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

Good morning, and welcome to InRetail Peru's First Quarter 2022 Conference Call. [Operator Instructions] Please note that the call is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Rafael Borja of InspIR Group. Sir, please begin.

Thank you. Hello, everyone. Welcome to InRetail Peru's First Quarter 2022 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 Peru are Mr. Juan Carlos Vallejo, Chief Executive Officer; Mr. Marcelo Ramos, Chief Financial Officer; and Mrs. Vanessa Danino, 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 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 earnings call. Today, we will discuss the main highlights of InRetail's first quarter results for 2022. I will start with a brief introduction and then Marcelo will walk you through our earnings presentation. Towards the end of last year and the beginning of this year, economic activity showed signs of an uneven recovery affected by the expansion of the Omicron variant and the worsening of geopolitical tension globally. This affected both growth and inflation. The appearance of the new variant Omicron supports a significant outbreak of new COVID-19 cases in Peru at the beginning of 2022. As a consequence, the new restrictions were imposed, including a curfew from 11 p.m. to 4 a.m. and certain capacity restrictions in establishments. However, at the end of February, the government eliminated the restriction for all businesses and enabled 100% capacity as COVID 19 cases decline leading to a recovery in domestic demand. In terms of inflation, this remain above the target range, driven by strong growth in food with a high important content and fuel prices. In spite of the constant political turmoil, macro fundamentals in Peru continued to be solid. In terms of our financial results, InRetail posted high single-digit growth in revenues and mid-single-digit growth in adjusted EBITDA due to a solid growth in our Food Retail segment helped by the consolidation of its multi-format strategy, the continued and solid recovery in our shopping mall segment and offset by a challenging quarter in our Pharma segment. Our Food Retail segment had a solid quarter, growing 11.6% in revenues and 23.1% in adjusted EBITDA, showing a strong growth across main formats. The Food Retail team continued to consolidate its multi-format strategy, further strengthening its leadership position in the segment. Our Pharma segment experienced a challenging quarter with lower growth in revenues of 2%, mainly due to a high comparison basis given a strong first quarter of 2021 and a slowdown in demand for COVID-19-related products. Adjusted EBITDA decreased 13.6%, mainly to a lower fixed cost dilution, incremental store personnel expenses and certain cost overruns related to our logistics operations. Finally, our Shopping Malls segment showed a strong performance in the quarter, consolidating its recovery from the pandemic with revenue and adjusted EBITDA growth of 40% and 54.4% respectively. As public health restrictions continue to be lifted, our tenants recovered their operation performance as well. During the quarter, we continued to strengthen our omnichannel strategy. As mentioned in our prior earnings call, at the end of last year, we incorporated with InRetail a series of digital services and solutions that complement our omnichannel strategy and existing digital platforms. We still have work to do to continue developing these services and solutions. Our online businesses continued to grow in all segments despite a strong comparable basis last year and the normalization seen in our physical stores. In terms of guidance for InRetail, we remain in line with the guidance given in March where we expect to achieve high single-digit growth in revenues and in adjusted EBITDA for 2022 at the InRetail consolidated level. In addition to our financial results, we are happy to announce that InRetail was reelected in the S&P/BVL Peru General ESG Index for the period May 2022 to May 2023. Additionally, in recent months, our shopping malls bonds received an upgrade to BBB- from Fitch and an average to BB+ for S&P. This rating action evidenced the strong operational recovery in our Shopping Mall segments. 