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

Good morning, everyone, and welcome to InRetail Peru's Third Quarter 2024 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 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 received a copy of the earnings report, please visit www.inretail.pe on the Investors section. And there is also a webcast presentation to accompany the 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 and 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 floor over to Mr. Juan Carlos Vallejo, Chief Executive Officer, of InRetail Peru for his opening remarks. Mr. Vallejo, you may begin.

Thank you, Jamie. Good morning, everyone. I am Juan Blanco Vallejo. Thank you for joining InRetail third quarter earnings call. Today, we will discuss the main highlights of Indigo's third quarter results for 2024. Joining me today are Marcelo Ramos, our Chief Financial Officer; and Vanessa Danino, our Investor Relations Officer. I will start with a brief executive summary, and then Marcelo and Vanessa will walk you through our earnings presentation. During this third quarter, the Peruvian economy experienced a mild recovery in economic growth with inflation and the control, interest rate gradually reducing and the former private label market showing early signs of improvement. As you know, the country faced several economic shocks in 2023 and in the first semester of 2024, from extreme weather events, social protests and a declined business confidence, but improvement in economic conditions and signs of slow recovery across various sectors as already visible. As mentioned in our previous earnings call, since late June, construction markets have slowly recovered, although somewhat explained by the extraordinary income from withdrawal of pension funds contribution and compensation time accounts. Households are still prioritizing their spending, -- searching for value for money at tenants. As anticipated, the third quarter ended up being a good quarter for InRetail. We continue to show strength and resiliency, posting a sound growth in revenues and adjusted EBITDA of 5.8% and 6%, respectively. Our Food Retail segment posted a strong growth in revenues of 7.4%. Growth was mainly driven by Mass and by Plaza Vea, favored by the recovery in nonfood categories given the low comparison basis from last year and extraordinary withdrawal mentioned before. As foreseen in our prior earnings call, our Pharma segment are [indiscernible] recording in this quarter. With growth in both Pharma and non-pharma categories from a strong winter campaign. Overall, revenues and adjusted EBITDA increased 4.7% and 8.3%, respectively. Finally, our Shopping Malls segment had a stable third quarter with revenues and adjusted EBITDA growth of 3% and 7.1%, respectively. In terms of guidance for InRetail, we remain in line with the guidance given at the beginning of the year of mid-single-digit growth in both, consolidated revenues and consolidated adjusted EBITDA. Finally, I would also like to highlight the opportunistic acquisition of [ ERB ] a small grocery retailer focused on food categories with 33 small location in Chile. This is a very small transaction that we see as a low-risk opportunity to explore and learn about the Chilean food retail market. With that, let me pass the word to Marcelo and as always, we look forward to answering your questions by the end of the 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 results for 2024. Now please turn to Page 4 in our earnings presentation to start reviewing our consolidated financial results. In Q3 '24, InRetail reported a sound growth in revenues of 5.8%. This growth results from strong growth in our Food Retail segment and expected recovery in our Pharma segment and a stable growth in our Shopping Malls segment. As anticipated in our previous call, we saw early signs of a slow recovery in consumption since June, which continued towards Q3 '24, partially explained by the start of the winter season and by the increasing disposable income from pension funds and compensation time account withdrawal, favoring certain categories across segments. In terms of adjusted EBITDA, we recorded a growth of 6% compared to the same period of last year, mainly explained by the growth in revenues and by the improvement in gross margin in spite of the incremental expenses from the new stores opened in our Food, Retail and Pharma segments. As it relates to net income, we registered a 51.3% increase in the quarter, given the improvement in performance and an important positive exchange rate effect. This quarter, we recorded a net FX income compared to net FX loss registered in Q3 '23. During Q3 24, the Peruvian sol appreciated around 3% while during Q3 '23, it depreciated around 4.5%. These movements in effect generated a noncash impact in our P&L and are mainly related to our dollar-denominated store leases registered under our balance sheet under IFRS 16. In summary, this was another good quarter for InRetail, evidencing the expected recovery mentioned in our prior call. As such, we still remain in line with the guidance given at the beginning of the year, expecting a mid-single-digit growth in consolidated revenues and in consolidated adjusted EBITDA for the full year 2024. Now please turn to Page 5 to review financial and operational snapshot of our consolidated figures. In terms of contribution by segment, this has remained similar to recent quarters. Our Food Retail segment continues to gain participation in revenues relative to the last 12 months figures in Q3 '23. On a consolidated level, during the last 12 months InRetail surpassed PEN 21 billion in revenues and PEN 2.9 billion in adjusted EBITDA. Our EBITDA margin improved compared to Q3 '23 due to the higher margins in our Pharma and Shopping Malls segments. Now please turn to Page 7. Our Food Retail and Shopping Malls segments were ranked #2 and #7, respectively, in the Great Place to Work sustainable management ranking, emphasizing our dedication and executing responsible ESG practices. Furthermore, our Pharma and Food Retail segments obtained their third Carbon Footprint star reducing our environmental impact. On the social front, thanks to our flagship program “Bueno por Dentro we donated more than 4 million food donation during the quarter, equivalent to PEN 17 million and benefiting more than 90,000 people on a weekly basis. We also conducted several initiatives to promote good health and well-being. This quarter, we carried out health campaigns in our malls, impacting more than 4,000 people Additionally, we donated medicines for more than PEN 500,000 and trained more than 120 future pharmacists in our educational program for [ Macondo well ]. Through our initiatives such as Peru Pasion and Placita del Emprendimiento, we remain committed to supporting SMEs, promoting economic growth and encouraging entrepreneurship within our communities. Altogether, we generated more than PEN 6 million in SME sales in our physical and digital channels. On the environmental front, and alignment with our environmental and energy efficiency goals, we continue working to reduce our energy consumption, and we managed to save almost PEN 1 million in our food vehicle stores by implementing best practices. Additionally, we recycled and reused over 3,000 tons of waste and more than 22 tons of organic wastes were recovered through our 8 Plaza Vea stores, which were later transforming to compost and reused in the benefit of the community. We are also promoting the sales of ecofriendly products through our pharmacies, generating PEN 6 million in sales of these products. Finally, during this third quarter, we released our annual sustainability report with additional valuable information about the sustainability strategy and projects, which is available on our website. Now we will go over our operating results by segment. For that, please turn to Page 9 to review our third quarter results for our Food Retail segment. Our Food Retail segment registered a strong top line growth of 7.4% in Q3 '24 with a same-store sales growth of 2.8% showing an important recovery and improvement versus the second quarter. Our nonfood categories registered a double-digit same-store sales growth, mainly in electronics and home-related categories given the low comparison basis from last year and the incremental disposable income from the pension funds and time deposit withdrawals. On the other hand, our Food categories experienced a positive low same-store sales growth this quarter due to the food deflation situation in the country, affecting particularly dry food categories and to the reduced spending capacity of consumers who are still prioritizing value for money alternatives. In terms of performance by format, all of our formats posted a positive same-store sales growth in the quarter. Same-store sales growth was driven by our Mass format, which continues to be favored by an increased preference of consumers to satisfy purchases in price-focused proximity channels. And also by our Plaza Vea format, given the low comparison basis in nonfood categories, together with incremental liquidity from the extraordinary withdrawals already mentioned. Revenues were also benefited by the contribution of the new stores opened in the last 12 months, which added 67,000 square meters of additional sales area. In Q3 '24, we opened 75 net Mass stores, mostly outside of Lima. Year-to-date, we have opened 257 stores and closed 15. By year-end, we expect to open approximately 350 new gross stores, slightly above our initial guidance. Our gross profit increased 8.8%, and with a gross margin of 23.8%, above Q3 '23 from a lower shrinkage compensated the increase in nonfood categories, namely Electronics, which have lower margins than food categories. Additionally, Q3 '23 was a particularly lower comparison basis in terms of gross margin, given an extraordinary accounting reclassification related to a selected sales tax, which was partially reclassified to gross margin in that quarter. Excluding this effect, gross margin would have still slightly increased compared to last year. In terms of adjusted EBITDA, Food Retail's adjusted EBITDA grew 2.6% in Q3 '24, with a decline in margin of 44 basis points. The decrease in margin is mainly explained by the increase in operational expenses from the new stores opened that are in the process of ramping up and by the high comparison basis in Q3 '23, which included extraordinary income and provisions reversals from previous periods. Excluding these onetime effects in the base, adjusted EBITDA margin would have remained relatively flat and adjusted EBITDA would have grown in line with revenues. Our omnichannel food retail value proposition continues to progress. In terms of our digital sales, we recorded a double-digit growth, combining a strong growth in food categories with a recovery in nonfood categories, given the incremental demand in electronics. Our growth in digital food category sales continues to be levered in our last mile platforms, which as of September represented over 55% of our food sales in this channel. As of September, our digital sales represented over 6% of total sales in our Formats with an active digital channel. Overall, as previously commented, our Food Retail segment registered a strong top line growth this quarter, showing slightly better trends than those observed during the first semester of the year. Although this improvement is partially explained by the extraordinary disposal income I mentioned before, early signs of low and cautious recovery in overall consumption is being evidenced during the second semester. Lastly, as disclosed to the local stock market regulator, on October 23 InRetail announced the acquisition of [ ERB], a small grocery retailer focused on food categories with 33 small stores in Chile, averaging 200 square meters of sales area. This is clearly an opportunistic purchase of a small operation that we see as a low-cost opportunity for us to explore and learn about a market of interest to us, with suppliers, customers and overall dynamics. Given confidentiality undertakings and the materiality of the transaction in terms of size for InRetail, we will not be disclosing the consideration paid for any specifics relating to the asset at this stage. The amount paid is nonmaterial vis-a-vis our business, and it is a transaction similar in size and profile to some of the exploratory transactions that we did in the recent past. Now please turn to Page 10 to review our third quarter results for our Pharma segment. Our Pharma segment posted an increase in revenues of 4.7% this third quarter, evidenced in the recovery anticipated in our previous earnings call. Same-store sales for the Pharmacies unit increased 2.1%, with an increase in Pharma and in Non-pharma categories. Pharma categories benefited from a colder winter season, driving demand for cold, flu and respiratory related categories among others. Non-pharma categories also posted a positive same-store sales growth during the quarter from an increase in consumer categories, 0in particular, Beauty Care and Personal Care, reflecting the successful execution of our category diversification and multi-format strategy. However, nonpharma same-store sales was partially affected by a decrease in more discretional categories, such as herbal supplements and baby care products. Our distribution unit posted a positive growth in revenues from a low comparison basis in the quarter and from the continued increase in demand from public institutions in Peru. In the last 12 months, we opened 113 net new pharmacies. And during the third quarter of 2024, we opened 26 net new pharmacies. Year-to-date, we opened 100 pharmacies and closed 10. As outlined in prior calls, until 2023, our Pharmacies unit focused on consolidating its scattering diversification and multi-format strategy through the store conversions outlined before. Since 2024, we have resumed our store openings, catching up with an existing pipeline of prior years, focusing in zones with suboptimal presence. In terms of gross margin, we raised our gross margin for 33.1%, above Q3 '23, primarily from a change in sales mix towards higher-margin products. In addition to lower shrinkage levels compared to last year, gross margin was affected by a decline in margins in distribution compared to Q3 '23 as a result of a change in channel mix towards public institutions. Our Pharma segment recorded an adjusted EBITDA margin of 17.3% higher than Q3 '23. The increase in margin is primarily explained by the improvement in gross margin outlined before and by fixed cost dilution, despite the increase in operational expenses from the new pharmacies opened that are in process of still ramping up. In terms of our pharma digital sales, we continue to record a strong growth of more than 20% this quarter combining growth in our pharma and non-pharma categories. As of September, our total non-physical sales represented approximately 5% of total sales in pharmacies. Please turn to Page 11 to review our third quarter results for our Shopping Malls segment. Our Shopping Malls segment registered a growth in revenues of 3% versus Q3 '23. This growth was mainly explained by the mid-single-digit growth in rental income due to the increase in both contractual fixed rents and variable rents as well as to the improvement in occupancy levels. Revenues were also benefited by the increase in publicity income. However, they were partially offset by lower growth in income from management services, which represents close to 30% of total income from tenants. This quarter, we reduced certain operating costs within our malls, resulting in lower reimbursements from tenants associated with such costs, which are registered as part of our revenues. Our tenants registered a same-store sales growth of 8.6% during the third quarter, evidencing a strong recovery across most tenants, both anchor and non-anchor. Anchor tenant sales growth was driven by department stores, home improvement and supermarkets, given the lower comparison basis from last year, the availability of pension funds and compensation of time account withdrawals and the rough winter season. On the other hand, cinemas continue to be affected by the lack of blockbuster content. Our gross margin was 68.1% this quarter, above Q3 '23, mainly explained by a lower comparison basis that included higher maintenance expenses related to preventive works, anticipated El Nino phenomenon and higher cleaning and security expenses. In terms of adjusted EBITDA, we reached PEN 125 million with a higher net rental margin of 83.1%. The increase in net rental margin is mainly explained by the higher gross margin outlined before and by the lower provisions and higher recoveries from accounts receivables, offset by higher personnel expenses. Now please turn to Page 12. Here, we summarize our openings and same-store sales performance for each business segment. This slide evidences what appears to be 2 different halves of the year; a significantly challenging first semester with a progressive recovery in demand in Q3 24. As outlined before, this low recovery is partially explained by the increased disposable income and from the strong winter campaign. Please turn to Page 14 to review our consolidated net income results. EBITDA registered a net income of PEN 276 million in Q3 '24, a 51.3% increase compared to Q3 '23. As mentioned before, the increase in net income is explained by the improvement in performance in all of our segments, as well as by a net FX gain of PEN 138 million compared to last year. This is a noncash accounting effect mainly related to our dollar-denominated store leases raised during our balance sheet and IFRS 16. Excluding this impact from the exchange rate and from the mark-to-market investment properties, net income for the third quarter would have reached PEN 252 million a 4.4% growth versus Q3 '23, more in line with improvement in operating performance. 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. During the third quarter of 2024, we invested PEN 228 million in CapEx for our 3 business segments. CapEx was mainly invested in the expansion of our physical network and in improving our logistics platform. In our Food Retail segment, CapEx was invested in the opening of 75 net new Mass stores, this third quarter in scheduled maintenance of existing stores and in the implementation of our new micro store in Lima expected to open later this year. In our Pharma segment, CapEx was invested in the construction of our new distribution center as well as in the opening of 26 net new pharmacies and in scheduled maintenance of existing stores. Finally, in our shopping mall segment, CapEx this quarter was invested in our expansion projects in existing malls and in scheduled maintenance and planned refurbishments in selected malls. In terms of cash balance, we ended the third quarter with PEN 1,411 million of cash, considering the PEN 363 million held in short-term liquid mutual funds for cash management purposes; higher than the end of last year's cash balance of PEN 1,142 million. The short-term liquid mutual funds are mainly held by our shopping mall segment. This reflects our focus on improving cash flow generation through an increase in EBITDA as well as through proactive working capital management among other initiatives, despite the higher growth CapEx investments and the $19 million dividend distributed in May of this year. Now please turn to Page 16 to discuss our consolidated financial debt. As of September 2024, InRetail had a consolidated net debt of PEN 6,246 million with a net debt to adjusted EBITDA ratio of 2.2x, 0.3x below the comparable quarter of last year. This is mainly explained by scheduled amortizations related to our medium-term loans and an improved cash flow generation, mainly in our Food Retail and Shopping Malls segments, and to a lesser extent, to the depreciation of the local currency which affects our U.S. dollar-denominated bonds related to our international bond issuances. However, as you know, our exposure has been covered through different hedging structures until maturity, which are detailed here and in our quarterly reports. 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 2,932 million, 0.4x below the comparable quarter of last year. Total net debt decreased by approximately PEN 300 million compared to Q3 '23, explained by scheduled amortizations related to our medium-term loans, and to an increase in cash, which incorporates improvements in working capital, some of which are related to extraordinary anticipated payments of pending deposits at the end of this quarter that temporarily increased cash above usual levels. InRetail Pharma ended the third quarter with a net debt of PEN 1,845 million and the net debt to adjusted EBITDA ratio of 1.4x, slightly below Q3 '23, even with the pickup in CapEx related to the construction of our new distribution center. Total net debt decreased by approximately PEN 130 million compared to Q3 '23. During Q3 '24, we executed a liability management strategy to refinance short-term debt associated to our pharma [ solis ]bond issued in 2018, which was set to mature in 2025 by securing a new 5-year medium-term bank loan, enhancing our liquidity position and extending our maturity profile. InRetail consumer, which consolidates our Food Retail and Pharma segments ended the third quarter with a net debt to adjusted EBITDA ratio of 1.9x. Finally, InRetail Shopping Malls ended the third quarter with a net debt of PEN 1,402 million with a solid cash and cash equivalent position of PEN 637 million resulting in a net debt to adjusted EBITDA ratio of 2.7x, below the previous quarter and almost one turn below Q3 '23, mainly explained by a strong increase in adjusted EBITDA, a reduction in debt from the scheduled debt amortization and an increase in cash and cash equivalents. This quarter, shopping malls increased its short-term debt position due to the reclassification of its medium-term loan to short-term debt since it matures in August 2025. The Shopping malls have a healthy cash position, and this is the only medium term loan facility outstanding. Similar to our Food and Pharma segment, there is plenty of interest from creditors and banks to lend money to shopping malls. Overall, for 2024, we expect to conserve a healthy consolidated leverage ratio while maintaining a diligent investment plan. As such, we anticipate a slight deleveraging of a retail net leverage ratio by year-end, combining a moderate deleveraging in our Shopping Malls segment with a stable leverage in a retail consumer in spite of the acceleration in our expansion plan and of our investments in improving our logistics platform. We continue to execute a strategy focused on improving the maturity and liquidity profile of our capital structure and taking advantage of a more constructive financing environment, we are currently exploring different alternatives to refinance debt positions in our business segments. With that, I will pass the word back to Marcelo.

Thank you, Vanessa. Overall, as you have seen in our consolidated financial numbers, Q3 '24 was a good quarter for InRetail. As anticipated in our previous call, we experienced progressive signs of recovery in consumption starting in late June, which continued into the following months in Q3 2024. Our results were aligned with expectations, showing some recovery compared to the previous quarter, giving us optimism on the months to come. During the quarter, our businesses continued to perform. As such, we feel confident in our strategy and our ability to continue executing going forward as economic growth and consumption resumes. 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 Nicolas Larrain from JPMorgan.

I have 2 actually. The first one is on short-term trends. You mentioned, of course, that after a tough first half of the year. Of course, we saw an improving third quarter. Curious to see how you're seeing the first month into the fourth quarter? And also, if you could comment a bit on how was the trend throughout the quarter, if you saw improving trends from the beginning towards the end? And again, how are you seeing early trends into the fourth quarter? And my second question has to do with Food Retail. You commented on the strong expansion of Mass. Any idea or any new views into how many stores we should expect into next year?

Sure, Nicolas. Thank you for the question. So in terms of the trends for the fourth quarter, we're seeing pretty similar positive trends to be honest. October, we closed Food with about 2.6% same-store sales, Pharma, pretty much the same level. And November is actually slightly better than October. So I think it further evidences the positive trend that we started seeing in the third quarter. And again, it gives us hope that the trends will remain for the remaining of the year. So all in all, pretty similar positive trends in October with slightly better trends in November. As it relates to Food Retail and the question on the expansion. So for this year, as we mentioned in the call, we slightly improved the original guidance. We're going to end up opening roughly 350 locations. I would say that for 2025 and onwards, we're still keeping the 300 locations estimate that we had, to be honest. And that should be kind of the run rate for the medium term so far as of now.

Our next question comes from Alonso Aramburú from BTG.

I wanted to ask about expectations of openings of the other formats, Plaza Vea and Macro. I believe you were building some of those stores. What should we expect in the next few quarters and next year? And also, if you can comment if you've seen any change in the competitive dynamics in Peru. There's some news about new discount stores opening, whether you've seen some of that affecting the competitive dynamics?

Sure. Thank you, Alonso, for the questions. So on the first one on Plaza Vea and Macro, we're still giving the same kind of medium-term guidance. And we expect to open, as we mentioned to Nicolas, 300 hard discounts and roughly on average about 2 big boxes. And those should be hopefully skewed more towards Macro. As Vanessa mentioned in the call, we moved faster on the opening of the next Macro that as of the last quarter, we expected to open in Q1 '25, we've moved forward to opening in Q4 '24. And we expect to open next year a couple of the big boxes as well. And again, that should be the run rate on the medium term as well for both the Plaza Vea and Macro stores. So in total, Plaza Vea and Macro, on average, 2 stores, more skewed towards Macro. And on the second question on the competitive dynamics for the discounters, So, so far, we haven't seen, honestly, a major impact on that. And honestly, we don't expect that to have a material impact on the growth opportunities for Mass. As was mentioned in different forums and situations before, the wide space opportunity, we believe, is pretty big. And there is space for more than one player. So we feel comfortable still even with the noise on the competition that's starting so far. That wouldn't have a material impact on our operation in hard discount in Peru.

