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

Good morning, and welcome to InRetail Perú's Fourth Quarter 2021 Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Rafael Borja of InspIR Group.

Thank you, and hello, everyone. Welcome to InRetail Perú's Fourth 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, questions from the media will not be taken. Joining us today from InRetail Perú are Mr. Juan Carlos Vallejo, Chief Executive Officer; Mr. Marcelo Ramos, Chief Financial Officer; and Mrs. Vanessa Dañino, Investor Relations Officer. They will be discussing the quarterly report distributed by the company yesterday. If you have not yet received a copy of the earnings report, please visit www.inretail.pe on the Investors section, where there is also a webcast presentation to accompany discussion during this call. If you need any assistance, please contact the Investor Relations team of InRetail Perú. 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 Perú for his opening remarks.

Thank you, Rafael. Good morning, everyone. I'm Juan Carlos Vallejo. Thank you for joining InRetail's fourth quarter earnings call. Today we will discuss the main highlights of InRetail's fourth quarter and full year results for 2021. Joining me today are Vanessa Dañino, our Corporate Finance Director; and Marcelo Ramos, our Chief Financial Officer since January 1, 2022. Prior to joining InRetail, Marcelo spent several years in our Pharma segment, where he took different roles such as CFO and Chief Strategy Officer and led multiple value creation projects, including the successful acquisition and integration of Quicorp. I will start with a brief introduction and then Marcelo will walk you through our earnings presentation. 2021 was a year with constant political uncertainty in Peru. This ultimately started impacting economic growth, mainly as it relates to private investments, which is an important fuel of the economy. We also experienced exchange rate and inflation pressures, particularly during the second half of the year. Despite the constant political turmoil, we are confident that the rule of law will continue to be respected in Peru. And hence, it will be difficult to push forward radical policies that materially change the current economic model. We remain optimistic on our ability to continue growing and improving performance metrics as well as to continue developing more InRetail in Peru. The strength and resiliency of our 3 business segments has allowed InRetail to experience double-digit growth, both in revenues and in adjusted EBITDA for the full year 2021. All in all, we successfully exceed our initial guidance for the year. Our Food Retail segment had an extraordinary year, growing 36% in revenues and nearly 32% in adjusted EBITDA for the full year 2021 with a strong growth across main formats and categories. The Food Retail team successfully integrated Makro's operation within the first year since acquisition, allowing us to continue strengthening our leadership position going forward. Our Pharma segment also experienced double-digit growth, both in revenues and in adjusted EBITDA for the full year 2021, demonstrating once again the resilient nature of this business segment, leading to a strong same-store sales growth of 10.6% in the year. Finally, our Shopping Malls segment, the most impacted during the pandemic, showed a remarkable recovery and predictability, growing revenues and adjusted EBITDA double-digit for the full year 2021. In terms of our omnichannel strategy, during the year, our digital platforms continued to perform strongly despite a high comparison basis in 2020. We also consolidated the largest click and collect network in the country, improved service levels and maintained our leadership position. In the last quarter of the year, we incorporated new digital services and solutions within InRetail to complement our omnichannel strategy and existing digital platforms. Looking forward into 2022, we expect our business segments to continued performance given the resilient and diversified nature, allowing us to achieve high-single-digit growth in consolidated revenues and in adjusted EBITDA as we continue to post positive same-store sales growth and consolidate our multi-format and omnichannel strategies. Finally, I'm glad to announce the buy-out of minority shareholders at InRetail Pharma, which we believe will contribute positively to InRetail going forward. We will provide more details on the transaction during this call. With that, let me pass the word to Marcelo. And as always, we look forward to answering your questions by the end of this call.

Thank you, Juan Carlos. Good morning, everyone. Thank you for joining us on this call. Today we will review the main highlights of InRetail's fourth quarter and full year results for 2021, comment on our guidance for the year; and finally, provide an additional information regarding the buy-out of minority shareholders at InRetail Pharma announced yesterday. I would like to start by briefly reminding you that the numbers we will be discussing today are presented under IFRS 16 and are fully comparable to numbers reported in our financial statements from 2020. 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. We have started to incorporate Makro's numbers as of 2021. However, our balance sheet numbers for 2020 do incorporate Makro's statement of position as well as the bridge loan we took for the acquisition. Now please turn to Page 4 in our earnings presentation to start reviewing our consolidated financial results for the fourth quarter of InRetail Perú. In the fourth quarter of the year, InRetail reported a strong double-digit growth in revenues due to a strong growth in our Food Retail segment, which incorporates Makro, a solid growth in our Pharma segment and a consistent recovery in our Shopping Malls segment. Revenues reached PEN 4.8 billion, a 22.7% increase versus the fourth quarter of last year and gross margin stood at 28.4% in the quarter, showing a slight reduction versus the comparable quarter of last year, mainly explained by the comparison of Makro, which operates at lower gross margins. In terms of adjusted EBITDA, we also recorded a strong double-digit growth of 17.9% in comparison to the same period of last year, recording PEN 621 million and an adjusted EBITDA margin of 12.9%, driven mainly by top-line growth, continued operating leverage and improved performance in our Shopping Malls segment. In terms of net income, we registered a strong growth in the fourth quarter, driven by a solid performance in all of our segments, an important mark-to-market gain in our Shopping Malls segment and a positive net FX impact mainly related to dollar-denominated leases as per IFRS 16. Overall, as we have seen in our consolidated financial numbers, 2021 was a strong year for InRetail. We successfully exceeded our initial guidance for the year, which was to grow revenues and adjusted EBITDA in at least 15% at a consolidated level. As mentioned by Juan Carlos, in terms of guidance for InRetail in 2022, at a consolidated level, we expect to achieve high-single-digit growth in consolidated revenues and in adjusted EBITDA, supported by new sales in all our segments, positive same-store sales growth, consolidation of our multi-format and omnichannel strategies and a continued search for operational efficiencies and productivity. Now please turn to Page 5 in our earnings presentation to comment on InRetail's main highlights for 2021. In 2021, InRetail showed significant growth in revenues and in adjusted EBITDA, demonstrating the diversified and resilient nature of our business segments. In our Food Retail segment, we recorded strong double-digit growth in revenues and adjusted EBITDA, incorporated Makro and with a strong performance across categories and main formats. In our Pharma segment, we also recorded double-digit growth with solid growth in both Pharma and non-Pharma categories. Finally, our Shopping Malls segment showed strong and consistent recovery, ending the year with approximately 90% of GLA opened and double-digit tenant growth. During 2021, we successfully integrated the Makro operation within our Food Retail platform. Immediately following the acquisition, we implemented an integration and synergy committee to identify, validate and structure a clear execution roadmap together with the Food Retail management team. Our diligent process allowed us to surpass our original synergies plan in both amount and velocity of capture. Our synergies plan included the consolidation of Makro as our cash and carry brand. We reconverted all of the Economax stores to Makro and opened 2 new Makro stores in Lima. Secondly, the well-developed know-how and positioning of Makro within the Professional Client segment allowed us to strengthen our value proposition and expand our relationship with these clients, benefiting from strong growth when their business are activated as restrictions lifted. Third, on the commercial front, we optimized our private label portfolio in cash and carry, benefited from the strong and highly recognized private label brands that Makro has. We also centralized our purchasing within our Food Retail platform, allowing us to continue strengthening our every-day-low price strategy. Finally, additional synergies came from marketing, overhead, the integration of the logistics operation, the consolidation of our IT platforms and improvements in the negotiation of non-commercial purchases, where we aim to take advantage of shared core functionalities. During the year, we also continued with our strong financial discipline. In March 2021, we successfully issued $750 million of 7-year senior secured notes at InRetail consumer level, obtaining the lowest coupon ever achieved by a Peruvian corporate in the international capital markets for the USD tranche. Funds were used to repay the $375 million bridge loan taken for the acquisition of Makro and to perform the NPV positive refinancing of our InRetail Pharma bonds. We also executed a sound hedging strategy to increase our protection level in the context of increased depreciation in the local currency, providing further stability to our cash flows. The continued recovery in our Shopping Malls segment allowed us to progressively increase our CapEx investments, including the expansion of Real Plaza Cusco. We also completed our Food Retail and Pharma store openings and remodeling. Despite the soft full increase in CapEx versus 2020, our strong top-line growth and rigorous cost controls allowed us to distribute an extraordinary dividend in the year, while still reducing our consolidated net leverage. Additionally, we also accelerated the execution of our omnichannel strategy. During the year, our digital platforms continue to perform strongly in terms of online sales growth, transactions and site visits despite the very high comparison basis in 2020 given the strict lockdowns. We also consolidated the largest click and collect network in the country. In the last quarter of the year, we incorporated new digital services and solutions within InRetail that complement our omnichannel strategy and existing digital platforms. This includes the incorporation of a series of shared services, including a platform to serve and manage customer needs post sales, a platform to process and fulfill orders in an integrated manner and a platform to speed payments. Additionally, we incorporated a series of digital solutions under the Agora brand, including a last-mile delivery service and personal shopper, a loyalty program and a digital wallet that offers payments and transfers. These digital services and solutions are currently at a very early stage of development. Finally, we also wanted to highlight our continued focus on implemented COVID-19 protocols in our stores and malls, remaining a best practice benchmark for our industry. During the year, we have closely monitored the health of more than 47,000 employees through digital tools, provided them with the