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. As mentioned by Juan Carlos, today we will review the main highlights of InRetail's first quarter results for 2022. Now please turn to Page 4 in our earnings presentation to start reviewing our consolidated financial results of the first quarter for InRetail Peru. In the first quarter of the year, InRetail reported a high single-digit growth in revenues due to a strong growth in our Food Retail segment and in our Shopping Malls segment, evidencing the continued recovery in the [indiscernible]. Our consolidated revenues also incorporates its lower growth in our Pharma segment, mainly due to the high comparison basis given a strong first quarter in 2021, resulting in a challenging first quarter for this segment. Revenues reached PEN 4.7 billion, an 8% increase versus the first quarter of last year. Gross margin stood at 26.9% in the quarter, in line with the comparable quarter of last year, showing relatively stable gross margins in both Food Retail and Pharma segments combined with an important improvement in margins in our Shopping Mall segment. In terms of adjusted EBITDA, we recorded a mid-single-digit growth of 4% in comparison to the same period of last year, reaching PEN 545 million and an adjusted EBITDA margin of 11.6%, driven mainly by the top line growth, the continued operating leverage in our Food Retail segment and the improved performance in our Shopping Malls segment. This quarter, the consolidated EBITDA also includes PEN 11 million of net expenses aimed to strengthen the new digital services and solutions incorporated in late 2021, which as mentioned in our prior earnings call are still in a development phase. These incremental expenses -- these are incremental expenses when compared to the first quarter of 2021 when these were not incorporated within InRetail. In terms of net income, we registered a strong growth in the first quarter of 2022 due to a positive net FX effect and the absence of onetime noncash effects registered in Q1 '21 in the Pharma segment related to the sale of nonmaterial operations and its liability management. In the following slides, I will explain these changes in net income in more detail. Now please turn to Page 5 to review a financial and operational snapshot of our consolidated figures. In terms of contribution, considering the last 12 months as of the first quarter of 2022, our Food Retail segment accounted for 53% of consolidated revenues and 39% of consolidated adjusted EBITDA with an adjusted EBITDA margin of 9.6%. Our Pharma segment accounted for 44% of consolidated revenues and 46% of consolidated adjusted EBITDA with an adjusted EBITDA margin of 13.6%. Finally, our Shopping Malls segment accounted for 3% of consolidated revenues and 14% of consolidated adjusted EBITDA with a net rental income margin of 78.3%. Compared to our financial and operational snapshot showed in Q1 '21, we do see a slight increase in the representation of the Food Retail segment as the last 12 months figures of Q1 '22 include the full year incorporation of Makro's operations. However, when we consider pro forma comparable numbers including Makro for the whole 12 months starting Q1 '21, the contributions from each business do not vary significantly. Now please turn to Page 7 to comment on our main sustainability highlights. During this first quarter, we continue with our commitment to move forward with our sustainability efforts. In environmental dimension, in our Food Retail segment, we continued with our company-wide waste management efficiency program, which includes implementing and training environmental leaders in all of our stores, reducing our food waste and implementing and continuously improving our recycling stations among several other initiatives. In the first quarter of 2022, we were able to recycle 70% of the waste we generated in our stores and logistics centers, totaling over 1,700 tons of waste material recycled. In terms of energy efficiency, 96% of our stores have implemented lead lining. During the quarter, we also performed internal audit and energy efficiency in all our Plaza Vea, Vivanda and Makro stores. Continuing with the environmental dimension in our Pharma segment, during the first quarter, we recycled 66% of waste from our logistics centers for both our pharmacies and distribution units. In our Shopping Malls segment, we also recycled 48% of waste from our malls. Additionally, in our 3 business segments, we are in the process of calculating Scope 1, 2 and 3 of our 2021 carbon footprint. As mentioned in our prior earnings call, we are measuring Scope 3 for the first time. Moving into the social dimension. In the Food Retail segment, we continued with our successful strategic partnership with the Food Bank. All of our Plaza Vea, Vivanda and Makro stores as well as our logistics centers participate in this partnership. During Q1 '22, we rescued 71% of our food waste, equivalent to 4 million food rations and over 61,000 beneficiaries. In terms of SMEs, we continue to support 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 30,000 packs of medicines and more than 90,000 medical prescriptions were dispensed in our pharmacies through our [ Pharmacy Racina ] program within the group. Additionally, we sponsored the new baking facility of the association, [Foreign Language], creating and representing an additional source of income for the residents. A large number of employees completed our sustainability e-learning program as part of our objective to promote a sustainability culture. We also received several awards in diverse rankings, such as Great Place to Work, power gender equality, medical ESG ranking among others, evidencing once again our commitment to our employees and the different communities. Finally, in terms of corporate governance at our Annual Shareholders Meeting held on March 31, 2022, 8 new directors were elected, including 4 independent directors and 2 women directors. InRetail was also reelected in the S&P/BVL Peru General ESG Index for the period May 2022 to May 2023. We will now continue with our results by segment. Please turn to Page 9 to start with our first quarter results for our Food Retail segment. Our Food Retail segment recorded once again a strong quarter, considering the high comparison basis of the comparable quarter of last year, when we registered double-digit growth in revenues as well as double-digit same-store sales growth. Revenues reached PEN 2.5 billion, registering an 11.6% growth. Same-store sales growth stood at 7.6% with a positive same-store sales growth in all main formats. We achieved a solid mid-single-digit same-store sales growth in Plaza Vea, our flagship format and double-digit same-store sales growth in both Makro and Mass, our cash & carry and hard discount format, respectively. Top line growth was positively impacted by a strong increase in food categories and a moderate growth in non-food categories. The non-food segment was negatively affected by a market-wide slowdown in the electronics categories, compensated by an important growth in other non-food categories such as [ bar ] and textile. Additionally, revenues were positively impacted by the contribution of the approximately 25,000 square meters of additional sales area opened in the last 12 months, of which 11,000 came from 77 net new Mass stores, 13,000 came from 2 Makro stores and the remainder from a Plaza Vea expansion. At the end of last year, we also reopened the 2 Plaza Vea stores, which were closed for remodeling, further contributing to this first quarter in comparison to the first quarter of last year. In Q1 '22, we opened 2 and closed 10 Mac stores, resulting in 8 net closings. As mentioned in our prior earnings call, there were still a few stores yet to be closed as part of our store optimization plan started late last year. These 10 stores were closed at the beginning of the year. We are not expecting to close additional Mass stores related to the fine-tuning plan. In terms of the opening fleets for Mass stores, the beginning of the year is usually lower in terms of openings. However, we expect to accelerate store openings in the following quarters, reaching the 120 new Mass stores we estimated for 2022. Our gross margin reached 22.6% this quarter. In the comparable quarter of last year, gross margin was impacted by a onetime purchase price allocation expense on inventory of PEN 16 million related to the acquisition of Makro. If we exclude for this effect, gross margin would have slightly decreased this quarter in comparison to the comparable quarter of last year, as expected reflecting the higher participation of our Makro and Mass formats in the sales mix, which operate at lower gross margins combined with the continued reinforcement of our everyday low-price strategy. In terms of adjusted EBITDA, Food Retail's adjusted EBITDA reached $232 million this quarter with a margin of 9.2%, an increase of 86 basis points versus the same period of last year, mainly explained by the continued fixed cost dilution and the absence of onetime expenses related to the acquisition of Makro registered in Q1 '21. Overall, in the Food Retail segment, we registered another quarter with strong trends consistent with previous quarters with an overall positive performance in all of our main formats, leveraging on our multi-format strategy. In terms of sales performance for the first quarter of 2022, our flagship format, Plaza Vea represented 61% of sales. Our high-end supermarket format Vivanda represented 3% of sales. Our hard discount format Mass represented 9% of sales, and our cash and carry format Makro represented 27% of sales. This remains in line with the revenue contribution we saw in the last quarter. Finally, in the Food Retail segment, we