Wal-Mart de México, S.A.B. de C.V. (WALMEX) Earnings Call Transcript & Summary

Good evening, everyone. I'm Salvador Villaseñor, responsible for Investor Relations at Walmex, and I want to thank you for joining our live Q&A session following the first quarter 2025 earnings release, which was published yesterday evening. Joining me today is Ignacio Caride, President and CEO of Walmart de México y Centroamérica; Dolores Fernández Lobbe, our CMO; and Paulo Garcia, our CFO. We will make every effort to answer as many questions as we can in the 45 minutes we have scheduled for this call. [Operator Instructions] Now we'll start right away and go to the first question.

The first question is from Mr. Alejandro Fuchs from Itaú BBA.

I have one quick one on my side, maybe for Ignacio and Dolores on Bodega. It seems that in the quarter, semester sales for Bodega increased, let's say, 1% or a little bit below 1%. I want to see how you're thinking about the growth of Bodega going forward for the rest of the year, right? It seems that macro environment is tough, but we would assume that value-oriented formats like Bodega and the soft discount should tend to outperform, right? So what are maybe you guys doing in order to incentivize a little bit of top line at Bodega? What are some of the initiatives you're working on? So maybe we can discuss a little bit how the format has been performing and what do you expect going forward?

Thank you, Alejandro. Thank you for your question. I will let Dolores give a little bit more color, but what I can tell you is we've seen a progress on Bodega along the quarter. So maybe at the beginning, a little bit slowdown in food and certain items. But as we were taking commercial actions, mainly focusing on price points and other decisions, we started seeing positive recovery and even positive traffic at the stores by the end of the quarter. So we can expect a better improvement going forward.

And maybe to complement on that is like when we saw the start of the year, this softness in consumptions, we put pretty fast, some commercial plans in place, focusing on price point and affordability for our customers. So you know that Morralla is one of our famous campaigns and then other commercial plans focusing on more investment in unit price, more investment in affordability in smaller packages to make sure we have the right value proposition for our customers. We have also seen not only that these commercial plans did work very well, but just to give you some color on the e-commerce business, the on-demand business that we have in Bodega, it's been growing high double digits in the first quarter. So it shows that all the plans that we have in place and the value proposition that we have for that customer has been accelerating the growth as the quarter went by. So good outlook for the coming months for Bodega.

I know Salvador said one question. Maybe if I can just do a quick second one, very short, if that's okay. Sorry, chava. For Paulo, in terms of working capital, we saw a little bit of a worsening this quarter. Inventory is a little bit higher, payables faster, right? I wanted to see if you could elaborate, Paulo, a little bit on what is -- when should we expect a normalization? What is driving this maybe working capital dynamic and if you expect this to normalize throughout the year? Sorry.

On the working capital, let me start and if Dolores also want to talk on inventory, happy that Dolores can build about that. So we've said in the past that we had to improve our working capital, in particular, our inventory situation. I think the softer environment and to some extent softer than to some extent people would have expected also tended to accentuate the problem. I think when you looked at accounts payable, it's mostly a reflection of the mix of our assortment. The fact that the ones that have longer payables days, so to speak, are the ones not rotating as fast as they should. It doesn't mean necessarily that I'm paying, of course, faster to the suppliers than I was doing before, Alejandro. So I think that will tend to be adjusted as we tend to rotate the inventory in a similar situation tends to link connected with the general merchandise, which, as you know, you've seen it from what we put in our cost and these durable goods are more in a softer performance at this stage. So it tends to payables. Inventory is in an area that we are focusing, addressing. We have plans in place, and we expect to address that throughout the -- continue to addressing that throughout the year.

Maybe just to complement on inventories. We are taking short-term actions and medium-term actions. As Paulo mentioned, the sales softness at the first quarter was what caused the higher days on hand in the first Q, but we can adjust purchases, and we are adjusting in the short term, but also in the medium term, as we mentioned before, we are working on processes and tools to make sure this inventory management is better every day.

Our next question is from Mr. Ben Theurer from Barclays.

