We follow closely what our competition does, and we try to -- not to copy it but to improve it and to translate it to what our market wants. So we are going to have tough competition, but we've always had tough competition. On the investment [ Thursday ], like 20 years ago, it was Zara and then it was Best Buy, and then it was -- so yes, we are going to have tough competition, and we're going to learn from them, and that's going to make us better as a company.

Graciano, you mentioned earlier nearshoring some of the supply chain in private label. Maybe can you expand on that, and what does that mean in terms of maybe reducing the inventory you carry into every fashion cycle or being able to respond more rapidly to trending topics in social and having the right product at the right time? And particularly in Suburbia, where you may face some of the cross-border a little bit more directly.

It's not only on private label. We're also trying -- some of the brands, international brands are looking more to Mexico as a manufacturer country instead of Asia, mainly China. So it's not only our own brands. It's as a whole, and we're helping them by introducing them to vendors we know that are -- that are very good quality and stuff. But that's going to -- it can be a little bit higher in cost today. But that cost, as you said, it's reduced by higher inventory turnover, which reduces markdowns, which increases again the margin. So there are -- it gives us better service as well because then we have the vendor right next door. So there are a few pros and cons, but mostly, I believe that if we build the Mexican textile sector which was hit a lot when China entered the agreements and everything. In the middle term, it's also going to give us a better economy. So that's going to improve our sales as well. I see a virtuous cycle by having more vendors here in -- not only in Mexico, it would also be in Central America.

Regarding your second question, Bob, around the banking license, i.e., I mean, it's very easy, it has to do with all the regulatory requirements that you have to have as a bank. As you know, it's a very regulated industry. You have to have tons of people doing all the legal and compliance functions. And frankly, we are not -- we don't have any interest alone in having to set up something like that inside Liverpool. So that's why we believe that it's better and faster for us to work with a strategic partner. And your next question regarding software development and how that is changing between what we used to have before, which basically was to -- we used to develop our own systems many, many which go way back, and then, of course, we jumped into the trend of buying the best-in-class, things like SAP at some point in time, ATG, and so on and so forth and basically, challenge the workers to "adjust" because it's not that visible anyway. It was then to set up those systems and do minimum developments. And now we're once again moving into doing more and more custom developments. So I'll pass the microphone to Mauricio to share some perspective on this front. Go ahead, Mauricio.

Thank you, Enrique. Just to give a little bit more color on what Enrique mentioned. As part of our IT transformation, for example, in the past year, we hired basically an IT architect, we hired a director of software development. So as Enrique mentioned, the idea is that to identify our core competencies and our core capabilities that we believe are key and central to our strategy, and trying to develop software on our end and having more control over that software development. Obviously, we have agile sales in many of our different products, not only on the e-commerce side, but also in fintech, as you mentioned. And now those agile sales, obviously, identify customer needs, prioritize them, manage the backlog and trying to release new functionality in different sprints. So we're basically in the process of migrating the -- I guess, the old ways that Enrique mentioned and trying to smoothly transition into this new agile methodology.

And Mauricio, would you highlight any -- the more pivotable enabling functionality that you think is critical to reach the penetration rates and service levels that Liverpool is targeting?

Obviously, there are a bunch on the e-commerce side and on the fintech side. I believe Antonino and Santiago shared some of them. I'll probably highlight on my perspective and then probably invite Antonino and Santiago if they want to pitch in and share their views. In my view, on the e-commerce side, personalization is key and the name of SHEIN has been mentioned in the past. But this idea of personalizing, having a vast assortment and being able to personalize the right assortment in the right way for the right customers, I think it's functionality that is key. As we have more customers and more assortment, the idea of helping in product discovery is obviously something that is very, very important. And everything that we're doing in that regard, I estimate that it will continue being very important. And on the fintech front, Santiago mentioned many of the new products that we want to launch. And I believe we've got great insight and great acceptance from our customers in terms of credit functionality that we can provide, in terms of the insurances and the insurance functionality and the way we sell them online. I mentioned the PIF as part of our monthly subscription service where we package not only insurances but also system services as well as extended warranty and others. So building on top of them and adding new products is something that we proceed doing in an agile methodology. And I don't know Antonino and Santiago, if you would like to share some ideas in your spaces.

