Wal-Mart de México, S.A.B. de C.V. (PNK:WMMVY) Q4 2024 Earnings Call Transcript

Wal-Mart de México, S.A.B. de C.V. (PNK:WMMVY) Q4 2024 Earnings Call Transcript February 14, 2025

Salvador Villaseñor: Good morning everyone. I am Salvador Villaseñor, responsible for Investor Relations at Walmex. And I want to thank you for joining us in our live Q&A session following our fourth quarter and full year results, which were published yesterday evening. Joining me today is Ignacio Caride, President and CEO of Walmart de México Centroamérica, Raúl Quintana our Chief Omnichannel Operating Officer 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. We kindly ask you to limit yourself to one question as courtesy to others. Now I will pass over to Ignacio for his initial remarks before moving on to the first question. Please. Ignacio.

Ignacio Caride: Yes. Thank you, Salvador and good morning and good afternoon everyone depending where you are. As always, I’d like to start by thanking our associates. The dedication to our customers keeps and remains unmatched. And together we successfully navigated a Q4 with intense activity and gaining the trust of our customers and members. So thank you for joining us today. Let’s go to our questions.

Q&A Session

Operator: [Operator Instructions] The first question is from Mr. Alejandro Fuchs from Itau BBA. Please go ahead.

Alejandro Fuchs: Thank you, operator. Ignacio, Pablo, Raúl, Salvador, thank you for the space for questions. My question would be on competitive landscape in Mexico. Wanted to understand if maybe Ignacio, you can give us some additional color on the quarter, how you saw competition. You mentioned on the release, more promotional activity, investing in price. Maybe we can touch on maybe differences between the formats, Sam’s and Bodega. How should we think also on competitive dynamics going into this year online versus brick and mortar. So anything that you can, give us additionally on competition, I think it’ll be very interesting to hear from you. Thank you.

Ignacio Caride: Yes, sure. Thanks Alejandro. I start and then I’ll let Raúl compliment here. But as always, and when you have a year like the one we had last year, with, let’s say, a little bit of headwind, at the end of the year, every single competitors and everyone start reacting to the softness of consumption. And this was exactly the case. What we try to focus on our end is bringing our purpose to life more than ever. This is where we feel with our, with our portfolio of brands and formats. It’s where we feel our purpose come to life better and everything. And what we did is invest a lot in pricing in order to help our customers navigate this softness at the end of the year, and we saw the reaction. So let’s say that this is what’s been happening at the end, at the end of the year or after, after half of the year Q3 and Q4.

So our focus was to help our customers invest in pricing and gaining market share that it’s the idea of this. 2025 has started pretty similar but we expect the year to improve along the way. In terms of the format?

Raúl Quintana: Yes, in terms of the format, I think we see consistency in market share gains from Bodega and Sam’s and we’re seeing a better improvement in Walmart Super Centers and in Walmart Express, which no place to our portfolio strength that we have as a company. So I think, the price investments that we took in Bodega helped increase traffic quarter-over-quarter. So if you recall quarter three, we had a little bit of a slowdown in Bodega. Quarter four had an improvement in Bodega in traffic. And Bodega as well gained market shares in quarter four as well as the full year measured by Nielsen. And then Sam’s as well continues to be consistent in market share gains. So I would tell you that our portfolio strength is well positioned and we have good consistency between Bodega and Sam’s and we have good improvement in Walmart Super Centers and in Walmart Express.

Alejandro Fuchs: Thank you. Thank you Ignacio and Raúl was very clear. Can I do one more follow up very quickly if that’s okay?

Paulo Garcia: Go ahead.

Alejandro Fuchs: Thank you. On the new businesses, just very quickly, they were contributing around 30 to 40 bps of margin the last quarters. This quarter was 20 bps to the gross margin by it continues to grow, very successfully. Right, and Walmart Connect as well. So I was, I was just wanted to see if there was something extraordinary this quarter on the profitability of the new businesses that maybe could be some of things like a one-off because the contribution was a little bit less than the last quarters. That was my second question. Thank you.

Paulo Garcia: Alejandro, now I don’t think you should read much into that. You probably have seen it at Connect, which is business that is doing extremely well grew a bit less in this quarter than the normal. So as the higher base. So it grew 22% versus an a year average of around 27% because last year the Q4 was particularly strong. But Q4 is also says because of seasonality is the highest in absolute terms connects this quarter was by far the highest. So I won’t read too much into that. I think we feel comfortable done in terms of what was delivered and what will be delivered going forward in terms of contribution of new businesses to our overall business and overall gross margins. Very clear.

Alejandro Fuchs: Very clear, thank you, Paulo.

Operator: Thank you very much for your question. Our next question is from Mr. Ben Theurer from Barclays. Please go ahead.

Benjamin Theurer: Yes, good morning and thanks for taking my question. Just wanted to actually follow up on Alejandro’s last question and if you could maybe share a few early assessments as to what the benefits are or are going to be that you’re seeing from the different things within the Walmex ecosystem. You’ve highlighted, I think yesterday and the prepared remarks that you’re going to provide a little more detail in coming quarters. So maybe a little bit of a tease or something that you can share with us, maybe Raúl or Ignacio something that we can kind of like maybe track over the course of the coming quarters as to how you’re actually going to leverage the Walmex 1 ecosystem as to growing then the top line once a macroeconomic environment improves a little bit. Thank you.

Ignacio Caride: Yes, thank you, Ben. So first of all, this is one of the areas where we’re extremely proud of what we’re achieving. Since we launched it half of last year, the reception we have coming from our customers, it really is really amazing and has been surprising us. The number of subscription was very positive. The great importance of the good importance about Beneficios is first of all it help us to know, understand and have information on the customers that used to pay in cash. And that’s about half of our business, especially in Bodega. And once you start gathering data on the customers and the customer getting a benefit for giving us that access, it help us understand much more their shopping patterns, how they interact between our ecosystem.

If they just buy one banner or they purchase in different banners, if they’re a bite customer, if they use the health membership, it help us understand how they are interacting across our ecosystem. Once you have that information, it’s considered like gold because you know exactly who to target and with what proposal you can target and convince us to jump into the ecosystem. Also this information is what is help us reinforce the value and the information we give to our suppliers through Scintilla. That is the new name for our previous Luminate product. But Scintilla gathers all this information and make it available to suppliers. So all of these help everyone in the business, suppliers and us understanding much better our customers and help us deliver better offering for our customers.

Let me give you a graphical experience. When you start understanding a customer, you can see that they restock for example toothpaste every month and a half. And you start seeing that because it’s a pattern. So you will know and understand, you know exactly when that customer will go into the shopping mission of getting toothpaste inside your inside your store. And it will go back to your store because you also know that customer is a bite user. So for every purchase they do at the store they get a benefit in byte with free megas. So for a supplier like Colgate, that information is super important. Especially because they can know if they’re purchasing their brand or another competitor’s brand. So again it helps us understand much better the customer.

And by using all this information together with suppliers, we will improve much better our offering. At the end it will help us, let’s say remove the guessing or the projection of the sales going forward. It will give you much more certainty on what to expect going forward from your own customers. So if you ask me, the one thing that really, really encouraged me of what we’re doing and give me a lot of passion of what we’re seeing is this, because the potential of all of this program is incredible.

Raúl Quintana: Can I just make two very quick builds? One is Ben. Ultimately at the end of the day translates into market share and capturing a higher share of wallet. And if you see our performance versus on top this year versus last two years where the ecosystem is picking up, you see the big difference in the numbers in the performance of [Indiscernible]. The second one is to point of — these things are not unfortunately very quick. We need a long period of time to be able to get significant ascertain from a statistical point in terms of the cause and effect relationship. We are working on that. What gives us a pride is if you look at in terms of market share, accelerated share gains, almost 200 basis points versus ANTAD in 2024 a year ago. A year ago 2023 was 50 and the year before was 10 basis points. So I think it’s working.

