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

Good morning, and welcome to InRetail Perú's Third Quarter 2023 Conference Call. [Operator Instructions] And please note that this call is being recorded. [Operator Instructions] 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 Ms. Vanessa Dañino, Investor Relations Officer. They will be discussing the quarterly report distributed by the company 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 accompany the discussion during this call. If you need 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 on 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. Mr. Vallejo, you may go ahead, sir.

Thank you, Roco. Good morning, everyone. I'm Juan Carlos Vallejo. Thank you for joining InRetail's third quarter earnings call. Today, we will discuss the main highlights of InRetail's third quarter results for 2023. Joining me today are Marcelo Ramos, our Chief Financial Officer; and Vanessa Dañino, our Investor Relations Officer. I will start with a brief executive summary, and then Marcelo and Vanessa will walk you through our earnings presentation. Overall, the Peru economy is converging to a low growth rate in the short term due to the decline in productivity and investments in the last semesters. Despite the lower economic growth, macroeconomic balances remain solid, with public debt levels still at the lowest in Latin America, inflation tapering off and the Peruvian Sol is still showing strength. Given the solid macroeconomic fundamentals, the government announced an economic program seeking to boost the economy to increase public investment and financing for small and medium-sized businesses. This program should be implemented at most by the beginning of next year, possibly influencing consumer confidence and consumption itself. In the midterm, the persistent increase in the cost of living has deteriorated the purchasing power of many Peruvians, forcing consumers to opt for more economic alternatives leading to a generalized slowdown in consumption. In spite of deterioration in demand during the third quarter, InRetail managed to achieve solid results reaching a mid-single-digit growth in revenues and a high single-digit growth in adjusted EBITDA. Our Food Retail segment had another solid quarter, growing 8.2% in revenues and 7.8% in adjusted EBITDA, with [indiscernible] operating margins. Growth was driven by our emerging formats, compensating a slowdown in our supermarket format impacted by the continued decline in nonfood categories. Based on market information from external providers during this quarter, we continued to outperform other market players in the [indiscernible] Food Retail channel. As anticipated in our previous earnings call, our Pharma segment experienced a more challenging third quarter from a high comparison basis given the strong winter campaign in Q3 2022, significantly affected Pharma categories. As such, revenues declined minus 2.2%, while adjusted EBITDA increased 10.1% from an improvement in gross margins and operational efficiency. Finally, our Shopping Malls segment had a solid third quarter with revenues and adjusted EBITDA growing at 8.6% and 8.8%, respectively. In terms of the guidance for InRetail, we are reviewing our guidance in revenue from high single-digit growth to mid-single digit growth, and confirmed our guidance in adjusted EBITDA of low double-digit growth, both for 2023 on a consolidated basis. 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 third quarter 2023 results. Now please turn to Page 4 in our earnings presentation to start reviewing our consolidated financial results for the third quarter. In the third quarter of the year, InRetail reported solid results despite a more pronounced slowdown in overall consumption, reaching a mid-single-digit growth of 3.7% in revenues. This growth combines a strong performance in our Food Retail and Shopping Malls segments, with a contraction in our Pharma segment due to a high comparison basis, which included a strong winter campaign last year compared to an unusual warmer winter this year. In terms of adjusted EBITDA, we recorded a high single-digit growth of 9.4% in comparison to the same period of last year, driven by the growth in revenues, the increased fixed cost dilution and operational efficiencies, combined with a stable gross margin. As seen in previous quarters, our consolidated adjusted EBITDA considers net expenses related to our digital services and solutions developed transversely across segments. Additionally, this quarter, our adjusted EBITDA includes approximately PEN 2.4 million of maintenance and other expenses related to preventive works anticipating a likely moderate phenomenon El Nino expected in the summer of 2024. We expect additional investments in the fourth quarter to continue with our presented measures. However, similar to this quarter, this incremental investments will not materially alter our financial performance. Moving on to net income. We registered a net income growth in the quarter, mainly explained by the strong EBITDA performance, partially offset by the lower mark-to-market gain in our Shopping Malls segment, and a