Thank you, Mauricio. Thank you, Bob. Just developing on what Mauricio is mentioning, yes, of course, personalization or hyper personalization is one of our pivot projects that are coming, and we continue to improve. There's a lot of e-commerce that are coming to life. But I'm saying with all the work that Edwin and his team has been doing, the logistics improvement is also a very important moment for our e-commerce. There's another 2 that I would like to talk to you a little bit about. It's product customization online. That's not a missive thing to do, and we're working heavily with Carlos and his team to put this customization live. And the other one is now the new trend is also the e-com experience. So in order for us to keep this going, we're implementing new services online, not just the financial ones, but also the retail ones. And also, we have to explore and continue to bring the other channels like what to WhatsApp, WhatsApp Business, also social shopping, as I mentioned before, live shopping. So our e-commerce trend now has a lot more things and a lot more channels to focus on, and that's where we continue to -- we are already exploring them. We are using them, but we need to take them to the next level.

Our next question comes from Álvaro García.

Álvaro García from BTG Pactual. Hope everyone's well. A couple of questions. My first one is on assortment. You mentioned you expect significant growth over the next couple of years. I think it was 42% growth this year. And I was just curious if you could sort of break that down. Is that entirely driven by your 3P? We're obviously living through some supply chain issues. Is that all 3P, or is some of that in-store stuff as well that you can better balance given your infrastructure makeup now? That's my first question.

Yes, thank you, Álvaro. Antonino, do you want to take that?

This is Carlos. Thank you, Álvaro. Well, mainly our 1P will grow but in a more stable basis. And the big part of it will come from 3P, yes.

Great. And then my second one is for Mauricio and Santiago. I know we've already touched a lot on this topic today on the fintech environment. It's clear you don't want to apply for a banking license. But I was wondering if Mauricio or Santiago could maybe sort of provide an update on just the fintech environment generally. It seems to be very sort of slow moving. It seems that all of the actors behind the scenes or your potential partners are sort of stuck in neutral. Any comments on the fintech environment in Mexico would be greatly appreciated.

Go ahead, Mauricio or [indiscernible].

Do you want to start, Mau?

Sure. Álvaro, thanks for your question. I probably would like to highlight a couple of areas where we have actually partnered with fintech. So one of them is the one that Santiago showed, which is the bill payment hub. So in that one, we're actually working with a fintech that was actually recently acquired by a big brand, basically Mastercard. And then we're also working with the fintech on connecting to the space systems. For example, all of our cards already have a clave, the number assigned to them, and we're connecting to that using STP, which is another fintech. So I guess we continue seeing -- analyzing and exploring different fintechs and where we see value, where we can partner, we're happy to do so without reinventing the wheel. And I guess part of the ecosystem strategy is to partner with companies that can complement our value proposition, and that's where we are selectively doing where it adds value to our customers and to our value proposition. Santiago, I don't know if you want to add something.

No, Mau. I think you covered it.

I guess the question, Álvaro, was more on your take on the competitive landscape and -- but fintechs are doing at our perspective is that they're never doing much.

Yes, and just to complement that. Just to complement and that's exactly right, but if you could just sort of how you think of other cards or other offerings or other fintechs infiltrating your ecosystem and sort of defense that you might have to play on that front, given how attractive your platform is.

Well, yes, definitely, we see all these fintechs and all these new players here in the market, offering their credit cards. There are some that are beginning to become important that we start seeing. Even in Liverpool, we start seeing them with a -- but right now, it is small, but they're growing faster participation on our sales with these cards. So definitely, that is why we need to move real fast, offering and developing all of our technology strategy to be able to offer and to be able to be as agile as they are being, let's say, on their offerings. And that is why we want to also keep developing on these new products that we want to go into that, hopefully, so we will be letting you know what we're doing because, yes, we're seeing this as a very big competition coming through.

Thank you very much, Álvaro.

Our next question comes from Joaquín Ley.