Ignacio Caride: Yes. And let me complement just one more thing is, one of the great benefits about this, that this is a win-win situation for our customers. What we’re hearing from our customers joining, joining Beneficios is that in the past for them it was quite expensive maybe to go to the cinema or to, or to get a coffee in a premium coffee shop or to go to a certain restaurant. And now just because they purchase with us, they start having access to these benefits. So we’ve been doing a lot of hearings with customers and the value they get from this is they really appreciate it. So it’s good. It’s very good. We’ll see a lot of value going forward.

Benjamin Theurer: Thank you.

Ignacio Caride: You’re welcome

Operator: Thank you very much for your question. Our next question is from Mr. Andrew Ruben from Morgan Stanley. Please go ahead.

Andrew Ruben: Hi. Thanks very much for the question. It was helpful you provided some perspectives for the year ahead. Maybe one item I wanted to dig in on a bit is operating expense. The message around single digit growth and less operating deleverage. So I’m curious if you could break some of that down, how you’re thinking about the impacts of wages, the pace of some of your digital investments and then the efficiency gains, how you see each of those versus this past year when we’re looking at 2025 ahead. Thank you.

Paulo Garcia: Yes. Hi Andrew, Good morning for you. Yes. In terms of regarding SG&A, a big component about the difference what you saw last year and what you’ll see going forward and we’ve talked about that is will be around labor. As you know Andrew, in the last four years the CAGR of labor had been around 20%. The minimum wage salary which of course tends to pull all the other levels of the organization that we have particularly of course into the stores. And U.S. as you probably have heard it for 2025 that minimum wage increase will be 12% and there’s an expectation that to be around 10% in the next five years. Still well above inflation. But of course something that together with the things that we keep constantly doing from efficient standpoint and in the company is something that of course allows us to be able to leverage better than we have done in the past.

We will do of course in terms of macroeconomic standpoint where we are today. We will review a few of some investments in terms of prioritizations. But I won’t reiterate here that at the end of the day when we think we still very much abide to the long-term view that we have in doubling this business, we still behind all the growth and strategic investments that we have, be it on the distribution centers, the automatization. We want to continue to expand stores if not even more remodelings and maintenance of the stores for us will be an important investment that we’ll continue to do going forward. And e-commerce is a great priority in this company. But of course we have that ability to navigate the environment here and there reprioritizing some investments who are needed and that’s why we talked about that.

We feel that this year we will see an increase in SG&A more around the single Egypt.

Andrew Ruben: Very helpful, Paulo. Thank you.

Paulo Garcia: Okay.

Operator: Thank you very much for your question. Our next question is from Mr. Antonio Hernandez from Actinver. Please go ahead.

Antonio Hernández: Hi, good morning. Thanks for the space for questions. Just a quick follow up regarding the contribution of new businesses. They’ve been helping profitability but just wanted to understand out of the three different businesses that you mentioned, maybe if you could provide more info on which one was the most impactful or which one has the most potential to contribute to margins going forward. Thanks.

Ignacio Caride: I think if you looked on standalone Antonio, as you will imagine on a standalone basis. We’ve talked about that our advertising business and Walmart Connect because of the size of the business that we talked about to you in 2023 that is growing now a rate of almost 30% year-on-year in the very high industry margins. That of course itself is the one that has the highest contribution. But byte is expanding very fast. We’ve talked about a couple of times in the past that actually it’s accretive also on the gross margin byte and actually it’s already a profitable business. Also known the financial solutions also the — while we’re progressing that in particular money also we’re making also with the income and help and the factoring income helping suppliers.

But I will argue that the biggest one on a standalone basis advertising and Walmart Connect. But don’t forget and comes to the point of Ben eluded before. At the end of the day all that we are creating these businesses the role that also they play ultimately is our ability to capture a bigger share of wallet i.e. driving increased frequency and higher ticket which translates to higher sales and therefore accelerated market share gains. And that’s how we tend to look not always is easier to capture all the numbers how we tend to look at the contribution of the genius business and verticals. Of course when you look standalone is what I was just mentioned to you.

Paulo Garcia: Yes. And let me add on this is please don’t look at the ecosystem standalone basis and separated siloed businesses because it’s not what we’re doing, it’s not in our interest and it’s not what we want to do. The whole idea of the ecosystem is this mutually reinforces benefits and services that will help drive different things. So Connect will help us with profitability. But Byte helps on traffic. Our health helps on traffic particular to pharmacy. So each one has their own idea goal on doing this. And maybe we will invest and some of this won’t be profitable at all. Never ever. And we will subsidize that with other parts of a business, especially in the ecosystem. But the ultimate goal is to share gain of wallet.

But it’s important to understand that our P&L is changing, the shape of our P&L is changing. And, and what we want to do with this is generate more space in order to reinvest back into pricing and start spinning the wheel once again with better prices. Everyday low prices will help families save money and live better. With that they will come back to our ecosystem. So it’s important to reinforce this because we can get the wrong ideas or things of we’re doing if we will look at a standalone basis.

Antonio Hernández: Perfect. That’s very helpful. Have a nice day.

Paulo Garcia: Thank you.

Operator: Thank you very much for your question. Our next question is from Miss Irma Sgarz from Goldman Sachs. Please go ahead.

Irma Sgarz: Hi, good morning. Thanks for the opportunity to ask a question. I just wanted to go to gross margin for a moment and maybe picking up on the point that you just mentioned that you’re hoping to have the contributions from new businesses enable further price investments. Yet in the release you made comments about the new business contribution to gross margin. Now in following quarters being expected to drop through to the margin again. So I was trying to square those two things up. Was it just specific in the fourth quarter that you just needed a bit more price investment because of the change in economic environment and maybe the combination of the comp being really hard for the new business contributions and it evens out a little bit more in the coming quarters or is there something else behind it?

And I’m also asking about gross margin in light of the higher inventories that you had at year end, how we should be thinking about you addressing those potentially a few days of excess inventories that you finished 2024 with and whether that could result in some pressures on the gross margin in first quarter. Thank you.

Paulo Garcia: Thank you very much. Good question and connecting all the dots there. So actually just now on the Q4 and as Ignacio was saying, we really saw an opportunity to help our customers in this macroeconomic environment and importantly an opportunity to accelerate market share gains. So that comes to our DNA, to our purpose of the company. Does it mean that every single quarter we have to invest and actually put to your words, actually the risking the gross margin, it’s not the case. I think you need to, I need to be prepared that the gross margin can vary by quarters. I actually was looking back so a couple of quarters we were talking about and people challenged us what our gross margins were too high in terms of contributions.

Now it’s of course there’s a challenge what in a particular quarter. I think we just have to adapt to accept that the business and environment where we operate is very volatile. And then you see volatility on the quarters. I think when you look forward and that’s what we try to pass in the message that we put in our webcast. Looking forward ahead, we still expect in 2025 that our margins, gross margins will see benefit from contribution from new businesses. And of course we will navigate the quarters and the economic environment which is expected to be stronger in the second half of the year than it will be in the first half of the year by actually taking the decisions around taking the best price investments or not to us to help our customers navigating the euro or the turmoil, if you will.

I think the inventory is just to do the last comment.

Ignacio Caride: Yes, we are right. We acknowledge these first, we actually have to improve that. And really is an opportunity, we all look to that as an opportunity to improve our also our cash flow. And so I think there is much that we can do there. In terms of what the impact of the markdowns is something that we do on a on a regular basis that we’ll have to be able to manage as part of the delivery of our gross margins and investments we make into to our customers.

Irma Sgarz: Understood. Thank you.

Operator: Thank you very much for your question. Our next question is from Mr. Bob Ford from Bank of America. Please go ahead.

Robert Ford: Hey, good morning everybody and thanks for taking my question. How should we think about the performance in apparel and general merchandise in the quarter and how are you thinking about strategies and tactics in discretionary categories for this year? And then I was hoping you could also comment a little bit on new store openings in terms of returns for historical and the concepts and regions that you’re most excited.

Ignacio Caride: Sorry Rob, can at least I didn’t pick up the second question.

Robert Ford: New stores returns versus historical and in the concepts and regions that you’re — you’re most excited for.

Ignacio Caride: Yes. So I can start with the — now I already forgot the first one. Okay, sorry.

Robert Ford: This question…

Ignacio Caride: I was trying to understand the second one, I forgot the first one. So let me start from the second one. I’ll come to the first one. And you happy to any of you to build. In terms of the returns of new stores, Bob, as you can imagine, of course the returns of new stores in immediate and short term are not as the same as the one that we already have in the existing. But we really see opportunity. That’s where we tend to look at here is there’s an opportunity in lots of white spaces to continue expanding. Often we get the question and ask guys, if you actually expanding more in your stores, it doesn’t drive cannibalization versus stores that you already have on the ground. The answer is yes. And we have a very sophisticated model and depending on whatever stores we open and depending the reasons and there are some days, that we have a lot of wide spaces probably more north and the southeast.

The cannibalization is lower, but many times the cannibalization will be higher if we actually let a competitor open. So that’s when we look at the returns of the new stores. We need to look at the full picture. Of course looking at standalone then versus also what if actually we are not doing there and therefore then we played with the diversification of our portfolio that Raúl alluded to the news that we are going to open versus the other ones that we already have there. And we keep on playing those investments and making decisions what are the best returns on investment. And we do that very often in terms of opening more stores versus remodeling or maintaining the existing stores is an ongoing discussion on this business. At the end of the day we have to do more off of the two.

And the second, which was your first question, Bob. Look, apparel for us is very low. I often get that question, Bob. It’s a very low single digit in the sales of our business. Quite frankly, apparel is a major opportunity for us and is a major opportunity, particularly online where we’re hardly playing today with that particular business and with all the things that we’re doing on the — from a tech stack front on the e-commerce, that’s something that will be able to be playing better going forward. In terms of GM is interesting. The dynamics that you see there. If you actually look at Q4 in particular, November there was a huge. So the November was very strong with the [Indiscernible] this season for everyone with record years for everyone and the GM with the TVs and toys and so on.

And then there is — there has been a bit of a slowdown. I think the people are very smart in terms and savvy understanding when there are best prices to buy this categories. I think what we have to do Bob is continue to diversify, diversify our portfolio in terms of including GM, because we continue to be very strong in a couple of categories which is TVs, toys, video games, white appliances. I think we have to do more and more of penetrating a few further a few other categories.

Raúl Quintana: And the opportunity to penetrate those categories comes from our strategy with the marketplace. Going forward, that is one of our top priorities, moving online. So bringing, bringing and creating this global marketplace together with a U.S. assortment is something we’re building and we’re much closer to having place. And that will help us position ourselves differently to the customers with a much broader offering other than what we have at the stores or in our warranty offering at the moment. So this is how we’re seeing GM going forward?

Robert Ford: The timing for that greater integration, just out of curiosity.

Ignacio Caride: This is going to be a very important and pivotal year in our technology. We’re doing one of the biggest migrations in terms of backend that will allow us at the beginning to join the hallways. If you’re tracking and following U.S., you can see that U.S. a couple of years ago they joined the hallway where the customer didn’t have to choose between buying groceries and buying extended assortment. It’s going to be just one app. The experience completely transformative. And as you can see after U.S., this change results start growing much, much faster. This is happening this year for us is a big, big back end technology change and operational change. So we expect that to start adding a lot of value in an e-commerce business and for the whole business going forward.

Paulo Garcia: Yes. And I think just to add a couple things on, on new store growth, I think we, we believe we’re a growth company. We need to double the business faster than we did in the past decade. And we’re going to accelerate store openings. No. And that’s going to accelerate in all our portfolio. It’s not going to, no — Bodera will continue to be the greatest number of stores. But Sam’s Club Super Centers and supermarkets will also have their fair share of that growth portfolio. And I think to your question, discretionary spending for this year. I think we’ll wait to see what I can tell you. We have a meeting every day at 7:30 with Walmart U.S. and Walmart Canada on tariffs, and we’re keeping a close eye on that. We’re understanding from the U.S. what that impact is from Canada what that impact is.

Some of the learnings that may apply to the Mexico market in those circumstances. And I think to your point on discretionary spending, I think we’ll wait to see. But we’re prepared and we are being proactive to understand our imports and our price points so that it still becomes attractive to the market here in Mexico no matter the circumstance of the economic environment or, or the political environment.

Robert Ford: Very clear. Thank you so much.

Paulo Garcia: You’re welcome.

Operator: Thank you very much for your question. Our next question is from Mr. Alvaro Garcia from BTG Pactual. Please go ahead.

Alvaro Garcia: Hi gentlemen. Thanks for the space for questions.

Ignacio Caride: We can’t hear you, Alvarez. I’m sorry, you need to speak louder.

Alvaro Garcia: Can you hear me there?

Ignacio Caride: Yes. Better.

Alvaro Garcia: A little better. All right. Thanks for the space. Question on expenses. I was wondering if you could maybe provide a bit more detail on the DC build out you have planned over the next couple years to maybe give a bit more context on the grow side of things. I think that would be helpful. Helpful context. And then two, just to double check on the buyback. Love to see it. Just to double check if you plan on canceling those shares. I’m not sure if you mentioned that earlier in the call or not, but I wasn’t, I wasn’t online. But just want to confirm if the idea is to cancel those shares once they’ve been bought back.

Ignacio Caride: Yes. Alvaro, let me start quickly from the second and the answer will be yes. Yes will not make sense that as being on the market, tapping the market and not canceling the stairs. So we will not bring rally to the shareholders and not giving the right signal as well. On the first one on D.C. basically as we’ve talked about that in the past. So these two big investments we are doing in Parque [ph] and Tlaxcala, they will be opening in 2027. We are already opening, we already working on them. This is basically just going to transform. We look at our disease because the level of automation is enormous. In this is the idea is of course in a country where the cost of doing business you still can argue versus others still low, but is increasing and has been increasing a lot significant the last years.

We need to drive a lot of automation in our organization, be it on the our distribution centers, be it also in the stores and the way we run them efficiently. And that’s we were planning to do with that DC which the cost to serve and will be a lot lower than what we have in the current DCs. But for that of course we have to make big investments. But we are here to stay not just for the next five years or the 10 years. We are here to stay for the long-term. We have this ambition of doubling the business faster than before, which means you need to create gross capacity and you need to be able to operate in a country that will be increasing the cost of doing business.

Paulo Garcia: Yes. And building on that, Alvaro, is when you know where the future is going, start investing now to be prepared. Because once the reality change is going to be too late. Investments are big. It takes time to build an automated DC. But I would love to invite everyone when we open it. It’s an incredible, incredible experience and seeing them operating and improvement in efficiency at the store level, not only supply chain, but at the store level is incredible. So you can get your pallets organized by aisle. So you can just download the pallet from the truck and go directly into the shelf without the need of using the background. And with an efficiency that will help us lower our operational cost by a lot. So you will you can expect us doing much more of this type of investments for the long-term and with technology, automation and digital mindset going forward.

Alvaro Garcia: Great. Thank you very much.

Ignacio Caride: More than happy to organize with our U.S. colleagues to visit to the one in U.S. if you guys want. More than happy to organize.

Alvaro Garcia: Yes, I’ll take care about that. Thank you.

Operator: Thank you very much for your question. Our next question is from Mr. Froy Mendez from JPMorgan. Please go ahead.

Froylan Mendez: Hello everyone. Thank you very much for taking my question. Good morning. Going back to the cash conversion cycle we did see some lengthening especially in the second half of this year. Just wanted to know your thoughts as on what is driving this lengthening of the cash cycle and if it’s somewhat related to the COFECE restrictions that you are made to implement. Thank you so much.