Just wanted to maybe follow up a little bit on the dynamics and what you've been seeing and you flagged, obviously, the softness at Walmart Supercenters in the first quarter. So I just wanted to understand if you're doing -- if you're taking any initiatives or any steps that you have to take in order to get this back on track or if it was a sheer function of just the calendar effect that just caused the general merchandise to be a little bit softer in 1Q. So any color that you can give us as to what was happening at supercenters and how to think about the supercenter performance in 2Q and beyond?

Yes. Connected to the performance in Q1, and you are right. What we have in our Walmart Supercenters is a higher percentage of general merchandise, right? And if you compare to last year's Q1, where we had this government incentives, also increased the durable goods sales during the first quarter. So when you look at that comp versus last year's first quarter, we knew that the comp was going to be harder, right? And that is part of what we see in general merchandise and the flip of Easter that is relatively more important for the supercenter. So that is what we've seen in Q1. But as I mentioned with the other formats, too, the groceries and consumer sales are growing faster, and we expect that to improve as we go by. In Q2, we have the Hot Sale, which is a major event for general merchandise, where people usually wait to buy these kind of products. So we expect with Hot Sale in this Q2, general merchandise performance to be better than in Q1 and different comps definitely versus last year.

Okay. And then just real quick, if I remember right, the Hot Sale last year, that was like partially April, partially May, it's going to be fully in May. So there should be some benefit as to funds available from consumers, correct?

No. But Hot Sale is end of May and June. So it's going to be full in Q2. And last year was in Q2 too. So the difference is between full in May or May and June, but it's going to be full in Q2 versus last year.

The help that you might get, Ben, is the help you might get in Mexico, you know that you get the profit sharing payment. And that tends to happen throughout the month of May, and it tends to happen mostly at the end of May, not always entirely. So I think this time around, the Hot Sale, it will get the, let's say, the tailwind, so to speak, of having the PTU, the profit sharing payment to help sales during the Hot Sale, whereas in the past, last year, people got their money after the Hot Sale event in many cases.

And one more thing to add here is when economies start to slow down, people tend to be a little bit more cautious, especially on durable goods. So that typically affects a little bit more Walmart than other formats. And you can see it as well as in the marketplace. So that is -- we are more heavy on general merchandise.

Our next question is from Ms. Irma Sgarz from Goldman Sachs.

Sorry, I haven't been able to enable my camera. But I was curious to understand what you believe drove the 100 basis point decline in customer price perception? And what are you planning to do to revert this? Do you expect to require more aggressive rollbacks in prices? Or is it more a matter of investing in marketing around those campaigns to let the customers know that you effectively have a good price gap? And then maybe to some extent, it's linked to that, can you just talk a little bit about what gives you the confidence that there should be a gradual recovery in consumer demand in the coming months?

Yes. I can start with the one regarding price perception and you can talk on the consumer demand. Regarding price perception, as you just mentioned, it's a matter of different levers, not only what we invest in pricing competitiveness versus our competitors, but in private brands and communication. So what we've seen in this first quarter with this softness in the consumption, we have seen a more competitive environment with higher communication and more aggressive pricing. So we see that, that might have affected the price perception that we have in this first quarter. We have been investing the same in our price gap. We feel comfortable around the levels that we have of price gap in the market, even so above our internal targets. So we are still investing in pricing. We're still investing in our KPIs key items. And we are adapting commercial plans and communications to make sure all the investment we are doing is reflected in the price perception with our customers. So we think that is what affected the price perception in Q1, but we are confident that, that with everything that we are doing is going to be reverted in the future.

Yes. Just on the macro. First of all, Irma, just for me to repeat what we've said before in the past. So I think you first need to look at the general fact that we have good visibility of the transition or the phasing effect of the government subsidies, the Easter impact, the leap year. And we had expected that and we gave a heads up on that one. If we look as we look already to April, we already see improvements in terms of the consumption. We see improvements in the traffic across all the banners. And then I'm referring to this also on like-for-like, not just on the calendar effect, the fact that now we have the Easter. So we're seeing that gradual improvement, and that's the gradual ramp-up that we expect to see also in consumption, but as well as in terms of the growth in our sales that led us to confirm still the full year guidance in terms of sales growth around 6% to 7%.

Our next question is from Mr. Bob Ford from Bank of America.

