Earnings call transcript: Alsea sees strong growth in Q1 2025

Alsea SAB De CV, a $2.3 billion market cap restaurant operator, reported a notable increase in sales and net income during its Q1 2025 earnings call, highlighting significant growth in its European and Mexican markets. According to InvestingPro analysis, the company appears fairly valued at its current price of $2.87. Despite challenges in some regions, the company’s stock price rose by 4.85% following the announcement, reflecting investor confidence in its performance and strategic direction.

Key Takeaways

• Total sales increased by 4.2% year-over-year to COP 20.4 billion.
• Net income surged 552.7% to $868 million, driven by non-cash foreign exchange effects.
• Alsea’s stock price increased by 4.85% after the earnings announcement.
• Strong sales growth in Mexico (9.1%) and Europe (25.4%).
• Introduction of Chipotle to the Mexican market.

Company Performance

Alsea demonstrated robust performance in Q1 2025, with total sales rising by 4.2% year-over-year. The company saw significant growth in its European and Mexican markets, which contributed to a 552.7% increase in net income, largely due to favorable non-cash foreign exchange effects. Despite economic challenges in Argentina and Chile, Alsea’s strategic initiatives supported its overall positive performance.

Financial Highlights

• Revenue: COP 20.4 billion, up 4.2% year-over-year
• EBITDA: COP 3 billion, up 10.5% year-over-year
• EBITDA margin: 14.2%, contracted by 40 basis points
• Net income: $868 million, up 552.7% year-over-year

Outlook & Guidance

Alsea plans to open approximately 200 new stores annually while maintaining mid-single-digit EBITDA growth. Analysts tracked by InvestingPro maintain a positive outlook, with price targets ranging from $2.23 to $4.01. The company aims to optimize its portfolio and focus on strategic capital allocation, prioritizing organic growth, portfolio management, and shareholder returns. InvestingPro’s Financial Health Score rates Alsea as "FAIR," with particularly strong marks in relative value metrics.

Executive Commentary

CEO Christian Gurria emphasized the company’s focus on expansion and innovation, stating, "We will prioritize expansion and innovation in brands with a stronger market position." CFO Federico Rodriguez highlighted the company’s strategy to maintain customer traffic by avoiding price increases: "We do not want to increase prices. We want to preserve the traffic."

Risks and Challenges

• Economic instability in Argentina and Chile could impact regional performance.
• Rising coffee prices, which have nearly doubled, pose a cost challenge.
• Competitive pressures in the fast-casual and full-service restaurant segments.

Q&A

During the earnings call, analysts inquired about Alsea’s strategies to mitigate rising coffee prices and the rationale behind introducing Chipotle to the Mexican market. Executives also addressed plans for digital transformation and regional performance variations, providing insights into the company’s strategic focus areas.

Full transcript - Alsea SAB De CV (ALSEA) Q2 2025:

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: Good morning, everyone, and welcome to ALCEA Second Quarter twenty twenty five Earnings Video Conference. My name is Gerardo Lozoya, Head of Investor Relations and Corporate Affairs. Today, you will hear from our newly appointed Chief Executive Officer, Christian Gurria and Federico Rodriguez, our Chief Financial Officer. I’d like to take a moment to warmly welcome Christian to his first earnings call as CEO. With over two decades of experience at Alcea, he brings deep operational knowledge and strategic insight into this new leadership role.

Before we continue, a friendly reminder that some of our comments today will contain forward looking statements. Based on our current view of our business and that future results may differ materially from these statements. Today’s call should be considered in conjunction with disclaimers in our earnings release and our most recent Bolsa Mexicana de Valores report. The company is not obliged to update or revise any such forward looking statements. Please note that unless specified otherwise, the earnings numbers referred to are based on pre IFRS 16 standards.

I will now hand it over to Christian for his initial remarks. Thank Gerardo.

Christian Gurria, Chief Executive Officer, Alsea: Thank you, Gerardo, and thank you all for joining us today. This is my first turning as CEO of Alcer. I am honored and excited to step into this road. After more than twenty five years with the company, a journey that began as a manager in a Domino’s Pizza store in Cuenabaca in Mexico. Over the years, I’ve worked with exceptional teams across multiple brands and regions, gaining a deep understanding of our operations, culture and long term potential.

I want to sincerely thank Armando and the entire Alsea team for their trust and support in ensuring a smooth and successful leadership transition for the past five months. It’s an honor to build on the solid foundation they have set. I take on this new responsibility with a clear and strong commitment to continue building on Alcea’s core strengths, operational discipline, a customer centric approach and a long term strategic vision. We remain focused on improving efficiency by making the organization more agile, driving disciplined organic growth in our highest value brands, reinforcing our core business and pursuing sustainable growth opportunities through the innovation and strong execution. All of this is supported by the best talent in the industry.

Before we turn to the quarterly results, I want to outline the strategic priorities that will guide our focus going forward. First, disciplined organic growth and brand portfolio optimization. We will prioritize expansion and innovation in brands with a stronger market position. We will strengthen our customer engagement through digital, loyalty and delivery channels, prioritize scalable and high ROI brands and rationalize noncore assets. Second, disciplined capital allocation, invest in growth and productivity initiatives with clear return thresholds, maintain strong free cash flow generation and a healthy balance sheet third, build a high performance organization attract, retain and continually developing high impact operational teams and top talent across all markets promote agility and accountability throughout the organization fourth, enhance profitability, drive cost discipline, enhance procurement efficiencies and optimize labor resources And fifth, advance ESG commitments.

Leading sustainability and governance leadership integrate ESG into daily operations and strategic decisions. Now I’ll provide an overview of our quarterly performance, including our financial results and key brand developments, along with updates on our digital transformation, ESG initiatives and expansion strategy. In the second quarter, we reported a 4.2% year over year increase in total sales, reaching COP 20,400,000,000.0 or an 8.9% increase when including foreign exchange effects. Same store sales grew by 4.9%. This quarter reflects the calendar effect impact the calendar impact of Easter.