higher net FX loss compared to Q3 '22, which, as a reminder, is related to our dollar-denominated operating leases. Overall, as evidenced by our consolidated financial figures for Q3 '23 in retail managed to perform well and above peers, in spite of the more challenging consumption environment. As anticipated in our previous earnings call, since July, we noticed generalized reduction in consumption from persistent increase in cost of living, combined with a slower economic growth environment. We are still experiencing an important decline in demand for discretionary categories such as electronics and clothing, mix with lower spending capacity for basic need categories. Looking forward for the full year 2023, we're slightly reviewing our revenue guidance from high single-digit growth to mid-single-digit growth, incorporating a slower growth in our Pharma segment and maintaining our expected performance in our Food Retail and Shopping Malls segments. In terms of adjusted EBITDA guidance, we remain in line with the previous updated guidance of low double-digit growth as stated in our previous earnings call, both on a consolidated basis. Now please turn to Page 5 to review our financial and operational snapshot of our consolidated figures. In terms of contribution by segment, this has remained in line with recent quarters. At a consolidated level, during the last 12 months, InRetail has generated close to PEN 21 billion in revenues and close to PEN 2.8 billion in adjusted EBITDA, with a stable EBITDA margin of 13.3%. Now please turn to Page 7 to review -- to give you a short update on our continued ESG progress during the quarter. During this third quarter, we continue with our commitment to move forward with our sustainability efforts. I will briefly comment on some of the initiatives. On the social front, we continued to grow our Bueno por Dentro program, a shared value initiative in our Food Retail segment that promotes the reduction of food waste nationwide. Donating 4.3 million food rations and equivalent of PEN 18.4 million, benefiting more than 90,000 people, which received both dry and fresh food on a daily basis. During the quarter, we also continued to support SMEs through our Perú Pasión project, generating sales for our stores and malls for PEN 3.9 million. We also carried out health campaigns in our malls, achieving more than 1,000 units of blood donated, more than 10,000 people vaccinated and more than 2,000 children screened for anemia. On the environmental front, during the quarter, we continued with the implementation of LED lighting in pharmacies and recovered more than 2,000 tons of recycled material, among other initiatives. Thanks to these and other initiatives developed, Real Plaza and Supermercados Peruanos achieved the 10th and 12th positions, respectively, in Great Place to Work in sustainable management. Now please turn to Page 9 to review our third quarter results for our Food Retail segment. Our Food Retail segment had another strong quarter. Revenues increased 8.2% in Q3 '23 with a same-store sales growth of 2.3%. Our food categories continued to experience a solid same-store sales growth this quarter, while our non-food categories experienced a more pronounced double-digit slowdown in same-store sales, evidencing the deterioration in the purchasing power of consumers. We expect this declining trend to continue during the last quarter of the year. It is worth noting, however, that non-food categories represent less than 20% of total sales in our Food Retail segment and affects primarily our supermarket formats. In terms of performance by format, our emerging formats, Mass and Makro posted strong double-digit and high single-digit same-store sales growth, respectively. While Plaza Vea, our supermarket format was affected by the decline in sales of non-food categories mentioned before, posting a negative low single-digit same-store sales growth. Additionally, revenues were positively impacted by the contribution of new stores opening in the last 12 months, represented 57,000 square meters of additional sales area, including the opening of 193 net new Mass stores, which operate with lower sales per square meters than our larger big box formats. In Q3 '23, we opened 45 net new Mass stores, reaching 805 stores as of the third quarter. This quarter, we also temporarily closed 1 Vivanda store in the District of Miraflores in Lima for remodeling purposes. In terms of participation by format, our emerging formats, hard discount and Cash&Carry, now represent 43% of our total revenues. Food-based formats continue to gain share against traditional supermarket formats, which are exposed to electronics, clothing and home decor categories that had a negative sales growth during the year. Our gross profit increased 5.9% with a gross margin of 23.5%, in line with the second quarter and below the comparable quarter of last year. As I have commented before, our gross margin incorporates negative pressures from the higher participation of our emerging formats in the sales mix, which operate with the lower gross margins consistent with their pricing strategy, partially offset by a change in category mix