Sendas Distribuidora SA (ASAIY) (Q3 2026) Earnings Call Highlights: Leverage Hits Lowest Level ...

Negative Points

• Same-store sales remained below inflation, pressured by high family debt levels and trade-down effects, impacting revenue growth.

• EBITDA margin remained flat at 8.8% as expenses were not fully diluted due to lower same-store sales, putting pressure on profitability.

• The macroeconomic environment remains challenging with high interest rates (14-15%) and compromised consumer income, limiting spending capacity.

• The tax reform implementation poses risks of turbulence due to lack of prior information on rules, potentially affecting operations and costs.

• Expansion plans for 2027 are uncertain and may be revised based on competition, interest curves, and debt weight, with no projects hired yet.

Q & A Highlights

Q: Luiz Guanais (BTG) asked for the composition of October same-store sales (price, volume, trade-up) and how the 2027 expansion/refurbishment plan fits with the deleveraging agenda. A: CEO Belmiro Gomes said October combined volume gains (especially from lower-income-serving stores), higher average tickets and some inflation, with roughly half the effect from volume and half from quality/trade-up; he cautioned it is too early to confirm persistence into November/December. On expansion, the five projects planned for 2027 have not yet been contracted, and final decisions will depend on year-end competition, interest curves and debt levels, so the plan could be revised.

Q: Lucas Esteves (Santander) asked what the next capital allocation priority is after deleveraging, and at what leverage level the company would feel comfortable accelerating expansion or returning capital. A: VP for Finances and IR Rafael Sachete said the decision depends on the economic scenario, same-store sales and interest rates; with same-store sales near zero and Selic at 14%-15%, deleveraging was the strategic choice. He said the company would like to be below 1.5x net debt/EBITDA, after which it could pursue store expansion in a booming economy or buybacks/dividends in a challenging one.

Q: Joao Soares (Citi) asked about the sustainability of the betting prohibition and its potential impact on 2027, and how the private-label card (pending central bank approval) would increase recurring purchases and share of wallet. A: CEO Belmiro Gomes said the company is preparing for the pre-prohibition scenario but expects the ban, if maintained, to benefit the food sector and lower-income consumers; he said a clearer view will come after the fourth quarter. On the private-label card, he said it should have more adherence than the current Itau co-branded card because terms can be tailored to cash-and-carry customers, noting micro and small businesses represent about 42% of sales and that lacking an own card can cost sales to competitors with better credit conditions.

Q: Vinicius Strano (UBS) asked about the main categories driving the same-store sales recovery, whether improvement in October came mainly from tickets and trade-up, and the impact of higher Bolsa Familia payments. A: CEO Belmiro Gomes said basic food items and staples led growth, along with alcoholic beverages, beer and soda, while cleaning and cosmetics were stable. He attributed October's improvement to a combination of volume and quality/trade-up, noted the strong prior-year base (October sales about 16%-17% above September), and said higher Bolsa Familia payments may not fully offset what consumers lost to betting, though he believes same-store sales could return to tracking food inflation if debt pressures ease.

Q: Joseph Giordano (JPMorgan) asked about the next expense-efficiency levers and the company's view on the tax reform timeline. A: CEO Belmiro Gomes said the company sees room to postpone the start of the tax reform given the lack of prior regulatory detail, warning of turbulence for smaller players and the broader service chain if it begins as scheduled; large companies are better prepared. On expenses, he cited artificial intelligence, payroll migration, self-service platforms, and industry agreements on packaging that reduces in-store handling (self-display packaging and standardized barcode placement) as key productivity levers.

Q: Pedro Caravina (XP) asked about the competitive environment in October versus a competitor's third-quarter acceleration, what gives confidence in a more positive trend, and the sales mix at the in-store drugstores, including GLP-1 drugs. A: CEO Belmiro Gomes said the market as a whole benefited in October, likely from the betting-platform restriction, and that Assai saw nothing unusual competitively, though its anniversary month creates a different base effect. On drugstores, he said it is premature to disclose the mix with only 11 stores operating since August; Mounjaro is among the best sellers, and full opioid licensing takes 60-90 days. VP Rafael Sachete added that the mix is in line with the relevant market share and includes GLP-1 pens.

Q: Rodrigo Gastim (Itau BBA) asked about the supplier finance line in the quarter and working capital outlook, and how the company measures trade-down. A: VP Rafael Sachete said the supplier finance impact came from weaker-than-expected September sales and higher-than-planned inventory ahead of the October anniversary month; stock has since normalized and no significant working capital changes are expected in the fourth quarter. CEO Belmiro Gomes explained trade-down is measured by comparing SKU-level price increases with average kilos/units sold, since fixed-basket inflation does not capture brand switching; he estimated trade-down explains most of the same-store sales gap, above 3%-4% depending on the quarter.

Q: Irma Sgarz (Goldman Sachs) asked about the food inflation outlook and whether B2B clients might stock up, plus an update on the Mercado Livre (Meli) partnership. A: CEO Belmiro Gomes said food inflation pressure is expected from October/December through January/February, partly currency-driven, but he is skeptical it reaches market estimates given high interest rates limiting consumer resistance and B2B stock-up incentives. On Meli, he said the focus has been on iFood and that interstate tax-rate differences and platform interconnection complexity have slowed progress; these should be resolved by year-end, with 2027 potentially showing the marketplace's full potential.

Q: Wellington Santana (Bank of America) asked whether October showed a shift in payment mix toward cash/debit as consumers had more available income, and whether B2B clients saw indirect benefits. A: CEO Belmiro Gomes said he had not yet analyzed October payment data, but among B2B segments, resellers (neighborhood grocery stores and small businesses) showed improvement consistent with Nielsen data, while food service and other B2B clients saw no variation. VP Rafael Sachete added that October's payment mix was in line with September, with only a slight increase in overdraft usage and days receivable, and no major behavioral shift.

Q: Andrew Ruben (Morgan Stanley) asked whether the converted Extra stores have reached full maturity and whether their same-store sales diverge from the rest of the base given their different demographic and location profile. A: CEO Belmiro Gomes said the converted Extra stores have already surpassed the company average in

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