La Comer S.A.B. de C.V. Jerónimo Cobián | Associated Analyst Historical News Consumer Goods [email protected] Ext. 1193 Enrique Mendoza | Sr. Analyst Last updated on April 30, 2021 [email protected] Actinver: (55) 1103 6600 LACOMER (Mkt. Perform): 1Q-2021 Conference Call Highlights During the earnings conference call, the company disclosed its new store openings (i.e., project investments) for 2021 by format; LACOMER would expect to open 2-3 (+1 remodeling), 1-2, and 1- 2 Fresko, City Market, and La Comer units respectively, deploying ~P$3,000 m of CapEx throughout 2021. Furthermore, the company is currently working to comply with the new outsourcing reform; note that, the potential impact on LACOMER operations remains unknown. After the news, we reiterate our ‘Market Perform’ rating on the name.

April 29, 2021 LACOMER (Mkt. Perform): Positive 1Q-2021; Below EPS Est. The company delivered positive Q-metrics, showing a still sharp top line and operating performance vs. the pre-pandemic. Reported results were in line in terms of revenues and EBITDA, although earnings per share (EPS) fell short compared to our estimates and the consensus. Year-over-year (YoY), total sales came-in +6.9% higher, EBITDA grew +3.5%, and EPS decreased by -12.5%. Relative to the consensus, results were 0.0%, -2.7%, and -5.5% for revenues, EBITDA, and EPS, respectively. After the earnings announcement, we are keeping unchanged our ‘Market Perform’ rating on LACOMER. Full report here

April 20, 2021 Consumer Goods Sector: Self-Service Industry—Model Updates We have updated our macroeconomic and operating expectations considering the current phase of the pandemic and the implications on the valuations of the self-service chains under coverage. Consequently, we have fine-tuned our short, mid, and long-term estimates through alternate scenarios, mainly taking in mind the global Covid-19 vaccine roll-out throughout 2021, bringing once again shifts in the social mobility trends, which in our view will remain as a key driver for the industry’s results. Moreover, despite an uncertain economic and political environment in , we continue to anticipate that self-service chains will keep showing sustained growth and a highly resilient profile in the long-term, mainly supported by its: (1) essentiality, (2) further room for physical stores and the Omni-channel formats, and (3) competitive profitability with room for improvement. Full report here

February 26, 2021

Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com LACOMER (Underperform): 4Q20 Earnings Conference Call We highlight the management’s 4Q-2020 earnings conference call remarks regarding: (1) Online sales, which accounted for ~12% of the consolidated top-line during FY2020, reflecting a solid performance (above the industry avg.) throughout this type of channels. (2) CapEx deployment should be around P$3,000 for 2021 (~1.7x higher vs. 2020). (3) LACOMER would expect to open 6 new units (most of them Fresko stores) during the ongoing year, in-line with our current openings forecast. (4) Additionally, the company’s current expansion plan will continue to focus primarily on regions where LACOMER is already active.

February 25, 2021 LACOMER (Underperform): Positive 4Q20, Below EPS Estimates Once more, the company delivered a positive 4Q-2020. Reported results were below our estimates and consensus in terms of earnings per share (EPS). Year-over-year, total sales (TS) came- in 19.9% higher, EBITDA grew 32.2%, and EPS decreased by 7.0%. Relative to the consensus, these results were +0.2%, +4.7%, and -17.2%, respectively. Despite the positive operating results, we keep unchanged our ‘Underperform’ rating and year- end 2021E price target of P$40.10 /share for LACOMER, as we believe the name currently trades ahead of its fair-value in the short-term. Full report here

February 16, 2020 Consumer Goods Sector: Expecting Another Positive Quarter As the pandemic continues to disrupt industries across the globe, the Mexican self-service industry has been able to capitalize from the crisis and the 4Q-2020 earnings season will not be the exception. We anticipate the last months of 2020 to follow almost the same positive tone of past quarters, although showing a deceleration in demand due to less strict social distancing measures and the repercussions of the challenging economic environment, in our view. Note that, companies with a more prominent presence in the central and metropolitan regions of Mexico (e.g., LACOMER and WALMEX) should keep sharply outperforming the overall competition (i.e., ANTAD), as social mobility in these areas remained very low (favorable trend) during the quarter due to high infection and hospital occupancy rates. Full report here

December 2, 2020 LACOMER (Underperform): Sound Long-Term Prospects We have updated our coverage on LACOMER, reviewing our expectations for the company’s operations during and post the ongoing pandemic. After fine-tuning our earnings model, we reiterate our positive view on LACOMER in the long-term following its solid prospects across the Mexican self-service

2 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com industry; however, at the current price levels at which the share is trading, we find it already stands at a not-so-attractive valuation in a short-term horizon. That being said, after an extraordinary outperformance (i.e., alpha) of +80.5% vs. the IPC (year-to-date), we have decided to downgrade our rating from ‘Outperform’ to ‘Underperform’. Full report here

November 12, 2020 Consumption Sector: ANTAD—SSS Turned Positive In October The National Association of Self-Service & Department Stores (ANTAD, acronym in Spanish) released its October 2020 results. At the consolidated, total sales and same-store sales (SSS) performed YoY by +5.5% and +2.8%, respectively, reflecting a full recovery since the pandemic affected the Mexican retailers’ operations in late March. We highlight the recovery throughout specialized stores, turning positive for the first time since the sanitary crisis started; SSS increased YoY by 4.1%. On the other hand, department stores’ SSS posted a slight YoY decrease of 0.9%, retreating to negative territory right after growing 3.5% in September. Furthermore, the self-service industry’ SSS results (+4.8% YoY) filled solid growth rates, breaking two consecutive months of deceleration.

October 23, 2020 LACOMER (Outperform): 3Q20 Earnings Conference Highlights ECC highlights, as in previous quarters the company remarked the fact that they have reviewed LACOMER’s expansion plan due to the structural changes caused by the ongoing pandemic; even though the intention is to open further new stores throughout 2021 to compensate the openings that weren’t executed during the current year, the number of new units will undoubtedly be subject to the evolution of the pandemic. Currently, we estimate eight new store openings during 2021. We reiterate our positive stance on the name.

October 22, 2020 LACOMER (Outperform): Positive 3Q20 Report, In-Line With Est. The company delivered positive 3Q20 results, sharply profiting through the pandemic’s consumer trends, once again. Same- store sales (SSS) surged 19.6% YoY and margins kept experiencing solid YoY expansions. Total sales (TS) came-in 24.7% higher YoY, EBITDA posted a 36.8% YoY growth, and earnings per share (EPS) increased by 53.2% YoY; these results were +1.8%, +3.5%, and -2.2% vs. the consensus, respectively. We reiterate our ‘Outperform’ rating on LACOMER. Full report here

October 13, 2020

3 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Consumption Sector: ANTAD—SSS Almost Flat In September The National Association of Self-Service & Department Stores released its results of September 2020. At the consolidated, total sales (TS) and same-store sales (SSS) performed YoY by +2.6% and -0.3%, respectively. The recovery throughout discretionary Mexican retailers continues; department stores posted the first YoY SSS growth (+3.5%) since the pandemic started in late March, however, specialized stores keep facing challenges to register a faster recovery, SSS were -3.5% YoY. The self-service industry’ SSS results (+0.7% YoY) filled the lowest growth rate of 2020, following a clear deceleration since the gradual re-opening started in June across Mexico. Note that, the ANTAD ended the 3Q20 with an average SSS YoY variation of -4.1% and -8.0% in nominal and real terms, respectively.

September 10, 2020

LACOMER (Outperform): Opens One New “La Comer” Store Announced that it has inaugurated a new store (“La Comer” format) in the state of “”, Mexico, representing La Comer’s first store under operation across this state. The new unit required a total investment of P$281 M (~US$13 M) and has a sales floor area (SFA) of ~5,500 m2, adding 1.8% to the company’s total SFA. After this announcement, the company now operates 73 stores across the Mexican territory; it is worth mentioning that, we do not expect any more new openings for the rest of 2020, while we estimate La Comer to be able to open 8 new units during 2021. We reiterate our ‘Outperform’ rating, at the same time we reinforce our solid long-term stance on the name.

August 21, 2020

Consumption Sector: Consumer Confidence Continue Improving According to the National Institute of Statistics & Geography (INEGI, acronym in Spanish), the consumer confidence index in Mexico reached 34.4 pts in July (vs. 32.0 in June), keeping its sequential recovery since May amid the ongoing sanitary crisis; however, the consumer confidence is still far away from the pre- crisis levels of 44 pts. Note that, the recent performance of the indicator follows so far the gradual economic re-opening, as the country began to reactive some sectors starting June.

August 12, 2020

Consumption Sector: ANTAD—SSS Decreased 9.1% In July The National Association of Self-Service & Department Stores (ANTAD, acronym in Spanish) released its official results of July 2020. At the consolidated, total sales (TS) and same-store sales (SSS) decreased YoY by 6.5% and 9.1%, respectively. Note that, July results show the lowest YoY decline since the beginning of the crisis and the first single-digit drop; it is worth mentioning that, although department and specialized stores’ SSS keep posting YoY decreases (-22.6% and -9.9%, respectively), we can observe a significant recovery reflecting the gradual economic re-opening

4 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com throughout Mexico. Furthermore, self-service stores continue showing a solid defensive profile, posting healthy SSS results (+3.1% YoY) that seem to be close to reaching normalized growth rates for the rest of the year under the ongoing pandemic.

July 24, 2020

LACOMER (Outperform): 2Q20 Earnings Conference Call Highlights (1) Already with a foot on the 3Q20, the company continues to experience a high demand across its stores, showing few signs of deceleration; (2) would expect to open 1 additional store during the current year (2 new openings in total) and 8-10 new units throughout 2021; also, (3) the company’s e-commerce platform (“La Comer en tu Casa”) represented 9.9% of the sales, being the most important sales strategy in the current environment. We reiterate our ‘Market Outperform’ rating on LACOMER, at the same time we maintain our positive long-term view due to its solid growth prospects.

July 23, 2020

LACOMER (Outperform): Positive 2Q20 Report, Above Expectations The company delivered positive 2Q20 results, as same-store sales surged 22.7% and margins kept experiencing sharp expansions YoY. Total sales came-in 30.7% higher YoY, EBITDA posted a 43.6% YoY growth, and the net income incremented by a sound 65.9% YoY. Relative to the consensus, results were +8.8%, +17.6%, and +19.5%, respectively. After fine-tuning our estimates, we reiterate or ‘Market Outperform’ rating on LACOMER, as we consider the company’s prospects as highly solid to face the rest of 2020; also, its long-term growth potential will be reinforced in our view, relying on a greater financial strength after the ongoing sanitary crisis, which will enable the company to continue growing steadily. Full report here

July 14, 2020

Consumption Sector: ANTAD—SSS Declined 17.9% In June The National Association of Self-Service & Department Stores (ANTAD, acronym in Spanish) released its official results of June 2020; at the consolidated, total sales (TS) and same-store sales (SSS) decreased YoY by 15.3% and 17.9%, respectively. Note that, reported results were above expectations and continue to show a sequential recovery since April, which reflected for the first time the full impact of the Covid-19 pandemic on the Mexican department and specialized stores. Furthermore, self-service stores filled their lowest growth rates since the contingency began, however, results keep being healthy at the same time the industry will continue to show a high defensive profile throughout the sanitary crisis.

July 9, 2020

LACOMER (Outperform): Opens Its Second “Fresko” In “Querétaro”

5 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Announced that it has inaugurated a new store (“Fresko Milenio”) in the state of “Querétaro”, Mexico, representing the first opening of the year and which required a total investment of P$323 M (~US$14 M). The new commercial unit has a sales floor area (SFA) of ~4,029 m2, adding 1.3% to La Comer’s total SFA. Currently, the company operates 72 stores across the Mexican territory, at the same time, we expect 9 new store openings during the 2020-2021 period (1 more in 2020 and 8 in 2021), retrieving delayed openings within the next year due to the ongoing sanitary crisis.

May 04, 2020

LACOMER (Outperform): 1Q20 Earnings Conference Call Highlights Without providing any official figures, a lower CapEx is expected than the one initially stipulated for the full year. New store openings could reach 2 or 3 units. Also, excluding aggregators, the e-commerce sales represented approximately 8% of the total (~5% including aggregators). Overall, it was mentioned that it is still too early to know the final implications of the contingency, so some decisions will be made accordingly to the evolution of the ongoing environment. We reiterate our Outperform rating on LACOMER following our positive outlook for the industry & the company's capabilities to successfully operate amid the sanitary crisis.

April 30, 2020

LACOMER (Outperform): Approves A P$0.40 /Share Dividend Payment The company held its Ordinary Annual Meeting, where it approved a P$0.40 per share dividend payment (~1.6% yield). The payout will be effected on Friday, May 8, 2020 (ex-date on May 6).

April 30, 2020 LACOMER (Outperform): Positive 1Q20 Report, Above Expectations Positive 1Q20 results, above both our estimates & the street’s consensus. Sales came-in 25.6% higher YoY, EBITDA posted a 42.6% YoY growth, & the majority net income incremented by a sound 64.2% YoY. Relative to the consensus, results were +5.5%, +21.3%, & +28.9%, respectively. We consider the company’s earnings growth rate (+30%E YoY) for the full-year to endorse its value amid the ongoing & unprecedented global COVID-19 sanitary crisis; currently, La Comer trades at 20.6x P/E (fwd. 2020E). Note that, the company has a solid balance sheet, with cash on hand of P$2,865 M & debt-free (excluding leases obligations). Full report here

April 21, 2020

6 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com LACOMER (Mkt. Perform) Proposes Dividend Totaling P$434 M

Announced that it will propose at the Annual Ordinary Meeting (April 29, 2020) the distribution of a dividend for a total amount of P$434.4 M, which represents P$0.40 per share and a dividend yield of ~1.9%. We reiterate our Market Perform rating on LACOMER following the news.

April 17, 2020 Consumer Goods 1Q20 previews: Positive results anticipated

We expect the Consumer Goods sector to post positive results across the board during the 1Q20 earnings season. Both February additional day (“leap year”) & the consumers’ panic buying during March amid the COVID-19 lockdown fears will surge the sector’s top-line, in our view. Note that, during the quarter, the self-service chains associated to the National Association of Self-Service & Department Stores (ANTAD, acronym in Spanish) posted total stores (TS) & same-store sales (SSS) increasing YoY by 13.1% & 10.7%, respectively. Full report here

February 27, 2020 LACOMER (Mkt. Perform, PT P$26.10) Positive 4Q19 Report, above expectations; sharp top- line growth

La Comer delivered sound 4Q19 results, reported figures came-in above our estimates and the street’s consensus. Sales (P$5,749 M) increased 13.4% YoY, EBITDA (P$482 M) grew 16.1% YoY, and majority net income (P$279 M) posted a 30.6% YoY decrease; these results were +1.8%, +10.0%, and +23.5 vs. our estimates, for sales, EBITDA, and EPS, respectively. Relative to the consensus, results were +1.0%, +6.7%, and +39.9%, respectively. After fine- tuning our earnings model, we reiterate our Market Perform rating while keeping unchanged our YE2020E price target at P$26.10 /share. Full report here

February 7, 2020 Consumer Goods Sector 4Q19 Previews: neutral results anticipated; consumption pace remains slow-going

Overall, we expect neutral results during the 4Q19

7 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com earnings season for the Consumer Goods sector. During the quarter, self-service chains associated to the ANTAD and the industry leader () posted same-store sales increasing YoY by 3.4% and 3.9% YoY, respectively. Considering the local inflation rate ended at stable levels of +2.8% YoY, we can assume self-service stores’ traffic has been the component that has decelerated the most. Digging into traffic, we believe its slow pace reflects consumer’s both real confidence and purchasing power. Note that, Mexico’s consumer confidence index increased YoY (43.5 avg. in 4Q19 vs. 42.7 avg. in 4Q18), although this indicator has not matched the industry's results, so far. Full report here

December 16, 2019 LACOMER (Mkt. Perform, PT P$26.10) Upgrading to Market Perform; a more appealing valuation at the current levels

After fine-tuning our earnings model and assuming a more conservative new store openings plan for the following years, we reduced our YE2020E price target from P$27.20 to P$26.10 /share. However, in recent weeks, the share price has dropped approximately 9% and the current level implies a potential return of 10.7% to our price target; therefore, we are upgrading our rating from Underperform to Market Perform. We forecast strong top-line growth for the next couple years, which is significantly higher than the industry’s performance, supported by La Comer’s clients’ high purchasing power and the company’s effective store location strategy. Full report here

December 13, 2019 LACOMER (Underperform, PT P$27.20) Opens a new “La Comer” store in Queretaro

The company announced it has opened a new “La Comer” store in Queretaro for a total investment of P$254 M. The store has a sales floor area of more than 6,530 m² and is located in “Ubika El Refugio”, one of Queretaro’s higher growth zones. With this opening, La Comer has inaugurated 6 stores so far in 2019, which implies a total investment of P$1,775 M. Currently, the company operates 71 units.

November 14, 2019 LACOMER (Underperform, PT P$27.20)

8 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Opens a new “Fresko” store in

The company announced it has opened its fourth “Fresko” store in Guadalajara for a total investment of P$202 M. The store has a sales floor area of more than 4,700 m² and is located in Midtown , one of Guadalajara’s newest premium shopping malls. With this opening, La Comer has inaugurated five stores so far in 2019, which implies a total investment of P$1,516 M. We consider the announcement as positive, at the same time the company keeps aiming to accomplish its openings guidance for 2022 of +100 stores; currently, the company operates 70 units. We reiterate our Underperform rating, as we believe the current share price is almost fairly valued.

October 24, 2019 LACOMER (Underperform, PT P$27.20) Positive 3Q19 report, in-line with expectations; reiterating Underperform

3Q19 Results. La Comer posted a positive report and delivered results in-line with our estimates and the street’s consensus. Sales (P$5,518 M) grew 11.9% higher YoY, on a comparable basis the EBITDA (P$448 M) increased 12.8% YoY, and net income (P$230 M) posted an 82.1% YoY increment; these results were +0.7%, +0.2%, and +10.1% vs. our estimates, respectively. Relative to the consensus, results were –2.0%, 0% and +1.3%. Valuation. After fine-tuning our earnings model, we reiterate our Underperform rating and P$27.20/ share price target (YE-2020), since we believe despite the company’s positive figures, the current share price trades on top of its fair value. Full report here

October 18, 2019 Consumer Goods 3Q19 Previews. Neutral results in the overall; introducing 2020 Price Targets and New Ratings

We expect mixed results during the 3Q19 earnings season for the Consumer Goods sector. LACOMER and LAB are expected to outperform this quarter, while and WALMEX lag behind due to a deceleration in Mexican consumption. As mentioned in previous reports, the consumer confidence indicator has not reflected the Mexicans’ real spending power; consumption companies’ sales performance have not matched the one of the index in 2019. It is key to mention that, despite the government’s new social program initiatives, the self-service industry has

9 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com not been able to increase same-store sales (SSS) on top of the inflation rate. Full report here

September 17, 2019 LACOMER (Hold, PT P$25.00) Downgrading to Hold. The strong growth has been fully incorporated in the stock price

Solid, Above-Industry Operations. First we would like to highlight the company’s strong operating figures during the 1H19, with an extraordinary 7.1% YoY increase in same- store-sales (SSS) and 13.2% YoY in total sales (TS). This has been well priced-in in LACOMER’s price, in our view. Going forward, our 2018-2024E CAGR expectations include: +8.2% for sales, +13.5% for EBITDA and +8.7% for EPS. Regarding openings, which has been another clear driver, recall that the company has opened 4 stores so far this year, with which it has reached a total of 69 units. For 2019, we still expect the company to add 7 units, for a total number of openings that would be falling slightly below the company’s annual guidance of 8 to 10. Full report here

july 25, 2019 LACOMER (BUY, PT P$25.0) 2Q19 Results - Positive Report, strong delivery continues

The company posted positive results at the top-line, as TS and SSS reported 11.9% and 6.9% YoY increases, respectively. Strong in-store execution added to the 6 openings in the last 12 months with a 13.6% YoY hike in sales floor. Margins continue to expand at all levels. La Comer posted a 12% YoY increase in sales, with a 7% YoY growth in SSS. This was well above the 4.8% SSS growth in ANTAD’s figure during the 2Q19. It is important to highlight, La Comer was the outperformer of the quarter, with the largest growth YoY. The EBITDA grew 27.5% YoY, and a still-outstanding 15.9% when excluding the IFRS16 effect, while the margin made a 30 bps expansion in comparable biases. It is important to highlight that the strong results came even with the strong CAPEX allocated to e-commerce platform and the opening of the City Market in . Net income posted a 25% YoY increase, despite a lower financial income, as during the 2Q19 the company recorded P$1 m of expenses and the last year

10 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com reported a P$68m gain. Most of this is also related to the IFR16 effect. During this quarter the company paid a 2% tax rate vs. zero of the last year, as it continues to have significant tax shields pending to apply. We should expect a positive reaction during tomorrow’s trading session due to the positive results.

May 30, 2019 LACOMER (BUY, PT P$25) Announced Opening of 10th City Market

Through a press release the company confirmed the opening of its 10th City Market. This store has the largest company's expectations, as this unit is placed in one of the top locations in the country. La Comer spent P$465m, and has over 5,000 sqm distributed in two floors. It's important to mention that it generates 550 jobs and has the latest technology on all fronts. This opening is the number 67th of the year and our expectations call for 7 opening during the year. After this announcement we continue to rate the company as a Buy and unchanged P$25.0 PT.

May 2, 2019 LACOMER (BUY, PT P$25.0) 1Q19 Report — Positive Results

The company posted strong results, we expect a positive reaction in the coming days due to the outstanding performance in SSS and net sales of +7% and 15%, respectively. Also significant margin expansion at all levels. La Comer posted a 15% YoY increase in sales with a +7% SSS. This was well above the 3% SSS growth in ANTAD’s figure during the same period. It is important to highlight that the format with the highest growth was Fresko. The EBITDA hiked 37% YoY, and margin made a 170 bps expansion reaching 10.3%. In a comparable basis, the EBITDA posted a 26% YoY growth, while margin expanded by 90 bps. Positive results came in despite higher energy and e-commerce expenses. Net income posted a 50% YoY growth, despite a lower financial income, P$14m vs. P$26m during the last year. Also net income was benefited by a lower tax rate, 17% vs. 26% from last year.

April 12, 2019

11 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com 1Q19 Previews: Expecting Mixed Results We expect a mixed 1Q19 earnings season for the Retail and Other Consumption Industry.

Positive Reports: Among the reports that we believe could be outstanding or above consensus' expectations in this season are CHEDRAUI, LACOMER, , and ELEKTRA. Neutral Reports: Due to the slow performance of the economy during the quarter, we forecast that , WALMEX, GSANBORNS, and LAB will post neutral results. Negative Reports: We forecast that will be the only weak report of the sector in the 1Q19 earnings season. Full report here

March 28, 2019 LACOMER (BUY, PT P$25.0) Opens a new store in

LaComer announces the opening of a new “LaComer” format store in the state of Puebla, which required a total investment of $480 million pesos.. The new store has around 7,000 square meters, and will generate a total of 350 jobs — 200 direct and 150 indirect. With this new opening, the company consolidates its operation in the state with two units. We regard this news as positive, an is in-line with the company’s guidance to reach 117 store by end of 2021. After this announcement, we reiterate our BUY recommendation with a PT P$25.0.

February 21, 2019 LACOMER (BUY, PT P$25) Positive results, industry-beating growth and profitability enhancements

Once again the company posted strong results, above our and the consensus expectations, we expect a positive reaction during tomorrow’s trading and in the short term. The company reported a 15% YoY increase in sales in which a positive 6.2% SSS advance stands out. This was well above the 3.6% SSS hike that ANTAD supermarket category reported in the same period, as well as Walmex’ 4.7%. It is important to highlight that the formats with the highest profitability, City Market and Fresko, are growing above the company’s average. Furthermore, we confirm a sizable impact from the maturing of stores opened in the past twelve months; in 2018 there were 4 new stores plus one reopening, within the 65 stores operating at year end.

12 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com The company continues to deliver on the expansion effort delayed a couple years ago, and which we expect to gather momentum going forward. EBITDA posted a 16.6% YoY decline given the absence of one-off profits from the sale of a property last year (P$196m); yet, on a fully comparable basis EBITDA is actually up an astonishing 49% and was also 4% above our projections. Net income beat our estimates due to a negative 50% tax rate vs. our 30% expectation. Once again, the full-year fiscal adjustment turned in a positive record for the quarter. We continue to be upbeat on Lacomer and reiterate our BUY recommendation and P$ 25.0 PT for 2019.

January 24, 2019 : Industry Update / 4Q18 Previews Expecting Strong Figures for the Next 3 years

Upgrading Chedraui to BUY, while Walmart, La Comer and Soriana ratings remain unchanged at BUY, BUY and SELL, respectively. Currently the Mexican market offers significant discount vs. its last 6 month valuation. It is important to notice that overall, we believe consumption will be benefited by the new administration that will specially focused in the South part of the country. Government spending in social programs and infrastructure projects are the main drivers for our consumption optimism, at least for the next 3 years. The new administration goals are focused in increasing the purchasing power of the majority of Mexicans, through better wages & employee conditions all across the country. We believe the new administration will be able to benefit the low social spectrum increasing its purchasing power during the next 3 years. 4Q18 Previews: An Expected Mixed Season at the Top- Line, but a Weak Performance in EPS due to Normalized Tax Rates. Our estimates for 4Q18 earnings results show a notable deceleration at the top-line level due to a tough comparison base. It is important to mention at for EPS, we expect negative figures with the exception of Chedraui and Walmex.

