Almacenes Exito SA (EXTO) 2018 Q1 法說會逐字稿

Welcome to the Grupo Éxito First Quarter 2018 Earnings Results Conference Call. My name is Richard, and I'll be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded. I will now turn the call over to Maria Moreno. Maria, you may begin.

Thank you, Richard, and good morning everyone. We appreciate you joining us today for Grupo Éxito's call. At this time I'm pleased to present our Chief Executive Officer, Mr. Carlos Mario Giraldo; and our Chief Financial Officer, Mr. Manfred Gartz. Today's agenda shown on Slide #2 will cover Grupo Éxito's financial and operating highlights, followed by a review of the company's international strategy and the consolidated financial results for the first quarter 2018. The call will conclude with a Q&A session.

Thank you for your attention. I will now turn the call over to Mr. Carlos Mario Giraldo for his comments.

Thank you all for your presence in the Q1 results conference. I will start in Slide #3 with the consolidated financial highlights of the quarter.

We had a resilient operating performance in all LatAm regions, with a positive net income at Éxito level and showing the benefits of diversification in different countries. In the financial highlights, our net revenue had a total growth of 6.3%, if we include the negative foreign exchange effect of 4.4 points, which was driven by solid sales performance both in Brazil and in Uruguay as in previous quarters, and a higher contribution from other revenues of plus 16%, most of these revenues coming from Colombia. Recurrent EBITDA had a growth of 7.2%, including a negative foreign exchange rate effect of 4 points, to a margin of 5%, keeping the same margin as in the first quarter of last year.

Net income was positive and it ended near to COP 10,000 million in positive grounds. In operating highlights, we had a positive performance in international operations, and we had a very clear control of operational expenses at the consolidated level, clearly below inflation levels. Synergy plan is on track to reach the guidance of $120 million of impact in operating profit. And, Merco, a specialized agency, qualified Éxito as one of the 10 companies in Colombia with best corporate governance and social responsibility practice.

If we turn to Slide #4, in the CapEx, we can see that our consolidated CapEx for the quarter arrived to COP 377,000 million, 57% of it dedicated to expansion. In Colombia, COP 62,000 million with 47% of it dedicated to real estate. The focus of the CapEx in the region was cash and carry, both in Brazil and Colombia, which is the main emphasis of expansion this year, and real estate construction of 2 big shopping mall projects, which are Envigado at 77% of advance and opening in September, and Tunja, 64% of advance and opening in October of this year.

Going to Slide #5. It is important to make some notes about the net sales performance of Colombia. I think the main focus is the trend and that we have a positive trend. We got increasing total sales of 1.5% corrected by calendar effect, which compares against the minus 4.1%, which was the result, both for quarters 2 and 3 if you can see it in -- excuse me, for quarters 3 and 4 of last year, if you can look them in the graph. That is 2.5 points better than these 2 quarters. This is not what we want, of course, and we want an increase in sales. But we see that it's arriving and that it will arrive for the quarter 2 of this year as of things we see to date in the market.

It is important also to note that this improvement in the trend is also impacted by food inflation. While food inflation last year in the same period was 3.65%, food inflation for the first quarter was 0.98%. That is, there are 267 basis points of difference in food inflation, which impact sales, of course, when you look them in pesos. So when you look at the trend and you consider the diminishing food inflation, it looks even better as a trend. It's important to see that the first best performers within the brands of Éxito were the value-added formats, specifically Carulla and Éxito. Finally, it's important to say that omni-channel growth had a positive contribution, growing more than 34% and that SurtiMayorista, as we will see later, had a very positive performance.

Going to Slide #6. We can see the analysis of this sales figure by banner. In Éxito, Éxito had a very good performance in nonfood categories, both textiles and electronics being positive. In textiles, clearly out of a value, fashion and private brand activities with Arkitect and Bronzini with special designers entering within the value proposition of Éxito and electronics, out of a gradual improvement that we have done in the most important Éxito stores, giving them the look and feel of a clear specialist in electronics at least in 40 of the stores, not only in product but also in service to our customers. Carulla grew in all regions, with the exception of Bogotá. Of course, Bogotá has a big impact on Carulla, but it had to do clearly with the trend of Bogotá, which is one of the regions which grows less in Colombia, while the North Coast is the region that grows the most. But this is a good trend for Carulla in sales, as you can see, from a minus 5.9% in quarter 3 of '17, minus 4.7% in the last quarter of last year, and minus 1.7% in this quarter. Carulla also had the impact -- we began to see the impact of the fresh market, where the 2 stores under the fresh market proposition have 15 points higher in growth to the rest of the Carulla stores.

