Grupo Gigante (GIGANTE) Q1 2023 earnings summary

Executive summary

• Q1 2023 revenue rose 9.5% YoY to MXN 8,510.6 mn; gross margin improved to 40.3%, while consolidated net income fell 24.4% to MXN 285.3 mn, mainly on higher financing costs.

• Same-store sales increased 9.3% YoY to MXN 8,249.6 mn; management-defined EBITDA grew 16.3% to MXN 1,213 mn.

Financial highlights

• Revenue was MXN 8,510.6 mn, up 9.5% YoY; cost of sales rose 7.5% to MXN 5,081.6 mn and equaled 59.7% of revenue in both periods.

• Gross profit increased 12.7% to MXN 3,428.9 mn; gross margin was 40.3% vs. 39.2% in Q1 2022.

• Operating income was MXN 764.8 mn vs. MXN 738.5 mn; net income was MXN 285.3 mn vs. MXN 377.6 mn.

• Net finance expense was MXN 405.0 mn, up 79.9% YoY, mainly from higher lease-financing costs and derivative fair-value accounting changes; income from joint ventures and associates rose 22.4% to MXN 89.6 mn.

• Basic and diluted EPS was MXN 0.25 vs. MXN 0.35; continuing-operations EPS was MXN 0.26 vs. MXN 0.36.

Outlook and guidance

• Strategy emphasizes selective organic growth focused on cash generation and profitability, e-commerce, shared technology/logistics capabilities, efficiency, digital transformation, and selective expansion in and beyond Mexico.

• Management plans to maintain prudent debt levels and pursue improved financing terms; COVID-19 impacts remain uncertain and may affect future performance.

• Continued recovery is expected to be gradual; management cited improved economic activity and consumer confidence, especially supporting restaurant cash flows, while monitoring pandemic and market developments.