Joaquín Ley from Itaú. I have 2 follow-up questions. The first one is on margins. I mean, you mentioned that healthier level of inventory is allowing for this super healthy gross margin that we saw in the first quarter in the commercial business. But still, I was wondering how sustainable is that going forward as the persistent high inflation eats into the purchasing power of the Mexican consumer and you might have to normalize your markdown activity, right? And when you put that together with what you just said about reserve creation of about MXN 1.2 billion for this year, it looks like the last time, Enrique, you talked about margins for this year that if I remember correctly, you said that they would be kind of in line with last year, about 15.8%, 15.9%. It seems that the new -- or the margins could be materially higher than that, maybe closer to 17%. So I would like to hear your thoughts on that. That's the first question. And then I would have a follow-up on logistics.

I hope you're right, Joaquín, and we get to the 17%. But frankly, as you were saying, well, what we saw in the first quarter was like a virtuous -- like a combination of very low markdowns due to the very healthy inventory position. Also, as I mentioned, less pressure from logistics expenses because of the factors that I mentioned also before. And also in terms of the EBITDA margin, NPLs were positive because we did the reversal that you saw. So yes, I think that, that difference that we have against 2021 and even against 2019, is definitely not sustainable. But what we think is that we are a little bit more optimistic on the margin front because of the head start that we have in Q1. So now we're thinking that we'll probably get to the 16.5%, 16.6% that we have in 2019 in the pre-pandemic. So that's what we have in our financial plan right now.

That sounds plausible. And on the logistics side...

Sorry, Enrique, just to complement. Another thing that is helping us with the margin, with the gross margin in this first quarter was the combination of our softline and hardline business. We are seeing a higher increase in the softline business than in the hardlines. And as you know, our softline business has a higher margin than the hardline. So that's also something that is helping us in this mix.

Yes. Thank you, Carlos. Thank you. And also I have to include the [indiscernible], which is finally like in better shape in terms of inventory, less markdowns and doing much better in terms of both sales and especially on margins.

Okay. And then second question on logistics. As the big ticket facility for Arco Norte comes into operation this year, what are you going to do with [indiscernible]? Are you going to shut it down? Or are you going to use that facility for serving the metropolitan area?

The idea that we have at the site point was to do a bidding process to sell it. But frankly, we are not very happy with the offers that we received -- as you can imagine, I mean the environment in Mexico doesn't help a lot in terms of people who want to invest a lot of money. So now we are changing gears and are planning to police it. I mean, frankly, with the new design of the release, the network that Edwin explained, we don't need that additional facility. So I decided what we have is to list it to third parties.

Our next question comes from Jorge Luis Mauro from Fundamenta.

My question is going back to [indiscernible], just trying to clarify a bit because if we focus on the NPL formation, it has been very low in the last 3 quarters after the pandemic, about 1.1%. Historically, information was more closer to 2.2%. So, and looking at your guidance, it seems that this should increase a bit to 1.3%. But just what changed here? I mean you are not being as aggressive here [indiscernible] as you were in the past. Why is that formation is roughly 1/2 as it was before the pandemic?

Yes. NPLs just to clarify, we closed last year at 2.2%. We expect -- I mean it sounds like a lot, but 1 -- basically 1 percentage point is a 50% increase in the NPL ratio. So I guess we're expecting as we -- like things normalize, we are going to see higher delinquencies. As -- but you're right, I mean, we're still well below the normal levels. Pre-pandemic were around 4.5%, more or less on average in the several years before the pandemic. So we're still running well below, so we believe that it's probably going to take us 2 or 3 years to get back to what the NPLs we had historically. But Santiago, I'm sure that you can provide some perspective on what's behind the low levels that we have seen in the recent past.

Can I add something, Enrique, I think something that is also true is that last year, because of still the uncertainties we had and everything, we ended up with provisions that were higher than our historical average. So that's why we probably need to make less provisions this year.

Yes, you're right. I mean last year, we still ended up with very high core ratios in every single KPI that you see in terms of coverage. We are way above what we had pre-pandemic. And that was because we took a very cautious approach due to the uncertainties regarding the Omicron and whether we were going to see additional store closures. But now that we are more confident, the idea, as we also pointed out, is that to bring the coverage ratios down still about the ones that we had pre-pandemic, but not as much as we had at the end of 2021. Thank you, Graciano. Santiago, do you want to provide some perspective on what's behind the performance?

Yes, and maybe just to complement. The levels that we have today, it is not that we really tighten up that much. As I mentioned before, our approval rates, even on the worst time in the pandemia, we kept them the same. Probably in the only part where we tighten up was some cash advances that we are regaining right now. We are reopening cash advances. We're going to be growing 30% versus last year. We're not going to get yet to the levels that we had prior to the pandemia. But as I said, today, we're going to be opening -- we are going to be originating more than more than 1 million accounts. And let's not forget that also the levels that we have today on NPLs. But last year, we had the higher write-offs than we've ever had. And that is because all of the accounts, the riskier accounts that we had in pre-pandemia and that we lost, that left us a portfolio with the less riskier accounts. And that is why these accounts started to be what we call total levels, that they pay total balances and so they don't generate interest, and that is why that is one of our goals right now to retain the profitability of the portfolio. But also, we see these levels because last year, we had all of these big write-offs that we haven't had in the past, and that left us a very clean portfolio. So that right now, our challenge is to start growing, and that's why we have been opening. Actually, today, let me tell you that the levels that we have on our cutoff points on all of our risk models are much more flexible than what we had even before pre-pandemia. Right now, as I told you, we're close to 45% approval rates on our credit. I don't know, Jorge, does that answer your question?

Yes. That's great. Just 2 follow-ups there. If you could share the percentage of total levels today relative to what it was before the pandemia, or just rough figures how much has increased? And then also looking at the growth of your great portfolio relative to the growth of sales, it has been lagging in the last few -- should we expect that to normalize and your portfolio should be expected to grow in line with sales going forward?

Yes. Actually, what we expect for this year is to grow -- is to -- pretty much on line with sales. Actually, we expect to probably gain a little bit of participation. So this would mean that we will be growing in -- the sales with our products, just a little over what the company is expecting. And I'm sorry, what was the first question again? Can you repeat that?

The total levels, the percentage of total levels?

Yes, and regarding the total levels, well, it depends. As you know, on a credit card, we have a lot of different credit plans. But let me give you an example. For example, in the deferred payment plans that, for example, buy in November and start paying in February or in March, those are incredibly -- have incredibly changed, because in the past, when we got to March, when we start charging the -- or collecting from the customers, probably we had 20% of customers that have paid their total balance even before we start requesting the payment. Today, what we've seen is that more than 50% of those customers have already paid their total balance. So there is no way that we can start revolving because the idea is that when we get there and we start requesting for the payment for these customers to start revolving. So in those cases, it has even more than doubled the customers that are paying us. But hopefully, I think the good news here is that these past 2 months, what we've been seeing is that the portfolio is starting to evolve a little better than what we had all the previous 12 months. So we are beginning to see that the growth in interest, for example, generated by the portfolio is that they are beginning to grow at levels of 17%, 18%, which is nice. So we do believe that we're getting there or at least we are on the way.

The next question comes from Nicolas Riva.

Thank you, Jorge.

This is Nicolas Riva from Bank of America. I have 2 questions. The first one, going back to the Financial Services business. So you said quite a few times in this call that you are looking to partner with a fintech or with a banking service provider. And I wanted to ask what exactly this banking partner would do? Because I can think of 3 things that they could do. They could take on some of your credit risk, right, in your creditor loan book; number two, they could help you fund the loan book; or number three, they could just provide expertise on new financial products; or maybe a combination of these 3 or something else. But if you can discuss what exactly this banking partner would do in the Financial business. And then the second question, if you can provide any color in terms of liability management plans. So at the end of last year, you took out about 1/3. You bought back about 1/3 of your 2026 bond. But you still have over $1 billion in cash, and you have a very comfortable debt schedule. You don't have much debt at all maturing the next 12 months. So if you can provide, yes, any color regarding liability management plans, especially around the 2024 and 2026 dollar bonds.

Yes. Santiago, do you want to talk about what we expect the strategic partner to bring to the table?

