Negative Points

• Admin expenses, excluding share-based payment, increased by 57 basis points year-over-year due to continued investment in talent and expansion into new regions.

• Q2 2026 included a one-time cash expense of MXN 37 million related to the equity follow-on offering in May 2026, impacting EBITDA and admin expenses.

• Potential pressure on logistics expenses in Q3 2026 due to the opening of three new distribution centers, which may temporarily impact margins.

• Same-store sales growth is partly driven by price (one-third), though internal inflation remains low, indicating some reliance on pricing.

• The company faces intense competition in the hard discount space, though management sees room for multiple players in the Mexican market.

• G&A expenses are expected to remain elevated (around 3% of revenue) as the company continues to invest in talent, which may limit operating leverage in the short term.

• The cardless payment test had a non-material impact, indicating limited near-term benefits from such initiatives.

• Management does not guide on EBITDA, and margin expansion is expected to be gradual, with potential volatility in gross margin quarter-to-quarter.

• The company's aggressive expansion (593 net new stores in 12 months) may strain operational resources and execution capabilities.

• The equity follow-on offering in May 2026 resulted in one-time costs and potential dilution, though management has mechanisms for orderly option sales.

Q & A Highlights

Q: How much of the same-store sales growth is driven by ticket versus traffic, and what is the contribution from new SKUs? Additionally, can you provide an update on the ERP rewrite and its deployment? A: Anthony Hatoum (Chairman and CEO) explained that approximately two-thirds of same-store sales growth is driven by volume and one-third by price, with the price component largely coming from better product mix rather than inflation. He noted that all categories are growing, with newer categories growing faster from a low base. The company remains extremely conservative with SKU additions, often dropping less attractive items. Regarding the ERP, he stated that phase one testing is going well, and AI tools have accelerated programming capabilities, bringing forward planned features and adding new ones. The new point-of-sale system will offer more services to clients, and logistics optimization opportunities will expand as the company scales.

Q: What drove the gross margin performance this quarter, and how should we think about the forward outlook? Also, what contributed to lower transportation costs? A: Anthony Hatoum (Chairman and CEO) explained that gross margin improvement is a dynamic process resulting from scaling efficiencies in buying, manufacturing, and logistics. As the company grows, it gets better input conditions and can optimize prices to balance volumes and dollar margins. He noted that while percentage margins may stabilize over time, dollar margin growth is the key metric. Eduardo Pizzuto (CFO) added that transportation cost optimization efforts and better management of pre-operating expenses for the new distribution center contributed to the quarter's performance. However, he cautioned that Q3 might see some pressure on logistics expenses due to the opening of three additional distribution centers.

Q: What percentage of new stores are opening under the upgraded format, and what sales uplift and ramp-up are you seeing from these locations? A: Anthony Hatoum (Chairman and CEO) confirmed that 100% of new stores open under the upgraded format, which was chosen for its superior performance compared to older stores, though existing stores continue to perform well. Eduardo Pizzuto (CFO) added that the ramp-up of new stores is tracking in line with the unit economics analysis updated in Q4, with the 2026 vintage performing consistently and as expected.

Q: Did the World Cup provide any tailwind to same-store sales, and what is the expected run rate for G&A investments in the second half? A: Anthony Hatoum (Chairman and CEO) stated that the World Cup did not have a relevant impact on sales, and it was difficult to tease out any effect. Eduardo Pizzuto (CFO) indicated that the company will continue investing in talent, and it's fair to assume G&A expenses will remain around 3% of revenue in the short term, similar to Q2 levels.

Q: Can you elaborate on which areas of the organization you're adding talent to, and what have you learned from the cardless payment test? A: Anthony Hatoum (Chairman and CEO) clarified that G&A investment is focused on adding and densifying talent in critical areas like purchasing, logistics, systems, and specialty roles where one person can have a dramatic impact. He emphasized that this is a high-return investment. Regarding the cardless test, he described it as a non-material experiment exploring the removal of credit and debit cards, noting that it's just one of several ongoing tests aimed at generating more revenue, reducing costs, or reducing risk, with no immediate plans for expansion.

Q: How should we think about the two-year same-store sales momentum, and what are you seeing in terms of competitive intensity in the hard discount space? A: Anthony Hatoum (Chairman and CEO) noted that same-store sales growth can increase significantly with just one more item sold per customer, driven by improving product value. He remains conservative but positive about continued expansion. Regarding competition, he stated that the company doesn't see anything new from FEMSA and believes Mexico's market potential is significant enough for several players to thrive. He emphasized that the company will continue its current strategy, which has been working extremely well.

Q: How much of the growth is coming from new customers versus increased share of wallet, and what initiatives are in place to expand items per transaction? Also, is there solid real estate availability for expansion? A: Anthony Hatoum (Chairman and CEO) explained that growth comes from a balance of new customers and increased wallet penetration, with newer store vintages capturing customers more rapidly. He noted that the existing portfolio still has tremendous potential for increased penetration without adding new SKUs. On real estate, he stated there are no constraints, and the runway in Mexico is tremendous. Eduardo Pizzuto (CFO) added that the company only carries high-rotation items, so new categories should not materially impact working capital, with inventory days remaining around 20 days.

Q: Was there anything one-off in the gross margin this quarter, and what mechanisms are in place to avoid disorderly selling of stock options after the restriction period? A: Anthony Hatoum (Chairman and CEO) stated that there is no seasonality in gross margins, though there is quarter-to-quarter volatility. He reiterated that the long-term trend is positive, with dollar gross margin growth being the most important metric. Regarding stock options, he noted that mechanisms are already in place to ensure orderly and timely selling, and he doesn't expect a rush to sell.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .