InRetail Perú Corp. ($INRETC1)

Good morning, and welcome to InRetail Peru's First Quarter 2026 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. Andrea Fabbri, Investor Relations Officer. They will be discussing the quarterly report distributed by the company yesterday, May 11. If you have not yet received a copy of the earnings report, please visit www.inretail.pe in the Investors section, where 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, 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 Peru for his opening remarks. Mr. Vallejo, please go ahead, sir.

Thank you, Sarah. Good morning, everyone. I'm Juan Carlos Vallejo. Thank you for joining InRetail's first quarter earnings call. Today, we will discuss the key highlights of our results for the first quarter of 2026. Joining me are Marcelo Ramos, our Chief Financial Officer; and Andrea Fabbri, our Investor Relations Officer. I will begin with a brief executive summary, and then Marcelo will walk you through our detailed earnings presentation. During the first quarter of 2026, the Peruvian economy demonstrated strong performance. We saw significant momentum in private consumption, an increase in consumer credit, and rising formal employment, all while inflation remained under control. Towards the end of the quarter, a few headwinds emerged that slightly tempered this strong start. This includes the rupture of the TGP gas pipeline, renewed uncertainty regarding the severity of the El Nino phenomenon, ongoing geopolitical tensions and local political uncertainty. Overall, however, general economic conditions during the quarter were markedly more favorable than those we faced last year. InRetail successfully capitalized on this positive momentum with record revenue growth across all segments, further outpacing the competition and strengthening our leadership position in the market. We move forward with determination in executing our strategic priorities. This includes advancing our organic expansion projects, reinforcing the value proposition across our formats and continuing the transformation of our logistics operations. Turning to our financial results. Consolidated revenue for Q1 2026 increased 10.2% year-over-year, while consolidated adjusted EBITDA reached PEN 785 million, representing a growth of 22.2%. Food Retail posted a robust revenue growth of 13.1% primarily driven by our hard discount and cash and carry format. Adjusted EBITDA for the segment reached PEN 299 million, a 30.7% increase. Pharma delivered a solid revenue growth of 6.2%, underpinned by a strong performance in our pharmacy unit, resulting in a 12.3% increase in adjusted EBITDA. Meanwhile, shopping malls saw adjusted EBITDA growth of 41.8%, largely due to a low comparison base from the previous year. I would also like to highlight a few subsequent events. First, in early April, InRetail and IFS completed the acquisition of InFinance XP, formerly Financiera Oh!, for a purchase price of $130 million. Through this 50-50 joint venture, we are taking an important step forward by adopting a proven global model, the synergy between retail and consumer finance. Second, for the fifth consecutive year, InRetail has been included in the Dow Jones Sustainability Index, MILA Pacific. This is a testament to our unwavering commitment to ESG and sustainable growth. On a final note, at our shareholders' meeting last Friday, our share repurchase program was approved for an amount of up to $100 million. We are currently finalizing the execution details and will provide updates in due course. With that, I will hand the floor over to Marcelo. And as always, we look forward to answering your questions at the end of the presentation.

Thank you, Juan Carlos. Good morning, everyone. Thank you for joining us on this call. Today, we will review the key highlights of InRetail's first quarter results for 2026. Now please turn to Page 4 in our earnings presentation to begin reviewing our consolidated financial results. As Juan Carlos mentioned, we observed stronger consumption dynamics across sectors this quarter, which benefited many market participants simultaneously. This positive momentum was partially driven by the incremental liquidity provided at the latest round of pension fund withdrawals. InRetail was able to capitalize on this favorable context, growing across all three segments, further outpacing the competition and strengthening our leadership position. The company achieved a 10.2% growth in consolidated revenues, driven by a double-digit growth in food retail and a solid growth in pharma and shopping malls. In terms of adjusted EBITDA, we recorded a strong double-digit growth of 22.2% compared to Q1 '25. This performance was driven by revenue growth, gross margin improvement and dilution of fixed costs. Additionally, it is important to recall the low base of comparison in Q1 '25, which was impacted by extraordinary events related to the incident at Real Plaza Trujillo Mall, including the temporary closure of multiple establishments and incremental operating expenses. Overall, as we have seen in our consolidated figures, Q1 '26 was a strong quarter for retail. We leveraged this positive environment to advance our key strategic priorities and further solidify our market leadership. Please turn to Page 5 to review our consolidated net income results. InRetail registered a net income of PEN 182 million in Q1 '26, a slight decrease compared to Q1 '25. The decrease in net income is mainly due to a net FX loss in Q1 '26 compared to a net FX gain in the prior year period. As you know, during Q1 '26, the Peruvian sol depreciated to PEN 3.495 as of March 31. This unfavorable movement created noncash P&L impact stemming from our dollar-denominated lease liabilities on the balance sheet. All in all, the unfavorable FX impact offset the improvement in adjusted EBITDA and the mark-to-market gain from valuation of investment properties. Excluding FX and mark-to-market effects, net income would have increased by 40.8% in Q1 '26. Now please turn to Page 6 to discuss our cash flow breakdown. We ended the first quarter with PEN 1.9 billion in cash, in line with our year-end balance. Historically, operating cash flow generation in the first half of the year is lower than in the second half due to seasonality. This is explained by higher working capital requirements, particularly in food retail for store restocking and payments to suppliers. Regarding CapEx, we invested PEN 138 million across our three business segments during the quarter. This was primarily directed towards expansion projects, including the opening of new locations and format renovations. Specifically, we opened 41 hard discount stores and 22 pharmacies on a gross basis, while also renovating 196 hard discount stores with an improved value proposition. CapEx was also allocated to schedule network maintenance and the continued improvement of our logistics platform, including residual investments for our new pharma distribution center and our hard discount distribution center. Finally, CapEx was lower year-over-year due to the high base of comparison in Q1 '25, which included major investments in the pharma distribution center and selected land bank purchases. Now please turn to Page 7 to discuss our consolidated financial debt. We ended the first quarter with a consolidated net leverage ratio of 1.8x and 0.3x reduction compared to Q1 '25. This improvement was driven by strong growth in adjusted EBITDA and our higher cash balance. Inretail Consumer reported a net leverage ratio of 1.4x, remaining relatively stable compared to last quarter and landing below Q1 '25 levels. This performance was driven by adjusted EBITDA growth alongside a reduction in total debt across both the Food Retail and Pharma segments. Meanwhile InRetail shopping malls ended the period at 3.1x. This was supported by the strong adjusted EBITDA growth against a low comparison base, which helped offset the increase in total debt following the new senior note issuance last October. Both issuers maintained healthy leverage ratios, consistent with the respective credit profiles. The short-term position of our consolidated debt saw a slight temporary increase consistent with the cyclical working capital requirements mentioned earlier. Thanks to our successful capital structure strategy in 2025, our debt maturity remains healthy. The only significant maturity until 2028 is our InRetail consumer senior notes, providing us with a strong liquidity position. Now please turn to Page 8. On a consolidated basis over the last 12 months, InRetail has generated more than PEN 23 billion in revenues and PEN 3.1 billion in adjusted EBITDA with a solid EBITDA margin of 13.4%. Now let's discuss results by segment. Please turn to Page 10 for full detail. Food Retail posted a strong revenue growth of 13.1% in Q1 '26, favored by improved consumption and the low comparison base. We registered an adjusted EBITDA growth -- an adjusted same-store sales growth, sorry, of 8.9% with positive growth across all formats. Revenues in our hard discount format grew more than 30%, supported by a strong same-store sales growth of 16.6% and the contribution of 237 net stores opened in the last 12 months. The format continues to gain traction. We're working decisively to reinforce our value proposition anchored in three pillars: proximity, high quality, and low price. As part of this plan, we are renovating stores, deploying an autonomous commercial team to improve private label sourcing, simplifying operations and implementing a more independent logistics network. We believe this will strengthen our long-term competitive position even more. Our cash & carry format, on the other hand, posted a strong double-digit same-store sales growth of 13.7%, favored by the low comparison base and market momentum, which benefited HoReca and food commerce clients in particular. Management also successfully executed customer segmentation and portfolio strategies to capitalize on these tailwinds. Supermarkets, meanwhile, posted a moderate same-store sales growth, supported by significant growth in nonfood categories, particularly textiles and electronics, driven by increased disposable income. In terms of adjusted EBITDA, Food Retail grew 30.7%. This was driven by revenue growth and higher gross margins, the latter due to improvements across most formats and a reduction in shrinkage costs given the temporarily high comparison base in Q1 '25. These effects were partially offset by changes in format in the revenue mix. Adjusted EBITDA growth was also favored by the low comparison base, which included extraordinary impacts from temporary store closures and reorganization expenses in Q1 '25. These factors largely offset incremental expenses from the new store openings and logistics improvements in our hard discount format this quarter. Overall, Q1 '26 was a very strong quarter for Food Retail. Our multi-format strategy allowed us to capitalize on the positive momentum, increasing customer interactions and accessing new homes with a highly competitive pricing strategy. Now please turn to Page 11 for our Pharma segment. Pharma posted a revenue growth of 6.2%, driven by an 11.9% increase in our pharmacies unit, which more than compensated for the decline in our distribution unit as we gradually exit non-core channels in Peru. We expect this decline in B2B revenues to continue through the year given the 2025 comparison base. Our pharmacies unit delivered an adjusted same-store sales growth of 9.3%, driven by both pharma and non-pharma categories. Growth in the pharma category was notably supported by increasing demand in antidiabetics and weight control medicines. Consolidated gross margins increased to 32.6%, largely because our pharmacies unit now represents nearly 80% of the mix, higher than last year. Margins within our pharmacies unit slightly declined, while our distribution unit significantly declined its margins, mainly from a change in revenue mix in Ecuador. Pharma adjusted EBITDA grew 12.3% as revenue growth and margin improvements offset expenses from new stores and the gradual implementation of the new distribution center. We expect this implementation expenses to continue as we optimize the new facility. Please turn to Page 12 for shopping malls. Shopping malls grew 5% in revenues, mainly due to new GLA from the power center in Tarapoto and expansions in the malls of Primavera and Puruchuco. Revenues were also benefited from the low comparison base, which included the temporary closure of several malls and the voluntary 2-day closure of all of our malls following the Trujillo incident. Tenant adjusted same-store sales grew 13.9% with positive growth in all categories except cinemas. Same-store sales growth was fueled by the improvement in consumption, partially explained by the incremental liquidity provided by the latest round of pension fund withdrawals. Adjusted EBITDA for the segment grew 41.8%, primarily due to the low base in Q1 '25, which included lost income and medical, legal and other expense provisions related to the incident. Adjusted EBITDA growth was also supported by the improvement in performance in other malls. Now please turn to Page 13. We moved forward with determination in the execution of our strategic priorities. We executed our planned organic expansions with 32 net new hard discounts stores and 20 net new pharmacies opened this quarter. We also began developing our new power center in provinces expected to open by year-end. Additionally, we continue reinforcing the value proposition of our different formats to enhance customer experience. We renovated 196 hard discount stores and remodeled several pharmacies with improved layouts to further capture high-growth, low-penetrated categories. We closed this quarter with a total of 1,721 food retail locations. The vast majority of these are our hard discount formats. However, when looking at our total footprint, supermarkets and cash and carry still account for the bulk of our sales there. As a final note on our financial results, Q1 '26 was a strong quarter across all segments, supported by the favorable economic cycle in Peru as evidenced by the solid same-store sales growth. These results were also aided by the extraordinary impacts in Q1 '25 from the Trujillo incident, particularly in our shopping malls and food retail segments. This comparative effect should dissipate as the year progresses. Now to Page 15 for a summary of a subsequent event. In early April, InRetail and IFS completed the acquisition of InFinance XP for $130 million, representing a 1.19x price to book value multiple. This is a 50-50 joint venture with a co-controlled governance. As such, this investment will be booked under the equity method on our consolidated financial statements. Please turn to Page 16. With this transaction, we're taking an important step forward by adopting a proven global model, the synergy between retail and consumer finance. We've seen this work successfully in markets around the world. By integrating a solid finance offering directly into our retail ecosystem, we could unlock some key levers, sales growth, enhanced customer loyalty and increased shopping frequency. But more importantly, this strengthens our value proposition to our customers. It allows us to deliver a superior everyday value proposition, making their lives easier. We secured a strategic partnership with IFS, one of the country's leading financial institutions, partners who bring deep expertise in both consumer finance and digital banking, where we provide the retail ecosystem. By maintaining a significant 50% stake, we ensure alignment on our core objectives, driving retail sales, increasing the penetration of in finance payments methods in our establishments and building a consumer finance company that is both scalable and sustainable for the long term. This concludes our presentation, and we are happy now to answer any questions you guys might have.