from the decline in lower-margin categories, namely electronics. In terms of adjusted EBITDA, Food Retail's adjusted EBITDA grew 7.8%, with a margin of 9.9%, explained by continued fixed cost dilution and operational efficiencies, mainly in store operational expenses, despite the lower gross margin, incremental operational expenses related to new stores opened in process of ramping up and increasing utility and maintenance expenses. The latter expenses related to preventive works in anticipation of a likely moderate El Nino phenomenon. In spite of such pressures, adjusted EBITDA margins remained relatively stable compared to the third quarter of last year. As it relates to our omnichannel Food Retail proposition, total digital sales in our Food Retail segment remains flat, affected by the decline in electronic categories, compared to the third quarter of 2022. However, food category sales in our digital platforms grew double digit versus the same period last year. As a reminder, we have a multichannel offering tailored for distinct purchase missions and services, including our last-mile platforms, Agora Shop and JOKR as well as our traditional e-commerce website for [indiscernible] Vivanda. Our last-mile platforms continue to grow and represent over 45% of our food category sales in our digital platforms. As of September, digital sales represented 6% of total sales of brands with an active digital channel. In summary, our Food Retail segment registered another quarter with solid growth and stable profitability margins. Our multi-format strategy allows us to accompany customers even in a more challenging environment of rising living costs and low growth, driving frequency into our stores, consolidating our leadership position. We have distinct price formats such as hard discount and Cash&Carry, and the company has been working aggressively in reducing costs and becoming more efficient in order to support our competitive everyday low pricing strategy. Now please turn to Page 10 to review our third quarter results for our Pharma segment. Starting this quarter, we will report our summary financial highlights for our Pharma segment on a consolidated basis, yet still provide incremental color on each of its units. As part of an effort to continue generating value, the company embarked in a project to integrate its supply chain. As such, beginning in July, we have progressively consolidated the purchase of inventory, reducing intercompany sales that were previously recognized in our unit level financial results. As a reminder, over PEN 600 million of annual revenues in our distribution operation in Peru came from sales to our own pharmacies. This intercompany revenues will disappear over time, making unit level historical financial figures not comparable. It is important to note that this intercompany revenues did not affect our consolidated results as they were already eliminated for consolidation purposes. Moving on to our financial results. As anticipated in prior earnings calls, the second half of the year had a more challenging comparison basis, both performances and distribution. This higher comparison basis, combined with the generalized decrease in consumption affected our Pharma segment, which registered a decline in revenues of 2.2% in the quarter. Same-store sales growth for our Pharmacies unit declined 1% from a decrease in Pharma category sales that compared a strong winter campaign in Q3 '22 to an unusual warmer winter this year. Non-pharma categories posted a moderate single-digit growth in same-store sales, below the same-store sales growth posted in the previous quarters of the year, impacted by a slower demand and higher comparison basis, though still favored by the category diversification strategy. Our distribution unit registered lower sales due to a slowdown in demand from independent pharmacies in Peru, and a high comparison basis as well as lower demand in institutional channels in Ecuador, due to a management decision to reduce exposure to the public institutional channel and concentrate efforts on the private channel. Although this strategy generates a temporary reduction in sales, we are prioritizing the quality of the client portfolio, collections and profitability. In the last 12 months, we closed 7 net pharmacies. During the third quarter of 2023, we opened 10 and closed 5 pharmacies. Our gross profit grew 2.4% compared to the third quarter of 2022. Our gross margin reached 32.7%, above Q3 '22, even with the decline in revenues. This was mainly due to a change in sales mix towards higher-margin products, significantly lower promotional activities and higher rebates in our pharmacies, offset by a slight decline in distributions gross margin. Our Pharma segment adjusted EBITDA grew 10.1% with an adjusted EBITDA margin of 16.7%, above the comparable quarter of last year. The increase in margin is explained by the improvement in gross margin outlined before and by operational efficiencies in both Pharmacies and in distribution. Additionally, adjusted EBITDA in the base of Q3 '22 had approximately PEN 2 million of incremental rent expenses that were later reclassified due to IFRS 16 from