In Surtimax and Super Inter, they were the lower performers, but they were profitable and probably, it is one of the few popular stores in Colombia that has profitable figures both with positive EBITDA. They were impacted with deflation in some of their product lines, especially cereals. Cereals with around a 5% deflation, and for example, rice with a 17% deflation. Our best performer was the B2B formats, that is the cash and carry and Aliados. As a whole, they now had a contribution to sales of 130 basis points. This is good because it shows that it starts to be material in the sales figures of the company. Its same-store sales had a growth -- a very strong growth of 20% and as a whole, SurtiMayorista with expansion had a growth of 138%. To the left, we have some of the ongoing strategies in Colombia and activities that drive performance in key formats and in monetization activities, of which I will speak later.

Moving to Slide #7. We make a focus on the cash and carry. Here you have pictures of the last cash and carry that we recently opened in Bogotá in Autopista Sur. It's called Autopista Sur. It used to be before a Surtimax. As a whole, we will open 8 stores to end the year with 17 stores of cash and carry. They continue to perform 2x the sales after conversions from other brands. And they have sales per square meters that are also 2x the average sales per square meter of the rest of the formats of the company, which means that they are accretive. Different from other popular stores, they are profitable from the first year and that's very good news for the company in value creation, in solid mid-single-digit margins. Their expected sales, as a whole, this year are over $100 million, which becomes an important base for their increase and their development in future years.

If we go to Slide #8, this is one of the big news of the quarter, and it's consistent with what we have seen in the last 2 years. We have been speaking for many years about the omni-channel strategy of the organization. In this quarter, it obtained COP 75,000 million with a growth of -- near to 35%. What's important is that it begins to become material as a baseline for sales of the company, with 3% share of total sales increasing 90 basis points. And we believe this is going to be the trend in the following quarters and in the following years, which shows that Éxito is clearly the Colombian retailer better equipped for the new reality of e-commerce, of marketplace, of home delivery, that is of the best union of the virtual and the physical stores.

There were 3 big levers in our e-commerce growth. One is home delivery, where our own home delivery service plus the exclusive alliance with Rappi, we made around 500,000 deliveries in the first quarter of 2018. This is an important figure anywhere in the world and in other urban areas and for other retailers. And 70% of these were dispatched by Rappi. Secondly, our digital catalogs continue to be strong with 28% increase in sales. And finally, our marketplace arrived to 900 sellers or vendors with more than 60,000 products, which is in line with the goal that we have to expand rapidly the portfolio that we sell to our marketplace and with a 72% growth in gross merchandise value, which is the measure of sales that we have for marketplace in the world.

Going to Slide #9. We see the innovation in Carulla which clear -- ratifies itself as the clear premium leadership in Colombia. First, we see the fresh market, opening now 2 stores with a very good sales increase, even if it has a lot of competition around. And we will be opening, next week, Apisierra, which is the most important Carulla store in Bogotá under the format of fresh market, which I think it's going to be great news for all of consumers in Bogotá. I invite those of you that live in Bogotá, please, to visit that store starting Thursday of next week, which I think it's going to be an amazing experience of buying and of experiencing the freshness and magic of products in Colombia. We had also the first opening of Carulla Cava, which is a liquor and delicatessen full experience store. It is small in size but fully concentrated to liquor and delicatessen, as you can see in the picture.

The good news is that this laboratory experiment that we have done with Carulla, it has now -- it is going to arrive at 3 stores. It will end in 6 stores in the year. But the most important thing is that those value propositions developed on our own or with suppliers that are there and that are performing well, we're going to take them to the rest of the most important Carulla stores. And secondly, then in Éxito, we're going to do also a laboratory of innovation, which is going to be great as a new generation of hypermarkets in Colombia. We're going to do it in the 2 top Éxito stores, one is the country, 134th Street store in Bogotá, and the other one is the Envigado store, which is going to be opening as a next generation in Medellín, at the same moment of the opening of the shopping mall that is in September. This -- internally, we call them as the wow projects for Éxito and these laboratories are going -- also going to serve to take at least more than 20 value propositions of innovation, of omnichannelity, of product in nonfood and food to the rest of the top stores of the Éxito brand. So we believe that for the market, in moments like today, where Colombia is recuperating in the economy and in the retail environment, innovation, new formats, omnichannelity are the right answers to grow profitably.