Could you please expand on some of the expense pressures you're facing as well as your mitigation efforts? And on Scintilla, could you give a few examples of how Scintilla is creating actionable insights for your vendors?

About...

Sorry, it was a little bit below the volume. So as we told the investor community during our Walmex Day, Scintilla is collecting all the information we have from our business and together with benefits and what is going on with our customers, we can already identify about 40% of our transactions with Beneficios, and this is generating a lot of information. All that is available for our suppliers, and they are working and analyzing and understanding much better and have much better information for them to take better actions not only that from their side, but we are also using that same information and the same access to the tool where we can be much more granular on the decisions that we take, especially on the commercial side. Let me give you an example. One of the things we can do is understanding from a broader assortment in, for example, Bodega Aurrera Express, which are those shopping journeys what is the customer is looking and what is the right assortment to have rather than a broader assortment, maybe a little bit smaller, but more targeted to what the customer wants based on not only actual transactions and actual change in dynamics from the consumer. So all of that is happening, still early stages. But I'm more than confident that this will generate a big disruption going forward. And as I said at our Walmex Day, we are moving slowly but consistently from estimating to knowing what is going to happen with sales in the future. So I'm very confident with this. We still see a lot of opportunity going forward.

The other question was just expense pressure, some examples of what you're facing as well as some examples of mitigation efforts.

So the expense pressure, so Bob, thanks for the question. Let me take that. So first of all, I think what you saw in the quarter 1, let me see the numbers and you know that very well, but let me just reiterate we were able -- we are delivering in line with what we said that was the guidance in terms of our expenses for the year. So we said that you may remember in the past, we had double-digit growth on our expenses, and we're now talking that's about high single digit. In terms of the -- basically, that is driven by our gross investments. And the gross investments, Bob, they will continue because they are the ones, what are we talking about accelerating expansion plan, what are we talking about remodeling and maintenance of our stores, what are we talking about e-comm and to some extent, invest in our associate value proposition. That will continue because we are here also for the long term. What we're doing on the present is twofold. One is our everyday low-cost philosophy. We have a small gazillions of items what we do every single day in order to bring efficiencies in the store. The second one is we are stopping the process that not adding much to our sales, particularly the smaller projects. We are prioritizing them in this tougher environment, focusing on the big things. And the third one and more importantly, we keep on working on transformational projects that will help us delivering more efficiencies going forward. And so like we've talked to you about, so sometimes it sounds as a repetition, but we are looking at the electronic shelf labelings or digital shelf labelings. We've done, of course, the multifunctionals in the past. We know the automation that we're doing in our cities -- in distribution centers. If we really want big savings, we need to do things of this scale over and above the things that we do on a daily basis to be more efficient in the store. Also reducing our inventory levels, which is one thing that we are focusing, Bob, will be able us to drive efficiencies across our network, both in the distribution centers, but also in the stores, and we'll be able to manage that with less people on the ground.

And for me, it's very important to -- we need to manage the short term, of course, but we are going to keep investing for the long term. This is very important. We can have an economic slowdown, but that doesn't change our long-term plans in the country. We just need to adapt to the reality. And one of the things I'm asking the team is how can we become more efficient every single day. How we can automate, how we can use digital tools in order to do less manual work and be much more efficient on a day-to-day basis. Sometimes that requires some short-term investments in order to get a longer-term benefit going forward, and this is on a constant basis. But what we are always looking is to invest with a great ROI and with a clear strategy going forward.

The one thing that I forgot to mention is that we are doing the pilot, Bob, you probably know. There's a lot of concerns not at our end but also everyone around the labor reforms and potentially reducing to 40 hours. We have now a pilot in 100 stores where we are taking a lot of learnings to see how we can cope with that if and ever that law will be enacted in upcoming periods. I kindly ask you to keep to one question because we can see the list. There is a long list of questions. So -- to see if we give time to everyone to ask a question.

Our next question is from Ms. Renata Cabral from Citi.

You're on mute, Renata, sorry.