EBITDA increased by 10.5% in the second quarter, reaching COP 3,000,000,000 with a margin of 14.2%. The margin contracted at 40 basis points year over year. We served nearly 35,300,000 digital orders in the quarter, totaling 7,700,000,000.0, which represents 38.6% of our total sales. This performance demonstrates the ongoing success of our digital strategy. Regarding brand performance in the second quarter, Starbucks Arcea same store sales increased by 4.4%.

For Starbucks Mexico, same store sales rose 3.8%, mainly driven by a loyal customer base and solid in store performance. For Starbucks Europe, same store sales increased by 2.5%, reflecting a gradual recovery in France and a sequential improvement in Spain, driven by effective commercial strategies. Finally, in South America, same store sales increased by 9.7% and declined 6% excluding Argentina. This is mainly driven by lower traffic in Chile. Domino’s Pizza, ALCEA posted a 6% increase in same store sales.

In Mexico, Domino’s Pizza same store sales increased 8.9%, driven by strong performance in the delivery channel. In Spain, same store sales increased by 1.9%, reflecting effective promotional efforts and a positive customer response to product innovation. In Colombia, Domino’s delivered strong results. Same store sales increased 10.8%, supported by successful marketing initiatives such as Domino’s Mania that boosted volumes and reinforced brand momentum. Burger King and sales same store sales, excluding Argentina, decreased by 6.1%.

In Mexico, Burger King reported a same store sales contraction of 6.8%. This was driven by continued underperformance in delivery in our premium offerings. The full service restaurant segment delivered 5.9% same store sales growth. This segment has performed well with same store sales growing at a mid single digit rate over the past three years. This consistent growth highlights the effectiveness of our value proposition and consistent execution across our core brands.

Same store sales for full service restaurant in Mexico increased by 6.1%, with most brands growing at mid single digit pace, while Chili’s and Italiana’s achieved a high single digit growth. This performance was driven by the strength of our value proposition, product innovation, successful product launches and a favorable calendar effect. Same store sales for full service restaurant in Spain grew 5.9%, with Bibs and Geno’s delivering solid growth of four point three percent and seven point three percent, respectively. Our global organic expansion strategy remains focused on prioritizing quality over quantity, targeting the most profitable opportunities across our key markets. In the second quarter, we opened 32 new stores, 24 corporate and eight franchises, with an emphasis on high traffic and high potential locations.

We expect the pace of openings to pick up in the second half of the year. This approach reflects our commitment to long term brand positioning and discipline, a strategic growth to traffic flagship developments and selective market expansion. Given the profitability and payback of remodeling, such as increased customer satisfaction and higher sales, we will continue prioritizing a refreshed and modernized look across our locations. Our digital transformation continues to drive growth. By the end of the quarter, loyalty sales increased 4.7%, reaching 5,400,000,000.0, representing 25,600,000 orders and contributing 26.8% of total sales.

We also surpassed 8,000,000 active users across our loyalty programs, confirming the strength of our digital engagement. This quarter, we continue to strengthen our sustainability model by aligning our purpose with every aspect of our operations. As part of this effort, we updated our global materiality assessment, which was published in our 2024 annual report. This analysis allow us to recalibrate our impact goals and move forward with greater precision toward a business model that fully integrates sustainability across all levels of our organization. Every step we take reflects our long term commitment to responsible purpose driven growth.

Thank you. I will now hand it over to Federico.

Federico Rodriguez, Chief Financial Officer, Alsea: Thank you, Christian. Good morning, everyone. Sales increased by 14.2% in the second quarter, supported by a strong performance in Mexico, Spain and Colombia. Excluding the FX, sales increased 8.9%. We remain on course to meet our 2025 guidance and are seeing solid progress, driven by disciplined execution across regions.

In the second quarter, sales in Mexico were up 9.1% to ARS11.6 billion. In Europe, sales increased by 25.4% to ARS6.4 billion, while in Europe terms, sales increased by 5.2%. Finally, South America sales grew 12.8% to COP3.2 billion. The EBITDA increased by 10.5% with a margin contraction of 40 basis points, mainly due to the depreciation of the Mexican peso and increased labor costs in Europe and South America. These impacts were partially offset by the favorable Easter calendar effect, the recovery of brands across most regions, disciplined revenue management and improved SG and A efficiency.

In this context, we choose to be careful with pricing to protect traffic and sustain brand competitiveness. In Mexico, the adjusted EBITDA increased 4.6%, supported by strong operating discipline and continued SG and A efficiencies, partially offset by FX driven input cost pressures. In Europe, the adjusted EBITDA increased by 26.4 year over year, primarily due to positive same store sales and improved traffic trends. In South America, adjusted EBITDA decreased by 11.4%, reflecting a lower consumption environment in the region except for Colombia. Lower traffic, particularly in Argentina and Chile, weighted on operating leverage and contributed to the decline.

The net income for the second quarter increased 552.7% year over year, reaching $868,000,000, reflecting positive noncash FX, which reduced the cost of our U. S. Denominated debt in Mexican pesos terms. Regarding the CapEx. The CapEx for the first six months of the year totaled 2,580,000,000.00.

Of this total, 70% was allocated to store development initiatives, including the opening of 24 new corporate units, the renovation and remodeling of existing locations and equipment replacement across the brands. The remaining 30% was directed at the strategic projects focused on technological upgrades, process improvements, software licenses and the construction of the new facility in Jalisco, all of the above, reinforcing the long term competitiveness and operational efficiency. At the end of the second quarter, the pre IFRS 16 gross debt increased by 5,500,000,000.0 year over year, reaching 34,800,000,000.0. This increase reflects the bank loans used to settle the minority stake in the European operations, the impact of the Mexican peso depreciation on the foreign currency denominated debt as well as short term debt for working capital needs. The company’s net debt, not counting the impact of IFRS 16, was 29,900,000,000.0, which is MXN 4,300,000,000.0 more than it was at the same time last year.

Consolidated net debt reached ARS47.9 billion, including lease liabilities. At the end of the quarter, 76% of the debt was long term with 65% denominated in Mexican pesos and 35% in euros. We remain focused on maintaining a healthy capital structure supported by prudent financial management and a strong commitment to meeting all obligations. At the end of the quarter, the cash position stood at MXN 4,800,000,000.0. Turning to the financial ratios, the total debt to post IFRS 16 EBITDA ratio closed the quarter at three times, while the net debt to EBITDA ratio stood at 2.7 times.