necessary testing and protective equipment and have rapidly responded increasing safety stocks of key categories to give tranquility to customers. Now please turn to Page 6 to comment on our main sustainability highlights of the year. During this year, we have reached important milestones in our sustainability efforts. For the first time, InRetail was included as a member of the DJSI MILA Pacific Alliance 2021 and was recognized as part of the DJSI Yearbook 2021 in the Industry Mover category. Additionally, InRetail was included as a member of Bloomberg Gender Equality Index 2022 and recognized as the first Peruvian company to form part of that index. Finally, InRetail was also included as a member of the new S&P Dow Jones Sustainability Peru Index 2021. We are very proud of these recognitions, which reflect the hard effort put over the last decade in the 3 dimensions; environmental, social and corporate governance. You will be able to find more detailed information in our annual sustainability report, which will be published in the following months. In the environmental dimension, in our Food Retail segment, we continued with our waste management efficiency program, which includes implemented and training environmental leaders in all our stores, reducing our food waste and implementing and continuously improving our recycling stations among several other initiatives. In 2021, we were able to recycle 71% of the waste we generated in our stores and logistics centers. We also facilitated the recycling of 67 tons of waste from our customers through our recycling stations. Additionally, we were able to reduce 28% of our greenhouse emissions through eco-efficiency initiatives. Furthermore, in our Pharma segment, this year, we recycled 90% of waste from our logistics centers. In our Shopping Malls segment, we inaugurated a natural gas self-generation plant in Real Plaza Puruchuco and reduced 27% of our greenhouse emissions. Finally, in 2021, we took a step forward towards into refining Scope 1 and 2 of our carbon footprint for our 3 segments with a third-party. Overall, in the environmental dimension, we are committed to improving our plan and action. Hence, we will measure our Scope 3 for all companies for the 2021 period. We will also continue to focus on responsible consumption and production as part of our sustainable development goals commitments. Moving into the social dimension, we continued to focus on the well-being and working conditions of our employees with all our business segments leading several great places to work rankings this year as we have in previous years. Additionally, in our Food Retail segment, in 2021, we continue with our successful strategic partnership with the Food Bank, donating 13 million food rations to more than 61,000 beneficiaries and also continue supporting more than 300 SMEs through our special training and development programs. In our Pharma segment, we continue to support the sanitary crisis in the country by donating more than 80,000 packs of medicines and affiliating our drug stores to social programs to help ease the distribution of medicine. In our Shopping Malls, we also continue supporting SMEs by implementing pop-up markets and access to our marketplace to increase their sales. Overall, in the social dimension, we will continue to focus on gender equality, decent work and economic growth, zero hunger and good health and well-being as part of our sustainable development goals. Finally, in terms of our corporate governance, we continued to strengthen the structure we have put in place over the last years with independent board members and audit committee with 2 independent directors, a strong compliance and anti-corruption program with a corporate internal auditor and a whistleblower line, which is operated by a third-party provider. In 2021, we also launched our ESG supplier assessment, which will help us identify our critical suppliers for the business and our ESG goals. Going forward, we will continue to strengthen our sustainability efforts, focused on our different stakeholders and aligned with our core values. Now please turn to Page 7 to review our financial and operational snapshot of our consolidated figures. In terms of contribution, considering the full year 2021, our Food Retail segment accounted for 52% of consolidated revenues and 38% of consolidated adjusted EBITDA with an adjusted EBITDA margin of 9.4%. Our Pharma segment accounted for 45% of consolidated revenues and 49% of consolidated adjusted EBITDA with an adjusted EBITDA margin of 14.1%. Finally, our Shopping Malls segment accounted for 3% of consolidated revenues and 13% of consolidated adjusted EBITDA with a net rental income margin of 76.8%. Overall, the contributions from each business segment did not vary significantly versus 2020. However, Food Retail did have a slight increase in its participation in revenues and in adjusted EBITDA due to the incorporation of Makro. And Shopping Malls, slightly increasing its adjusted EBITDA participation given a strong recovery during 2021. We will now continue with our results by segment. Please turn to Page 9 to start with our fourth quarter highlights for our Food Retail segment. Our Food Retail segment recorded once again a strong quarter even with a high comparison basis last year when we registered double-digit growth in revenues and a record same-store sales growth due to the increase in demand in the context of the pandemic. Revenues increased 38.7% this quarter. This growth is explained mainly by the incorporation of Makro and a solid same-store sales growth of 6%, driven by an important growth in all main formats and an increase in both food and non-food categories. Additionally, revenues were positively impacted by the contribution of approximately 21,000 square meters of additional sales area opened in the last 12 months, of which 13,000 came from 85 net new Mass stores, 7,000 from 2 Makro stores and the remainder from a Plaza Vea expansion. Specifically, in Q4 '21, we opened 74 new Mass stores and closed 33, resulting in 41 net openings. We also opened 2 new Makro stores in Lima in December. As mentioned in prior earnings calls, the closing of the 33 Mass stores were part of a plan to optimize our format, closing underperforming small site stores opened during the initial stage of the rollout of this new format. Our gross margin decreased 264 basis points this quarter in line with what was registered in the previous quarters, mainly due to an increased weight of cash and carry format, which operates at a lower margin. In terms of adjusted EBITDA, Food Retail's adjusted EBITDA grew 43.5% in the quarter, reaching an adjusted EBITDA margin of 10.6%, 36 basis points higher than the same period of last year, positively impacted by the continued fixed cost dilution and incremental operational synergies, including efficiency -- including synergies from the Makro acquisition, more than offsetting the lower gross margin. Overall, we registered a fourth quarter with strong positive trends as seen in our previous quarters, with a solid performance in all of our main formats, reinforcing our multi-format strategy. In terms of sales performance, for the fourth quarter 2021, our flagship format, Plaza Vea, represented 62% of sales, Vivanda represented 3% of sales, our hard discount format Mass 8% of sales, and our cash and carry format Makro, 28% of sales. This remains in line with the revenue contributions we have seen throughout the year. Now please turn to Page 10 to comment on our full year 2021 highlights for our Food Retail segment. Our Food Retail segment experienced a significant growth in revenues and adjusted EBITDA in 2021. Revenues increased 36% with a same-store sales growth of 7.8%, with a strong performance in all categories and main formats. Our adjusted EBITDA increased 31.5% in the year with continued fixed cost dilution, the successful execution of synergies and incremental operational and logistic efficiencies. As I previously commented, the rapid integration of Makro within our Food Retail segment was the key contributor to our solid performance, exceeding our initial synergy estimates, which will have a full year effect in 2022. With these results, we exceeded the guidance given for the full year 2021, which considered a higher than 25% growth in revenues and 20% growth in adjusted EBITDA. In 2021, we continued to strengthen our multi-format strategy, opening stores from our different formats. We opened 2 Makro stores in Lima, ending the year with 23 cash and carry stores. We also opened 130 new Mass stores, including more in Arequipa, ending the year with a footprint of 557 stores, of which 29 are outside of Lima. Finally, we will open 2 flagship Plaza Vea stores in Lima, which were fully renovated. Each of our formats has its own differentiated value proposition, allowing us to complement our offering to different customer segments and continue bringing modern vehicle nationwide. Additionally, in 2021, we strengthened our e-commerce offering and platform. Despite the high comparison basis in 2020 and the fewer restrictions for customers to shop at physical stores, we recorded a plus 50% growth and a roughly 30% growth in 2021 in online sales and in average ticket respectively, with nearly 80 million web sessions in the year. We closed the year with a participation of 7% of total sales in our formats that have been -- that have an active digital platform. As I mentioned earlier, in our sustainability highlights, our Food Retail platform received several recognitions related to work environment, diversity and inclusion. And we continue to push relevant and core projects in food donation and recycling. Finally, we maintained our focus on protecting the health of our employees through protective equipment, preventive tests, medical and psychological assistance and constant communication. In 2021, we performed over 23,000 preventive COVID tests, more than 12,000 medical follow-up calls and acquired over 15 gallons of oxygen for our employees. Overall, 2021 was a strong year for our Food Retail segment. We are confident that our main formats will continue performing despite the strong basis in 2021. As such, in terms of guidance for our Food Retail segment for 2022, we expect to achieve a high-single-digit growth in both revenues and EBITDA. This incorporates a positive same-store sales growth in our main formats, the contribution of the 2 Plaza Vea flagship stores that were reopened last year and the 21,000 square meters of new sales area we opened in 2021. Please turn to Page 11 to review our fourth quarter highlights of our Pharma segment. Our Pharmacies unit registered a top-line growth of 7.5% in the fourth quarter with same-store sales growth of 4.9%, slightly above the third quarter, positively impacted by growth in both pharma and non-pharma categories. Despite an already important revenue basis for Q4 '20 when the relaxation of the strict lockdown measures significantly increased foot traffic. The continuous extraction of our health and wellness spaces in stores throughout the year contributed positively to the growth of our non-pharma categories this quarter as well. This quarter, we opened 44 pharmacies and closed 3, resulting in 41 net openings. Our gross margins reached 37% this quarter, slightly above the comparable quarter of last year and higher than expected -- higher than the previous quarter. In terms of adjusted EBITDA, we recorded an adjusted EBITDA margin of 17%, slightly below the comparable quarter of last year, mainly due to increased operational expenses related to store conversions and renovations. Now moving into our distribution unit. This quarter, revenues slightly decreased by 1.6%, mainly due to a higher comparison basis in Q4 '20 when independent pharmacies and institutions registered a strong recovery. Gross margin was 12.2% in the fourth quarter, below the comparable quarter of last year and adjusted EBITDA margin reached 3.8%, mainly due to the lower gross margin. Overall, at a consolidated basis, our Pharma segment revenues registered an increase of 5.5% in comparison to the fourth quarter of last year with an adjusted EBITDA growth of 0.7% and a consolidated adjusted EBITDA margin of 13.9%. Now please turn to Page 12 to comment on our full year 2021 highlights for our Pharma segment. Our Pharma segment recorded a strong performance in 2021, reinforcing the resilient nature of this business segment, with a 12% growth in revenues and a 13.7% growth in adjusted EBITDA. This in a context of fewer restrictions in comparison to 2020, which led to a strong same-store sales growth of 10.6% in the year. We experienced strong demand in both pharma and non-pharma categories. During 2021, we continued to reinforce our every-day-low price strategy, strengthening our commitment to delivering affordable health to Peruvian families. We were able to fulfill our promise of low prices and product availability in our stores, including COVID-19-related categories. A thoughtful commercial procurement and logistics plan throughout the year allowed us to fulfill consumer demand despite constant shortages and challenges in supply of key categories given the pandemic. All of this, while maintaining our operating margins for the full year given the rigorous cost control process and search for operational efficiencies. All in all, we were able to exceed the guidance given for 2021 of mid-single-digit growth in revenues and in adjusted EBITDA. In pharmacies, a key driver of our future growth is our category diversification and multi-format strategy. During 2021, we continued expanding our health and wellness spaces to enhance our customer experience with the aim of increasing sales and profitability per store. We adopted 29 additional Inkafarma stores to increase display and ease of reach of personal care and consumer products and 21 Mifarma stores were converted to Mifarma beauty format with increased assortment of wellness and beauty categories. These new formats on average tend to perform better than traditional formats in terms of average daily sales per store. We also managed to open 87 new pharmacies in the year, net of closings, reaching a store network of 2,252 pharmacies, which represents around 14% of total private pharmacies nationwide. During 2021, we also continued our efforts to grow our digital platforms and strengthen our delivery capacity to keep driving growth. In 2021, we had more than 90 million sessions in our digital platforms where transactions grew by 85%. In our Inkafarma brand, non-physical sales represent approximately 6% of total sales in Lima by year-end. This shows an interesting penetration so far, but also a significant opportunity for further growth. During the year, we also consolidated the largest click and collect network in the country with more than 2,000 pharmacies nationwide available for store pickup. By year-end, click and collect represented 25% of our digital sales, contributing as well with incremental traffic in our stores. We also inaugurated 2 new dedicated distribution centers for our digital channels in Lima, increasing our order capacity by more than 3x. For our distribution business in Peru, our B2B e-commerce platform, Mi Quimica, is transforming the traditional market. Our platform reached important monthly sales, which represented 16% of our sales in the traditional channel by year-end. This platform was launched in December 2020. Finally, during 2021, as in our other segments, we put strong efforts in our sustainability and best practices in the COVID-19 context, focus on employees and customers. In 2021, we executed more than 19,000 preventive COVID tests and more than 75,000 medical follow-up calls to our employees in efforts to ensure their safety. In terms of guidance for our Pharma segment for 2022, we expect to achieve a mid-single-digit growth in both revenues and in adjusted EBITDA. This is driven primarily by a positive same-store sales growth in pharmacies despite an already strong comparison basis in 2021, the opening of 100 new stores in the year and the continuous expansion of health and wellness spaces in our stores, growing our complementary non-pharma categories to improve customer experience. Now please turn to Page 13 to review our fourth quarter highlights for our Shopping Malls segment. In the fourth quarter, our Shopping Malls segment continued with its progressive recovery and growth. As a reminder, during the prior quarter, we finished the expansion of Real Plaza Cusco and cinemas we opened within those store -- our malls. Within this context of progressive recovery, our Shopping Malls revenues reached PEN 163 million, registering a 38.9% growth versus the comparable quarter of last year. GLA opened remained stable at 90% by year-end compared to 80% in the same period last year. We continued to maintain high occupancy rates of 93%, in line with the previous quarter and the comparable quarter of last year. In terms of adjusted EBITDA, we registered PEN 92 million in the quarter and net rental margin was at 76.4%, 145 basis points higher than the comparable quarter of last year. In terms of mark-to-market, we registered a gain of PEN 123 million this quarter compared to a loss of PEN 51 million in the comparable quarter of last year. This gain in mark-to-market is associated with increase in GLA and the gradual reduction in rent discounts, which impacts projected cash flows. In terms of liquidity, as of December 31, our Shopping Malls segment had PEN 277 million in cash and equivalents and an investment of PEN 191 million in InRetail shares as additional source of liquidity. As of Q4 '21, our malls were operating with a maximum capacity between 60% and 80%. However, as of yesterday, the government has lifted capacity restrictions. Now please turn to Page 14 to comment on our full year 2021 highlights for our Shopping Malls segment. 2021 was a year of constant recovery for our Shopping Malls segment as restrictions continue to lift and more tenants were allowed to open as the year progressed. In the context of rigorous government measures, particularly as it relates to capacity, operating hours and late in the year vaccination requirements, during 2021, revenues and adjusted EBITDA grew by 38% and 53.9% respectively in line with the guidance given in prior quarters of 35% and 45% growth in revenues and in adjusted EBITDA. Once again, arising the high predictability and stronger resiliency of this business segment. Throughout the year, our tenants also showed strong recovery with the same-store sales growth of 16.3%. As a reminder, in an effort to further strengthen our relationships with tenants, during 2020, we offered discounts to tenants not legally allowed to operate and to those most affected by the pandemic. Through a thoughtful and well-coordinated effort in conjunction with the tenants, we have progressively reduced such discounts as operations recover. During the year, we also continued to maintain a disciplined financial management, controlling expenses, reducing tenant discounts and progressively reactivating new projects, including the expansion of Real Plaza Cusco, the inauguration of H&M stores in Centro Civico Cusco, among others. Because of the strong growth, strict cost controls and selective CapEx investments, we were able to significantly reduce net leverage from 9.4% as of December 2020 to 5.7% as of December 2021. As mentioned before, in the context of the depreciation of the local currency, we also replaced $100 million worth of call spread for $100 million of full cross-currency swap for InRetail Shopping Malls USD bonds. Our digital strategy in Shopping Malls also experienced a strong acceleration during 2021. Real Plaza Go, our Shopping Malls marketplace, grew 7x and 11x in sales and transactions respectively since it began just over a year ago. Also, in an effort to continue promoting and improving our omnichannel experience for customers, we strengthened our click and collect service, which represented 50% of sales by year-end, bringing additional traffic to our malls. Finally, during the year, our Shopping Malls segment continued with its commitment of having a great place to work environment for our employees, receiving multiple recognitions from third-party institutions and participating in social and environmental projects, which I highlighted at the beginning of the presentation. We also adopted more protocols to changing government requirements and received certification from AENOR for all malls regarding our protocols for real-time control of capacity within each mall. In terms of guidance for our Shopping Malls segment, for 2022, we expect revenues and adjusted EBITDA to grow around 15%, driven by an increase in GLA opened through 2021, expected increase in the occupation, particularly in our Puruchuco Mall, which was in the progress of maturing before the pandemic and the recently inaugurated expansion of Real Plaza Cusco mall. Now please turn to Page 15. 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 2021, we opened 2 new Makro stores, 130 Mass stores and closed 45 Mass stores, as I commented before. With this, we ended the year with 109 supermarkets, 557 Mass stores, 23 cash and carry stores and 498,000 square meters of total sales area. In our Pharmacies unit, we opened 98 stores during 2021 and closed 11 stores, opening 87 net pharmacies. With this, we ended the year with a total footprint of 2,252 pharmacies. In the Shopping Malls segment, we finished the expansion of Real Plaza Cusco and other minor expansions, adding 26,000 square meters of additional GLA. In terms of same-store sales, we can clearly observe the strong same-store sales performance in Food Retail even with the strong basis reported in 2020 since the second quarter. Additionally, the slide reflects the solid same-store sales growth in Pharmacies, particularly in the first and second quarters of 2021, given the strict lockdown during the first half of 2020, which affected sales and demand. Most importantly, though, we also see an important same-store sales growth in the third and fourth quarters despite a high comparable