Yes. Just one. It's on Walmart Express. So we are seeing an absolute and relative improvement in the performance of the format. And we know that the company has been doing several actions for the improvement of the value proposition, specifically for this format. So my question is, can you give us some examples of actions that are in place and that has been driven the good performance and the time line for all the Walmart Express formats being operating under the proposed changes, if there's still some time to do that or if that's concluded and now we should see only the results. We know that it's an ongoing process that will never end, but I mean in terms of the biggest actions for the change in this format.

I can start and then you can complement. The main actions that we did in Walmart Express that we've been sharing, but now we're starting to see the results of everything that took time was first, regarding assortment. So one of the things we did with Walmart Express is we knew that we needed to enhance the assortment, put more premium assortment and increase the value proposition for the customer in that end. So we have included more than 1,000 new items in the store, premium items. But not only have we increased the assortment, but we have also given better visibility and space in the store and communication regarding all the innovation and the new assortment that we have. The second thing that is really important for this format as a supermarket is fresh, everything related to perishables. So we have invested in not only the look and feel and the assortment in fresh, but also in service. One of the things that we did was that we -- we need to invest more in service in these formats. We have invested not only in our bakery, but in our meat sections, and that is paying off. The growth that we see in these key areas that generate traffic to the stores are very good. The margins are improving. The traffic is improving. So the service and everything we are investing is paying off too. And the -- I will say, it's service, it's assortment and then it's value. But when you talk about value in Walmart Express, it has to do with the right price for the right quality items. So we've seen our price perception in Walmart Express has been improving, too. You see a number for all, but Walmart Express is still improving its price perception, although we are introducing more premium items. So traffic is improving, sales are improving and margins are improving because although we are investing in price with the better sales and the way in BMS and how we manage the margins and the price mix, the results for Walmart Express are improving overall.

Yes. And let me build on that. There's 3 other things that I believe they are super important. The first one is we brought back our butchers and bakeries. So that is giving great going to the service part is now you can -- our customers can choose the wide of the meat cut or they have actually fresh baked bread at the store, something we didn't have in the past after the conversion, and we are reintroducing that. So that is resonating very good with the customer. And finally, all the online service with on-demand. It's where we are the fastest delivering where our in full is much better, and we have a higher service level for e-commerce. So all of this is resonating very good with our customers and bring them back to our format.

Just a follow-up. All the Walmart Express are already operating under those changes that you mentioned now? Or it's still an ongoing process?

It's always an ongoing process because we test different things in different stores, but most of them has already a big part of new assortment. There are certain things that are already in place for all of them and others are in the rollout process. So again, as you know, we have about 100 Walmart Express stores. So it takes some time, sometimes to roll out different changes.

We always have trades and the premium or the stores of the Walmart Express will have these things that Ignacio and Dolores were talking about.

Our next question is from Mr. Álvaro García from BTG Pactual.

My question is on the 100-store pilot that you ran on labor reform. I was wondering if you could maybe, one, assess the probability of labor reform passing. I know it's difficult. But two, sort of what are the key learnings and what are the key challenges from the shift in structure you need to put together, assuming that labor reform does pass as advertised?

Yes. Thank you, Álvaro. This is something we started last year actually or more than 1.5 years ago. Actually, it started when I was on the role on operations. What we are doing is actually running the stores with a 40-hour format for our associates and identifying what are the bottlenecks, what are the things that we can do, what are the things we need to eliminate. So it's a big focus on productivity. Big findings is that there are certain things that we do right now at our stores that we will need to stop doing and how we work and understand how the impact about stopping those and how we can offset it with technology or actually eliminating the process. One of my beliefs is the worst thing you can do is optimize a process that you don't need. So we are using these 100 stores in different parts of the country, in different trade areas to understand the impact of the things we're doing. Of course, we know that the change in regulation won't come from one day to another. It's not we're going to move from 48 to 40 from one day to another. It's going to be gradual. So that give us the time to keep adapting. But we are already operating 100 stores with labor working 40 hours. They're still growing. They're still operating, and it's helping us understand the productivity circle that we need to have there to operate our 3,000 stores in that way.

I think if you ask us the question, sorry, just to build on Ignacio, do you expect this to come? I think the answer will be we expect this to come at some point, Álvaro. I think this was a promise from the President for doing a stint as the President of Mexico, whether that's in a year or 12 months or -- well, 12 months, 18 months or 6 months, it's -- we don't know, but will come. And what we are sure for sure is that will be gradual when it's implemented.

And the good thing about this pilot is it's also helping us right now. So we're identifying things that we can stop doing doesn't generate a bigger impact. So we are transferring that to actual productivity right now. So it's always a good exercise.

And how do you feel about paying, I guess, under the new structure, more overtime under that new structure?

The idea is not to increase overtime. And actually, part of what we expect and know about the reform is going to consider this the overtime pay as well because it's going to be very difficult for the labor force for the whole country. But the idea is to be more productive, not to be more expensive to cover those extra shifts. So we don't expect to pay overtime above what we typically need.

Our next question is from Mr. Antonio Hernandez from Actinver.

Just a quick one regarding Sam's Club. How much of maybe the consumer environment or overall trends and competitive environment, maybe private label as well, how do those factors play into the performance of this last quarter, which was the outperforming segment?

Yes. So Sam's Club was our best-performing format. So we're very happy with what we're seeing. Of course, it's resonating the value proposition that we have, even though it was not an easy quarter as well for Sam's, but we are very happy with what we're seeing with them. So I don't know if you want to build on that.

Yes. Just a couple of things that I would say just to build on Ignacio. First of all, Antonio, what is driving the growth of Sam's is the business individual member. So our business still is composed of individual member and the business member, B2B and still is a significant chunk of our Sam's business. The one that is driving all the growth is the individual member. And it's driven by the CVP, the customer value proposition or in this case, member value proposition that we offer that is bringing excitement, new items to the table that are attracting the individual member. We're increasing the penetration of the individual members also to the more premium members. And in particular, the big driver of that has been Fresh. Fresh in Sam's has been a big driver of traffic. So the traffic in Sam's is a lot more premium. You have also to acknowledge that Sam's versus the other format probably is a little bit more affluent in terms of the social pyramid and less for -- less exposed to the softer environment. But the team has been doing a good job in capturing increasing individual members and bringing in items that are exciting the member and also an increasing penetration of Member's Mark, which is the private brand of -- with Sam's. As you may have seen it in the past, the stores are really bringing interesting items, particularly tag-ons that we have from U.S. And that's an attractive proposition that keeps on working in Sam's despite the fact that they also have the challenge on general merchandise this quarter like we saw in the -- in particular in the Walmart Supercenter.

One more thing is Sam's was a little bit behind in terms of technology, especially on e-commerce, the platform for e-commerce and the operational part. We've been doing a lot of those transformations last year, and we are starting to see the benefits of the new back end, the new platform, the new operational process at the store. So service levels are improving. So e-commerce is starting to add some value as well to the Sam's Club. We are seeing ourselves as mainly the only club who actually give this type of service at this scale and with this service level. So we are very happy with that. And that resonates a lot with our customers, especially members.

Our next question is from Mr. Ulises Argote from Santander. Our next question is from Mr. Alexandre Namioka from Morgan Stanley.

Most of my questions have been answered, but maybe starting on the e-commerce side. I think you focused a lot on the initiatives you have in place to sort of see this revenue ramp up, at least on the store side. But curious to hear if you have like any specific initiatives in the short term to help boost e-commerce sales for -- across your businesses, right?

Yes. Regarding e-commerce, and we shared some of this during the Walmex Day. So we've seen a softer growth on the marketplace in Q1, but we've seen a constant growth -- double-digit growth on our on-demand groceries and consumables business. So we keep investing on service. We are improving our crowdsourcing capabilities in the stores. We have the best in foods that we had ever. So we have a very good service with our customers in e-commerce. And as we mentioned at the beginning, we have 3 main initiatives to this year. One is to accelerate the marketplace with new sellers and new capabilities for that platform. The second big one is the one hallway that we mentioned at the beginning. All the plan is on track. We already started with some internal tests. So the plan that we shared with you that this year, we're going to have only one app with one merch hallway taking advantage of the food and consumables traffic to enhance our sales as a whole in e-commerce are keep on track. So that's good news for us. And the third one is regarding quick commerce and faster deliveries. We mentioned at the beginning of the year that we were increasing the number of deliveries, orders that we were delivering in less than 90 minutes, and we keep on enhancing that number. So very good news for service with the customer, faster deliveries and all the investment and initiatives thinking about the long term and having a full e-commerce value proposition better for the customers are still on track.