As expected for the time of the year for the first half, cash usage was elevated during the first six months, reflecting the typical seasonality of the business and the temporary draw on working capital. We anticipate a gradual recovery like we had on the last year as sales volumes normalize and working capital efficiency improves. I will now pass you over to the operator for the Q and A session.

Operator: We will now start the Q and A session. The first question is from Mr. Ben Thoreau from Barclays. Please go ahead.

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: We cannot hear you, Ben.

Federico Rodriguez, Chief Financial Officer, Alsea: Not your emails, Ben.

Christian Gurria, Chief Executive Officer, Alsea: Better?

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: Yep.

Christian Gurria, Chief Executive Officer, Alsea: Yes.

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: Now we can.

Ben Thoreau, Analyst, Barclays: Oh, okay. Okay. We now I can barely hear you, but we’re getting there. Does it work?

Federico Rodriguez, Chief Financial Officer, Alsea: Yeah. It works. Perfect.

Ben Thoreau, Analyst, Barclays: Technical issues. Well, we got this. First question, thanks for the patience as well here. So first question actually for you, Christian. Obviously, you got new into the role, but you’re with the firm for many, many years.

So maybe help us aside from what you’ve laid out within your prepared remarks about the strategic initiatives, etcetera. How you look at the business as came into the role new CEO? Where do you think are the biggest opportunities where you can potentially drive a tough growth?

Christian Gurria, Chief Executive Officer, Alsea: Thank you, Ben. Thank you for the question. Well, as you know, I beyond the twenty five years, I don’t for Federico.

Federico Rodriguez, Chief Financial Officer, Alsea: We stopped hearing you, but we understood the first question, the priorities for Christian, and we couldn’t hear the Christian, if you want to answer.

Christian Gurria, Chief Executive Officer, Alsea: Thank you, Ben. And, well, as you know, beyond the twenty five years I’ve been part of the Alsea family, I spent the last five months in a deeper onboarding across all the business. And and aligned with the priorities I shared at the beginning of my intervention, for me, it’s same store sales growth to traffic is is one of the number one priorities. And this is the what, but the how is through the development and intentional focus on elevating the talent of our operators in our stores and the operational base that supports our brands and our business. Talking about store managers mainly, our store managers manage businesses around $800,000 per year.

And we know that by unlocking their potential, we will, for sure, unlock the growth at our stores levels. And this will also intentionally elevate our district managers and regional directors of operations through the system. That is one part of the answer. And the other one is through remodelings. We know we are preparing a ratio of two:one, one store opening, two remodelings because we know this not only enhances the experience of our customers and brings additional traffic at the stores, but it’s also has a really good ROI and a very good payback.

So those are part of the key strategies and focuses that we will be working on as we move forward.

Ben Thoreau, Analyst, Barclays: Okay. Perfect. And then I hope you can hear me. Just one second real quick. As you look into the performance in Mexico, we’ve had a lot of other companies that called out adverse weather as a very negative effect, but it feels like you were a little more isolated.

Maybe any comment you can share as to why the performance actually was fairly decent in terms of traffic data same store sales within the operations in Mexico?

Federico Rodriguez, Chief Financial Officer, Alsea: Yes. Well, Meny, as we told in the first quarter, we have a positive calendar effect, not only in Mexico, but in the rest of the regions too. And obviously, that helps because Easter passed from March to April. But, additionally, we have seen the resiliency and the positive trends that we have seen in a lot of brands. Obviously, we are still suffering in Burger King.

In Burger King, we have the negative side of the story, but Starbucks is performing slightly better than in the first quarter with respect to the same store sales. We have a mid single digit in there. Domino’s Pizza had a super strong recovery, now performing in the high single digit and a significant part of this with transactions. And the strength of the full service restaurants in Mexico, both in Europe too. It is really significant, the trend that we have in that pillar for ALCEA.

We have from mid single digit same store sales to high single digit depending on the brand. And we are happy because of the innovation, the consistency in the message. So I think we have a clear path. Obviously, in the third quarter, we are see and we have only three three weeks of the month of July. We still have two months in the front, but we are we are seeing the same trend than we had in the second quarter.

Ben Thoreau, Analyst, Barclays: Okay, perfect. Thank you very

Christian Gurria, Chief Executive Officer, Alsea: much. And if I may complement, Federico, also, we were able to understand better what was the consumer needing. And with some value driven campaigns, we were able to activate traffic and we have some examples of what we have done in Beads in Spain with some of the higher value driven dishes. And also in Bibs Mexico is another example of menu of the day and how we have been able to respond to what the customer is looking for. And several initiatives like three for me in Chili’s, which has been really driving growth in these particular brands.

And like that, we have many other examples in the other brands how we reacted after seeing at the trend that we were looking at the beginning of the year.

Operator: Thank you very much for your question. Our next question is from Alejandro Fuchs from Itau BBA. Please go ahead.

Alejandro Fuchs, Analyst, Itau BBA: Thank you, operator. Hola, Cristian, Federico. Gerardo, congratulations on the results and Christian on the new role. My first question is for Christian, also a little more strategic similar to Ben. And then I have a follow-up.

Christian, you’ve been at the company obviously more than two decades, right? You have seen many cycles going not only in Mexico, the sector, but also the company. So wanted to maybe pick your brain a little bit on where do you see Alcea in the next ten years, right? You already shared with us some of the key strategies that you’re going to be focusing on, which is very appreciated. But if you could take us ten years from now, where would you see the company?

What would be, let’s say, the goal for you over that period? That will be the first question.

Speaker 6: Thank you,

Christian Gurria, Chief Executive Officer, Alsea: Alejandro. From my view and my perspective, I believe it’s an evolution and continuation of the current strategy we have in ANCE. First of all, by a very disciplined organic growth, prioritizing quality over quantity. Second, continuous and ongoing analysis of our existing portfolio of stores and brands, which is something, as you know, we work on this every day to improve performance and deliver stronger results. The third one I would say is we know that talent will be part of our success and has been so far.

And one of the biggest confirmations through my this year is that the biggest asset we have in ALSEIA is our people and our talent. So we will intentionally and continuously invest on developing the stronger talent. In this process of this portfolio management, we will also continue working on finding the right brands that are accretive to our portfolio, but at the same time, understand when is the life cycle of a brand into our portfolio coming to an end. So I can tell you that to summarize this, a very strong and solid portfolio of brands driven by the best talent and delivering the best cash conversions and returns in the industry with a very solid and disciplined plan for the next years.

Alejandro Fuchs, Analyst, Itau BBA: Thank you. Was very clear. And just one very quick follow-up, if I may. I want to touch upon maybe the part of the business that is going through a little bit of a slowdown, right? I think Mexico and Europe, very good and very impressive performance.

But maybe we can discuss a little bit of South America with excluding Argentina, semester sales in some of the brands. Maybe can you elaborate a little bit more on what’s going on in Chile, in some of the other countries, Colombia that you’re seeing and maybe what you expect for the second half? Well,

Federico Rodriguez, Chief Financial Officer, Alsea: you heard what’s happened Mexico regarding Europe. We increased in a mid single digit the same store sales with a significant recovery in Spain given the positive calendar effect, a better performance of Starbucks across the region, not only in Spain, but in France too. We’re improving sequentially the same store sales and the same for Portugal. And as said before, the food service restaurants pillar, which is, would say, around 50% of the total EBITDA for the region in Europe. The performance is great.

The openings are having a better payback, improving ROIC, ROI, sorry. The innovation that we are taking to the customer is amazing. As Christian mentioned, we are changing or we did a completely change of the menu in beeps and in Genos, and that is bringing, again, more traffic and traffic for the stores. We have improved the remodelings, and we are having a double digit increase in the same store sales where we have performed a change in the look and feel of the of the unit. And regarding Domino’s, you you can remember that last year, we launched the Crozantisima dough pizza.

That activate the brand, and we’re seeing an increase in the same store sales trend, especially in the delivery part. So we are quite happy regarding what is happening, not only in Europe, but in LatAm too. And unfortunately, the negative side of the story in South America, Argentina. Argentina has sequentially recovered apart, but, obviously, the inflation, it is still showing traffic pressure as the cost of living has been increasing, creating challenges for the consumption and the economy overall. And Colombia, as mentioned before, obviously, we’re improving.

We have seen a positive trend in the Domino’s Pizza business during the last twelve months. So we are quite happy with the part of Colombia, but obviously Argentina and Chile are still suffering.

Alejandro Fuchs, Analyst, Itau BBA: Super clear and congratulations again.

Christian Gurria, Chief Executive Officer, Alsea: Thank

Operator: you very much for your question. Our next question is from Mr. Thiago Jarvulin from Citi. Please go ahead.

Thiago Jarvulin, Analyst, Citi: Hello. Hello. Good morning. Good morning, Christian, Federico, Gerardo. Thank you for taking my questions.

I would like to explore two points here. The first one, so you were mentioning a little bit about the Domino’s performance in Mexico. Fantastic performance, by the way. Congrats. And just wondering if we could maybe discuss a little bit about the competitive markets here.

So how you’re seeing competition, how that played out in this quarter? In the previous 1Q, we saw the brands, if I’m not mistaken, posting same store sales at one and a half. This quarter, 8.9. So just wondering if this gap, it should continue going forward because it’s it’s a fantastic level. And and, yeah, I have a second question.

I I think I’ll just make it right now. Just if we can maybe discuss a little bit the full service restaurants also having fantastic performance, both Mexico and Spain. Just wondering what you’re seeing on specific brands, what are the top performance and maybe opportunities you’re seeing here? Do

Federico Rodriguez, Chief Financial Officer, Alsea: you want to start?

Christian Gurria, Chief Executive Officer, Alsea: Yes. Thank you, Thiago. Well, to your first question in terms of Domino’s Pizza and the performance of the brand. As we mentioned before, we are working in a very in an approach around the revenue management and product innovation. And this has clearly been recognized by the customer.

And in the beginning of the year, we were more following other type of initiatives. And by this shift into this revenue management approach, sticking to our core, to our business, which is about the quality of our product, elevating the experience, the delivery experience in our stores for our customers. Clearly, this is showing how the customer is positively responding. And this is, as mentioned before by Federico, initiatives like we had, particularly in Spain with Quasantissima and a solid portfolio of offers in Mexico for takeaway and also in delivery. This has clearly driven the additional traffic and shifted the trend that we had at the beginning of the year, again, by listening and understanding better what the customer needs were and the moment we were leaving and the ability or agility to adapt.

On your second question about the performance on our casual dining or full service restaurants, I believe part of the answer is consistency. We have been driven consistency across the last years and taking the necessary decisions internally to the brands that were we were having some gaps to catch up. And there are several examples of like in Spain with Foster’s Hollywood and the introduction of chicken in our portfolio was originally a very beef driven hamburger driven brand. And now chicken has become with this Nashville chicken campaign, we have seen clearly the customer responding in a very favorable way. And in the case of Mexico, the possibility to have clearly a value offer where we could provide a full service restaurant experience with very competitive and accessible prices has clearly been recognized by the customer and continue building on our platforms, like I mentioned before, like three for me in Chili’s, like many of the day in dips and Paradiso Italiano in Italianis, which clearly the customer has recognized and continues driving traffic and a solid consistent performance also by having strong operators in these brands and making sure that stability on our managers and having the best talent has also been paying up.

Federico Rodriguez, Chief Financial Officer, Alsea: And to complementing, Cristy and Tiago, all of the brands of the full service restaurants portfolio are performing from amid to a high single digit same store sales trend. So we are quite happy from P. F. Chan’s, The Cheesecake Factory. So we have a we never talk a lot from this part of the business, from this segment, but we are quite happy.

Last week, we opened one unit of The Cheesecake Factory in Puebla, and it has been amazing, the response of the people. 6,000 people per week. Obviously, that drives a lot of increase into penetration of the brand. So we have a lot of white space. And that’s for talking from for for the Cheesecake Factory, but Bips Bips in Spain this year will open from 15 to 20 units.

Obviously, specifications from to open one of these units is totally different from Domino’s Pizza or a Starbucks coffee store. So we are quite happy, and I think we are in the in the right path, especially with consistency. We do not want to increase prices. We want to preserve the traffic as we have mentioned from 2024 as of today.

Thiago Jarvulin, Analyst, Citi: No, this is fantastic. Very clear. Thank you very much and congrats on the results.

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: Thank you, Thiago. Thank you.

Operator: Thank you very much for your question. Our next question is from Mr. Thiago Bertolucci from Goldman Sachs. Please go ahead.

Thiago Bertolucci, Analyst, Goldman Sachs: Good morning, gentlemen. Thank you very much for the presentation. It’s always a pleasure to talk to you, Christian. Congrats on the new role. Best of luck.

It’s a good way to start, with a very solid quarter. Congrats on the results. I’ll just like to explore a little bit more the discussion we had year to date on coffee prices. Right? If I recall correctly when, we were in the first quarter conference call, you were mentioning that, you know, you were just sitting with Starbucks to negotiate coffee prices for the year, and we might start to see some of this pressure or, you know, some of this impact flowing to the p and l from the second quarter.

Fast forwarding to the end of the second quarter, actually, when I looked at your gross margin performance in Mexico. Right? Year on year, it’s getting better. Right? And then I I think the question is, when I try to tie up this with the speech where you’re being prudent on pricing, trying to protect traffic, and we know coffee probably is one of the most important raw materials adding pressure to your cost structure in the year, How much of this is already in the p and l in the numbers?

Right? Or how, you know, incrementally more this could weigh on on on the results by the back end of the year? This is my number one question. And then the second point, maybe it’s more for Federico. I know you reiterated the guidance and particularly on the top line, FX is playing a positive role so far.

But then, Frederico, when I look to your pre IFRS EBITDA particularly, right, it’s virtually flattish on the year to date comparison, right, up by low single digit. And, obviously, I know when we have been extensively discussing this, and thank you very much, Jerry, for the patience on going through this all over again, in all the conversations we have. There’s a difference between lease accounting, right, and the post and pre IFRS trends and recognition. But particularly on the pre IFRS, which is the one that matters for free cash flow, right, how confident you are with the mid single digit growth guidance? Thank you very much, guys.

Thiago Jarvulin, Analyst, Citi: Okay.

Federico Rodriguez, Chief Financial Officer, Alsea: Regarding the second question, Thiago, regarding the guidance. Obviously, right now, we have tailwinds because of the average FX that we used to build the guidance. As you can remember, we use 20.8 per dollar, around 30% of the total food basket to Fauciat is dollar index. And right now, we are below 19. There’s a lot of volatility.

I don’t know how long it’s going to last, this part of the equation. But as mentioned in the last quarter, with all the negative result contraction of around 300 basis points from a pre IFRS 16 view, we are quite positive that we will achieve the guidance. I think we have done all the job and a lot of reports from the different people covering the share are telling about the SG and A. I will say that, obviously, as mentioned, we are not putting the 100% of the inflation, the internal inflation increase to the ticket. We want to have positive trends because of the traffic.

But additionally, we have a lot of levers from our rent expense part. Obviously, all the cost of the structure inside Alcea. The ways to do a different scheduling into the stores. We have three three main levers into the into the p and l. The revenue, the cost of food, and the labor.

We’re increasing productivity using tools, using the digitization, trying to measure on a better way peak hours, the rush hour into resource and could offset part of the increase of the FX. But I would tell you that, obviously, we manage the business from a pre IFRS 16 part. Never we never see the post IFRS 16 and we are quite positive regarding achieving the guidance as we mentioned. Right now, we are having a low single digit in terms of EBITDA. But as you can remember, we have a lot of seasonality, sorry, in this business.

We have a relevant part of the revenue going from the the January to the end of sorry, the November to the January. So I am quite positive. Obviously, we are putting all the campaigns in form to be relevant this part. But with the trend that we see in the same store sales, I’m quite positive that we will achieve the the guidance. Sorry for the extension on the answer, Christian.

Christian Gurria, Chief Executive Officer, Alsea: Thank you, Frederic. Santiago, in the case of coffee, as you know, this commodity has been we are seeing increments out there in the market of almost 100%. Fortunately, due to the we are taking the leverage that we had with Starbucks and the high, high volumes of coffee they purchased, we have not felt this level of or this percentage of increment. We had felt some of it. But the way first of all, by leveraging this, we are able to offset some of these high increments on this particular commodity.

We are expecting for the second half of the year, particularly fourth quarter, an improvement on this particular coffee prices. But nevertheless, is what we can control is where we focus on and put our energy, Trying to avoid to pass this to the customer by working on our cost of food control, enhancing and putting focus on making sure that the controls we have at the store level are in place and are being strictly followed by a very disciplined revenue management strategy, which includes pricing, category management, optimization of our coal portfolio and LTOs. And so all this combined together with campaigns that are more, I would say, more effective, all this combined allow us to offset these types of things. And as you know, sometimes it’s coffee that goes up, sometimes other goods go down. So it’s an always on game.

And I believe that we know how to manage that without passing the cost directly to the customer. And complementing, Christian, we have a

Federico Rodriguez, Chief Financial Officer, Alsea: lot of different effects during a normal year. Right now, we have the pressure of the coffee. I would say that more than 50% of the price increase we have seen into the P and L of the first half, there’s a part of the increase only on coffee that we will see over the second half. But we did not count with the positive FX. Right now, we are seeing some decreases in some of the main SKUs that we use into the food basket of Alsea.

Only to to give you one figure, we have more than 4,000 SKUs into the total composition of the portfolio. Obviously, coffee, cheese, syrups are relevant because all the pizzas has cheese has cheese. But I would say that we have a lot of levers. And for example, we have an increase into the beef right now where we were recently launched the Nashville chicken into the Posters Hollywood. So we can change the mix and that’s part of the revenue management of this business.

Maybe we will not talk around the changes on the revenue management, the mix that we use, but all the value campaigns, the promotions are thinking from a gross margin protection. So we have the the less impact into the total mix of the EBITDA fee. Sorry.

Thiago Bertolucci, Analyst, Goldman Sachs: No. This is great. Thank you very much. And if I may, just a very quick follow-up here. This is in same store sales, right?

4.5% in the quarter, very nice print. As you recalled in the opening remarks, clearly benefited by a positive calendar, which hurt you in the beginning of the year, right? If I assume more or less a 100 basis points Yep. Then your underlying same store sales would be close to inflation in the quarter. Right?

What makes you think that we should see, you know, real same store sales growth Mexico by the back end of the year?

Federico Rodriguez, Chief Financial Officer, Alsea: Well, as you know, we do not split or we do not deliver the split among transactions and tickets. So I would say that we are not obsessed to have a post a positive figure or real figure because it is not only ticket. And I would say that less than 50% of this figure is coming from ticket. As in the first commentary, the mid single digit that we have across all the full service restaurants portfolio, 80% is coming from traffic. And that’s where we want to set out, say, not only for 2025, but for the future.

I know that the rest of the players, the main competitors in terms of coffee or pizza are doing a pass through of the 100% of the increases in coffee and cheese. We do not want to move to to that position because we can save this year, but we are gonna suffer in the long term.

Thiago Bertolucci, Analyst, Goldman Sachs: That’s great. Thank you very much again, guys, and congrats on the numbers.

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: Thank you, Gabriel. Thank you.

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

Federico Rodriguez, Chief Financial Officer, Alsea: Good morning. Thanks for taking my question. Congrats on your results. And Christian, welcome to this new position. Just a quick one regarding your CapEx plans for the future.

I mean, beyond 2025 in light of, I mean, considering digitalization, remodeling, just as you mentioned, as well. What are your plans going forward? Or what do you see them maybe as a percentage of sales, maybe as a total amount and maybe a potential breakdown as well? Well, Antonio, as you know, the guidance for CapEx in 2025 is around 6,000,000,000. Onethree of that figure is coming from openings, onethree is coming from maintenance when you change the AC or when you paint the wall, etcetera, etcetera.

And the remaining part for new projects, digitalization projects, the new facility in Guadalajara, etcetera. I would say, and maybe Curisem can add something regarding the opening remodelings for the future, Both for 2026 and ongoing, we’ll spend that figure, obviously, towards inflation, etcetera. But we are on the range to open around 200 new stores year over year to fulfill the more than 2,000 white space that we have delivered in the last days the different brands. And the the breakdown will be pretty much the same. One third openings plus remodeling, plus the maintenance, another one third.

That is that that would be the the idea.

Christian Gurria, Chief Executive Officer, Alsea: I don’t know if you want to Yes. For sure. Then and to complement Federico’s answer and a little bit following up on the breakdown. In the case of openings, we will clearly prioritize quality over quantity and the right brands and the right geographies. In terms of technology and the projects of technology, we will also focus on what can add technology for the customer and technology for our members, our team members, how to make their life easier, how to allow them to focus on the customer and on the business and try to simplify and reduce, I mean, tasks.

And in the case of the customer, obviously, the loyalty programs are, as you have seen, kind of clearly driven traffic and we continue building a strong base. So clearly, we are going to prioritize on these two to access. And as I mentioned before, in the case of remodelings, we have clearly seen a very positive ROI and positive payback on remodelings. Clearly, the FSR segment, we see a stronger response from our customers due to the nature of the business when we remodel the store. So we are going to continue to respond.

And as I mentioned before, a ratio of two:one, so two remodelings for every single opening. So that’s where we’re going to be on the maintenance CapEx that part of our business. Antonio, sorry. I’m so sorry, Antonio. Antonio.

Sure. Thanks. Thanks for

Thiago Jarvulin, Analyst, Citi: the color. And just a quick follow-up.

Federico Rodriguez, Chief Financial Officer, Alsea: You also mentioned in terms of digitalization and how you’re working on these different tech initiatives to reduce maybe staffing in certain hours and so on. How advanced are you in these type of programs maybe from a format or unit perspective?

Christian Gurria, Chief Executive Officer, Alsea: There are certain geographies where we are fully implemented. We have fully implemented these tools like in the case of Europe. In Mexico, we are more advanced in some brands than others, but this is work in progress. And likewise, in South America. Obviously, productivity has become more and more relevant in the past years.

We know that there is labor reforms across different geographies, and we continue trying to be ahead of the curve. And when we talk about productivity, we are also learning and we have previous experiences. Last six years, I was based in France. So this is one of the big learnings that we can bring and leverage to other geographies. And again, one is through how can we become more productive in terms of hands, but also how we can become more productive in terms of how do we make the life of our customers easier and the life of our staff at the stores more easier so they can focus on the customer and not on the task.

So this is ongoing on work in progress. And again, how can we get ahead of the curve and achieve these balance. Our

Operator: next question is from Mr. Froylan Mendez from JPMorgan. Go ahead.

Federico Rodriguez, Chief Financial Officer, Alsea: We cannot hear you. No. No. No.

Christian Gurria, Chief Executive Officer, Alsea: Can

Froylan Mendez, Analyst, JPMorgan: you hear me now?

Federico Rodriguez, Chief Financial Officer, Alsea: Yes.

Froylan Mendez, Analyst, JPMorgan: Perfect. So sorry about that. Thank you for taking my question. Congrats on the on the appointment and and your your first earnings call. Two questions.

One more of a follow-up to Tony’s question. This two to one ratio on remodeling versus opening. How does this compare to the past? Is this, let’s say, a higher ratio than before, so we should expect something incremental going forward on the remodeling side? And how does this compare to the industry standards in this ratio?

And the second question is on the portfolio optimization, a clear focus on your new strategy, Christian. Is this only Burger King and some of the full service offerings in South America? Or how much, let’s say, VAT do you see in the portfolio that needs to be optimized, and what is the timing to reach the ideal setup? Thank you so much.

Christian Gurria, Chief Executive Officer, Alsea: If you want to answer the second question first.

Federico Rodriguez, Chief Financial Officer, Alsea: Well, Faradhan, good morning. As we have mentioned before, obviously, we cannot disclose what are we thinking regarding the whole portfolio. We have a lot of collaborators. We have to improve the operations and to maximize the EBITDA of these businesses. But we are actively looking for new brands, portfolio optimization regarding brands and stores.

And obviously, we want to unlock all the value for the investor, for the shareholders. But we are obviously looking to sell some of the brands because we are focusing three in three main strategies, the quick service, the full service restaurants and the coffee shop. But we have something we’ll tell you in the next months

Christian Gurria, Chief Executive Officer, Alsea: regarding the And first regarding the first question about the rate of Roiland, in the past, we had a we were prioritizing, in a way, new store openings. And right now, we are going to, as I mentioned before, prioritize in the terms of the organic growth, quality over quantity, the right brands in the right geographies and with the best cash conversions. And likewise, in the case of remodelings, it’s the same approach, understanding that the ratio and the number of if we know we open an average of 200 stores, this means an average of 400 remodelings per year, so which is a higher number that we used to have in the past.

Federico Rodriguez, Chief Financial Officer, Alsea: Yes. That that is not changing the needle for the for the CapEx. Obviously, in the last couple of years, maybe we’re having a lower ratio, but it is not changing. Obviously, when we remodel a store, it is not like you are building a new store. So maybe you are spending around 15 to 20% depending on the brand of the initial CapEx and the returns, as Christian mentioned, are amazing.

You improved, for example, in the food service restaurants, above 8% in terms of traffic. So that is planned part of the strategy of Christian for the future.

Froylan Mendez, Analyst, JPMorgan: Excellent. Thank you very much.

Christian Gurria, Chief Executive Officer, Alsea: Thank you very much

Operator: for your question. Our next question is from Mr. Ulises Argote from Santander. Please go ahead.

Christian Gurria, Chief Executive Officer, Alsea: Hi, guys. Thanks for the straightforward questions here, and I echo my my colleagues in wishing you all the best in your in your new role, Christian. Just maybe taking advantage of you seeing the business here with, with a fresh set of eyes, I wanted to take your brain further on Burger King and maybe kind of following there on Frode’s last question. Also, obviously, the format continues to be challenging in in Mexico in particular, but you also mentioned Chile with with some very challenging trends there. Any plans that you can share maybe if there’s drivers for a turnaround?

Or should we think more this going the avenue of what you guys did in Europe for the forecast? In the case of Mexico, particularly as mentioned before, we have been able to shift the direction as we saw the trends at the beginning of the year. And we will continue following up the current strategy with the different examples that we have shared in terms of the FSR or Starbucks or Domino’s Pizza to continue delivering this performance. As we said before, we are seeing a very similar trend in Q2 to the one in Q3, sorry, to the one we saw during Q2. So we are confident that this is working.

And also, as mentioned before, that we’re last quarter, starting the last late October and the end of the year is where we have the stronger campaigns. And now we have had the time to do the work to have and prepare stronger campaigns. In the case of Burger King, as we mentioned before, we continue seeing a not clear recovery. So we are working with the teams and with the brand to continue understanding how we can drive the and reactivate the traffic and focusing again on what we can learn and understand and listen to the customer. But we see a more flat trend as we move forward.

And in the case of Chile, we had this effect from the strike, particularly in Starbucks. We have seen a slower recovery than what we expected. But there is the recovery is there, but it’s lower. So we expect to continue following this trend with a slow a slight recovery and with a positive trend as we went as we go through the year.

Operator: Our next question is from mister Alvaro Garcia from BTG Pactual. Please go ahead.

Speaker 6: Hi. Can you hear me?

Federico Rodriguez, Chief Financial Officer, Alsea: Yes. Great.

Speaker 6: I have two questions. One for Christian and one for Feder. One for Christian on Starbucks in France. We seem to have found a floor on on store productivity in France, and I would love to sort of gauge where you are from a conviction standpoint on new openings. Obviously, a couple years ago, a big chunk of your openings were gonna come from France.

How do you feel sort of finding this floor on new openings in Starbucks in France? And then for Fete, on SG and A in Mexico, we were a bit surprised with, yeah, how low s g and a was this quarter, both on sort of nonoperational expenses and operational expenses. If you could maybe comment and give some more detail on on how that happened, that’d be very helpful. Thank you.

Christian Gurria, Chief Executive Officer, Alsea: Thank you, Alvaro. In the case of France and Starbucks, we we continue seeing positive trends trend in terms of traffic recovery, which has been slower than we expected. Nevertheless, we continue seeing a positive trend on this on traffic. We also expect that the summer is going to be stronger by when we compare to previous year with the impact negative impact of the Olympic Games. So we know there will be additional traffic and we know there will be better performance in terms of same store sales.

We have we launched a very specific plan, three year plan to drive and to change this to shift this trend. And we are already seeing how this is paying off with the figures we’re seeing. In the case of store growth, as you answered as you asked, again, we are going to continue prioritizing quality over quantity and continue growing through our franchisees and through company owned stores. As you know, in France, it’s the only market where we have a franchisee model in Starbucks. And we are working with our franchisees to continue driving this growth and at the same time, continue gaining market share in the market, both with a very, I would say, boutique approach in the market.

Federico Rodriguez, Chief Financial Officer, Alsea: And for the second question, Alvaro, as I mentioned, more than eighteen months ago, I knew that there was a little bit of grading to the bottom part Obviously, we have been growing during the last twenty years, crossing the Atlantic, going to France, acquiring a lot of different transactions. And we were not available to consolidate all the synergies. And what I’m talking about, it is not around the service on the stores. Obviously, we want to increase productivity because it is good and we have a lot of different tools, not only internal, from Domino’s Pizza, from Starbucks, etcetera.

And we have to lever the business in there to have so much partners as we can behind the bar for the Starbucks coffee in the rush hour both to have less people when we are opening the stores, for example, in the case of border restaurants or a full service restaurants in Mexico or Europe. So I would say one of the levers is productivity. We are increasing the productivity across all the different regions and brands. The second one, we are re renegotiating all the different fixed services, those that you can imagine, all the marketing fees, agencies that we have, all the layer lawyer fees that we that we used to pay. Obviously, we want to have a cross services across in the different in the different areas, in the different regions.

For example, one treasury that can cover Alcea, not one in Spain, one in Mexico, one in Chile, one in Argentina. Obviously, it is not easy to do, but that’s part of my job, and that’s the kind of efficiencies that we are finding in the bottom part. Obviously, we have more efficiencies in the long term. We are not capture that in the next three or six months, but it is an ongoing process of finding these kind of efficiencies. And obviously, Christian has found a lot of potential synergies across productivity revenue management into the different stores with the induction process that he has lived during the last six months.

Speaker 6: Great. I’m gonna do one other follow-up because we’ve been asked this a lot. You know, we’ve seen a lot of weakness from beverage players. That was a great answer, Freda. Thank you for that.

We’ve seen a lot of weakness from beverage players in the second quarter. Obviously, a boatload of rain in June in the center of the country and sort of across the whole country. So in the context of Starbucks Mexico, you know, obviously, the mix of beverages, specifically cold beverages, has really picked up over the last couple of years. Was that a specific category that saw weakness or not really at Starbucks Mexico this quarter?

Christian Gurria, Chief Executive Officer, Alsea: No. I I believe on the contrary, I believe it’s one of our strongest categories due to the mix that we have and the offer both core and LTO offer that we have. When I mean LTO is the seasonal offerings, sorry. We have a very, very strong portfolio that not only responds to seasonality and weather changes, but also responds to dayparts and moments of consumption. So we have a very strong coal beverage portfolio, which responds not because it’s not only a specific city.

Sometimes you can be having 40 degrees in the South and 10 degrees on the North. So this core offer together and complemented by our seasonal offerings are, I would say, which includes both innovation and our core portfolio are clearly drivers of traffic not only today but historically. So we continue on this trend and adjusting and adapting to trends on ingredients, to trends on the beverage profiles. And having the support of a partner like Starbucks clearly allows us to push on that very many months ahead of the

Ben Thoreau, Analyst, Barclays: curve. And

Federico Rodriguez, Chief Financial Officer, Alsea: if I may add, complementing Christian’s answer, the hard figure, obviously, I have just We asked for this have increased more than 50% the cold beverage for Starbucks coffee in Mexico. I don’t have, obviously, the categories for the rest of the regions, but a Starbucks Mexico is most than 80% of the total mix of the of the pillar. That’s it. Yeah. It’s positive.

Christian Gurria, Chief Executive Officer, Alsea: And we can adapt to either geographies. You can see different behaviors. In Europe, 60% of the traffic is driven more in the afternoon with a more focus on cold beverage. In the case of Mexico, it’s more a morning traffic, more on the espresso category. So I believe this ability to adjust and adapt and to continue always innovating is one of our stronger assets.

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: And if I may, Alvaro, related to your question, and this is not for Starbucks, but for Domino’s Pizza. Some the good performance of the quarter, it was also related to a very strong June month that, I would say, the rainy season on the delivery type of orders excelled. So that was also one of the reasons why Domino’s to some others other question that we received, it was also driven by this effect.

Speaker 6: Awesome. Thank you very

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: much. Thank you

Operator: very much for your question. Our next question is from Mr. Julio Cesar Martinez Castro from Sura Investments. Please go ahead.

Christian Gurria, Chief Executive Officer, Alsea0: Thank you for the call. My question is related to Joseas’ overall growth strategy for 2026. Will the company prioritize growth through innovation such as introducing new brands and exploring new segments rather than focusing primarily on increasing market share through pricing strategies. We saw a reduction in in the Burger King brand, and we later saw an announcement of introducing chipotle into the Mexican market. And my follow-up question is specifically regarding to Chipotle.

What was the overall rationale and strategic, vision behind bringing chipotle into the Mexican market for 2026?

Federico Rodriguez, Chief Financial Officer, Alsea: Okay. I will answer the first question regarding capital allocation, Julio. We have three main levers for the capital allocation. Obviously, the organic growth. As mentioned before, we have more than 2,000 openings footprint for the next ten years.

I will say that the rhythm will be from 200, two twenty stores year over year, including the franchisees. The second one is portfolio management. Obviously, we are looking, as said before, to what to introduce into the portfolio as we did with Chipotle a couple of months ago. And what are the stores that we are going to close because the neighborhood has changed or the kind of brands where we want to rationalize the portfolio. Obviously, it is not only Burger King or the casual dining part in South America.

We are analyzing the 100% of the portfolio where we should be, why we should compete in that sector. And if we are going to grow because, obviously, maybe we have an extraordinary performance of the unit. Both we have three units, and we are not available to open 100 in the upcoming future. So we are not we do not want to compete in there. That would be regarding portfolio management.

And the third part is to return to shareholders through the payment of dividends. We have started in 2024 with the payment of dividends. This year, we have canceled around 11,700,000.0 shares in the last quarter, and we’ll continue with the buyback slash dividend strategy for the upcoming years. And regarding the second question for Chipotle and the rationale.

Christian Gurria, Chief Executive Officer, Alsea: Yes. In the case of Chipotle, our DNA, it’s always looking for opportunities. And this is part of the dynamics of Alsea, and we have always been looking for opportunities. There are not too many brands out there with the size of Chipotle and the potential. And we clearly see in Chipotle a very strong potential.

It’s also important to mention that we are not competing with Tacos. This is not our focus. Here is about bringing a brand in what is called the fast casual segment, where we can have a very high quality product with extraordinary ingredients, proteins with a healthy profile that will be complementing the existing offer that there is in the market. We clearly see a very big potential with a very good value proposition, which is what Chipotle is going to bring. So we are very obviously, we have a very non CapEx intensive commitment with Chipotle to develop the brand, and we are very optimistic of what the results are that we can expect.

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: Thank you. Thank you very

Operator: much for your question. That was the last question. I will now hand over to Mr. Christian Guria for final comments.

Christian Gurria, Chief Executive Officer, Alsea: Thank you very much, everyone. And before we conclude, we would like to thank you for your participation and interest in our quarterly conference call. We deeply value your trust, the trust you place in our company. And as a new CEO, I reaffirm our commitment to transparency and sustainable growth. If you have any additional questions or require further information, our Investor Relations team is always available to assist you.

We wish you an excellent day and look forward to having you join us for our next quarterly call update in October. Thank you very much. Thank you, Gerardo. Thank you, Federico.

Gerardo Lozoya, Head of Investor Relations and Corporate Affairs, Alsea: Very Thank much. You very much.

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

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