13 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com

December 18, 2018 LACOMER (BUY, PT P$26.0) Opens its 11th City Market Store

The company informed it has inaugurated a City Market unit in , Sate of Mexico, driving the total stores in this format to 11, and the total company-wide to 65 units. The store, located within the higher-end neighborhoods of , required a total investment of P$445m and will add 4,000sqm (+1.6%) to Lacomer’s sale floor. This news confirms our expectation of an accelerating store-opening schedule for 2018 and beyond, following a slower-than- expected start after the company was spun-off from in 2016.

July 26, 2018 LACOMER (BUY, TP P$23.0) 2Q18 Report - The strongest report among retailers

Modestly surpassing our estimates, Lacomer’s 2Q18 earning report confirmed our call for advances in the company’s business model, reliant on the higher-end of the consumer spectrum and operating leverage achieved as new sales floor matures. Sales and EBITDA were up by 17% and 20%, roughly 4% above our estimates, while Net Profit expanded 34% just as we expected. Beyond the operating prowess, we should note that the expansion in the past twelve months has been achieved entirely on internal cash funding, as the company continues to be debt-free and the cash balance was actually up 1% to P$2.7bn, equivalent to 12% of current market cap.

May 09, 2018 RETAIL Fifth edition of “Hotsale” will take place between May 28th and June 1st

The National Association of Online Sales (AMVO) has confirmed the online version of “El Buen Fin” will take place

14 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com the upcoming week comprising between May 28th to June 1st. A total 330 companies have confirmed their participation, up from 264 from last year’s event, in which a total P$4.9bn sales were recorded—these were up 60% from 2016. Among participants we can highlight Elektra, , Aeromexico, Netshoes, Alameda, Price, Travel, Linio, Mercado Libre, eBay, Adidas, Petco, Wibe, and Nike. Most of the bigger retailers have usually participated, so we also expect to see most, if not all, of the listed companies taking part in this event.

April 27, 2018 LACOMER (BUY, PT P$23.0) 1Q18 Report: The leader in SSS for 1Q18

Lacomer released what we regard as the best report in the retail sector this quarter, yet complying to our estimates, this does not alter our optimism or target price; we repeat a P$23.0 target and BUY recommendation. The report stands out only because the company achieved industry- leading Same-Store-Sales performance, but mostly as the operating profitability has shown solid steps forward on top of in-store execution and expense growth that is becoming aligned to revenue expansion. A 10.6% rise in Same-Store- Sales topped even Walmex’ 10.0% —the long-standing industry benchmark— and was the prime mover to consolidated sales growing nearly 14% YoY. EBITDA margin gained 53bp YoY and reached 8.6%, implying EBITDA expansion of 21%.

March 8, 2018 LACOMER (BUY, PT P$23.0) Reopening of Lacomer Insurgentes Store

The company announced it has concluded the renovation of its Lacomer Insurgentes flagship store, and has been reopened to the public today. This store was actually demolished and completely built again with a P$355m investment during the past twelve months—it was closed during 1Q16. . Besides the incremental sales Lacomer will enjoy from this particularly positive location, we believe this is very positive news as the company continues to pick up the pace in new store openings, an issue that had been lagging during 2016 and most of 2017 as the company struggled with the ramp up of operations under its new platform following the sale of Comercial Mexicana stores to Soriana. Lacomer’s smaller size means this sole aperture

15 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com stands for 2.6% of the total sales floor of the company.

February 22, 2018 LACOMER (BUY, PT P$23.0) 4Q17 Results: It’s time for delivery

Lacomer earnings are finally showing the results of its longer-term business model. The company’s operating performance took off slowly in 2016 after its predecessor sold the Comercial Mexicana stores to Soriana; a number of issues ranging from the adaptation to a new scale, extraordinary expenses, temporary closings, logistics issues, and delayed expansion all made for subpar performance in 2016. This all changed in 2017 and 4Q results strengthen the case for our investment thesis on Lacomer. We continue to rate it as BUY, while our recently revised P$23.0 is unchanged. Full report here

February 21, 2018 LACOMER (BUY, PT P$72.0) 4Q17 report expected AMC

We expect a positive 4Q17 earnings release to be filed today AMC. In fact, we believe Lacomer will post the strongest SSS numbers among Mexican retailers this earnings season, with just over 11% according to our assumptions. Moreover, we look for a moderate margin expansion even when considering that Lacomer still has significant preoperating expenses linked to the new stores’ pipeline and a low operating leverage as the few new units have still to advance on their maturing curve. We have not included any extraordinary gains that could be recorded in relation to the sale of non-strategic assets. Net profit falling sharply would be caused by the absence of deferred tax credit recorded a year ago; our estimates assume a 30% effective tax rate, compared to a negative 50% in 4Q16.

January 19, 2018 LACOMER (BUY, PT P$23.0) Revisiting our 2018-2023 estimates

Following a couple of years in which the downsizing has come with some minor setbacks, we are updating our longer-term estimates for LACOMER and sustaining our

16 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com basic investment thesis: the company should be the fastest -growing retailer for the next few years as new store openings kick in and add to sales, higher-end customers prove resilient to economic challenges, and size-driven advantages begin to show clearly in the company’s numbers. We have upgraded our target price from P$22.0 to P$23.0, while the recommendation stands unchanged as BUY.

December 20, 2017 LACOMER (BUY, PT P$22.0) To open at least 8 stores in 2018

According to media reports, Santiago Garcia, LACOMER’s CEO, expects the company will add at least 8 new stores in 2018 and translate to a 13% rise over its current capacity (60 stores). The company’s goal to reach 117 stores in operation by 2021 stands unchanged from the original business plan presented after the sale of 143 Comercial Mexicana stores to Soriana in 2016. Mr. Garcia also stated that e-Commerce sales should double next year, yet declined to mention the amount this channel currently has. He also mentioned that, with the return of the Comercial Mexicana brand and images by mid 2018, the company has yet to make a decision on the fate of these intellectual properties. The news is positive as, even with the delays experienced.

December 14, 2017 LACOMER (BUY, TP P$22.0) Two new store additions before the year concludes

The company informed the inauguration of two new stores today. The first one is a City Market located in Puebla — which makes this the fourth state in which the format is present—, and the second one is a La Comer store in . Investment was P$151m and P$461m respectively, even though the first number does not include the land cost, as it was already part of Lacomer’s land reserve; both are fully owned units. Our estimates show this would drive total sales floor to an annual rise of roughly 2.5% as the company continues to slowly catch up on its original expansion program. Ending the year with 61 units in operation, this means a mere net of 2 stores were added throughout the year, compared to an original goal of six units; management expects the expansion pace to accelerate during the next few months.

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November 23, 2017 LACOMER (BUY, PT P$22.0) City Market opens in Guadalajara

The company informed the start of operations of a new City Market Store, located in Guadalajara, Jalisco, by which the company continues to expand its higher-end format into new territories. This is the eight store operating in this format, yet only the second one located outside of , a fact that underscores the longer-term potential the company sees in its niche. La comer invested P$200m in this unit, which has 3,497sqm of sales floor and implies a 1.4% increase in the company’s sales area.

November 17, 2017 RETAIL Media reports 10% expectations for sales growth throughout El Buen Fin

During this long weekend in Mexico there will be the seventh edition of El Buen Fin, Mexico’s version of Black Friday. Media reports call for a 10% increase in total sales (estimate attributed to a number of sources, including ANTAD), that would therefore reach over P$100bn over the weekend. It is important to note that our own expectation is around 4% - 5% on a same-store basis, so total sales reaching an 8% to 9% range would suffice our anticipation, and be marginally below the top-line figure reported by the media.

October 26, 2017 LACOMER (BUY, PT P$22.0) 3Q17 Results: The Business Model Kicks into Gear

LACOMER released a positive 3Q17 earnings report that was slightly above our expectations, confirming what we regard as perhaps the best report of the retail industry for this quarter. As it gradually leaves adaptation processes behind, the business model continues to bear fruit with solid sales pace, but more importantly, incremental gains in operating profitability. We have made only minor adjustments to our estimates, so the P$22.0 target for 2018 remains unchanged, on which we continue to rate LACOMER a BUY. The only weak point could be the

18 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com limited liquidity the stock has. While the salient aspects of the report on the positive side are definitively the outperformance of SSS at 14.3% and the continuous evolution of margins, on the negative side we have a delayed expansion program that includes no openings in the past two quarters and one flagship store that is still closed for remodeling. Hence the top line being driven solely by the SSS pace...for now.

October 25, 2017 LACOMER (BUY, PT P$22.0) 3Q17 Results Scheduled for Today AMC

Lacomer is expected to release a solid 3Q17 earnings report today after markets close. We look for a positive showing that might place Lacomer as the best-performing retailer in this quarter. Adding up to a strong SSS baseline, we estimate sales will improve further as new stores advance in their learning curve, while the mid- and high- end focus of the company’s formats should shield it from a cautious consumer, also making for improved margins overall. In addition to that, we must stress the fat that Distribution Center issues should be minimal after a year of operation, giving further support to the expected margins recovery.

July 27, 2017 LACOMER (BUY, PT P$20.0) 2Q17 Report: And...it’s out of the park!

We were pleasantly surprised by Lacomer’s 2Q17 earnings report, as even if the operating leverage still remains to be achieved, the cost and logistics achievements have made for a very good showing that left both our expectations and consensus well behind. This should make for a positive reaction in the stock. We have updated our target price on Lacomer after incorporating these results into our earnings model, setting a new level of P$20.0 that is also prompting us to upgrade the recommendation to BUY. LACOMER filed a solid 2Q17 report that left our estimates, and consensus expectations, well behind. This should make for a positive reaction in tomorrow’s trading. Revenues rose 10% on the back of 9% higher SSS, and also as new stores have matures and balanced the closing of one large unit in Mexico City which is due for a full remodeling. Management cites Easter Holidays as another element that negatively affected sales performance, even if at a first

19 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com glance, figures do not show that. The salient aspect of the report is the improvement in profitability, which lead to EBITDA rising an impressive 30%, being 11% above our estimate. Savings in logistics and basic cost of merchandise outshine the still-high expense growth rate. EBITDA margin was 7.8%, compared to last year’s 6.5%. Net profit at P$148m was up 17%, just 2% above our projection as the effective tax rate (30.4%) was somewhat above our estimate.