continue to strengthen our digital platform. In terms of our e-commerce sales, despite the high comparison basis of 2021 and the physical stores being fully reopened with the normalization of activities, we recorded a positive growth of 3% with a 70% growth in sales from third-party sellers. We continue to increase the assortment of products in our web, increasing available SKUs 3.6x in comparison to the first quarter of last year. During the quarter, online penetration remained at approximately 6% of total sales in our formats with an active digital platform. Finally, our e-commerce platform received an important recognition from America Retail as the best Peruvian e-tailer, distinguishing our food retail platform in terms of customer service, customer experience and service. Please turn to Page 10 to review our first quarter results for our Pharma segment. Our Pharmacies unit registered a top line growth of 1.1% in the first quarter with a same-store sales growth of minus 1.2%. This was a challenging quarter for our pharmacies business, mainly due to the high comparable base to the first quarter of 2021, which recorded a high same-store sales growth of 17.8%. Our pharmacies unit also experienced a progressive slowdown in demand for COVID-19 related categories in both pharma and non-pharma products, once infection rates decreased. This slowdown was a market-wide effect, impacting all channels. Additionally, sales were also affected by challenges in logistics due to an important decline in supplier service levels, impacting our ability to fulfill customer demand. The slower demand in COVID-19 related categories was offset by a better-than-expected performance in personal consumer categories, fueled by the continuous execution of our category diversification and multi-format strategy. Going forward, we plan to continue expanding our health and wellness spaces in our stores, which will help us grow our complementary non-pharma categories while enhancing our customer experience. During the last 12 months, we opened 83 net new pharmacies. And during the first quarter, we opened 15 pharmacies and closed 4, resulting in 11 net openings. We remain positive in our plan to open approximately 100 new pharmacies by year-end as we increased the pace of our openings in the coming quarters. Our gross margin reached 35% this quarter, in line with the comparable quarter of the previous year, while maintaining our everyday low price strategy in the market. In terms of adjusted EBITDA, we recorded an adjusted EBITDA margin of 14.9% below the comparable quarter of last year. The decline in adjusted EBITDA margin was mainly due to an increase in store personnel expense, some of which is related to new personnel from the new store openings in the period, cost overruns in our logistic operations related to increases in local and international transportation costs as well as incremental temporary personnel and lower fixed cost dilution from its lower top line growth. In terms of our omnichannel strategy in the pharma segment, we continued with our efforts to grow our digital platforms. Despite an already high comparison basis in 2021, we registered a strong 30% growth in online sales. Penetration of nonphysical sales in our Inkafarma brand stood at approximately 6% of total sales in Lima. Our click and collect alternative continued gaining share during the quarter, representing 28% of our digital sales in March with 65% of orders available for pickup in less than 10 minutes and almost 100% of orders available for pickup in less than 2 hours. As a reminder, our click and collect network in pharmacies includes over 2,000 locations nationwide. Now moving into our distribution unit. This quarter, revenues increased by 6.5%, mainly due to a recovery in demand from institutional clients. Gross margin was 10.4% in the first quarter, below the comparable quarter of last year, affected basically by a net FX translation effect in our cost of sales related to operations in Ecuador and the absence of gross margin from the assets sold at the end of first quarter of last year. Adjusted EBITDA decreased compared to Q1 '21 with a margin of 2.9%. The decline in adjusted EBITDA was mainly due to the lower gross margin and the absence of EBITDA from the assets sold at the end of the first quarter of last year. Excluding both the net FX translation effect in our cost of sales from the operation network and the impact on the sales sold in the prior year, the adjusted EBITDA margin would have been stable compared to Q1 '21. Overall, on a consolidated level, our revenues registered an increase of 2% in comparison to the first quarter of last year, and our adjusted EBITDA declined 13.6% with a consolidated adjusted EBITDA margin of 12.4%. In summary, our Pharma segment experienced a challenging quarter, particularly since March, with a strong slowdown in demand from COVID-19-related products, both pharma and nonpharma as well as a continued deterioration of our supplier service levels. Looking forward and based on the initial results observed during April, we estimate that these negative trends could impact our performance in the second quarter as well. Please turn to Page 11 to review our first quarter results for our Shopping Mall segment. In the first quarter of this year, our Shopping Mall segment continued with the consolidation of its recovery and growth. Our Shopping Malls revenues reached PEN 152 million, registering a 40% growth versus the comparable quarter of last year. This growth was mainly explained by the increased GLA open versus the same period of last year, with approximately 90% of GLA opened versus approximately 81% open in the prior year for the same period. As a reminder, in February 2021, our Shopping Mall segment experienced periods with partial closures, where GLA opened stood at 50%. The strong growth in revenues was also fueled by a methodical and effective reduction in discounts as public health restrictions were lifted and our tenants recovered their performance. Finally, we had additional GLA from the expansion of Real Plaza Cusco in the third quarter of last year, which contributed to revenue growth this quarter relative to Q1 '21. In terms of occupancy rates, we continue to maintain high levels of 93%, in line with the previous quarter and the comparable quarter of the last year. In terms of adjusted EBITDA, we registered PEN 93 million in the quarter, and net rental margin was 81.7%, 587 basis points higher than the comparable quarter of last year, showing a strong improvement, thanks to a strong top line growth, the improvement in gross margin and increased fixed cost dilution. In terms of mark-to-market, we registered a loss of PEN 21 million this quarter compared to a gain of PEN 12 million in the comparable quarter of last year. This loss in mark-to-market is associated to a lower FX apply to the dollar valued land bank that Shopping Malls owns. As of March 31, our Shopping Malls segment had a solid liquidity position with PEN 160 million in cash and equivalents and an investment of PEN 190 million in InRetail shares as additional source of liquidity. We are proud to announce that our Shopping Mall bonds received 2 rating actions this last month, an upgrade to BBB- from Fitch and an upgrade to BB+ from S&P, both of which reflect a solid operational recovery in our Shopping Mall segment post-pandemic. In terms of mall operations, during the first 2 months of the first quarter, our most operating with a maximum visitor capacity between 60% and 80%. Since February 28, 2022, restrictions on capacity and opening hours were released. However, vaccination and face mask restrictions inside establishments remain in place. Finally, education tenants are now in the process of opening. Now please turn to Page 12. 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, we closed 8 net Mass stores for the first quarter. As mentioned earlier, there were still a few stores yet to be closed as part of our store optimization and model reconfiguration plan started late last year. These 10 stores were closed at the beginning of the year. We are not expecting to close additional Mass stores other than those as part of the ordinary course of business. As I shared before, we continue to expect to open 120 mass stores by year-end. These openings will be complemented with 2 new Plaza Vea stores and 2 new cash and carry stores as stated in our previous earnings call. In our Pharmacies unit, we opened 11 net new stores this quarter. For 2022, we still expect to open approximately 100 new stores and execute the store reconversion plans for the year. Finally, in our Shopping Malls segment, there were no increases in G&A this quarter. For 2022, we still expect to open approximately 5,000 to 10,000 square meters of expansion GLA. In terms of same-store sales, we can clearly observe the strong same-store sales performance in the Food Retail segment despite the strong basis recorded in 2021 continuing with a strong same-store sales growth quarter-over-quarter. As mentioned, in Q1 '22, we experienced positive same-store sales growth in all main formats. Additionally, we know this lower same-store sales growth in pharmacies, which compares with a record same-store sales growth in Q1 '21 of 17.8% and an already more moderate same-store sales growth in the second semester of 2021. Finally, the slide reflects the consolidation in the recovery of Shopping Malls, driven by strong tenant same-store sales growth, consistent with the trends seen in prior quarters as public health restrictions were lifted. Now please turn to Page 14 to review our consolidated net income results. InRetail's registered a gain of PEN 219 million in the first quarter of 2022 compared to a loss of PEN 35 million in the same period of 2021, mainly explained by additional EBITDA contribution of $21 million due to a strong performance in our Food and Shopping Malls segment a positive net FX impact of $213 million in the quarter, of which $119 million is related to dollar-denominated lease liabilities as per IFRS 16 and lower net financial expenses of $131 million in this quarter compared to the comparable quarter of last year. Since in the first quarter of last year, we registered a onetime expense of $144 million related to Retail pharma's liability management and construction costs related to the bridge loan used for the acquisition of MAC. Finally, we also registered lower D&A this quarter since in the first quarter of last year, we recorded PEN 65 million of onetime noncash expenses related to the sale of noncore assets. Excluding exchange rate impacts, mark-to-market from the valuation of investment properties and adjusted for onetime effects, net income for the first quarter would have reached PEN 139 million. Now please turn to Page 15 to discuss our CapEx and cash flow generation. During the first quarter of 2022, we invested PEN 150 million in CapEx for our 3 business segments, mainly for the opening of new pharmacies, format reconversions in our Pharma segment and for our 2022 projects for our Food Retail segment. As I commented in the previous earnings call, for the 3-year period 2022-2024, we plan to invest around PEN 2.5 billion in our 3 business segments. However, as demonstrated in prior years, our budget is discretional and we have the capacity to quickly react and diligently adjust our CapEx investments if deemed necessary, without materially compromising our operations and growth. In terms of cash balance, we ended the first quarter with PEN 821 million, slightly below the end of last year cash balance of PEN 917 million. Now please turn to Page 16 to discuss our consolidated financial debt. As of March 22, InRetail had a consolidated net debt of PEN 7.689 billion, with a net debt to adjusted EBITDA ratio of 3%, slightly above the previous quarter, mainly due to slightly higher leverage in our Food Retail and Pharma segments, which was offset by the continued deleverage in our Shopping Malls segment. In terms of the composition of our debt by currency, as of March, 53% of our debt is in soles, 46% has been hedged and only 1% of our debt is exposed directly to the dollar. 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 PEN 2.970 billion, including the intercompany loan with InRetail consumer related to the acquisition of Makro. Net debt to adjusted EBITDA slightly increased to 3.0 compared to 2.8 at the end of 2021. InRetail Pharma ended the first quarter with a net debt of PEN 2.651 billion and a net debt to adjusted EBITDA ratio of 2.1x, in line with a net debt to adjusted EBITDA ratio at the end of 2021. Supermercados Peruanos and Retail Pharma show a slight decline in cash balances, primarily due to a periodic dividend distribution to the parent company as part of our cash management plan to partially finance InRetail dividend distribution of $75 million approved by our Board of Directors. Finally, InRetail shopping malls, ended the first quarter with a net debt of PEN 1.772 billion with a net debt to adjusted EBITDA ratio of 5, an important reduction versus 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 relatively stable net leverage on a consolidated basis as our segments continue to perform, but as we slightly and diligently increase our CapEx investments to continue driving future growth. This covers our presentation, and now we will be glad to answer any questions you might have.

[Operator Instructions] Our first question comes from the line of Alonso Aramburu with BTG.

Yes. I wanted to ask you about the comment you made on Pharma regarding Ecuador. You don't mention 2 of the operations outside of Peru. So can you give us some color about that operation and remind us how relevant it is and what are the plans with those operations outside of Peru? And my second question regarding malls, just to clarify, you mentioned that the education tenants are the last ones that are being reopening? Are they the last ones or do you have any other tenants that are still -- I mean need to reopen?