the delay in the recognition of renegotiated contracts. This amount is significantly lower compared to approximately PEN 14 million that were included in prior quarters, hence, making rent expenses, this third quarter, more comparable to those of last year. In terms of Pharma digital sales, we continue to report a strong growth in the third quarter of more than 20%, compared to the comparable quarter of last year. Our nationwide click-and-collect network still represents around 40% of our digital sales as of the third quarter of 2023. This delivery method helps us expand our digital offering more districts in the country in a more cost-efficient manner, taking advantage of our capabilities and capillarity nationwide. Overall, as anticipated in prior earnings calls, the second half of the year has a more challenging comparison basis for both pharmacies and distribution. During the second semester of 2022, pharmacies reported a strong same-store sales growth of 6.6%, driven by the recovery in Pharma categories, capitalizing on the winter campaign. Distribution, on the other hand, already incorporated the new exclusive distribution lines in Ecuador. As such, we anticipated a slowdown in demand in our Pharma segment for the remaining of the year, which combines the higher comparison basis with lower spending capacity for basic need categories. Please turn to Page 11 to review our third quarter results for our Shopping Malls segment. Our Shopping Malls segment registered a strong top line growth of 8.6% versus the comparable quarter of last year. This growth was mainly explained by the increase in incremental GLA opened versus the comparable period of last year, with approximately 96% of GLA opened in Q3 '23 versus approximately 93% opened in Q3 '22, and by an increase in inflation-linked fixed rents. This, despite a high comparison basis of last year, which included an extraordinary income from a onetime regularization of rent payments from an entertainment tenant not billed during the COVID-19 period. Our tenants raised a same-store sale reduction of 5.6% during the third quarter. Anchor tenants continue to experience a decrease in sales. Excluding anchor tenants, same-store sales growth was flat during the quarter. Some non-anchored retail tenants experienced a slowdown in demand for textile and clothing categories, attributed to the unusual warmer winter with a lower demand for electronic categories as well as a drop in demand in nonessential categories. On the other hand, entertainment tenants, such as cinemas and restaurants showed a good performance during the quarter, recording a positive same-store sales growth. As a reminder, cinemas were still in a recovery phase in the comparable quarter of last year. Compared to Q2 '23, our occupancy rate increased to 96%, mainly due to the interest of some non-retail tenants, such as entertainment, call center and gym as well as the opening of other small tenants in different malls. Our gross margin was 66% this quarter, a decrease compared to the same period of last year, mainly explained by an increase in maintenance expenses related to the preventive works anticipated in El Nino phenomenon, and higher cleaning and security expenses from the increased food traffic in our malls. In terms of adjusted EBITDA, we reached PEN 116 million, registering an 8.8% growth versus Q3 '22 and a net rental margin of 82.4%, mainly explained by the continued fixed cost dilution. Additionally, in Q3 '22, we recognized a onetime expense of PEN 2.3 million related to a write-off of studies for projects that did not materialize. Excluding this onetime expense in Q3 '22, adjusted EBITDA margin would have been at similar levels to Q3 '23. Despite signs of a general slowdown in consumption, our malls continue to be resilient. With a high participation of anchor and defensive tenants as well as with the high predictability of revenues, given that approximately 85% of rents are fixed payments. Now please turn to Page 12. This slide summarizes store openings and same-store sales performance for each business segment. In terms of the same-store sales, we can observe a general slowdown in consumption commented before, which affected same-store sales growth. Growth in our Pharma segment additionally had a significantly higher comparison basis from last year, where same-store sales growth surpassed 6%. Please turn to Page 14 to review our consolidated net income results. InRetail registered a gain of PEN 182 million in the third quarter of 2023, a 10.2% increase compared to the same period of 2022. This increase in net income is mainly explained by the operating performance of our 3 business, resulting in additional EBITDA contribution of PEN 62 million, partially offset by a lower mark-to-market gain in our Shopping Malls segment and a higher net FX loss compared to Q3 '22. Excluding exchange rate impacts and mark-to-market from valuation of investment properties, net income for the third quarter would have reached PEN 241 million, an 18.3% growth versus the comparable quarter of last year. Now I will pass the word to Vanessa, who will discuss our CapEx, cash flow generation and financial debt.

Thank you, Marcelo. Now please turn to Page 15 to discuss our CapEx and cash flow generation. During the third quarter of 2023, we invested PEN 129 million in CapEx for our 3 business segments, of which the majority corresponds to our Food Retail segment. In this segment, CapEx was invested in the store expansion plan, including the opening of 48 Mass stores this third quarter and in scheduled maintenance in our existing stores. Additionally, CapEx this quarter was invested in the initial investments for the construction of our new distribution center for our Pharma segment. As a reminder, last year, we purchased the adjacent land bank for our Food Retail distribution center for the development of this project. This project will be inaugurated in 2025. For 2023, we remain in line with the CapEx guidance given for the year, which was to invest around PEN 800 million for our 3 business segments, expecting a pickup in CapEx during the fourth quarter. This incremental CapEx will be invested in completing the expansion plan for our Food Retail segment, which includes 1 [indiscernible] store and around 220 Mass stores for the full year 2023. Additionally, as I previously mentioned, we have initiated our investments related to our new distribution center for our Pharma segment. And during the fourth quarter, we will increase our CapEx related to that project. In terms of cash balance, we ended the third quarter with PEN 878 million of cash, below the end of last year's cash balance of PEN 952 million. Considering the PEN 121 million held in short-term liquid mutual funds for cash management purposes, which reduced our comparable cash position but are immediately available, our cash would reach PEN 999 million above the end of last year's cash balance. This reflects an improved operating cash flow generation from an increase in EBITDA, despite the USD 90 million dividend distributed in May of this year. Now please turn to Page 16 to discuss our consolidated financial debt. As of September 2023, InRetail had a consolidated net debt of PEN 6,920 million with a net debt to adjusted EBITDA ratio of 2.5x, 0.6x below the ratio in the comparable quarter of last year, achieving a reduction in total net debt of more than PEN 700 million combined with an important increase in last 12 months adjusted EBITDA. Short-term debt represents around 10% of our total debt. As we have commented before, in terms of the FX exposure of our financial debt, approximately 50% of our debt is U.S. dollar-denominated, and the other 50% of the debt is in local currency. Our entire U.S. dollar-denominated debt has been hedged through different hedging structures until maturity, which are detailed here and in our quarterly report. As of September 30, the Peruvian Soles currency closed at PEN 3.797, compared to PEN 3.633 as of June 30. Now please turn to Page 17 to review our debt by segment. Supermercados Peruanos, our Food Retail segment, ended the third quarter with a net debt of PEN 3,236 million, above the previous quarter. The incremental debt was used to finance the CapEx outlined before and temporary increases in inventory for seasonal purchases. We should expect net leverage to converge by year-end towards a similar level to end of last year. InRetail Pharma ended the third quarter with a net debt of PEN 1,978 million and the net debt to adjusted EBITDA ratio of 1.5x, in line with the previous quarter and below the end of last year. As commented before, we do expect a pickup in CapEx in the following quarters related to the construction and implementation of our new distribution center and logistics platform for our Pharma segment. However, we anticipate leverage ratios will remain relatively stable to current levels by year-end. In retail consumer, which consolidates our Food Retail and Pharma segments ended the third quarter with a net debt to adjusted EBITDA ratio of 2.1x, slightly below the previous quarter and more than half a turn below the comparable quarter of last year. Finally, InRetail Shopping Malls ended the third quarter with a net debt of PEN 1,726 million, resulting in a net debt to adjusted EBITDA ratio of 3.6x, below the previous quarter and the previous year, mainly due to a slight reduction in debt and a strong increase in EBITDA. Now I will pass the word back to Marcelo.

Thank you, Vanessa. Overall, as we have seen in our consolidated financial numbers, the third quarter of 2023 ended up being another solid quarter for InRetail, outperforming peers in the market. We are operating in a low economic growth environment, which is affecting general consumption. However, we remain confident in our ability to continue outperforming given the resilience of our business model, based on a consolidated multi-format portfolio combined with low and competitive pricing strategies, anchored on a permanent search for operating efficiencies and low costs. This covers our presentation, and now we will be glad to answer any questions you may have.

[Operator Instructions] And our first question today comes from Alonso Aramburú with BTG.

Yes. I wanted to ask about Mass and the openings. It looks like you're going to end the year with 220 stores like Vanessa mentioned, which is a little bit ahead of your guidance of around 200. I'm just wondering if you are [indiscernible] on accelerating growth a little bit more. Do you feel comfortable growing above that number, given the context of low consumption where Mass appears to be gaining some share and some traction?

Sure. I'll take the question. This is Marcelo. Thank you, Alonso, for the question. It's correct. We've accelerated a little bit the openings for this year. The prior guidance we gave was around 200, and we expect this year to close with about 220. And the plan going forward is to accelerate more the openings. So the performance of the new openings have been actually better than the ones before. And to give you an idea, is stores that are already mature, meaning more than 3 years of being opened are now reaching EBITDA margins of about 4.5%, 5%. And so for the next year, we expect to increase openings to around 300 locations.

Great. And can you -- on a consolidated basis, is Mass at breakeven right now with all the new openings?

Yes. So if you look at the complete P&L of Mass of the format, including kind of some administrative expenses, which are dedicated to Mass, it's already breakeven. So we've got margins of about 2% around that. Yes.

And our next question today comes from Nicolas Larrain with JPMorgan.

Mine is also in the Food Retail side, you mentioned, of course, that more value-oriented formats have been gaining share. And similar to what Alonso mentioned into Mass, I wanted to understand if you've seen any changes in the mix in macro. I remember that from the moment of the acquisition, if I'm not mistaken, the B2B component was around 65% of sales. I just was wondering if it is rebalanced more as also final consumers are going more into Cash&Carry to find more attractive pricing?

Sure. Thank you for the question. So you're correct, before COVID, the share of the B2B was at around 65% or so. Of course, during COVID, given the restriction and whatnot, the component of kind of the B2C increased given that certain establishments were not allowed to open. However, if you look at the performance, I don't know, from 2021, 2022 and now, the mix hasn't changed that much. It's roughly 60%, 40% still, 60% B2B and 40% the B2B consumer, depending on the quarter, you might have, I don't know, 62%, 38%, but roughly, on average, is around 60%, 40%, and that has been pretty stable over the past couple of years.

And do you think it makes sense maybe to push more of the B2C? Or do you think that, that will be covered by the Mass at the end of the day?

I think you touched it. I think that B2C should be covered with the expansion of the Mass. I think the -- we will continue with the focus in macro on B2B. And if you look at the macro stores, how they're built, the value proposition, the SKUs and everything that we have there, it's tailored to the B2B. And I think at least in [indiscernible] term, that's what we're going to keep doing and having Mass to compete and gain the B2C share.

[Operator Instructions] At this time, we will take the webcast questions. Please proceed.

First question is, can you comment a little bit more on the potential impact of phenomenon El Nino and the prevention plans you are executing?