basis in 2020, evidencing the strong resilience of this business segment. Finally, the slide reflects the strong recovery of Shopping Malls, especially towards the second half of the year. Please turn to Page 17 to review our consolidated net income results. InRetail registered a gain of PEN 269 million in the fourth quarter of 2021 compared to a gain of PEN 114 million in the same period of 2020, mainly explained by additional EBITDA contribution of PEN 94 million from a strong performance in all of our segments and additional mark-to-market gain of PEN 147 million as a consequence of a gain of PEN 95 million in Q4 '21 compared to a loss of PEN 53 million in Q4 '20 as a result of adjusting the fair value of the investment properties to a more favorable context in comparison to the comparable quarter of last year, affected by the pandemic and by a positive net FX impact of PEN 90 million in the quarter, of which PEN 53 million is related to dollar-denominated lease liabilities as per IFRS 16. Excluding exchange rate impacts and mark-to-market from the valuation of investment properties, net income for the fourth quarter would have reached PEN 155 million. Now please turn to Page 18 to discuss our CapEx and cash flow generation. During the fourth quarter of 2021, we invested PEN 230 million in CapEx for our 3 business segments, a 95% increase compared to the same quarter last year. This was mainly related to the opening of the 2 Makro stores, to the Mass stores, which were opened in the last quarter and to the renovation and opening of pharmacies. For the full year, we invested PEN 679 million, significantly above 2020 levels, which as mentioned in prior calls, the reduction in that year was explained by the temporary suspension of projects in Shopping Malls and the delay in the execution of certain projects in the Food Retail segment. In terms of cash balance, we ended the year with PEN 917 million of cash, slightly below the end of last year cash balance of PEN 936 million, having incorporated the operation of Makro, performed the associated liability management post acquisition in the first quarter of the year, distributed both an ordinary and an extraordinary dividend during the year and incorporated into retail, the digital products and services mentioned before in the last quarter of the year. Please turn to Page 19 to discuss our consolidated financial debt. As of December 2021, InRetail had a consolidated net leverage of PEN 7,817 million with a net debt to adjusted EBITDA ratio of 2.9%, below the previous quarter, mainly due to the deleveraging of our Shopping Malls segment despite the extraordinary dividend payment distributed in November. In terms of the composition of debt by currency, as of December 2021, 50% of our debt is in soles, 47% has been hedged and only 3% of our debt is exposed directly to the dollar. Please turn to Page 20 to review our debt by segment. Supermercados Peruanos, our Food Retail segment, ended the year with a net debt of PEN 2,541 million, including the intercompany loan with InRetail consumer related to the acquisition of Makro. Net debt to adjusted EBITDA decreased to 2.8% compared to 3.2% at the end of 2020. Makro's results and uncertainties were gradually incorporated in the last 12 months' adjusted EBITDA through 2021. On the other hand, InRetail Pharma ended the year with a net debt of PEN 2,280 million and a net debt to adjusted EBITDA ratio of 2.0X, slightly above the 1.5x net debt to adjusted EBITDA ratio in the end 2020. InRetail Pharma distributed a significant amount of dividends that were used for InRetail's ordinary and extraordinary dividend payouts. The company also invested in refurbishing and remodeling traditional formats to foster future growth. Finally, InRetail Shopping Malls ended the year with a net debt of PEN 1,853 million with a net debt to adjusted EBITDA ratio of 5.7x, an important reduction since last year, evidencing once again the continued recovery in the segment, leading to an improvement in adjusted EBITDA from increased GLA under operation and strong sales recovery from tenants. In 2022, we expect to maintain a stable leverage as our segments continue to maintain positive growth rates, but as with slightly and diligently increase our CapEx investments to continue driving future growth. Now please turn to Page 22 for our 3 year CapEx guidance for the period 2022, 2024. In total, we plan to invest around PEN 2.5 billion in our 3 business segments over the next 3 years. Our Food Retail segment will incur an approximately half of our total CapEx budget. For our supermarkets, we expect to open 2 new Plaza Vea stores in 2022. For our Makro cash and carry format, we expect to open 2 new stores in 2022. And finally, for our hard discount format Mass, we expect to open 120 new stores this year. Our Pharma segment will represent approximately 21% of our total CapEx budget with the opening of 100 new stores per year and incremental investments in our logistics network to continue improving customer experience. Finally, the Shopping Malls segment will incur an approximately 31% of our CapEx budget, opening approximately 5,000 to 10,000 square meters of expansion GLA per year and considering a potential to start a new shopping mall development in the medium term. In terms of type of investment, we will spend roughly half of our CapEx budget in increasing our footprint, 25% in logistics and IT and the remainder in maintenance, refurbishing and expansion of our existing performance. As demonstrated in prior years, our budget is discretional and we have the capacity to quickly react and diligently postpone CapEx investments if needed and deemed necessary. Finally, we would like to discuss an important subsequent event announced yesterday. Please turn to the next page. On February 28, 2022, InRetail Perú announced and closed the buy-out of Nexus' 12.98% minority stake in InRetail Pharma for a total consideration of $240 million. This consideration is divided in 2 components. Approximately $35 million in cash and approximately $205 million in newly issued InRetail Perú shares, which translate into approximately 5.94 million shares at $34.5143 per share. This price per share is equivalent to the 15-day volume weighted average stock price prior to the acquisition date as of the closing of trading on Friday February 25. The newly issued shares are subject to local provisions. The total consideration implies an enterprise value to last 12 months EBITDA for InRetail Pharma of $8.6 million. The transaction removes the overhang generated by this minority participation at InRetail Pharma, eliminates pre-existing rights, including the right to call for an IPO of InRetail Pharma, eliminating risk of split liquidity. The transaction also aligns interest and the objectives as it relates to dividends, CapEx investments, among other things, and consolidated minorities as a public entity. Moreover, the acquisition multiple compares favorably to InRetail Perú's trading metrics as of the closing date and could result in a potential increase in free float in the public entity when Nexus decides to monetize its stake in the company over time. J.P. Morgan acted as financial adviser to InRetail Perú and provided a Fairness Opinion to the Board of Directors of the company. This covers our presentation. And now, we will be glad to answer any questions you may have.

[Operator Instructions] The first question comes from Alonso Aramburú with BTG.

A couple of questions. Regarding the transaction with Nexus, can you give us the conditions of the lockup? What's the timeframe on that? And also, regarding the other acquisition you did in the quarter of Agora, maybe can you give us additional color as to how does this acquisition fit into your digital strategy and your overall strategy really? And the third one, if I may, regarding the Mass new stores for 2022, is that a net number or basically are you done with the optimization of Mass stores?

So starting with the first one in terms of the local provision, it's a lockup of 180 days since the closing of the transaction, so 180 days starting on February 28. In terms of the second question, as we mentioned in the call, so essentially, what we incorporated into InRetail is a series of products and services of digital products and services that we truly believe complement with the digital strategy that we currently have in our format in InRetail. As I mentioned, we -- the different digital products include several shared services for our digital platforms, such as an integrated platform for managing post sales dynamics with customers, an integrated platform for the supply and delivery of products in our digital channels as well as an integrated platform for speeding up payment processes in our digital platforms as well. In terms of the Agora brand, we basically incorporated a series of digital products, which are at an early stage of development. And these digital products include, as I said, a last-mile delivery service and personal shopper to basically improve the customer experience and basically allow customers to buy their whole purchases on a [ quickly manner ] with a more personalized service. Number two, we also acquired a payment like a digital payment product, which again, it's a very early stage, but we think it compliments very well as well to the digital platforms and offerings that we have at InRetail. And finally, we also incorporated the third digital product that I mentioned, which was the integrated loyalty group, where we think we're going to include the 3 business segments that we have in an integrated manner to offer discounts and personalized services to our customers that interact with us in our digital ecosystem. And so the third final question, in terms of the guidance for the stores, for the Mass stores is 120 new stores, which are gross alone.