And because we've been building this for quite a long time, we are already profitable, especially in on-demand. This gives us the advantage of keep reinvesting and also while keep -- being profitable here. So scale here matters. We reached a scale that already put us in a very comfortable position of being profitable and keep investing in improving the service levels, while we see other players still trying to get to scale in order to build a profitable business going forward. So I'm very happy with what the team is doing. I'm very happy with the results, especially in on-demand. And we will double down on investments, especially for service levels that this will put us in a big advantage against everyone else. So good progress here, not only during the quarter, but what we're seeing in terms of technology going forward.

Our next question is from Mr. Froy Mendez from JPMorgan.

You mentioned positive contribution from ecosystem initiatives to your gross margin, 20 bps, if I recall correctly. Could you please expand on which initiative is bringing the positive delta? And is this a matter of lower cash burn or actually these initiatives moving to profitable territory? And also in that sense, what is the expectation for the positive impact for the full year in 2025?

So let me answer to that question. So the biggest contributor to that, as we've discussed in the past and also will be the biggest contribution going forward tends to be around advertising. So our Connect business that falls into the gross margin. So that's the #1 contributor when you look at the gross margin accretion, but all of them are contribution. The second one that is also contributing is our Byte business, our telephonic business because it's -- there's a gross margin that is accretive to the organization. And also, we talk sometimes on the financial solutions, particularly when we refer to factoring the dynamic discounting, we've been talking in the past that that's also helping those numbers. But primarily one will be on advertising, and that will continue to be the case. We have alluded to the fact, for instance, on Byte, we don't do it necessarily because of that. But actually, Byte, we told to the fact that actually, it's breakeven actually positive to the overall business just on a stand-alone basis, let alone the additional traffic that we've discussed with you that is bringing to the stores, both actually to the stores, digital stores, but also online stores. I think if you ask us what's our plan and what we do in the money, we always have been open about that. So the contribution to the new businesses should help us to create additional funds that we can invest in the strategy, we can invest in the long term. We have a growth strategy that we can push in order to keep growing and then delivering the requirements that we need from a margin perspective or returns on investment. We've made a commitment in the past on sales and on returns on investment, and that's what we keep on commitment going forward. Is it helpful? Yes, it doesn't sound, but I hope so.

Our next question is from Mr. Héctor Maya from Scotiabank.

Ignacio, just wanted to get more clarity on Byte. I mean with the consumer softness that we are seeing, I was wondering how Byte could be evolving as a traffic driver considering the strong user growth that you are getting? Any color on the dynamics there or on how it could be helping a specific category or format more than another? And if so far, there could be an upside risk for the MXN 10 billion in revenues expected from Byte in 2025.

Yes. Thanks. So Byte is, I would say, one of our best-performing ecosystem vertical, has been growing steadily. And this is because our offering to the customer is extremely good. We are 1/7 of the cost of the leader in the market. And on top of that, we are giving some additional benefits if the customer, Byte customer goes to the stores and participates in our benefits program. So what we're seeing is the value of the ecosystem coming to play, being Byte customers have benefits when you visit our stores and when you buy online. So that is resonating very good with our customers. Traffic is generated, of course, to our stores because of the benefit. If you're a Byte user and you buy at the stores, you will get extra data to consume for free that we give our customers and other benefits in terms of if you recharge your Byte account with our Cashi platform that gives extra megas as well. So again, the ecosystem -- this is a beautiful -- the beauty of the ecosystem is how we can reinforce each part of the business with one another. So this is resonating very good with our customers, and you're seeing it with the growth we are having and how we keep gaining customers there. In terms of income, even though it's not our main priority for us is how they add up to the ecosystem, but we made it public in the Walmex Day that we expect about MXN 10 billion coming from Byte during the year. And we expect to hold to this commitment going forward.

Revenues.

Revenues, yes.

And also, we said just one last build from Ignacio. Ignacio said also in Walmex Day, we actually gave some data in terms of -- with the Beneficios customers because we now can track the ones that are Byte and the ones that are non-Byte that actually the Byte customers have a higher spend, the frequency. And it's just also they have been increasing their frequency and their spending throughout the period. So the people that comes to our stores to actually to recharge or top up their Byte SIM card phones, of course, they are driving more traffic to the store.

And there's another thing that is important to start mentioning is when you try to -- when you're building a financial ecosystem as well or financial services, one of the things that helps a lot, especially to give out credits or to give access to credit lenders into our customers is the algorithm we can create in order to have better scoring. And that algorithm is reinforced by the telephone line from our customers from Byte or the history they have at the stores of consumption or remittances or all the information we have from our customers. When you put all that together into this algorithm, it gives you much better information to the credit lenders to be more confident in order to give credit. And actually, I would say the telephone number and the byte information is one of the most important one for this -- for the creation of the algorithm. So we can expect all of this information that we are generating from the whole ecosystem to give us a big, big benefit in the creation of the algorithm, knowing better our customers, so we can be able to give them a bigger credit with better recovery of those credits to our credit lenders. So this is all parts of the ecosystem we are building and happy how it is progressing.

Our next question is from Daniela Bretthauer from HSBC.

Can you give us an update on the Cashi strategy? I know you mentioned that you tested with employees and then it's been -- I don't know if it's open loop already and perhaps how -- if the remittances function is already in place. So that was the first question.

Okay. So yes, we already started to launch the open loop on a very small -- to a very small base of customers. So we finished the friends and family test and now we open it to our top customers, let's say, this way or more active customers. But we are progressing on a steady base, and we want to make sure everything is working perfectly here. I'm going to be a little bit conservative on the aggressiveness of the rollout basically because we're starting to manage other people's money, and we have to be very careful with that. And during this rollout, the digital remittances will be a reality. It's not there yet, but it's going to be in the following months once we accelerate the rollout of the open loop. Remittances is a part of our business. We have certain percentage of this market through our stores, but it will transfer to the digital remittances pretty soon. Just to give you a little bit more color on this, about 40% of the remittances in the country are being done digitally. So we want to participate in this market. And we are building and we already have most of what is needed to do this transfer. So we can expect this to come in the following months.

So by year-end, for sure?

Yes. Yes, we should be. Unless we have unexpected delays, we should have it during this year, yes.

Okay. And my second question would be regarding Sam's Club. You mentioned that most of the long-term investments are focused on productivity and efficiencies. And to that end, Walmart U.S. has gone completely checkout-less at Sam's Clubs, and they have the scanners also in place. So do we have expectations to also move towards that in Mexico and scan and go? Any updates in terms of automation for Sam's Club, that would be great.

Yes. Like always, we try to leverage as much as possible from the U.S., especially on the things that works. So we can expect to -- at least for us to start testing all of this. We already have scan and go working here in Mexico. Penetration is still kind of low. I would expect it to be a little bit higher right now. But again, it's -- we need to adapt what works and what we know is going to work. Not everything applies the same to the Mexican customer or Mexican philosophy versus the American reality. So everything that we have in the company in the U.S., we analyze it, we test it. And if it works, we deploy it. If it doesn't work, we stop it. So you can expect us to test -- to have at least a try to see if it's the right way to go here.

That was the last question. I will now hand over to Mr. Salvador Villaseñor for final comments.

Thank you very much, everyone, for joining us and for participating in this call. I will now hand over to Ignacio for his final remarks. Please, Ignacio.

So thanks, everyone, for the interest in our company. Although we knew this was going to be a tough quarter, I'm happy with how we have progressed and how we managed the quarter. I'm very confident on all the plans that we have going forward. We have second quarter with Hot Sale, with seasonal events like Mother's Day and summer campaigns. So it's a very actively commercial quarter. We are confident that we have the right business proposition and the right commercial proposition for our customers. So we expect the growth to start accelerating a little bit, the growth to start accelerating a little bit more. And as we expect that the rest of the year have a little bit more benefit. So thanks, everyone, again. It was a tough quarter, but we are happily progressing on our strategy, and we expect the year to start improving going forward. Thank you very much.

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