Ignacio Caride: Yes thanks for the question. And the answer is absolutely no, 100% no. The COFECE has zero impact on the discussion on the payment terms on the cash cycle. I think the opportunity is the one I alluded to before and we mentioned in the webcast is primarily in the days on hand concerning inventory where we’ve mentioned before that we have an opportunity to do and that it’s a clear priority in the organization and it’s something that we can use better our cash and put it that to work. And it’s something that we are putting a focus in 202025 and to be more disciplined in this area.

Froylan Mendez: And if I may just follow up on Walmart Connect. You have been speaking about the tremendous growth that this business has. Can you give us a sense of the size in dollar terms or peso terms and if there is a goal on I don’t know what penetration of sales and how dependent is that on the development of e-commerce?

Paulo Garcia: Yes so we published so ineffectively could give you but I will give it in one mixtape but I think you can get to the number Froy. Last year we said that was a MXN3 billion $150 [ph] million I’m running. You know the growth rate? 27 I think you can do the maths. Last year what we said it is to the base that we mentioned last year. Our ambition is to indeed next five years to fourfold this business that is four times bigger than the number that we gave in the end of 2023. So which was roughly $150 million in the next five years. And you know the margins of these industry margins. So I think also you can actually make your own calculation around that. I think to your point on e-commerce within Connect. We’ve always alluded to the fact that today the part that we do from Walmart Connect in the stores, in the brick and mortar is still a little bit more or two thirds of our business.

So one third is actually more digital and e-commerce. And that’s also why we are confident in our ability to unleash the potential that I was talking to you because we have a lot of space to grow in the, in the digital area as our e-commerce business continue to grow in accelerated growth, which is what happens in the our mother company in the U.S. Actually our mother company in U.S. when you look at advertising business, pretty much, and I don’t like to give a lot of stats, but it’s a public number, it’s almost 90% comes from a digital space. So that’s why we believe that we can unleash that opportunity.

Raúl Quintana: Yes. And let me build on that. And to clarify something on how to think about this business going forward, we are not turning our stores or our sites into an advertising business. The advertising business or Connect is something that needs to add value to our customers and need to have a relationship with the customer experience. So you should not expect. And we are not going to turn, for example, our stores into a place full of advertising. It doesn’t make sense to our customers. So this is why we are building a business that is sustainable, but it adds value to the ecosystem, adds value to our customers and it needs to add value also to our advertisers or suppliers in this case. And the opportunity for us is how we, how we move this more into digital space rather than the physical that where we are stronger today given the opportunity we’re seeing that is happening in the U.S. So together with the changes we’re doing in [Indiscernible] technology in an e-commerce business, this should be the opportunity is very big, but doing it the right way.

Froylan Mendez: Understood. Thank you very much.

Paulo Garcia: [Indiscernible] Froy.

Operator: Thank you very much for your question. Our next question is from Miss Renata Cabral from Citi. Please go ahead.

Renata Cabral: Hi everyone. Good morning. Thank you so much for taking my question. My question is regarding Bodega. We saw that the format is performing above ANTAD, but it’s laggy versus other formats in the Walmex. So I would appreciate if you could give some color of the main drivers of it, tickets, traffic or both. And naturally that this is a reflection of the economy. But do you have do you see a clear opportunity of any change in this format in order to boast semi store sales? And if you see that the current economic environment should take this format this year to continue be the format amongst the others that will lag or if you see opportunity to this catch up along 2025. Thank you.

Raúl Quintana: Sure. Thank you for your question. Like mentioned before, we saw a better traffic performance in the quarter for Bodega versus quarter three. So our traffic was up? No. We took some additional measures on price investments that Ignacio and Paolo mentioned. Some of these price investments were tailored to the Bodega customer to help know that customer and the environment for the quarter. But we believe, Renata, that the portfolio is well positioned for any economic situation. So Bodega is going to continue like mentioned before, it’s winning market share and it’s consistently winning market share. Market share in the quarter and it won market share in the full year. And we believe for this year, whether the economic environment gets tougher or not, that our portfolio will be able to succeed.

And Bodega is a big part of that. Now our strength in the Bodega formats where Bodega Aurrera Express, we see a good market share gains from an external from an amplitude of the market. From a proximity standpoint, we see Bodega as well continuing the rural areas to be able to provide good value propositions for our customers and the large format on shopping locations for the missions. Bodega continues to be a good performer in a large format to our customer base. As well, we saw good performance as well in e-commerce, e-commerce is performing strongly in Bodega on demand, as you saw in the transcript, for more than 70% growth in El Fin Irresistible, for the quarter. So we continue to see good penetration on both Bodega and Mi Bodega on an e-commerce base.

And then as a reminder, the ecosystem is a competitive advantage for Bodega as well. Bodega stores represent a large portion of bite customers and a large portion of cashing as well of health. And that continues to complement, like Ignacio said, that wheel will complement my core business to add traffic so that my Bodega customer can have more added value services and continue to see Bodega as not only products but services and solutions. But we see Bodega with good consistency. We see Bodega with a good value proposition on price, on price leadership and we expect Bodega to continue to deliver in 2025.

Renata Cabral: Super clear. Thank you so much for the color.

Operator: Thank you very much for your question. Our next question is from Mr. Andrés Ortiz from BTG Pactual. Please go ahead.

Andrés Ortiz: Hello, Ignacio, Paulo, Salvador, good morning. First of all, I would like to start with a follow up to [Indiscernible] Froy’s question on inventory. How long would it take for you guys to reach the levels that you are comfortable with, and if you could share some color on which categories are the ones that actually did not sell as well as expected that as you mentioned in your remarks. And a second question from my side is you mentioned this effect on the tax rate. I don’t know if you could share some color because it was large enough to offset the pressures that you have below the EBIT line, right. So anything will be helpful here. Thank you.

Ignacio Caride: Yes. So I think when we talked about your first question, Andrés, I think it’s about throughout the year we have the opportunity to actually reduce the inventories levels. We have our internal owner, internal ambition that we want do there will not necessarily disclose it here but I think it’s throughout. Actually the opportunity to do better on days on inventory, inventory hand is actually in all the categories. Of course in some of the categories on the general merchandise we have a bit more inventory. Normally you have the longer inventory in these categories. As you can imagine there are particular ones on some of the of this area but also actually on food where is a rotation which is much more frequently and lots of top items that I think we have the opportunity to be more efficiently and not hold so much of the inventory in terms of foods and consumables.

And that’s also another area where we want to reduce. At the end of the day if you want that to be meaningful and because foods and consumables is still such a big part of ourselves in our business, we need to reduce it across so Andrés is not in a in exactly in a particular category. In terms of your question was around DTR. So DTR as you know almost around the mid-twenties. If the discussion was why in this particular quarter DTR was lower than the normal mid-20s that we tend to offer. I think we alluded to that in the webcast transcript. So as we review the Andrés the useful lives and the tax values of our fixed assets we actually from we had to recognize or make an adjustment in terms of our values of our the current and deferred taxes.

At consolidated level on the Q4 that led to as we actually put in the transcript a 15 million impact on net income which actually meant was and a recognition of interest significant interest associated to the tax. We also had also SG&A a small adjustment one-off related to that, which was partly compensated by a benefit in our effective tax rate. So that benefit on our tax rate that one-off is actually what pretty much explains ROTR [ph] that typically it’s around the mid-20s and this time around as a one-off it was lower as you have seen it, Andrés

Andrés Ortiz: Okay, thank you very much. Appreciate it.

Ignacio Caride: Thank you.

Operator: Thank you very much for your question. That was the last question. I will now hand over to Mr. Salvador Villaseñor for final comments.

Salvador Villaseñor: Well thank you very much for joining us once again and hope to see you at our investor day March 27th. Thank you for your interest in the company as always and have a good day. Cheers everyone.

Operator: Walmex would like to thank you for participating in today’s video conference. You may now disconnect it.