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

I have two. The first one is just if we could have a couple of comments on what you've seen in the early months of the second quarter. We know that first quarter had a soft comparison base and also the withdrawal from the pension funds. Interesting to -- would be very interesting to know how you've seen in April and maybe the beginning of May. The same-store sales were, I would say, a highlight also on cash and carry. So very interesting to hear from you what you're seeing in this early second quarter. And the second one has to do with Finance XP. When do you expect for the effects of this JV to be reflected on results, not only in the equity income, but in the acceleration of same-store sales in the food retail or in the retail format as a whole?

Sure. Thank you, Nicolas, for the questions. So the first one regarding April, May, as it relates to revenues in April, we saw pretty much the same trends that you saw in the first quarter with that positive momentum continuing into the current period. In food retail, on a consolidated basis, we're seeing slight double-digit growth in top line, fueled again by hard and cash and carry, pretty similar trends, as I said. In pharma, on a consolidated basis, top line growth around 5%, which is pretty much what we saw in the first quarter as well. And again, pushed by the pharmacies unit with a continued decline as well in distribution given what we said in the quarter. With regards to May, I would say it's a little bit early to discuss May. And the reason is that the Mother's Day campaign shifted -- the date shifted compared to our base year, and that's a very important campaign as you guys know, for retail in the year. So I think we need a little bit -- a couple of more weeks to get the data more normalized. But what we're seeing so far in general is pretty similar trends to the first quarter. There were a few headwinds that Juan Carlos mentioned at the beginning of the call, basically, of course, the war, the local political uncertainty and the uncertainty around El Nino. Those things, essentially, what happens is they present potential inflationary risks related to rising oil prices, shipping costs and in the case of El Nino, potential supply chain complications. We did not see any of those effects in the first quarter. However, we did observe marginal increases. I want to recall that it's marginal increases related in transportation and other expenses started in April, which our teams are monitoring closely and working alongside the suppliers. Important to note, as you guys know, that our portfolio of categories is anchored on nondiscretionary categories, which historically, these categories have proven to be highly resilient during inflationary cycles or seasonal cycles, and we remain very confident in our ability to manage our cost structure effectively. And then regarding InFinance XP, Look, a little bit early to tell when we're going to see those impacts. What we can say is that we do see significant upside potential for us and for the asset. Remember, InFinance, as many other consumer finance companies in the country are emerging from a very challenging 2023, 2024, and a part of 2025, which makes them very well positioned for a rebound. We do see also significant upside on the asset as it relates to launching new financial products, including FX, savings, salary accounts, treasury management, which should create a more diversified business with incremental income streams. And of course, as the company starts to rebound, that's going to favor as well penetrations in our own establishment and eventually sales growth. But a little bit too early, we think that momentum could begin starting by the end of this year.

The next question comes from Alonso Aramburu with BTG Pactual.

I wanted to ask about the renovation of your Mass stores. You mentioned this reinforced value proposition. Just curious, are you doing mainly cosmetic changes? Or are these, like, bigger changes to the layout or the stores? So maybe if you can comment on that? And what are the plans for the rest of the year? Do you plan to continue remodeling a bunch of stores? And is this going to have any impact on your growth expectations in terms of number of stores?

Sure. Thank you, Alonso, for the question. So the value proposition of the drivers in Mass, the things that we're doing is a bit more than the renovations. As we said, we're going back, if you want to summarize that basis, reinforcing the four pillars, proximity, high quality and market-leading low prices, correct? So the renovations are part of a more integrated 360 plan that we're doing for the format, specifically for expansions and the renovations, as we said, we've renovated 196 stores. We're planning to renovate a total of 800 stores by year-end. And the renovations are between minor and major overhauls. We're changing layouts. We're upgrading the infrastructure as well and changing a little bit more the flow in the stores to basically simplify the stores and improve the customer experience in the stores targeted or focused on the three pillars. I said before, this is part of a bigger plan and bigger strategic plan that we're doing in Mass, which looks to optimize the assortment of the SKUs, enhance the product quality, simplify logistics and most importantly, to be honest, maintain an unrelenting obsession with cost control to drive price reductions and accelerate the [ private label ].