I'll go to Slide #10 to net sales performance in Brazil. They were already revealed by GPA in their conference, so I won't go into detail. But clearly, the big news is that we recuperated leadership in Brazil food retail, and we had the largest sales in reals above any other food player in Brazil, in the first quarter of this year. Sales adjusted by calendar effect increased 5.5%. And that's very good if you consider that in Brazil, for the first time in history, we're having a huge deflation in food that in this quarter arrived to around 5 points of total deflation. So it shows a very big increase in volume and traffic. Most of this is driven by Assaí. Assaí sales increased 25%. Same-store sales, plus 9.4%. Very consistent in same-store sales growth, but also, in expansion, with 20 stores to be opened during this year. The same number that we opened last year, and representing for the quarter 44% of the Brazil total food business of Grupo Pão de Açúcar. Multivarejo was also positive, adjusted by calendar effect, with 1.3% increase in same-store sales. And the digital transformation and discounts through mi descuento or My Discount and the renovations in Pão de Açúcar as the premium format of the Brazilians were responsible for this increase.

I hand the word to Manfred to go over results and then I come back with other aspects of synergies and final remarks.

Thank you, Carlos Mario, and good morning, everyone. Let's start on Slide 11 with the highlights of the operational performance in Colombia.

I would like to start saying that after 4 quarters on negative grounds, net revenues grew 0.1% in the first quarter, reaching almost COP 2.7 billion. This change of trend was the result of better consumption dynamism in the country, an outstanding performance on other revenues, which grew over 31%, and the outcome of commercial strategies that were put into place in the past quarters.

Gross margin finished at 24.3%. They're in line with the historical performance of first quarter when excluding the extraordinary result of 2017, which was the -- fostered by improved productivity, lower logistics cost and better terms with suppliers. So we're pretty much back on track on the margin.

On the SG&A side, the operational expenditures grew 2.8%, probably the lowest since IFRS has been implemented in Colombia, way below the inflation of the expenses structure of the company and the 4.09% inflation level of last year.

All actions planned -- implemented have successfully offset the increases in key expenses accounts like labor, which rose 5.9% as per the minimum wage. And occupancy cost would normally raise the CPA cost and spread depending on the asset. I think this continues to show the commitment of the company to protect the bottom line.

Finally, the recurrent EBITDA reached COP 107,000 million and a margin of 4%, reflecting somehow the lower expenses dilution and the back on track of the gross margin.

Moving forward to Slide 12, to start viewing the performance of our international operations. Net revenues in Brazil grew 7.5% in local terms in the quarter after a strong performance of Assaí. In COP, net revenues reached almost COP 10 billion, growing 1.9% as a consequence of a negative FX effect of about 2 point -- 5.2%.

Gross margins reached 22.5% of sales, with almost a flattish result in the gross profit. Rapid moderation of Assaí stores and food deflation, especially at Multivarejo, explain this result.

In terms of SG&A, the strong expense control and implementation of efficiency initiatives in -- especially on -- in headcount, logistics and other relevant costs allowed a dilution of about 90 basis points in expenses. Also, the Assaí stores' maturity contributed to the dilution. At the bottom line, recurrent EBITDA was over COP 500,000 million, growing 12.6% and resulting in a 5% margin, 50 basis points higher than the year before.

Please move now to Slide 13. Uruguay, net sales in local currency grew 8.5%, outperforming inflation. For our Uruguayan operation, it was a particularly outstanding summer season in which commercial activities offered excellent results. Also, the convenience format gained traction of the 8 stores that were opened in the last 12 months, growing 51%. In COP, net sales reached COP 709,000 million and a growth of 6.1% after FX. Like for like grew 6.8% in the quarter, again, outperforming inflation and especially driven by the categories of fresh, textiles and home.