So sure. I mean, the operation in Ecuador, it's still a small operation. Just to give you an idea, and you can see it in the light of the Pharma segment, the distribution business itself is about 30% of revenues and 8% of EBITDA. Of that, Ecuador is less than half. I mean, the Peru operation in the distribution business is kind of the majority of operations. And in the other operations that we have is Bolivia as well, which is de minimis. It's super small even relative to Ecuador. Look, the plan for Ecuador going forward, we've done a lot of effort to basically stabilize the operation itself as soon as we acquired. I think the operation in Ecuador is finally showing interesting results, which started now last year and have been consolidated this year. So look, I think we look at Ecuador with optimistic eyes. I think it's a market that we've been always looking at. And so I think given the results -- the recent results that we have in the operation, we're optimistic of the performance that we can have this year. But as I said, it's a small operation. And the translation effect that we mentioned is essentially a translation when we transfer the USD dollars into soles for consolidated results InRetail Pharma in soles. It's an impact of about PEN 6 billion to PEN 7 billion in the cost of sales, which if you look at the numbers, has a major impact as well on the consolidated results for the distribution business. So that's basically for Ecuador. And then the second question on Shopping Malls and the tenants. I mean the education players or education tenants are the ones that are yet to be opened. After that, it's very specific tenants that haven't opened yet, either -- mainly for business rationale reasons. It's small modules, no, nothing major. And again, it's tenant more than specific in categories has to do with a couple of malls. In the case of Cusco, for example, which is a mall that you guys know we expanded in the 3Q of 2021, we still have spaces to know to cover and tenants to include there and Puruchuco as well, which is a mode that we opened late in 2019, came with a pandemic, and we still have work to do on that mall to bring back more of the tenants. So to your question, the only, I would say, category remaining to open in terms of tenants is location. The rest is specific small tenants and tenants that have to do with both Cusco and Puruchuco.

[Operator Instructions] Our next question comes from the line of Chelsea Colon with Aegon.

I just have 2, if I may. You confirmed your guidance at the consolidated level for high single-digit growth in revenues and EBITDA, but you seem to have a more cautious stance towards the performance of the Pharma segment. And it sounds like it's even gotten worse in second quarter, unless I misinterpreted your comments. So can you just give some more color around the consolidated guidance? Are you expecting the other segments to compensate for Pharma or do you think Pharma will improve in the second half of the year? And then my second question also related to Pharma was just related to your working capital. Your inventory turnover, your inventory days seems to have increased above historical levels in the first quarter of this past year. Can you just explain why that occurred? And if you expect that to remain at elevated levels or to come back down throughout the year?

So starting with the first one. As I mentioned in the call, you're right. Confirming the guidance, we gave on a consolidated basis. Overall, I think it's going to be -- I mean, we haven't seen much of a change, especially in April in terms of the trends that we discussed during the call. Overall, I would say, we're being a little bit more cautious on the Pharma segment. We've seen the last few weeks in April, with a couple of tendencies that we mentioned in the call, which is lower demand in the COVID-related categories, which includes both Pharma and non-Pharma products. The typical Pharma products like paracetamol, azithromycin, ivermectin and whatnot. But also certain non-Pharma SKUs, for example, alcohol, [ face mask ], including as well as certain nutritional products like vitamins, for example, that were very related to COVID. And the second trend that we're still seeing in April is the low levels of supplier service levels, correct? So I think we're being a little more cautious with Pharma. We still have hopes and the Pharma team is actually doing a lot of work with suppliers to turn around this trend of low service levels as well as working very heavily on their strategy of diversification and multi-format, correct, which should give us, again, more growth in terms of the complementary categories like wellness and consumer, correct? But I would say that at a high level, the reaffirmation of the consolidated guidance is a function of a little more cautious on Pharma, combined with an overcompensation and a strong performance in both Food and Shopping Malls, consistent with the trends in the numbers that you've seen, correct, in the earnings quarter 1Q. And in terms of the second question regarding working capital and specifically inventory in Pharma, it was basically a management decision given that we were having certain low service levels from suppliers in certain categories. As soon as management could, we basically have some no security inventory in certain categories increase due to the context as well of -- as I said of the low levels of suppliers and as well a little bit of categories that haven't actually turned around that much. The expectation going forward is for that to correct, and we expect to be in more normalized levels than the one than the very high 100 days -- 95 to 100 days that we're seeing right now.

[Operator Instructions] There are no further questions in the queue. I'd like to hand the call back to Mr. Vallejo for closing remarks.

Okay. Thank you all for participating in our first earnings call. As a final remark, I just wanted to highlight again that the first quarter ended up being another good quarter for InRetail. Despite a constant challenging political and economic environment, we remain confident on our ability to continue growing and improving our performance metrics as well as continue developing more [indiscernible]. If you have any follow-up questions, please do not hesitate to contact any of us. Thank you very much.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.