July 26, 2017 LACOMER (HOLD, PT P$18.0) 2Q17 Report due out today

Lacomer’s 2Q17 earnings release should set it apart from the competition, signaling the effect of its niche-driven strategy and sizable sales floor expansion achieved on a reduced operating base on which the company took off in 2017. Our estimates project sales will rise 15% and EBITDA 17%, showing some scale benefits finally, while Net profit could be up a modest 2% assuming a normalized tax rate is applied this time. We assume Lacomer achieved SSS close to +8% in the quarter, setting the pace in the industry as the new stores from 2016 advance in their maturity curve; sales floor at the end of 2Q should be close to 243 thousand sqm, up 5% YoY. Lacomer continues to be a debt-free company, and should report a cash position just above the P$3.0bn mark, largely unchanged QoQ.

April 27, 2017 LACOMER (HOLD, PT P$18.0) 1Q17; Moving ahead, slowly but surely

LACOMER released positive 1Q17 results that turned in line to our estimates at the operating line, though net profit was a large miss on larger FX losses than we expected. Same-Store-Sales were up an astonishing 9.0% and made for the key driver to the quarter. Sales rose 14% just as we projected, supported partially on the company’s 2016 expansion to 58 units, 8 more YoY, and meaning a 4% hike in sales floor for the year. Net profit of P$103m was down 35% entirely as a consequence of non-cash FX losses. Excluding the FX losses, Net Profit would be close to P$155m, compared to a projected P$139m, but mostly flat YoY. Lacomer continues to be a debt-free company, with a net cash balance of P$3,115m at the end of 1Q17; this is equivalent to 19% of the company-s market capitalization.

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April 26, 2017 LACOMER (HOLD, PT P$18.0) 1Q17 Results Due Today AMC

This will be the first YoY fully comparable report by Lacomer. We expect positive news, though we might be too optimistic on the evolution of expense-diluting expansion to start showing up just a year after the company’s formal startup. Yet, the operation has indeed shown a steep pace of development; closing 2016 with 60 units in operations is in itself a 10% rise that could equal close to an 8% rise in total sales floor. We look for sales to rise 12% on the back of 4.9% SSS expansion and the mentioned sales floor increase. We project 20bp of EBITDA margin expansion to 7.9%, so EBITDA could be up 15% YoY, while Net Profit could be dragged down (-5% e) by the lack of FX gains recorded a year ago.

February 23, 2017 LACOMER (HOLD, PT P$18.0) 4Q16, Setting up the table; improvements yet to come

While Lacomer achieved a positive sales performance in the final quarter of its initial year in operations, recording a proforma 10.5% YoY rise that resulted in the actual number being off from our estimates by a modest 4%, the persistent expenses related to the adjustments needed in its operating base are still weighting on the company’s profitability, driving the EBITDA margin to a modest 5.5%, far form the potential 9%+ we envision for the company in the longer term, and of course the 7.7% we had expected for the quarter—being the seasonally strongest period. At the net profit level, the reported P$135m result was even better than our projection (P$110m e) in spite of the operating profit miss, yet the difference has to do with adjustments in deferred taxes that yielded a P$50m credit in this line, making the Net Profit and related market ratios non-relevant.

February 22, 2017 LACOMER (HOLD, PT P$18.0) Reclassification of some accounting lines on its 1Q, 2Q and 3Q16 statements.

21 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com The company re-issued its financial statements for the first three quarters of 2016 as it is now applying a different accounting scheme over the value of its trade marks and their depreciation, as these assets have not presented the deterioration the company assumed when it started the year. As a result, lower depreciation and amortizatrion charges are seen throughout the year, with the effect of reporting a higher operating profit in its revised figures, but with no impact on EBITDA or cash flow generation. At the net level the company has also benefited, even if the adjustement also implies higher taxes are recorded as their deferred portion decreases. With the new accounting, for the first nine months of the year Lacomer recorded sales of P$10,830m and EBITDA of P$721m (both unchanged from the original reports), but operating profit stands at P$365m (up from an original P$129m) and Net profit of P$383m (up from 218m). Equity is mostly unchanged at P$19,968m by the close of 3Q16 (+1% vs. prior report), while debt remains cero, as originally recorded. We do not expect a reaction following this reclassification, as it is merely an accounting issue.

December 1, 2016 LACOMER (BUY, TP P$20.50) Inaugurates its third Fresko in Guadalajara, making 9 in total.

Lacomer announced the opening of its third Fresko store located in the City of Guadalajara, making for nine total stores currently operated in this format, and taking the total store count to 58 following the most recent opening of a City Market in Queretaro a few weeks back. The new store, at 2,600 sqm required a total investment of P$130m and means a 1% incremental sales floor, but we estimate it could translate to a 3% to 4% rise to total sales once it matures and reaches a stable operation. The news confirms the advance in the company’s capex program, by which an average 7 to 8 new stores per year will be added in the next few years. While our BUY recommendation stands unchanged, our P$20.50 target price is under review in order to incorporate new economic scenario following the recent outcome of the US Presidential elections.

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