Grupo Gigante (GIGANTE) Q3 2023 earnings summary

Executive summary

• Q3 revenue rose 4.4% YoY to MXN 9,192.4m; gross margin expanded 120 bps to 40.4%, EBITDA increased 17.5% to MXN 1,456m, and consolidated net income grew 56.8% to MXN 864.9m.

• 9M revenue increased 6.7% to MXN 25,587.2m and EBITDA rose 9.6% to MXN 3,639.2m; net income advanced 21.6% to MXN 1,412.3m.

• September refinancing replaced near-term bank debt with seven-year facilities, reducing current bank loans 70.2% and extending maturities to September 2030.

Financial highlights

• Q3 same-store sales increased 3.0% to MXN 8,835.9m; 9M same-store sales rose 5.6% to MXN 24,651.2m.

• Q3 cost of sales was MXN 5,481.1m, up 2.4% YoY; it declined to 59.6% of revenue from 60.8%, lifting gross profit 7.5% to MXN 3,711.3m.

• Q3 administrative expenses, excluding investment-property fair-value gains, increased 6.7% to MXN 2,777.7m; the fair-value benefit was MXN 682.9m vs MXN 356.9m in Q3 2022.

• 9M gross profit grew 9.9% to MXN 10,385.0m, with gross margin at 40.6% vs 39.4%; adjusted for property fair-value changes, administrative expenses rose 11.1% to MXN 8,155.7m.

• 9M net financial expense rose 20.9% to MXN 1,102.8m; the increase was attributed mainly to changed accounting for derivative valuations, moved from earnings in 2022 to equity in 2023.

Outlook and guidance

• Strategic priorities include disciplined debt management, profitable organic growth, e-commerce, technology and logistics synergies, digital transformation, efficiency, and selective expansion in Mexico and abroad.

• Management cited economic reactivation as a principal contributor to 9M EBITDA growth; strategy also includes developing Casaideas as the successor concept to The Home Store.