Net revenues reached COP 750,000 million and operation in Uruguay continues to gain market share. At the gross margin, it finished at 34.8%, 20 basis points above last year. While on the SG&A side, it gained 40 basis points from improved control activities and the natural dilution of sales growing above the expenses. On the recurrent EBITDA side, it grew 13.2% to COP 76,000 million, reaching a 10.6% margin due to the strong summer holiday season. And Uruguay continues to demonstrate its capacity to growth in a sustainable way and solid profitability levels.

Let's take a view on Argentina on Slide 14. I think despite our complex macro environment, Libertad's sales performance has -- was pretty much in line with total and food inflation in the country, reaching a net sales growth of 24.7%, like-for-like growth of 24.2% in local terms. FMCG, fresh and textiles were the categories that were the top performers. In COP, net revenues reached COP 334,000 million posting a 1.4% decrease as the consequence of a negative FX effect of 22%. I think it was important to mention here in Argentina is that, as supposed to other major retailers, competitors in the country, even bigger ones, which have been posting negative results, for Libertad, the real estate hedging strategy has allowed us to maneuver through troubled macro worries and still maintain the profitability on the operation. SG&A also grew below local inflation, thanks to strong productivity efforts and the optimization of structures. Finally, recurring EBITDA reached COP 8,500 million with a 2.6% margin.

Please move now to the next slide to see the consolidated results. Net revenues reached COP 13.7 billion with a 6.3% year-over-year growth if excluding an aggregate FX effect of 4.4%. These results obviously reflect the strong sales performance in Brazil and Uruguay and the growth of the complementary businesses in Colombia. SG&As continue to reflect the productivity efforts and other cost-cutting initiatives across our footprint in the region and diluted 70 basis points. Recurring EBITDA margin grew 7.2% when excluding an FX effect of -- aggregate of 4%, maintaining a margin of 5%. EBITDA reached almost COP 700,000 million in the quarter. Finally, at the bottom line, net income group share finished at COP 10,000 million which compares with the minus COP 8,000 million the last of -- last year's quarter, first quarter. I will explain -- I will further explain the results on the next slide.

Please move now to Slide 16. I want to show you a little bit the bridge between the results of the first quarter of this year and last year's. The main items to highlight were, on the adverse side. nonrecurring expenses related mainly to the restructuring processes conducted in both Brazil and Argentina -- and Colombia. The outcome of all these processes, we are seeing that right now in the SG&A accounts, and we will see the benefits of all this restructuring in the future quarters and 2 from Colombia's operational results. On the positive side, we have an improved financial result as interest rates lowered in Brazil and Colombia and a solid performance of Brazil during the quarter. Also, productivity efforts throughout the region have better results.

Finally, please move now to Slide 17 to show the evolution of the net debt at the holding level. Net financial debt closed at COP 3.8 billion, decreasing 2.1%, very much in line with the company's strategy to continue to leverage. Cash and equivalents closed at COP 631,000 million, driven mainly by working capital improvements and increased dividends from subsidiaries.

At this point, I would like to return the call over to Mr. Carlos Mario Giraldo to continue.

Let's go with Slide #18. Synergies continue at full speed in the 4 countries, with the guideline of $120 million of impact in operating profit for the end of the year and with 28 initiatives under execution. The first ones have to do with the formats that are taken from one country to the other one, like the cash and carry from Brazil to Colombia, and the fresh market from Uruguay to Colombia, to Brazil and to Argentina.

In Slide #19, we can see that in food purchasing power, other than the normal negotiation of untapped conditions with international and national brand big suppliers, we are buying together commodities. And in the first quarter, we bought 220 food containers, 1.2x the volume bought last year.

Going to Slide #20, this is one of the most important synergies and it is taking the textiles model -- business model from Colombia to the other countries. You can see in the picture, it's very clear the type of look and feel that we have in the Éxito stores in Colombia, which is kind of a specialist in textiles and it competes against the specialist in textiles in Colombia. It is a value-added replication that has been done with a very -- going to 61 stores and with very solid growth rate in all the countries and gaining participation in the sales of the hypermarket as the figures that you can see in the slide.

Going to Slide #21. I want to make the main conclusions. The first one is that there is top line growth, both including and excluding foreign exchange impact, and even if we have lower inflationary food trend in most of the countries, especially in Brazil and in Colombia. I can say that we expect for Colombia, the trend to continue improving as retail is improving and as the action innovation plans that the company is taking both in -- both physical and omni-channel places are having impact. And that we expect the second quarter to be positive in sales, a positive outcome of international business units. Plans to control expenditures are at full speed and with improved productivity in all the countries. And we expect that to continue that way. The good thing is that as sales improve and costs are under control, we will have a dilution in costs, which of course, are positive for operational profit.

A positive net result in the quarter, a synergy plan on track, first signs of revenue recovery in Colombia. Even if sales were negative 1.5% in the quarter, you can observe that revenues were positive 0.1% and that is the impact of other complementary businesses, which are very accretive to the operation in Colombia. And we expect sales to continue improving. But at the same time, we expect that for the second quarter, we will be positive in operational profit and in EBITDA profit, increasing versus the second quarter of last year and with a better margin than the second quarter of last year.

There are clear action plans by country to drive the sales and to drive results and to bring new incomes from monetization of traffic. And we are clearly the leader in the region in trending formats as the cash and carry, which has taken the leadership in the Brazilian market and it's now clearly visible in the Colombian marketplace; with the fresh market, which is the most premium of the formats in Latin America and with the omnichannelity. I would say that if we look to the retail that is leader in the world and the participation that omnichannelity has, others is even higher. And it's important to see that we are one of those food retailers and nonfood retailers that is leading these figures. And I would also say that real estate continues to have a very important, solid and consistent contribution to results. And that we're going to have in the third quarter of this year, the opening of the Envigado shopping mall, 130,000 GLA, deemed to be the mixed shopping mall most important in Colombia, the #1 if we put together 30,000 of offices that we have there and 100,000 of commerce.

So this would be the remarks for this call. I thank you very much for your attention, and we are open now for a Q&A. Thanks a lot.

(Operator Instructions) And our first question comes from Nicolas Larrain from JPMorgan.

Good morning, Carlos Mario, and for the call and for taking my question. I want to ask about leverage levels. So EBITDA keeps suffering, right, so net debt to EBITDA has been rising lately. Could you give us an outlook on how your plan for deleverage is going? And how it should progress going forward?

Thank you, Nicolas, for your questions. What I would say is that you have to bear in mind that the indicator at the end is calculated at year-end. The reasons for this is given the normal business seasonality, the normal net debt seasonality and obviously, to capture the full period's dividend flows from subsidiaries. I think as you mentioned, we continue working on different initiatives to deleverage. It includes -- we continue on the working capital optimization. We continue with the sale of certain nonstrategic assets. We continue controlling expenses and implementing action plans in that sense. And also we expect a gradual recuperation of the EBITDA level in Colombia and improvements of the dividend flows from subsidiaries.

Our next question on the line comes from Antonio Gonzalez from Crédit Suisse.

I just got a quick one. I wanted to ask if it's possible to comment. Amazon obviously just did a deal in France with the parent company, with Casino, on the Monoprix brand. And I wanted to ask if you can extend this partnership in your markets in Latin America? If you have any prospects of doing so and if there is any timing, in case you're able to comment on that?

Yes, Antonio. I cannot comment on that. It's a specific partnership done by Casino in France and by Monoprix with Amazon. What I can comment is that for the moment, in our market, we like to feel ourselves like the Amazon of the Colombian market in the nonfood scenario. And as the Ocado of the food market in the e-commerce in food. And that's our goal. And that's why we are the ones that are arriving to the households with food through home delivery. We are leading the last-mile environment, which is very important for the future in cities highly congested like Bogotá, Medellín, Cali, Barranquilla. And we are also a very competitive player in the nonfood, in all the big appliances where our kiosks have been a great innovation for the market. And will permit us even doing pilots outside of our stores, which is something that we are going to do this year. So thanks for your question, Antonio.

I appreciate that. And if I may -- I appreciate this color, Carlos Mario. And if I may just very quickly, is there anything additional you can share with us on the agreement that you have with Rappi at the moment? How has it enabled you to shorten the delivery times, increase the coverage to more cities or to more neighborhoods and perhaps anything that you can share on the economics of the agreement?