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

Thank you, Sara. We have some questions here from the webcast. The first one is, will the strong Q1 '26 results force you to upgrade 2026 guidance?

Thank you for the question. So as of now, we're remaining in line with the guidance we provided earlier this year of high single-digit growth in revenues and adjusted EBITDA. For Food Retail, we're expecting an estimated high single-digit growth in revenues as well with a slight operating leverage as it relates to EBITDA. Pharma, pretty similar to what you saw in the first quarter in terms of top line, mid-single-digit growth in revenues. Of course, there's going to be -- there should be a benefit this year as it relates to gross margin that has to do largely and explained by the fact that the pharmacies unit is growing more than the distribution unit, and that should be translated into adjusted EBITDA. So we're thinking mid-single-digit growth in top line with some operating leverage as it relates to adjusted EBITDA. And in the case of shopping malls, we reaffirm that we expect the company to go back in terms of adjusted EBITDA to the 2024 levels that we had before.

Thank you. We have another question from the webcast. Could you please give us more color on the new Trujillo mall that was announced in the media a couple of weeks ago? How much will be the CapEx? Have you faced difficulties in obtaining the permits from local authorities? When do you expect the mall to be operational?

Sure. Thank you for the question again. Just to provide clarity on Trujillo, as you guys know, the mall remains closed as the prosecutor's office continues the investigation. We're fully collaborating with all relevant authorities. However, because there is no current visibility regarding when the food court or the mall will be handed to us, we have reached, kind of, a strategic inflection point. While our initial intent was to open the mall with the existing structure, the ongoing delays have led us to basically accelerate a long-term strategic plan that we already have. The significant remodeling and major overhaul of the Trujillo mall was already part of our multiyear pipeline, given the current circumstances and the evolution of the market in Trujillo, which since we opened the mall many years ago, there's more competition, there's more offerings out there. We have decided to move forward with a redevelopment and a more ambitious project. Trujillo is a vital economic engine for the country. It's one of the most important cities in the country. And the goal is to build a unique gathering place that features top-tier design, significantly enhanced value proposition and a seamless urban integration. It's about creating a modern place that connects with the local community and further strengthens our competitive position in the region. I must emphasize though that this project is in very preliminary stages. The PEN 500 million figure that was announced is a very, very early estimate of potential implementation costs and the project has not been formally submitted to the authorities. [ We did ] work hand-in-hand with local officials to ensure that this project serves as a catalyst for Trujillo's economic reactivation, but still, as I said, very early stages. So definitely, we shall provide updates to you guys as the project matures, and we'll keep you posted on that.

We have another question. Could you comment on the share repurchase program that was just approved?

Sure. Thank you for the question. So the buyback program was approved in the latest shareholder meeting last Friday. And in summary, the program basically, as Juan Carlos mentioned at the beginning of the call, is a program for up to $100 million. The repurchases could be made either through InRetail and/or any of its subsidiaries. The program will remain in effect until the Board decides to terminate it or if we reach the $100 million, whatever happens first. And of course, the program is subject to the regular blackout periods that we have at InRetail. Why we did it? Look, the buyback program is a strategic component of our commitment to delivering long-term value and sustainable value to shareholders. The primary focus still remains the execution of our growth strategy, the expansion projects, capturing new growth levers and enhancing the value proposition of our different ports. We've secured the funding necessary for those strategic initiatives and hence, we've identified a compelling opportunity to invest in our own shares. We view the share buyback as an efficient tool for value distribution. At current market valuations, honestly, investing in our equity represents a very attractive use of our excess cash. It also serves as a signaling of our conviction and confidence on the company's future and growth potential.

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

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

Overall, the first quarter of 2026 was a strong start for InRetail. The Peruvian economy entered the year in a very favorable cycle. The combination of increased liquidity and a more dynamic local market provided a significant macroeconomic tailwind that benefited the entire retail sector. InRetail successfully capitalized on this momentum, further expanding our market leadership and driving growth across all segments. Despite political and climate uncertainties, our strategy remains fluid. We are focused on scaling our growth projects, sharpening our customer value proposition and increasing operational flexibility, all while maintaining rigorous financial discipline. With this, we conclude our first quarter earnings call. Thank you for your continued support and for joining us today. If you have any follow-up questions, please do not hesitate to reach out to any member of our team. Thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect.