InRetail Perú Corp. (INRETC1) Earnings Call Transcript & Summary

Good morning, and welcome to InRetail Peru's First Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. And please note that this call is being recorded. After the presentation, we'll open the floor for questions. At that time instructions will be given, as to the procedure to follow, if you'd like to ask a question. It is now my pleasure to turn the call over to Rafael Borja of Inspire Group. Sir, please begin.

Thank you, and hello, everyone, and welcome to InRetail Peru's First Quarter 2021 Earnings Conference Call. Before we begin, I would like to remind you that today's call is for investors and analysts only, therefore question from the media will not be taken. Joining us today from InRetail Peru are Mr. Juan Carlos Vallejo Blanco, Chief Executive Officer; and Mr. Gonzalo Rosell, Chief Financial Officer. They will be discussing the quarterly report distributed yesterday. If you have not received a copy of the earnings report, please visit www.inretail.pe on the Investors section, where there is also a webcast presentation to the to accompany discussion during this call. If you need any assistance, please contact the Investor Relations team of InRetail Peru. Please be advised that forward-looking statements may be made during this conference call, and they do not account for economic circumstances, industry conditions, the company's performance or financial results. As such, these forward-looking statements are based in several assumptions and factors that could change causing actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the quarterly report, which was issued yesterday. At this point, I would like to turn the call over to Mr. Juan Carlos Vallejo, Chief Executive Officer of InRetail Peru, for his opening remarks. Juan Carlos, please go ahead.

Thank you, Rafael. Good morning, everyone. I'm Juan Carlos Vallejo. Thank you for joining InRetail's first quarter earning call. Today we will review the main highlights of InRetail first quarter results, beginning with a brief comment on the current political context. I will start with a quick introduction and then Gonzalo will walk you through our presentation. As you all know, Peru is in the middle of a polarized presidential run-off between Pedro Castillo, an extreme left union leader and an elementary school teacher, and Keiko Fujimori an antagonistic right-wing politician, daughter of former President, Alberto Fujimori. Although poll started showing a comfortable advantage for Castillo, the gap has been recently narrowing toward a technical tie. In this context, the outcome is still uncertain, but considering that no party has a majority in congress, we believe that as long as the rule of law keeps being respected in Peru, it would be difficult to push forward radical policies that materially change the current economic model. And considering that the largest share of our business operates in consumer and non-discretionary industries, we remain optimistic on our ability to continue growing and improving performance metrics as well as continue developing modern retail in Peru. Moving on to our financial results. The first quarter was a nice solid quarter for InRetail, with a strong double-digit growth in revenues and EBITDA. And double-digit growth in net income when excluding onetime effects related to the sale of nonmaterial operation and their refinancing as well as FX losses. With regard to our segments, our Food Retail segment experienced a very strong quarter with 41.9% top line growth and a strong EBITDA growth of 35.4%, due to a strong operating performance in all formats and due to incorporation of Makro. Our Pharma segment, on the other hand, posted a strong double-digit growth of 17% in revenues and 21.6% in EBITDA, due to our good performance in both our pharmacies and distribution unit. Finally, our Shopping Malls segment continue experiencing a consistent recovery, resilience and predictability with revenues and EBITDA much in line with Q4 results. Normally a strong quarter due to seasonally. This rounds up another solid quarter for InRetail, which paved the way for a nice strong year. With that, let me pass the word to Gonzalo; and as always, we look forward to answering your questions by the end of this call.

Thank you, Juan Carlos. Good morning, everyone, and thanks for joining us on this call. Once again, before starting, I would like to briefly remind you that the numbers we'll be discussing today are presented under IFRS-16 and are fully comparable to numbers reported in our financial statements since 2019. Moreover, I would also like to remind you that our 2020 results did not incorporate Makro's results in our P&L, since it was acquired on December 23, 2020, towards the very end of the year. We have started to incorporate Makro's numbers as of 2021. Now please turn to Page 4 in our earnings presentation to start reviewing our highlights and consolidated financial results of the first quarter for InRetail Peru. In the first quarter of the year, InRetail reported a double-digit growth in revenues, mainly due to a strong growth in our Food Retail segment, which includes the incorporation of Makro, a strong growth in our Pharma segment and a progressive recovery in our Shopping Mall segment. Revenues reached PEN4.3 billion, a 27.5% increase versus the first quarter of last year and gross margin stood at 27% in the quarter, showing a reduction in comparison to the previous year, mainly due to the incorporation of Makro's cash-and-carry stores, which operate at lower gross margin and due to the underperformance of our Shopping Malls segment in the COVID-19 context. In terms of adjusted EBITDA, we recorded a double-digit growth in comparison to the same period of last year, recording PEN524 million and an EBITDA margin of 12.1%, mainly explained by the strong growth in revenues and the increased fixed cost dilution that more than compensated COVID-19-related expenses. Finally, our net income this quarter was mainly impacted by onetime noncash effects in the Pharma segment, related to a sale of nonmaterial operations in liability management and an FX loss related to a dollar denominated leases in our 3 segments as per IFRS 16. In the following slides, I will explain these onetime effects in more detail. In terms of guidance for InRetail, we reaffirmed the guidance given in February, where we expect to achieve double-digit growth in revenues and double-digit growth in adjusted EBITDA for 2021 at InRetail consolidated level. Please turn to Page 5 to give you a brief summary of the extraordinary events we had this quarter. On March 11, we successfully issued $750 million of 7-year senior secured notes at the InRetail consumer level in both U.S. dollars and PEN, achieving the lowest coupon ever by any Peru incorporated in the international capital markets in the U.S. dollar tranche and with an order book of subscription of 4.2x at peak. Funds were used to fully repay the $375 million bridge loan used for the acquisition of Makro and the NPV positive refinancing of InRetail Pharma's 5.375% 2023 U.S. dollar bond. InRetail Pharma's liability management impacted our results with PEN130 million of onetime expenses, mainly noncash, explained by onetime cash expenses of PEN47.5 million due to a premiums paid for the tender and make-whole of the InRetail Pharma 2023 U.S. dollar bonds, onetime noncash expenses of PEN70.1 million related to a mark-to-market and unwinding of an existing call spread, and onetime noncash expenses of PEN12.1 million related to the accelerated accrual of InRetail Pharma's 2023 U.S. dollar bond structuring costs. Additionally, during the quarter, we sold Cifarma, our manufacturing unit in Peru in Quimica Suiza Colombia, our distribution operation in Colombia, both sales to nonrelated parties. These sales are nonmaterial since they are small noncore assets, which together represented 1.6% of Pharma's 2020 revenues and 1.1% of Pharma's 2020 EBITDA, and generated a onetime noncash impact of PEN65 million this quarter mainly due to the amortization of the purchase price allocation on brands, and other intangible assets of the acquisition of Quicorp in January 2018. With these sales, we expect to increase our focus within MDM on our core business, which is distribution in the Peruvian and Ecuadorian market. Please turn to Page 6, to review our consolidated net income results. InRetail registered a loss of PEN35 million in the first quarter of 2021 compared to a gain of PEN92 million in the same period of 2020, mainly explained by PEN159 million of higher financial expenses in the quarter, of which approximately 50% are noncash and 90% are onetime expenses, and are associated to the InRetail Pharma's liability management, which I previously explained and onetime expenses related to restructuring costs from the bridge loan used for the acquisition of Makro. Additionally, net income was impacted by PEN65 million of onetime noncash expenses in the Pharma segment related to the sale of noncore assets, which I also previously explained; and our net FX loss of PEN80 million, of which PEN39 million relates to the FX loss on dollar denominated lease liabilities as per IFRS 16. Excluding FX mark-to-market and the onetime effects for the quarter, net of tax effect, net income for the first quarter would have reached PEN161 million, a 33.6% increase versus the comparable quarter of last year. Now please turn to Page 7, to review our financial and operational snapshot of our consolidated figures. In terms of contribution considering last 12 months, as of March 2021, our Food Retail segment accounted for 49% of consolidated revenues and 37% of consolidated adjusted EBITDA, with an adjusted EBITDA margin of 9.6%. Our Pharma segment accounted for 48% of consolidated revenues and 54% of consolidated adjusted EBITDA with an adjusted EBITDA margin of 14.1%. Finally, our Shopping Malls segment accounted for 2% of consolidated revenues and 9% of consolidated adjusted EBITDA with a net rental income margin of 69.9%. This last 12-month figures only include this quarter for Makro operation. However, as I commented last quarter, when we consider pro forma numbers, including Makro for the whole 12 months period, the contributions from each business segment do not vary significantly. We will now continue with our results by segment. Please turn to Page 9, to start with our first quarter highlights for our Food Retail segment. Our Food Retail segment recorded, once again, strong quarter with 41.9% revenue growth in comparison to our first quarter of last year, mainly explained by the incorporation of Makro's 16 cash-and-carry stores, 1 new Plaza Vea store inaugurated at the end of last year, 74 net Mass stores incorporated since Q1, and a same-store sales growth of 10.7%. Same-store sales growth was positively impacted by a strong increase in both food and non-food categories, despite a slower performance in February due to the more generalized quarantines, which restricted the operation of nonessential businesses such as the HoReCas and the absence of the Back-to-School campaign. Our gross margin decreased 252 basis points in this quarter, mainly due the incorporation of Makro's cash-and-carry stores, which operate at lower gross margins as well as the higher penetration of Mass and e-commerce. Additionally, gross margin was impacted by a onetime purchase price allocation on inventory of PEN16 million related to the acquisition of Makro. In terms of adjusted EBITDA margin, we registered a decrease of 40 basis points in the first quarter with improved fixed cost dilution, but negatively impacted by the PPA effect on gross margin and by an additional onetime expenses of PEN2 million from an asset write-off related to a remodeling and expansion of one of our top-10 Plaza Vea stores. If we adjust for these onetime expenses, adjusted EBITDA margin would have increased 40 basis points in comparison to the comparable quarter of last year, evidencing improved fixed cost dilution as in previous quarters of 2020. Overall, we registered another quarter with strong positive trends, with a solid performance in all our formats, which reinforces our multi-format strategy. In terms of sales per format, for the first quarter of 2021, our flagship format, Plaza Vea, represented 63% of sales. Our high-end supermarket format, Vivanda, represented 3% of sales. Our hard discount format, Mass, represented 8% of sales. And our cash-and-carry format, which includes Makro and Economax, represented 26% of sales. In terms of e-commerce sales, this quarter we continued to experience an important demand for food and non-food categories versus pre-pandemic levels. Now please turn to Page 10, to give you an update on Makro synergies. As I have previously commented, immediately after the acquisition of Makro, we implemented our synergies committed to clearly identify and execute the synergies identified previously. First, we have put focus on strengthening client relationships with our professional clients by extending Makro's long-lasting customer relationship plans to Economax clients. Additionally, we have implemented Tarjeta Oh! within all Makro stores, extending benefits to Makro clients. Second, in terms of commercial strategy, we have now centralized all purchasing within our Food Retail platform, which will allow us to continue strengthening our everyday low-price strategy. Additionally, we have strengthened our product offering by incorporating Makro's well regarded private label brands within all our stores. Moving onto a third synergy. We have successfully transferred Makro's third party logistics operation to our Food Retail state-of-the-art distribution center in Punta Negra. In line with this, we have also successfully integrated Makro's logistic, commercial, finance and HR IT platforms into hours. Overall, we expect to progressively extract efficiencies in supply chain and operational expenses. In terms of store optimization, we have taken the decision to rebrand the 5 Economax stores we operated to the Makro brand. Makro is a leading cash-and-carry brand in the country and will thus allow us to reinforce our current store offering. We will be starting with a rebranding shortly and additionally, we will be opening 2 new stores under the Makro brand in Lima by the end of the year. Finally, we have moved forward with internal organizational changes. We have absorbed Makro's organizational structure into our Food Retail platform, reducing overhead, financial and marketing expenses and have also centralized noncommercial purchases. Overall, we are well advanced in the identification and execution of the different synergies, and this will start being progressively reflected in our results, with more relevance towards the second half of the year with a full year effect in 2022. Please turn to Page 11, to review our first quarter highlights for our Pharma segment. Our pharmacies unit registered a top line growth of 19.3% in the first quarter with a record same-store sales growth of 17.8%, which was positively impacted by a solid increase across all categories with a continued increase in nutrition and wellness categories. This quarter, we opened 15 net pharmacies. Our gross margin reached 35.1% this quarter, impacted by the increase in sales of lower margin products in the context of COVID-19, but in line with 2020 levels. In terms of adjusted EBITDA, we recorded an adjusted EBITDA margin of 17.5%, with increased fixed cost dilution compensating COVID-19-related expenses. Finally, in terms of e-commerce in our Pharmacies unit, we also continued experiencing a strong demand versus pre-pandemic levels. Now moving on to our distribution unit. This quarter we reported a revenue increase of 5.8% mainly due to a strong demand from pharmacy chains and independent pharmacies. Gross margin was 12.3% in the first quarter, slightly lower than Q1 '20 mainly due to a change in client mix in the distribution unit in the context of COVID-19. Finally, in our distribution unit, adjusted EBITDA margin reached 4.3% in the quarter, in line with 2020 levels. All-in-all, at a consolidated level, our Pharma segment's revenues registered an increase of 17% in comparison to the first quarter of last year, with an adjusted EBITDA growth of 21.6% and a consolidated adjusted EBITDA margin of 14.6%. Now please turn to Page 12 to review our first quarter highlights for our