Yes. Thank you, Nicolas, for your question. I would like to clarify here that this -- when we talked about this partnership that we're seeking right now and that we're working on, this definitely has nothing to do with our credit business and our loan portfolio. That is going to be something that we're going to keep ourselves. They are not going to be doing any underwriting on that. That business is going to be -- we're going to keep it exactly the same way that we've had it. For the new products and what we saw and probably for our current accounts and investments and those kind of new products that we are working on right now, those are the kind of associations that we want to have with any strategic partners. There, so as Enrique mentioned, we don't want to get into a regulatory and because we would need to be a bank, which we're not going to be, if we wanted to get funds from the public. So that is where we want to find a strategic partner specifically.

Now regarding the liability management, Nicolas, I mean, we really don't have any plans to do anything like we did last year in terms of prepaying neither 2024 or another part of the 2026. I mean we're feeling very comfortable. Our cash flow projections for this year, basically, I mean, we think that the free cash flow after the CapEx is going to be close to 0. And then that will allow us to pay with the cash we have in hand the dividends that we already paid and the ones that have been announced. And the -- the second -- and we have due in September this year of [indiscernible] and still end the year with cash on hand of around $1 billion, $1.2 billion. So we -- as you pointed out, our maturity schedule is very comfortable. And frankly, the way interest rates are right now, it probably doesn't make any sense for us to issue national debt because we don't need it. And it will be more expensive. And so again, we've no plans to do anything on that front. Thank you.

Our next question is from Irma Sgarz from Goldman Sachs.

Many very good questions have already been asked, but I just have 1 question on the fulfillment by Liverpool. I was just curious how relevant you believe this can become over time. I understand you're leveraging or looking to leverage your capabilities and specifically in bulky items, but whether you see that sort of extending to a broader range of assortment, and how relevant overall you could imagine this becoming? Is it sort of, in your mind, just sort of a niche product for specific categories, or can it become something broader? And in that context, I was just curious how much demand you're getting or whether you feel that you need to actually provide incentives to lure vendors into your fulfillment infrastructure.

Yes. Thank you, Irma. Do you want to provide some color on that, Tony?

Yes. Thank you, Enrique. Irma, thank you for your question. Our fulfillment it was recently launched. And as you know, we've always delivered big ticket items way, way, way before e-commerce. So that's one of our competitive advantages. So right now, we started focusing on our fulfillment with big ticket items. I believe Liverpool is one of the best companies to deliver big ticket items and we're focusing there. We started on the last trimester of last year. Right now, as I mentioned before, we have around 60 sellers, and we have a lot of demand. Right now, we're working a lot with Edwin and the way they're opening the Arco Norte. So we have a little bit more space to be able to service this new business model. But of course, [ Western room ] as a niche in big ticket guidance, but where also we see it growing faster, we are -- we have already started with some softline products. And the demand from our sellers, it's impressively high. So it's a business model that it's also been pressured by our sellers. We don't have to go and they're already asking for this business model and I believe it's on a growth trend in the next couple of years.

Great, very exciting to follow this. Second question I would have is -- and I apologize if this has been addressed or answered in another part of the presentation that I may have missed, is on some of the opportunity for advertising and leveraging the fact that you obviously have a loyal customer base and an impressive amount of unique active monthly active users. Is there any sort of plans? Is there any projects underway to potentially monetize this through the sellers that you have or the brands by sharing data, by making space available for them sort of in the line of a merchant media model that we've heard other retailers speak about?

Yes. Do you want to talk about that?

Yes. That's on me. The answer is no. And we don't do it on the store here, even though Walmart and several other people do it because when that happens, you end up advertising Apple and Samsung and all those all those vendors that have money for that specific purpose. So that's something we don't want to do right now because we believe having this -- a client as a center, so we prefer to do what Antonino said that we prefer to show the customer what's relevant for him, not show the customer what's relevant for our vendors that have money. So right now, we are not planning on it. And I don't like it, frankly, but we know there's probably some revenue to be made there, but we're not planning on doing it right now.

[Operator Instructions]

I guess we are done. I think that any additional comments that you want to make, Graciano?

No, I just want to thank everybody for being here. Thank you all for the presentations. And whatever you need in terms of further clarification, don't hesitate to contact us.

That concludes today's event. All the materials presented today will be readily available in Liverpool's Investor Relations website. Thanks for joining. Have a good day, and you may now disconnect.