Yes. I want to be cautious about it because there are some things that are confidential with -- in this agreement. But what I can say is, first, that results are amazing. We are increasing home deliveries by 3x. It's threefold. And if you look, the number of home deliveries of more than 500,000 in 1 quarter, that is comparable with almost any important player in food in the world. Number two, it is a profitable business and that's very important because the level of commission that we pay is profitable for Éxito. And I believe that in the medium term, it's also profitable for Rappi, bearing in mind that they combine our food purchases with other services to their customers.

So it's highly effective and it permits us also, that's the third thing, to acquire new customers. Because there are many customers who have not been customers of Éxito, who enter in this service, for example, by buying restaurant services, and we capture them in our food delivery. And the fourth thing is that it's a very interesting and profitable way to penetrate into the proximity market because it permits us to go and to attack many neighborhoods where we don't have stores and even where we have competitor stores. And given that we have an on-time connection of the application of Rappi and our own applications, we can make a big data absolutely intelligence connection with the new customers and current customers.

That's very helpful. Is it possible to comment whether it's just Bogotá, Medellín and the largest cities? Or are you extending it nationally already?

It's being extended nationally, but it's going to be gradual. The next goal that we are going to do is to go to the high-level neighborhoods near to Bogotá and Medellín, where many of the customers are, especially during the weekends.

Our next question online comes from Federico Pérez from Bancolombia.

I had a couple of questions. The first one is regarding the same-store sales in Colombia. As you guys mentioned in the -- your Slide #5, we are seeing a change of trend. Do you have any goal or any guidance you can give us on when are you expecting these same-store sales to go back to the positive side? The second question is regarding the Surtimax and Super Inter brands. As you guys mentioned, you're having like a strong deflation in these brands and that is affecting the sales of Surtimax and Super Inter. Can you share a little bit of color in the outlook for the coming quarters in specifically these 2 brands? And my last question is regarding the leverage ratios. As Nicolas mentioned, like quickly, you're getting to a high leverage ratio, but I'm worried about Colombia specifically. If you see the net debt of the whole group -- I know you shall see it in a consolidated basis but if I only look into Colombia, most of the debt is in Colombia. And I just -- I would like to know if there is any covenant in judging the debt that you hold in Colombia that should we be aware of?

Thank you, Federico, for your questions. I will deal with the first 2, and then I hand it to Manfred. In same-store sales, we're not growing -- giving a guideline for the moment, but what we are saying is that in total sales, we're going to be positive in the second quarter. And of course, what you can see is that the trends are there and I believe in trends. We saw an increasing retail in the first quarter of Colombia. And given the things that we are doing in the market, we believe that they are going to have an impact.

The second thing is Surtimax and Super Inter. Today, the channel, which is mostly affected in Colombia, is what we call the independent supermarket and Super Inter and Surtimax are kind of independent supermarkets. They are the highest impacted not only because of competitive scenario but because of deflation. The share, for example, in Super Inter of fresh products is near to 45% of its sales. So -- and we have a deflation in the first quarter, internal deflation of 1.55% in fresh products and also in grains, which account for 10% of the sales. But I would say something which is very important. And it is that regardless of the competitive scenario, Surtimax and Super Inter remain profitable. They are probably one of the few independent kind of supermarkets and clearly give you -- we would call them soft discounters that are profitable in Colombia, while others are playing a game with the high quantities of losses.

Okay. And on the leverage questions, what I would like to say is that at this point of the year, it may be too early to give any kind of precise guidance on what we're expecting to land the indicator. What I can say is that -- what we expect is that we will be comfortably below what we show last year. That has to do with the fact of, one, on the ongoing deleverage plan that we have already working -- that we are already working on that. Second has to do with the fact that we expect a better performance of Colombia in the upcoming quarters. And three, from the -- once again, from the improved dividend flows that we expect from subsidiaries, especially GPA. I think the covenants and what we have, we have them publically disclosed. We are until almost end of the year at a 4x covenant, is the threshold that we have. It's going to change to 3.5x. It's public. We have been disclosed that since a couple of years now, even since the -- until we took the debt. And once again, we feel very, very comfortable that we will be way lower than that.

Our next question online comes from Carlos Rodríguez from Ultraserfinco.

I have 3 questions. The first one is how much of the decrease in same-store sales in Colombia was attributed to the high competition by the high discounters? The second one is, why lower food inflation has affected more in Colombia than Brazil? And the last one is, how many quarters should we expect the nonrecurring expenses related to restructuring process in Colombia and Brazil? And if you could detail some -- if you could give us some detail of the amount spent in Colombia and Brazil?

Yes. The first one I would say that high competition in Colombia impacts more total sales than same-store sales. We feel much more comfortable with same-store sales, and I think that same-store sales have been evolving with the evolution in the retail panorama. If we look at Nielsen, Nielsen shows that in the last quarter, for example, same-store sales in Colombia were negative around 2.2%. So it's very similar to what we had. So what it really impacts is new stores that are being expanded in very -- other places, not profitable, but they are there, and they are a reality. And of course, we have a very clear strategy to that. First of all, we have to have a profitable strategy. So what we are doing is, in the short term, strengthening our private brand proposition with at least 200 categories, which are being offered at this very moment at the same price as the closest competitor, being whatever type of competitor it is.

Number two, alliances with private brand suppliers. There are very strong alliances that we call senior proveedors, senior suppliers. We have at least 20 of those alliances, of people that are investing in technology and are investing highly to grow with Éxito in a consistent and long-term way. And the third way that we are working in this is through proximity through things like the omnichannelity and the last-mile service that we are doing. But at the same time, we're working in innovation. As you have seen with Carulla, and we're going to have the innovation lab with Éxito. When you look at international panorama, and I think British market is a very good scenario to see what happened with this kind of phenomenon. The brands that better performed were the brands that answered, of course, with fair prices but especially with innovation. And in England, they were Waitrose and Sainsbury. And the brand that tried to play the game only with low prices and reducing profits, which was Asda, as you know, is now being disposed in the market.

So the second question is about -- yes, food inflation in Colombia and in Brazil. Why does it have a different impact? I think that in Brazil, it has to do with the fact that the momentum that Pão de Açúcar has in the market is very important because of the critical mass that Assaí has acquired. Assaí is today, the most dynamic format in all the Brazilian market. It has the highest expansion even compared with other cash and carry players. It is gaining 300 basis points of market share against last year. So that has a great impact to, I would say, counterbalance the deflation in food, bearing in mind that it's having increases in customers and in volumes in a very consistent way. I hand it to Manfred for the other question.

Okay. So regarding the restructuring view on the nonrecurring expenses, what I could say is that especially in Colombia, I think, for nonrecurring expenses directly related to restructuring, we have done I think a very important part of what we plan for the year. So it's -- we especially wanted to have that at the beginning of the year in order to capture the benefits of what we're getting throughout the year and once again trying to protect the bottom line. Regarding Brazil, I think I will stick pretty much with what they have disclosed. And it's that they will find some things, certain level of asset recurring -- nonrecurrent expenses throughout the year.

Our next question comes from Miguel Moreno from LarrainVial.

I have 2 questions. The first one is regarding general strategy and second is regarding the status of the new models. In general strategy, we're seeing margins compression on center sales, especially in Surtimax. Looking at, let's say, 3 years from now, we know that we are seeing a positive center sales or maybe a positive trend in revenues. But is there some plan to close stores that are maybe with negative EBITDA right now, that they are selling less or through vehicles on textile industry rather than supermarkets. So if you can give us a more general view about that, that would be great. And the second question is regarding the status of the new models. You mentioned in the press release that Viva Envigado is 77% competition, Tunja 64%. Did you start to commercialize these malls, so you have already rented some part of the malls? I'd like to understand what the occupation rate that you'll have them all once opened, would be great.

Okay. So I'll start with the strategic one. What we are doing in our formats, is yes, we have closed some stores which are not profitable, but especially proximity stores. That is some express stores, and we have closed some stores in Uruguay also, some express Devoto stores that are not performing well, but that's not a big fan of closing. What we have done, and this is very interesting, is that we are converting stores. That is that we are taking nonperforming stores located in very interesting, popular areas like big Surtimaxes or some Éxito popular stores and turning them into cash and carry, and this has been a highly profitable leverage decision. As of the malls, what I can say is that Envigado mall has now a warranty of more than 90% of occupation between the commitments of occupations that are going to start since November -- since September, excuse me, or occupations that will be performed during the first Q of next year.

This is a very interesting model because it's going to be connected with the metropolitan train of Medellín. It's going to be one of the 3 malls with Puerta del Norte in Bello and with Mallorca to the southern part of Medellín that are connected to that train Metropolitan. And these malls each have an Éxito store. So it's Éxito which is going to be clearly connected to the malls, generating traffic, which create customers from all over the city. And the other thing is that we really have great brands into the Éxito shopping mall. And finally, that it has a high content of entertainment. Today, the shopping malls in the world have to have a high quality and a high percentage of entertainment and the Envigado shopping mall is going to offer the biggest entertainment zone for children in Medellín. And also a big area of cinema with the highest technology, the biggest that Cine Colombia has done in Colombia, and also it's going to have a bistro high-level restaurant area, which is a novelty for Medellín under a shopping mall proposition. And Tunja has an 85% occupation level, which is great for this moment, some months before the opening.

(Operator Instructions) At this time I see we have no further questions. I'd like to turn the call over to Carlos Mario Giraldo for closing remarks.

I will take 5 minutes of your time for some closing remarks because I think this is a very important point to make emphasis on strategic areas of the organization. First of all, we are optimistic for 2018 as the whole business panorama for Éxito and especially, we're optimistic with the evolution that Colombia will have. When we speak about the LatAm consolidated business, we believe that Brazil and Uruguay are performing very strong numbers in sales and profit, and that is a full operation we started the first quarter. If we deflect the impact of foreign exchange with very positive consolidated numbers in sales, in recurrent EBITDA and also with a positive net profit.

We believe also that the leading regional trends are being conducted by Éxito and that is premium formats, cash and carry and omnichannelity. And I think that you have to reflect a little bit about what's happening in the world. In the world, when you see what Walmart is doing in England, in Brazil and what it's done in India with Flipkart, it's clear that the most important with -- and the alliances that are being done by Amazon in England, in Spain and now with Monoprix in France, when you see this kind of trend, it is clear that omnichannelity is a key factor for the future of retail. But not only nonfood, because it was clear that in nonfood it had a high content. But the big message of the last 2 years and also with the Whole Foods purchase of Amazon in the U.S. is that omnichannelity becomes key in the food proposition, in the consumer goods proposition. And we have that trend within our region.

Second, that premium formats are resilient, and they are resilient in most parts of the world. And in Latin America, in Brazil, Uruguay and Colombia, we think that we have the leading premium formats in all the regions. And finally, that cash and carry is a phenomenon that is here to stay, not only in difficult moments but also in better economic moments because they have become a destination point that are perceived as comfortable and good and exciting for the customers. Third, a word about Brazil. We believe that it's a strong and consistent business proposition, which is playing in the extremes of the premium and the cash and carry and which is doing a lot of improvement in the middle market with the Extra brand. And then we have in the Colombian business gradual improvement. We are seeing consumption improving, with a reduction of interest rates, with petroleum prices, with nonfood categories reaction and with an inflation benefit against salary increase for consumers.

We see that in our own sales, Colombia has improved against the last 3 quarters. And trends are trends, and they continue and they finally get you where you want when it's a positive trend. And we believe that for the next quarters, we will see a recuperation in Éxito sales but also in -- we will see a positive EBITDA growth against the comparable quarters and also in the margin. Expenses continue under control. And we continue to have the impact, as we saw in the first quarter, of complementary monetization income like credit, insurance. And it's very important to note the impact of real estate.

Strategic initiatives are there. They have strong fundamentals and they acquire materiality and this is very important, that as the Carulla most important propositions are going to all the stores, as the cash and carry gets to 17 stores, as the omnichannelity becomes to be a strong means of increasing sales, they become material to the results of Éxito. And it is important to see that we are taking this kind of innovation also to the Éxito brand and this is key for the organization because it represents 2/3 of the sales of Éxito.

Finally, that the real estate business continues to be good, and strong and solid and with very good occupation levels and that we are going into the customer coalition of Puntos Colombia with a pilot that is starting in the coffee region this month. And then in the third quarter of the year, we will be going nationally in what we believe is going to be a very strong coalition and with very important allies now joining the coalition of Éxito.

So I want to thank you all for this conference and for being here, again, and hope to be here in the following months for the Q2 results. Thanks a lot.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.