Shopping Mall segment. During the first quarter, our shopping malls went from 80% of GLA open at the beginning of the quarter to 50% of GLA during February, due to the more generalized quarantines, which restricted the operation of almost all nonessential tenants, and back to 81% in March, as the measures were lifted. Cinemas and education tenants are still restricted to operate and mainly explain the 12% of GLA which we have restricted. Additionally, malls remain with capacity restrictions, operate with reduced opening hours and some are not allowed to open on Sundays, depending on the risk of each region. Moreover, since May 10, our malls in Lima, will once again be able to open on Sundays and will operate with increased opening hours. As of April 30, 2021, GLA which is open remains at 81%. In this context of progressive recovery in GLA and the operation but with temporary government measures and temporary rent reductions, revenues decreased 15.7% in the first quarter versus the previous comparable period and the adjusted EBITDA declined 17.9%. During the quarter we also -- we were also able to maintain high occupancy rates of 93%, in line with 2020 levels. In terms of mark-to-market, we registered a gain of PEN12.3 million in the first quarter compared to a gain of PEN7.5 million in the same period of 2020, mainly due to increased valuation of some properties due to the appreciation of the U.S. dollar. In terms of liquidity as of March 31, our Shopping Malls segment had PEN128 million in cash and equivalents. And we also have an investment of PEN218 million in InRetail shares as additional source of liquidity. Furthermore, as a reminder, our Shopping Malls segment has no relevant maturities of financial obligations due in 2021. Now please turn to Page 13. This slide sums up our Food Retail sales area, number of pharmacies and shopping malls as well as our same-store sales by quarter. In the Food Retail segment in the first quarter of 2021, we did not register any relevant openings. We opened 4 and closed 4 Mass stores, with a net effect of 0 openings. With this, we closed the quarter with 109 supermarkets, 472 Mass stores, 21 cash-and-carry stores and 477,000 square meters of total sales area. In our Pharmacies unit, we opened 17 stores and closed 2 stores, opening 15 net pharmacies in the quarter. With these, we ended the quarter with a total footprint of 2,180 pharmacies. In the Shopping Malls segment, there were no openings in the quarter. In terms of same-store sales, on this slide, we can observe the growth -- the strong same-store sales growth of Food Retail, the solid recovery of Pharmacies in the second half of the year, which has strengthened this first quarter, and a progressive recovery of Shopping Malls. Now please turn to Page 15, to discuss our CapEx and cash flow generation. During the first quarter of 2021, we invested PEN159 million in CapEx for our 3 business segments, a slight pickup in comparison to previous quarters due to the acquisition of landbank in the Food Retail segment, together with the investment in the construction of new stores for Food Retail and Pharma. In terms of cash balance, we ended the first quarter with PEN1,189 million of cash above the end of year cash balance of PEN936 million, having incorporated the operation of Makro and having performed the associated liability management post acquisition. Please turn to Page 16, to discuss our consolidated financial debt. As of March 2021, InRetail had a consolidated net debt of PEN7,447 million with a net debt to adjusted EBITDA ratio of 3.1x, in line with the end of the year. This leverage ratio only considers 1 quarter of Makro's operation, since Makro's results are not considered in 2020 EBITDA figures. In terms of the composition of our debt by currency as of March 2021, 52% of our debt is in sol, 46% has been hedged and only 2% of our debt is exposed directly to the U.S. dollar. The hedges that we currently have in place are call spread structures. For the newly issued InRetail consumer bonds, we have a Call Spread structure that protects us from exchange rate depreciation between 3.7% to 4.2% or 100% of a notional amount of $600 million until maturity of the bonds. For InRetail Shopping Malls, we have a call spread structure that protects us from exchange rate depreciation between $326 million to $375 million for also 100% of the notional amount of $350 million bonds until maturity. As of March 2021, PEN-dollar exchange rate was 3.758. As of December 2020, U.S. dollar exposure increased due to a bridge loan used for the acquisition of Makro, which was fully paid in March 2021. Please turn to Page 17 to review our debt by segment. Supermercados Peruanos, our Food Retail segment ended the first quarter with a net debt of PEN2,550 million, which includes the intercompany loan with InRetail consumer related to the acquisition of Makro. Net debt-to-EBITDA increased to 3.5x, slightly above the previous quarter, mainly due to a reduced level of cash in comparison to the end of the year, that usually has high levels of cash. As I commented last quarter, we should start deleveraging through 2021 and 2022 as Makro's EBITDA is progressively incorporated in the last 12 months EBITDA figures and once expected synergies from Makro's start to materialize. On the other hand, InRetail Pharma ended the first quarter with a net debt of PEN1,456 million with a net debt-to-EBITDA ratio of 1.4x, slightly below the previous quarter due to the strong EBITDA growth this quarter. Finally, InRetail Shopping Malls ended the first quarter with a net debt of PEN1,890 million, with a net debt-to-EBITDA ratio of 9.4x, mainly explained by the full year effect of the pandemic on the last 12 months EBITDA. As I commented in our previous earnings call, we expect to start deleveraging beginning the second quarter of 2021, as GLA and their operation has already begun to stabilize and tenants continue to recuperate sales, as they did towards the end of 2020. This covers our presentation, and now we will be glad to answer any questions you may have.

[Operator Instructions] Our first question comes from Nicolas Larrain with JPMorgan.

I had a question on Food Retail, especially regarding Makro. Wanted to understand how are you seeing the trends of Makro specifically in other normalization versus last year? And how did you see the more organic operations performing the legacy format that you already have before Makro?

Thank you, Nicolas. In terms of Makro's performance and trends, we believe this is going to be a great year for Makro. It will bounce back from the tough second quarter it had last year as lockdowns were generalized in Peru. And it will have an easy comparison basis in the second quarter and relatively easy in the second half of last year. So far it's performed pretty well. February was a little bit slow given that, in Peru, government imposed, again, relatively generalized mobility restrictions. But quickly bounced back in March to the good trends that we have been experiencing during the second half of last year in January, again once government eased mobility restrictions. So we believe that for Makro, this should be a pretty good year. And for our legacy formats, we've seen pretty good trends as well. Despite the fact that we will face a tough comparison basis for Plaza Vea, Mass and the Economax cash-and-carry stores we operated last year, that had a great performance in the second quarter when the lockdown started in Peru. We believe that we will be able to continue experiencing a double-digit trends throughout the year across the board. So we feel very excited about the [indiscernible] acquisition, the good operational metrics of Makro, the good integration and fast integration we have managed to execute so far, and what Makro brings to our multi-format strategy. So with that, we believe that we should exceed the guidance we gave when we published our Q4 numbers in February for Food Retail segment, when we said that we expected this year to grow above 25% in revenues and 20% in EBITDA in our Food Retail segment. We feel comfortable that we will exceed those trends for what we have seen so far in the first quarter and what we have seen so far in April as well.

Perfect, Gonzalo. So just to be sure, so that they -- the legacy formats, they are -- they continue to grow strongly, right, on a year-over-year basis?

Yes. Exactly.

[Operator Instructions] Our next question is from the line of Alonso Aramburú with BTG.

Just following up on the previous comment. Gonzalo, can you maybe break down the performance by format in Food Retail, how is Mass doing, how is Plaza Vea doing? Are all the formats going double-digits? And also this quarter, I noticed that -- we noticed that you didn't open any Mass stores, so are you still on-track? Or you still think that you will open 150 stores this year?

In terms of breakdown by format, Plaza Vea is growing double-digit; all our formats, with the exception of Vivanda. Vivanda is not growing at double-digit, given that last year when the pandemic started and we experienced a migration of part of our sales of a physical world towards the e-commerce, migrated towards the platform of Vivanda, the e-commerce business of Vivanda. So now facing that comparison basis, Vivanda is not growing that strongly versus last year. But aside from that, Plaza Vea is growing at double-digit, Mass, as well in the cash-and-carry is performing strongly as well. And in terms of the opening pace of Mass, yes, we haven't opened stores yet. But we continue aiming at opening the 150 stores we gave as guidance. For the yearly guidance, in general, for our different formats for full year 2021 has not changed. There's been some more difficulties in some bureaucratic permitting issues to allow for the opening of some of our high discount stores. But we have a pipeline that we intend to push forward to get hopefully to 150 for the year. And in the -- taking advantage of a question, in the Pharma segment as well, despite the fact that we only opened 15 stores so far this year, we still expect to get to a 100 net openings for full year 2021.

Okay. And maybe you can comment also in the case of pharmacies that you have very strong sales, I mean, what's driving the growth? Is it some specific categories? You mentioned or the press release mentioned Wellness. Why is growth being so strong this last few months?

Yes. The growth is coming across the board. Actually, Pharma categories are growing very strongly as well, and complemented evidently with Nutrition & Wellness, as we have mentioned explicitly in our report. So growth is coming across the board. It has to do with a combination of a recovery in food traffic as things are being normalizing in Peru since the third quarter of last year. And with increase in food traffic, we have seen an acceleration in same-store sales and sales trends in general. And the other has to do with -- I would say, the impact of a positive measures we have taken. Prior to the beginning of quarantine last year, we had started implementing changes at store level in terms of the expedition of certain categories looking to accelerate sales growth of non-pharma categories, that when the pandemic came, did not end up materializing in incremental sales, given the reduction in food traffic experienced, particularly in the second quarter of last year, and then progressively recovered through the year. So I believe it's a combination of parts: food traffic, the positive impact of measures taken at store level by ourselves, and then -- and also a positive trend for the industry as a whole. There is more optimism and consumption is getting stronger in general terms.

[Operator Instructions] This concludes the question-and-answer portion. Pardon me. We have a question coming from Josseline Jenssen with Lucror.

I would like if you could provide us your expectations for this year for real estate, please?

Our Shopping Malls business is going through progressive recovery, as we have seen since the end of the second quarter of last year when government started allowing for normalization of nonessential businesses in Peru. And as you have seen, the decrease of revenues and EBITDA versus the previous year is lower this quarter and the segment is getting recovered. There are several tenants that are performing really well and above pre-pandemic levels. Some relevant anchor tenants are performing really well, I mean, the Food Retail business is related to home improvement and home-related categories. Tenants selling electronics and tech-related categories are performing really well. And then there are others that are not performing well, which are more related to fashion, accessories and restaurants. So all in all, the mix is evolving positively as, in Peru, people resume a more normalized day-to-day living. We are seeing traffic recovery and better performance for our tenants and therefore a pretty good health and a consistent recovery going forward. So while we expect all in all for this year is in line with the guidance we shared a couple of months ago when we reported Q4 numbers in February, which is Shopping Malls still being -- experiencing a growth of between 35% and 45% versus 2020, in terms of revenues and EBITDA. So it is really a strong recovery versus 2020, but still below 2019 pre-pandemic levels. Now only in 2022, we expect to slightly exceed 2019 revenues and EBITDA levels as we are seeing trends today.

And with these results, do you expect -- when do you expect to start delivering -- since the next quarter?

Yes. Yes, the next quarter, we are going to start deleveraging dramatically. We will leave behind the pretty tough second quarter of last year in our numbers and our EBITDA continues recovering from now onwards. So towards the end of the year, we expect to end up somewhere close to 6.5x net debt-to-EBITDA ratio, well below the around 9.5x where it lay. So from Q2 on, there is going to be a fast deleveraging going forward.

Okay. And please could you comment about your view on the actual political uncertainty?

As Juan Carlos mentioned, honestly, we believe that as long as the rule of law keeps being respected in Peru, there is not much room and it would be very difficult to push forward radical policies that materially change the current economic model. So honestly in -- as long as we don't have any concrete signals that give us any evidence that rule of law is not going to be respected, we remain optimistic that -- we have the right business models to continue growing, improving operational metrics and bringing modern retail to Peruvian emerging middle classes and therefore prospering despite the political instability. Actually, we've been living in Peru for years with a lot of political instability and we've been -- we've managed to prosper in that context as well. So for now at least, we remain in the same line and optimistic about the future.

So this political situation is not preventing you to continue with your growth strategy?

Exactly. Until we have no further evidence of anything dramatically changing, the current -- the economic model, and as long as the rule of law gets respected in Peru, we will continue investing and look into -- bring modern retail to emerging middle classes in the country.

Thank you. That concludes the question-and-answer portion of today's conference call. I will turn it back over to Mr. Vallejo for closing remarks.

Thank you all for participating in our first quarter earnings call. As a final remark, I just wanted to highlight that although the political context remain uncertain, considering the constitutional legal framework in Peru and the nature of our business, we remain optimistic on our ability to continue growing and improving the performance metrics as well as continue developing modern retail in Peru. This covers our presentation and now we will be glad to answer any question you may have through the Investor Relations team. Thank you very much.

Ladies and gentlemen, that concludes InRetail Peru's first quarter 2021 earnings conference call. We'd like to thank you again for your participation. You may now disconnect.