Regearing Mass. So is the optimization of stores or the closing of stores -- I mean you always close stores every quarter at a certain number, but the large closing of stores that you have in 2021, is that over or do you still have a few more from that vintage that you needed to close?

So most of the stores were already closed in Q4 2021. There's just a few but non-material number of stores. I think in 2022, I would just assume that it's going to be more in the customary course of business in the closing of the stores. And remember, as I said in the call and we mentioned in prior calls, the closing of the stores is a function of kind of fine-tuning and finding the right model for the format itself. We feel very comfortable that we found kind of the value proposition and the format that we want to grow in the future. And we feel very optimistic that the Mass stores are going to allow us to grow significantly going forward, particularly as it relates to gaining share with respect to the traditional market.

Our next question comes from the line of Jamie Nicholson with Credit Suisse.

Out of the PEN 2.5 billion for CapEx over 3 years, how much do you expect to spend this year? And also, do you have guidance on what you expect your dividends to be in 2022?

So of the PEN 2.5 billion in CapEx that we're saying we're going to spend in the next 3 years, about roughly PEN 800 million would be spent in 2022. But again, as we mentioned in the call, we've shown that our CapEx is discretionary and we have the capacity to postpone certain CapEx investments if need be. But we're expecting a CapEx investment of about PEN 800 million for this year. And in terms of dividends, we haven't approved the dividends yet. We actually have a shareholders' meeting at the end of the month, which we're going to approve. But I would think that it would be fair to estimate something around $75 million to $80 million in dividends for the year.

And then secondly, I think I heard you say that you expect InRetail Shopping to have 15% year-over-year growth in revenues and EBITDA this year. Is that correct?

Yes, 15%, 1-5, yes.

And then related to that, what do you expect your net leverage to be in InRetail Shopping given that growth? Do you expect it to further decline or do you have any target leverage ratios for that business?

So we do expect leverage to decline as it has been declining over the last year. As we mentioned in terms of the CapEx guidance for the Shopping Malls, we expect to continue growing or expand, as I said, by 5,000 to 10,000 square meters of GLA. And in the medium term, we are considering an investment in the new mall. But in terms of 2022 guidance for the Shopping Malls, we do expect a continued deleveraging in the business.

Do you have a target of where you think you can get to given your EBITDA projection?

We estimate it's going to be around -- it's going to be below 5%.

[Operator Instructions] And our next question comes from the line of Nicolas Larrain with JPMorgan.

I wanted to understand a bit on the refurbishment on the drug store side and the renovations and remunerations there. Should we continue to expect this? Like what's the volume of stores we should continue to see being reconverted this year? And what's the type of target you can provide to us in terms of where do you want to reach?

So in terms of the refurbishment and remodeling, it's mainly associated with what we mentioned in the call regarding the multi-format and multi-category strategy and the diversification of categories that we're going through in our pharmacies, particularly related to the Mifarma Beauty format as well as the changing of the layout of our Inkafarma format where we're trying to put more non-pharma-related products, reachable to the customers at the end. So in terms of guidance for 2022, we expect to continue on that path. We expect to close 2022 with about 300 Mifarma Beauty and about 350 Inkafarmas converted to this new format.

This concludes the question-and-answer portion of today's conference call. I would like to turn it back over to Mr. Vallejo for closing remarks.

Thank you all for participating in our fourth quarter earnings call. As a final remark, I just wanted to highlight again that 2021 ended up being another extraordinary year for InRetail with a double-digit growth in revenues and in adjusted EBITDA. We remain optimistic about our business segments, supported by new sales area, positive same-store sales, our continued and rigorous focus on operational efficiencies and the consolidation of our multi-format and omnichannel strategies. If you have any follow-up questions, please do not hesitate to contact any of us. Thank you very much.

Ladies and gentlemen, that concludes InRetail Perú's Fourth Quarter 2021 Earnings Conference Call. We would like to thank you again for your participation. You may now disconnect.