Yes, sure. Thank you for the question again. So the main impact that we're seeing in -- or we're expecting in phenomenon -- with El Nino phenomenon, again, everything that we mentioned during the call is assuming the more likely scenario, which is a moderate Nino phenomenon. But the main complications could come within the supply chain, correct. In transportation routes, shortage of certain categories and specific SKUs, depending on the severity of the weather, we could have a little bit of a reduced food traffic. And of course, an overall impact on consumption in the country. What preventive measures we're taking right now, and we mentioned some on the call, basically is ensuring inventory in critical SKUs. We have the experience in -- from 2017 and from the weather impact we had earlier this year to be able to predict which are the most affected categories and the companies are focusing in ensuring that we have the inventory that we need prior to the impact of El Nino. And second, we've made some investments in infrastructure and maintenance, and we're working closely with employee base to ensure their safety and to ensure that they are trained for a potential impact like that. And as I said before, we have operated with these similar and favorable conditions before, the process, the rainy season that we had at the beginning of the year and even El Nino phenomenon in 2017, and we managed to have or to avoid major impacts in the operation. Remember that we have a unique logistic networks nationwide. We have an everyday low price strategy with -- in the context of El Nino with high inflation, is favorable for us. And we're focused on basic needs as well. To give you a sense in terms of the investment that we're making, as I mentioned in the call in Q3, for the 3 segments, we invested about PEN 2.4 million in OpEx and about PEN 0.5 million in CapEx. For the fourth quarter of the year, we expect about PEN 4 million in OpEx of expenses related to that, and about PEN 5.7 million, PEN 6 million in CapEx again related to the reinforcement of infrastructure.

Next question is, how are you seeing trends in consumption recently?

So trends in consumption, pretty similar to the ones that we mentioned in the call in both October and November, we're seeing pretty similar trends. There is -- even though -- and as Juan Carlos mentioned at the beginning of the call, inflation is tapering off. There are certain categories like food and beverages, where inflation still remains a little bit high. Again, remember that the inflation numbers reported by the authorities are a reflection of the total market. And specifically in the case of Food Retail, depending on which provider you look, around 70%, 75% of the market, it's still traditional trade. And so most of the price increase is a reflection of price movements in the traditional trade. But we're going through kind of an environment of persistent inflation and low growth which, again, it's been translated into lower purchasing power for many consumers. And so what we're seeing is a habit of consumers looking for more economical alternatives and solutions. And essentially, they're promoting habits and formats focused on price. The second is that -- and this is a tendency that we saw throughout the year, and it's been a little bit more aggressive this third quarter, which is consumers increasing frequency into the stores and reducing the average ticket size, right? And then that's transversal across the different formats. And that's why proximity has become another important factor in consumer habits. Having said that, and all in all, we are confident with the business model that we have, which is focused on essential categories. As I said, every day low price anchored on an everyday low cost mentality in order to be able to transfer those efficiencies and cost reductions into a more aggressive pricing strategy, as well as a multiformat solution for distinct purchase missions within -- and within those formats, we have distinct price formats, which are gaining traction, in particular, over the last few months.

At this time, I'm showing no further questions. I would like to turn the call over to the operator.

There appears to be no further audio questions at this time. I would like to turn the floor back over to Mr. Vallejo for any closing remarks.

Thank you, Roco. As a final remark, I would like to reinforce that this was a tougher quarter for the Peruvian economy in general. With a more pronounced slowdown in consumption, InRetail once again show resiliency and strength in the business volume, being the leader Peruvian multi-format retailer, with an indisputable leadership position. We are currently operating in a challenging local and global setting, combined with a likely moderate El Nino phenomenon scenario for 2024. We will continue to execute our strategy, focused on low prices and multi-format solutions, which are permanent search of operating efficiency. Thank you all for participating in our third quarter earnings call. If you have any follow-up questions, please do not hesitate to contact any of us. With this, we are finalizing the call.

Thank you. This concludes today's conference call. You may now disconnect your lines, and have a wonderful day.