[Operator Instructions]. And we do have a follow-up question from Nicolas Larrain from JPMorgan.

I wanted to get maybe early thoughts or whatever you can share on this opportunity in Chile, right? These 30 stores, I understand as you mentioned, this is as an exploratory, let's say, investment. Any -- like anything you can share in any call or any plans would be super helpful.

Thank you, Nicolas, for the question. So as I mentioned Nicolas, I mean, given confidentiality undertakings and the size of the transaction, we're not going to disclose the -- we can't disclose the consideration paid or many specifics on the asset. But remember, it's a grocery retailer focused on Food categories with 33 locations, approximately 200 square meters in sales area on average. In terms of revenues, we estimate this year, if you make something short of $20 million, it's the lowest cost opportunity for us to explore and learn about this market that we've been looking for some time. Chile is one of the different markets that we have explored outside of Peru as part of our expansion plans. We're taking advantage of this purchase to kind of explore the market, which is of interest to us, and through the acquisition, try to extract important learnings both from -- for a potential gradual internationalization of InRetail or for our current business in Peru as well. Currently, to be honest, we don't have in place plans for material and significant investments related to this acquisition in the short term. I think this will be constructed and defined as we keep learning from the market.

Thank you. Ladies and gentlemen, at this time, we'll turn the floor over for webcast questions.

The first question is, how will you deal with the short-term debt?

Okay. Perfect. I can take that question. So in terms of the short-term debt, first of all, as a reminder, the temporary increase that we see in the short-term debt relates to basically medium-term loans, which have entered into the short-term part, which mature next year and to a less extent, to additional working capital lines despite our strong growth and increased CapEx reinvestments. So particularly, as I commented as well, we have already executed part of the liability management of our short-term debt, specifically during this third quarter, we already refinanced our Pharma [ solis ]bonds for around PEN 380 million, which were set to mature next year and have secured a 5-year medium-term bank loan instead. So already, when we see September, we already see the decrease of short-term debt compared to the second quarter. This quarter, specifically, as I mentioned as well, there was a shopping mall, also a long-term debt related to the construction of Puruchuco, which came into the short-term part. But overall, it's basically medium-term debt that we are in the process of refinancing. We already are in active conversations with local banks. And overall, there is a strong appetite to refinance it, not only with local banks, but also in the capital markets. Our 3 business segments are blue-chip companies. And as you know, we are now in a more favorable interest rate environment as well. So that's basically the strategy going forward, which has already started and that we will continue to execute over the following quarters.

Next question. I wanted to know if you have spoken with Moody's about the negative outlook and the possibility of stabilizing that rating, considering your delivering trends despite the higher CapEx and openings in your segments?

Okay. I can take that question as well. So with respect to Moody's, yes, we do have constantly conversations with Moody's and the team about the negative outlook. I believe they know that we have quite a positive performance on the business operations and also acknowledge the fact that we have continued to delever as well the business despite the CapEx and -- the higher CapEx and openings. So I think operationally, they are quite positive on the business. And in terms of the short-term debt, we have been close to them in terms of updating them on our strategy and our refinancing. So very close to them and keeping them updated on our strategy. But not -- it's obviously, now it will depend on them in terms of the decision, but we haven't heard of any decision yet with respect to that outlook.

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

Ladies and gentlemen, there appear to be no further questions at this time on the audio side either. I'd like to turn the floor back over to Mr. Vallejo for closing remarks.

Thank you. Overall, as anticipated in prior calls, the third quarter, gains a recovery in the Peruvian economy. In this still challenging environment, our companies have continued to show resilience and strength. We were able to end our third quarter with overall good results, and we are confident in our ability to continue performing, thanks to our multi-format and diversified portfolio and our everyday low price strategy across our main businesses. With this, we are finalizing the third quarter earnings call. If you have any follow-up questions, please do not hesitate to contact any of us. Thank you all for your participation.

And ladies and gentlemen, with that, we'll conclude today's presentation. We do thank you for joining. You may now disconnect your lines.