El Puerto de José Cebeira | Sr. Analyst Discretionary Consumption S.A.B. de C.V. [email protected] Ext. 1394 Historical News Jerónimo Cobián | Analyst [email protected] Actinver: (55) 1103 6600 Last updated on July 20, 2020

LIVEPOL (Mkt. Perform ) 2Q20 Earnings Conference Call Highlights The company has implemented several strategies to face the current challenging environment under the Covid-19 pandemic. Some examples are: i) 50% reduction in Capex in 2020, ii) no additional stores opening during the next six months, iii) the repurchase share program has been put on-hold, iv) the company expects to place a P$3.5 Bn bond briefly with a 10-year maturity, v) the cash from the bond will not be used to repay the P$3.5 Bn credit loan contracted during the 1H20. Full report here

July 17, 2020

LIVEPOL (Mkt. Perform ) Negative 2Q20 Report, Below Expectations LIVEPOL filed a negative 2Q20 report, below our and consensus' expectations. After fine-tuning our earnings model, we have decided to leave unchanged our Mkt. Perform rating, despite the challenging environment that the company will continue to face in the 2H20. We forecast a slower recovery than we were expecting for LIVEPOL stores, mainly in the Suburbia format. 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.

June 3, 2020

LIVEPOL (Mkt. Perform): Reopened Stores in The company re-opened stores in and Nuevo León with rigorous protocols. The openings have been with the government’s approval. We see this news as positive for Liverpool. Although the limited amount of Liverpool stores

Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com opened. The re-opening has been before expectations as even the most optimistic view aimed for mid-September.

April 29, 2020

LIVEPOL (Mkt. Perform): Negative 1Q20 Report, Below Expectations Livepol posted figures below consensus expectations as a result of a weak month of March. The department stores will face a challenging environment even though Livepol has different virtual platforms. We expect the company to sell approximately 15% of the anticipated sales through the platforms. The 2Q20 will be tougher for Liverpool, considering the local confinement measures that will bring along a sharper deterioration of the Mexican economy & personal income, which ultimately will have an impact on consumer discretionary spending. A recovery in the company’s top line would come until 3Q20 & it is expected to be gradual. We are downgrading our rating from “Outperform” to “Mkt. Perform”. Worth pointing out the company’s sound balance sheet to face the Covid-19 crisis for at least 6 months with store restrictions. Full report here

April 1, 2020

LIVEPOL (Outperform) COVID-19 strategy

Sanitary Measures. In response to the declaration of a public health emergency caused by the COVID-19 pandemic announced by the Mexican government on March 30, the company has decided to close all of the Liverpool stores, Suburbia stores, Galerías shopping centers, and boutiques nationwide from March 31 until April 30. The company is committed to guaranteeing the jobs of its employees and, to the extent of its possibilities, to continue paying their full wages and benefits, among other economic support measures. Livepol has activated the continuity plan, and most of its administrative employees are working from home. The company has the digital and logistical infrastructure necessary to continue serving clients throughout various platforms available such as Liverpool, Suburbia, Williams Sonoma, Boutiques, and Marketplace. They are taking the sanitary measures needed to fill and deliver all these orders. It is important to mention that the Click & Collect service will not be available in the next month. For that reason, the company is offering home delivery. The areas for receiving and dispatching merchandise from the warehouses, as well as the distribution centers, will be operating with a reduced staff. All employees are allowed to stay home if they are ill or feel vulnerable to contagion, with full payment. In general terms, the components of the supply chain continue to

2 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com operate normally.

Financial Measures. The company’s current financial position is solid, with available cash balance to pay all the obligations in the months also includes credit lines with several banking institutions. The total amount of the US dollar-denominated debt (US$1.05 Bn) is fully hedged in pesos and fixed rates. Additionally, all the debt is at fixed rates. The LIVEPOL 10 and LIVEPOL 10U bonds, totaling P$3.0 Bn, which expire this May, were pre-funded last November. The next debt maturity is until 2022. The foreign-exchange hedges relating to merchandise Spring- Summer season is mostly covered, while the Autumn- Winter season is partially hedged at the moment. It is essential to mention that the current public health emergency has already resulted in a substantial reduction in traffic in department stores, stores, boutiques, and shopping centers since mid-March. To reduce the decline in revenues and preserve the liquidity levels, the company is implementing an emergency plan to reduce operating expenses and CapEx such as: i) above all, preserve Group liquidity; ii) rigorously reduce the budget for capital expenditures. Halted projects that had not begun or were still in the early stages; iii) Livepol has restricted operating expenses to the minimum necessary; iv) also, they have introduced credit solutions to benefit current customers to retain them and enable them to continue using their credit cards and responsibly avoid higher loan delinquency ratios. Digital channels for receiving credit card payments continue to function normally; v) inventory levels and purchase plans are being handled with caution.

February 26, 2019

LIVEPOL (Outperform, PT P$131.11) Positive 4Q19 Report, above expectations; significant improvements in margins

Liverpool filed a positive 4Q19 report that came in above our and consensus expectations. After fine-tuning our earnings model, we are leaving unchanged our Outperform rating and P$131.11/ share PT YE2020E. Excluding the IFRS-16 effect, the company reported sales growing 5.2% YoY, EBITDA increasing 14.9% YoY, and net income up by 11.0% YoY. Through IFRS 16, Liverpool posted EBITDA increasing by 17.9% YoY and net income climbing 7.2% YoY. These results were –2%, +11.5%, and +15.2% relative to our estimates, respectively. Full report here

3 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com October 23, 2019 LIVEPOL (Outperform, PT P$131.11) Neutral 3Q19 report, despite limited sales growth. Liverpool’s figures were negatively impacted by Suburbia

Liverpool filed a neutral 3Q19 report that came in in-line with our and consensus expectations. After fine-tuning our earnings model, we leave unchanged our Outperform rating and P$131.11 PT YE-2020. Under IFRS 16, the company reported sales growing a limited 3.1% YoY, EBITDA increasing 14.0% YoY, and net income declining 1.5% YoY. In a comparable base (ex- IFRS16), Liverpool posted EBITDA increasing 1.0% YoY and net income climbing 1.9% YoY. These results were – 1%, +0.2%, and +40.1% relative to our estimates (on a comparable basis), respectively. Full report here

October 15, 2019

Previews Food & Beverage Low expectations for the 3Q Earnings Results. Partially offset by USD appreciation vs. MXN

During the 1H19 of the year, the industry performed below expectations in the majority of the cases. For the 2H19, the trend continues almost on the same path, as the consumer remains cautious given uncertainty from the new administration’s policies. We expected a weak earnings quarter as a result of low single-digit growth, on the back of higher prices rather than volume. We only expect a couple of names to surpass market expectations, such as AC, , BACHOCO, and SPORTS. Although the sales growth is not expected to be significant, we forecast a higher growth rate (at least high single-digits) at the EBITDA and EPS level. We expect weak results for companies such as KOF, BIMBO, and CUERVO. Even though the companies are going to report a low sales growth figure, we are going to see a limited improvement, at the EBITDA level. Even though Cuervo is facing an easy

4 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com comparable base at the EBITDA level, we do not foresee any improvement due to higher prices in raw material and the USD appreciation vs. the MXN. Full report here

July 24, 2019

LIVEPOL (BUY, PT P$125.0) 2Q19 Results - Positive report, larger promotion activity impacted the company’s margins

The company posted strong top-line results, even considering that profitability was affected by a higher promotional activity than last year given one less weekend; EBITDA margin (excluding IFRS) contracted from 14.9% to 14.6% as a result. On the positive side the delinquency rate continues its downtrend from 5.7% to 5.6%. Sales reported a 9.3% YoY increase, supported by 8.2% and 11.7% sales growth in Liverpool and Suburbia, respectively. Positive results were boosted by SSS with a 7.1% and 5.0% in Liverpool and Suburbia, respectively. Liverpool’s credit cards sales reached almost 46.2% of total sales, up from 45.8% in 2Q19, while credit reserves grew 11.8%. Liverpool credit cards increased 1% YoY, reaching 4.820 million cards. The company’s EBITDA posted a 16.5% YoY increase as-reported, but a more modest 7% excluding IFRS 16, while the margin at 16.5%, excluding IFRS 16 was a 30 bps contraction. The results on this line came below our expectation due to a stronger than expected promotional activity. Finally, net income reported a 12.1% YoY increase and was noticeably stronger than expected. Despite the negative effect of IFRS 16, it was more than offset by a 5% reduction in debt. Also benefited by a lower tax rate vs. last year (25% vs. 28%).

June 26, 2019

Retail and F&B industry update Reducing growth expectations for 2019e-2020e

We are reducing our growth expectations, updating them with the latest economic data in the country. Currently, our economy department expects a 1.5% GDP growth for 2019e and a range of 1.6-2.1% for 2020e. We have observed several indicators related to consumption such as Consumer Confidence, ANTAD, Jobless Claims, Foreign

5 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Direct Investment, and many more, performing below expectations. Also, some rating agencies have been very active in reducing Mexico's ratings or outlooks. Year to date, some companies results have suffered from the significant deceleration in the country's dynamism. It is also worth mentioning that worldwide economies have been experimenting a significant deceleration in the majority of the countries with some exceptions; as a result, we are reducing our expectation in some companies in the sector such as: LIVEPOL, ALSEA, LAB, AC, KOF, and LALA. : Full report here

April 24, 2019

LIVEPOL (BUY, PT P$170.0) 1Q19 Earnings Report: Positive Result

The company posted strong top-line results, although the EBITDA came slightly below our expectations (ex-IFRS 16); in terms of profitability, margin continues at the top of the industry due to a lower delinquency rate. Sales reported an 8.7% YoY increase, supported by 7.8% and 4.2% growth in Liverpool and Suburbia, respectively. Positive results were boosted due to 5.7% growth in the average ticket in Liverpool’s stores while traffic decreased 0.7% by the negative comparable base of the Easter week. Liverpool’s credit cards sales increased 22% YoY, while reserves only grew 7.5%. Liverpool credit cards increased 1.8% YoY, reaching 4.8 million cards. The company’s EBITDA came in below our expectations (ex-IFRS 16 a 9.1% margin vs. our expected 9.7%) and above our estimate if we include the IFRS 16 effect with a 10.8% margin. Excluding IFRS 16 EBITDA grew 6.5% YoY and including IFRS 16 it rose 25.5% YoY. The company continues with one of the lowest level delinquency rates at 5.2%, which was flat vs. last year’s figure. Finally, the net income reported a 4.2% YoY decrease, negatively impacted by larger financial expenses and a higher tax rate (22% vs. 19%). We expect a positive reaction during tomorrow’s trading session due to the strong delivery at the top-line and a limited increase in NPL reserves during the quarter.

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April 12, 2019

Retail 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 , LACOMER, LIVERPOOL, and ELEKTRA. Neutral Reports: Due to the slow performance of the economy during the quarter, we forecast that ALSEA, 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 13, 2019

ANTAD February sales accelerate on par to Walmex’

The National Retailers Association reported that sales among its affiliates grew 3.3% on a Same-Store-Basis during February, while total sales edged 7.8% higher. We had seen January’s pace decelerate to 2.5%, so this month’s uptick follows largely the steps seen in Walmex’ 4.4% to 5.4% evolution for the same periods.

February 18, 2019

LIVEPOL (BUY, PT P$170.0) 4Q18 Report: Strong Result, Figures Meet Our Expectations

Revenues were up 8.6% as Same-Store performance remained solid, supported by 8.2% and 7.5% growth in Liverpool and Suburbia, respectively. Albeit at a slower pace, Suburbia (SSS +6.6%) once again outpaced the

7 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Liverpool format (+6.4%) and built up for the total 6.5% SSS consolidated increase. Sales floor was up 5.9% YoY, with a total 264 stores in operation at the close of 4Q18; 12 stores were inaugurated this quarter (7 Suburbia and 5 Liverpool). This quarter the conversion of the 41 Fábricas de Francia stores will continue to be implemented; two- third of them will become Liverpool units and should be done by the end of 2019. We must stress the transition that we will start to observe in the next quarters, as Livepol shifts from an intense sales-floor expansion program to the logistics focus it has been preparing. The new state-of-the- art distribution center is expected to begin operations in 2021, and will eventually pave the way for enhanced productivity both for physical stores sales and online transactions. Full report here

February 15, 2019

Livepol (BUY, PT P$170.0) A Positive Report, NPLs Continue to Improve

Sales reported an 8.1% YoY increase, supported by 8.2% and 7.5% growth in Liverpool and Suburbia, respectively. The increase was bolstered by aggressive discount campaigns and November’s figures. The company’s EBITDA reported in-line with our expectations, with a 10.8% YoY growth, despite sales that came-in below our estimates. The company continues with a significant expansion in its margins due to a positive performance in the delinquency rate, 4.5%, which was flat YoY and down from 3Q’s 5.8%, marking a stronger-than-usual seasonal retreat. It is important to highlight that the company increased its sales by Liverpool’s credit card by 8.9% and reserves only grew 0.3%. Finally, the Net income reported a 7.8% YoY growth, boosted by a lower financial expenses and despite a higher tax rate of 26.6% vs. 22.8% in the last year.

INCOME STATEMENT 4Q17 4Q18 Chg. 12M17 12M18 Chg. 4Q18e Real/Est. Revenues 44,546 48,395 8.6% 122,168 135,535 10.9% 48,617 -0.5% EBITDA 8,383 9,290 10.8% 18,382 20,258 10.2% 9,308 -0.2% EBITDA Margin 18.8% 19.2% 15.0% 14.9% 19.1% Net Profit 5,636 6,076 7.8% 9,883 11,704 18.4% 5,630 7.9% Net Profit Margin 12.7% 12.6% 8.1% 8.6% 11.6% EPS $4.199 $4.527 7.8% $7.363 $8.720 18.4% $4.195 7.9%

February 13, 2019

ANTAD

8 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com January Sales Report — A weak start for the year, +2.5% SSS

The National Retailers Association recorded a weak +2.5% Same-Store-Sales increase for January in its first release for the year, the first also excluding Walmex after the company recently decided not to be part pf the association anymore. By store type, lead the way with a 3.1% rise, while Department stores broke the streak of leading performance by recording a 2.4% increase, at the time, Specialized stores remained lagging with 2.1% SSS hike. It is worth recalling that full-year expectations from ANTAD call for a 3.1% SSS increase.

January 25, 2019

Department Stores Industry Update / 4Q Previews

After some comments of the new administration, the Mexican market has been hit by the exit of international and domestic players as their sentiment toward the new administration is not the best. We expect at least three active years in consumption due to government spending on social programs and infrastructure projects. The new administration increased the national minimum wage in the country to expand the citizens purchasing power. 4Q18 Previews: Department Stores & Others Discretionary Consumer

Sales EBITDA Net Income Department stores 4Q17A 4Q18E % Chg 4Q17A 4Q18E % Chg 4Q17A 4Q18E % Chg Elektra 27,087 28,291 4% 4,284 4,802 12% 902 3,561 295% Gsanborns 16,008 16,446 3% 2,288 2,306 1% 1,660 1,343 -19% Liverpool 44,546 48,617 9% 8,383 8,589 2% 5,636 5,124 -9% Total 60,555 65,063 7% 10,671 10,895 2% 7,296 6,467 -11% Source: Actinver

Sales EBITDA Net Income Others 4Q17A 4Q18E % Chg 4Q17A 4Q18E % Chg 4Q17A 4Q18E % Chg Alsea 11,616 12,114 4.3% 2,358 1,774 -24.8% 652 328 -49.6% Lab 2,885 3,050 5.7% 613 649 5.8% 339 397 17.2% Total 14,501 15,164 4.6% 2,971 2,423 -18.4% 990 725 -26.8% Full report here

January 24, 2019

ANTAD Same-Store-Sales grew 3.4% last December; 5.0% for the full year.

The National Retailers Association reported that Same- Store-Sales among its affiliates grew 3.4% during

9 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com December, confirming the deceleration trend anticipated by Walmex’ previously reported numbers. By store type there were few surprises in terms of the general trend, as Department stores held on to the leading pace at 5.0%, with supermarkets second at 3.4%, and Specialized stores a disappointing 1.8%. For the year, total SSS were up 5.0%, marginally above inflation and missing on the original target of 5.8% set ANTAD at the start of 2018. Full-year SSS at Department stores were 6.8%, Supermarkets rose 5.0%, and Specialized edged 3.7% higher YoY, being the sole category top record a full-year number below inflation.

December 13, 2018

November ANTAD’s Sales, above expectations.

Today ANTAD published a positive result, that came slightly above the consensus expectations with a 6.0% SSS and 9.9% increase in Total Sales. We believe this result should be considered as a positive for the industry. Department Stores continue with the strongest delivery with an impressive 10.2% hike due to the aggressive strategy for the majority of the players. Super markets also posted a positive trend with a 5.1% increase, which is important to mention is above the inflation rate of 4.7%. Finally Specialized Stores reported a weak 4% growth, we are optimist about next month’s sales in this segment, which should reach a 5.0%.

November 13, 2018 ANTAD Announced Good Sales Report

ANTAD released a good sales report for October. Department same store sales continue to lead growth with a 9.6%, among Supermarkets (2.3%) and Specialized Stores (2.4%). Walmex (3.0% SSS) continues to gain an edge among supermarkets with a +70bp spread. It is

10 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com important to notice the extraordinary numbers from last year, as September’s earthquake in Mexico affected Department stores and boosted the Supermarkets sales.

October 23, 2018

LIVEPOL (BUY, PT 2019e P$175.0) Positive 3Q18 Report: Rising margins and a healthier credit portfolio

Livepol reported a positive quarter that was marked by solid sales performance, higher-than-expected advances in margins, plus a credit portfolio that shows sizable results from management’s credit- quality focus. We are introducing a P$175.0 target price for 2019, on which we continue to rate Livepol a BUY. Profitability stands out this quarter; both a rising merchandise margin (31.6%, +70bp YoY) and declining credit reserves combined to outpace both ours and the market’s expectations. As a result, EBITDA shot up 53% as the margin gained a full 450bp. Yes, part of that effect was the absence of one-off costs a year back, but the underlying performance in undeniably solid. Full report here

September 13, 2018

LIVEPOL (BUY, TP P$169.0) To convert Fabricas de Francia into Suburbia/Liverpool formats

The company announced that it will start a process to convert its 41 Fabricas de Francia Stores into either Suburbia or Livepol formats by 2019, seemingly depending on the specific location of each unit. This comes following a

11 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com market study that points out to a stronger customer loyalty and recognition on Suburbia over Fabricas de Francia. This also accompanies the imminent start of Suburbia’s omnichannel efforts, as the company’s e-commerce website is expected to be launched within the next couple of months. At the close of 2Q18, Livepol operated a total of 259 Department Stores, including the aforementioned 41 Fabricas de Francia (16% of the total units), plus 90 Liverpool stores and 124 Suburbia, so the conversion will also need a smaller investment that would have been the case if the decision were to be the other way around, as market speculation pointed from time to time. Fabricas de Francia has a total sales floor of 256.7k sqm, making for 11.2% of the total as these are smaller boxes than the company’s average (6.3k sqm vs 8.4k sqm). We believe the move will help to streamline the company’s supply-chain structure and add to the projected improvement in profitability over the next few years, while allowing its marketing efforts to be aligned in just two major brands, instead of three that overlapped at some points. Yet, this does not alter our already optimistic view on Livepol, which we continue to rate as a BUY with a P$169.0 target price.

August 10, 2018

ANTAD July Sales Confirm a calendar-driven deceleration

The National Retailers Association reported that Same- Store-Sales among its affiliates grew 4.8% during July, a sequential slowdown from June’s 7.9%, but matching the consensus call for a 4.9% increase. We must remind the calendar effect was not the only factor in play, as June was also buoyed by the incremental expenditure linked to the electoral process. By store type, Department stores remained in the lead with a 6.2% rise, while both Self- service and Specialized stores posted a 4.4% expansion. These numbers bode well for Livepol, which we believe continues to set the pace among Department Stores, while for Walmex, the figures show the market leader continues to gain share, but did so by a narrower margin this month.

July 30, 2018

12 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com LIVEPOL (BUY, PT P$169.0) 2Q18 Report: And now, back to the usual program

Livepol pleasantly surprised on the upside within its 2Q18 earnings release. It includes sales rising in line to expectations, but a superior result in terms of profitability and credit portfolio control, while at the same time the company marches on with its financial strengthening targets. We believe these numbers will help dissipate the uncertainties along the market that ensued after an unusually weak 1Q18 report, and look for a positive short term reaction in the stock.

July 11, 2018

ANTAD June Sales Report Adds to the Optimism on Consumption; SSS up 7.9%

The National Retailers Association reported a 7.9% increase in Same-Store-Sales among its affiliates during June, following the recovery trend set forth in Walmex’ figures a few days back. Yet, self-service stores recorded a 7.8% sales rise that was a bit more than 2pp off Walmex’, confirming the company´s market-leading performance once again. It was noteworthy to look at Department stores (SSS +10.7%) once again taking the lead among the three retail formats, benefitting from the online promotional of Hot Days, the extra Saturday, and incremental consumption linked to the World Soccer Cup , especially in electronics. Finally, Specialized stores came in last among the formats, but still outperformed inflation levels achieving a 5.9% hike.

June 21, 2018

LIVEPOL (BUY, PT P$169.0) Prepays P$2,187m of its debt; liquidates Suburbia’s acquisition loan

Livepol announced it has prepaid a further P$2,187m out of its outstanding debt, thus reaching a current outstanding debt of P$29,394m. This comes as an addition to the couple of prepayments made last December and January (P$1,250m each), and implies a reduction of 11.8% from the reported figures at the close of 1Q18. Furthermore, this payment is liquidates the syndicated loan the company

13 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com took in March 2017 in relation to the Suburbia acquisition, and shows not only management’s compromise to undertake a quick deleveraging process, but also is evidence of the strong cash flow generation the company is having despite a year with relatively lower growth rates in the retail industry.

June 12, 2018

ANTAD Sales Report for May includes a 5.6% rise in SSS

A strong May sales report was released yesterday by the National Retailers Association. ANTAD reported that sales among its affiliates edged up by 5.6% during May. Department stores returned to the lead after just over a year in which the category has consistently lagged. This month’s numbers include the annual online promotional Hot Sale event, which in some cases (such as Walmex) carried on to the physical locations, and might partially explain the recovery shown in the durables categories implied in the Department Store performance, which stood at 7.5%. Supermarkets recorded a 4.6% increase and were notably off Walmex’ 7.2%, meaning the company continues to gain market share. Finally, Specialized stores rose 6.2%, also marking a significant improvement over recent month’s trend (average of 2.5% in the past 12 months).

May 11, 2018

RETAIL ANTAD Same-Store-Sales declined 0.2% in April

The National Retailers Association recorded a 0.2% retreat for its affiliates’ SSS in April, which was largely a reflection of negative seasonal factors as the lack of Easter Holidays and one less Saturday this year; it follows and extraordinarily high 9.9% increase recorded for March, in which said factors were exactly the opposite. The performance by store type was barely positive on Supermarkets (+0.5%); while Specialized stores had the weakest showing with a 1.6% retreat and Department stores also posted figures in the red, albeit only a 0.3% contraction. We recall Walmex’ SSS a few days back were reported at 2.4% for Mexico, so the trend continues to favor Walmex onhard data, and we expect Livepol to be on a

14 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com similar trend among Department stores, yet we will have to wait for 2Q numbers to confirm this.

May 9, 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 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 26, 2018

LIVEPOL (BUY, PT P$169.0). 1Q18 Report: Even after non-comparables, 1Q is uninspiring.

We regard Livepol’s 1Q18 earnings release as weak, given that not only same-store-sales performance has failed to pick up, but profitability has taken a significant hit from increasing credit reserves and higher expenses owing to the addition of 11 new stores in 2017, which even stripping the non-recurring boost from last years’ sale of Aeropostale and Cole Haan brands points to a modest performance in the next quarters. We have adjusted our target price to P$169.0, down from P$188.0 following the incorporation of these results into our earnings model, which now assumes higher NPLs and lower merchandise margins at least for the remainder of this year. Even so, the potential 31% return leads us to repeat our BUY rating on Livepol.

February 21, 2018

LIVEPOL (BUY, PT P$188.0) 4Q17: Outpacing the environment

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

Livepol released a positive 4Q17 earnings report that outpaced our expectations in every relevant aspect, including stronger same-store performance, improving finances, defensive operating and EBITDA margins, and even a modest QoQ improvement in its credit portfolio’s delinquency ratio. The past few years Livepol has consistently outperformed its competition, yet 2017 closed with one of the biggest gaps we’ve seen even while suffering the closure of its Galerias Coapa Mall and working through the integration of Suburbia. We look for a positive short-term reaction in the stock, while we continue to rate Livepol a BUY with a target of P$188.0.

February 20, 2018

LIVEPOL (BUY, PT P$188.0) 4Q17 report expected AMC

Livepol should release a positive 4Q17 earnings report today after markets close. We look for revenues to grow over 22% on the back of the third quarterly incorporation of Suburbia, but also as organic sales should benefit from solid, yet not spectacular, same-store performance (+4.5% e) and the maturing of the company’s most aggressive expansion plan executed in 2016-2017. Our estimates also point to a 10% rise in EBITDA, including a 1.9pp margin dilution coming from lower-margin Suburbia, plus the recording of higher credit reserves. We must note that merchandise margin should remain in the high-end of the company’s results for the past ten years. Net profit at P$4.5bn would be off 8% YoY as Livepol faces higher financing costs owing to the funding of the Suburbia acquisition.

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January 25, 2018

LIVEPOL (BUY, PT P$188.0) Yet Another Debt Prepayment

The company informed that, just as it did in the final days of 2017, it will proceed to prepay a further P$1,250m out of the credit facility it used to fund the Suburbia acquisition. Such facility was withdrawn in march 2017. As a consequence, the company will have paid half of the original amount (P$2.5bn out of P$5.0bn) of said financing and total debt will be P$32.8bn, down 8.4% from the last reported figure, as of the 3Q17. The company stated that it now faces a modest P$2,546m maturity in 2018, with a 100% of its debt being peso-denominated, and 92% contracted at fixed rates that on average stand at 8.0%. As it did in December, Livepol stated that the reason behind the prepayment was the strong sales season achieved during the final months of 2017.

December 22, 2017

LIVEPOL (BUY, P$188.0) Commited to deleverage; prepays P$1,250m of debt

The company informed it will prepay P$1,250m of the syndicated loan it obtained last March, as part of the financial package used to acquire Suburbia. The payment represents a quarter of the original loan, and would drive total debt to P$34,065m (-3.5%), likely closing 2017 at a 1.2x ND/EBITDA ratio —by our calculations—, which would be down from 3Q17’s 1.5x, also aided by the seasonal FCF recovery. Livepol stated that the decision to make the prepayment comes as a result of a solid sales performance in the season and the ensuing strenght of its cash position. Following this payment, LIvepol will face only a P$2,859m maturity in 2018, while the remainder of its debt stands at

17 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com an average maturity of 6.8 years, is 100% peso- denominated and carries an average rate of 8.0%.

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 20, 2017

LIVEPOL (BUY, PT P$188.0) 3Q17 Earnings report: Weak numbers that are worth a closer look

Livepol presented a mild quarterly report affected by a number of unusual events that detract from an otherwise sound foundation. Even if this leads us to revise our target price from P$195.0 to a new level of P$188.0, we continue to rate Livepol a BUY and consider the report should not trigger a negative reaction in the stock. Revenues were, as expected, fueled by the incorporation of Suburbia and recorded a 24% YoY expansion. Yet, same-store performance of 5.1% at Livepol’s traditional base (vs 2.0% e) drove overall numbers a bit above our estimates. It is worth noting that by itself, Suburbia recorded a 3.2% SSS gain. EBITDA was up only 5.8% mostly as the company recorded a one-off reserve of P$186m linked to possible expenses in relation to the earthquake in . Excluding this charge, EBITDA would be up 12% and merely 0.5% off our estimate. Likewise, the margin would be 11.4%, instead of the reported 10.8%. Net profit was down 21% YoY, 6% below our projections, also explained by the aforementioned reserves.

18 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com October 19, 2017

LIVEPOL (BUY, PT P$195.0) 3Q17 Results scheduled for today AMC

Livepol is expected to release mixed 3Q17 earnings results today AMC, including sales up by 22%, EBITDA rising 10% and Net profit falling 19%. We expect strong sales growth as the company consolidates Suburbia stores only for a second quarter since its acquisition, outpacing both a modest SSS increase (+2%e) seen across Department Stores the past few months and a negative impact on sales of durable goods in the final two weeks of the quarter, following September’s earthquake in Mexico. On the other hand we look for margins to be pressured not only by the shift in the sales mix (Suburbia is focused on the lower-end of the economic scale) and reduced sales in the final weeks of the period, but also as credit reserves might be up as the loan portfolio matures at a higher speed than credit-backed sales; we assume NPLs could be 5.5% at the close of 3Q17, compared to 4.9% a year ago. The lower overall margins (11.7% EBITDA margin, off 130bp YoY) would come in spite of improved merchandise margins, though. At the net level, we expect a 19% retreat given increased financial expenses related to the funding of the Suburbia acquisition. We are not incorporating reserves or extraordinary expenses related to the remodeling/ reconstruction of units damaged in the earthquake, in spite that its store and mall at Villa Coapa (in the southern neighborhoods of Mexico City) remain closed up until today; insurance should cover these needs.

September 28, 2017

LIVEPOL (BUY PT P$195.0) No Structural damages reported at its Galerias Coapa Mall

In response to recent media speculation over the need to possibly demolish the company’s Galerias Coapa Mall, Livepol issued a press release stating that it has completed a thorough physical inspection of the premises, and as a result it is able to report that the mall has not suffered any structural damage, that the quality of the materials, the structure and its designs have proven to be in accordance to regulation, and that only minor, aesthetic damages have occurred. As a result, the company will proceed with the

19 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com needed repairs and cleanup, and will reopen the mall once Government authorities’ approval is obtained. The mall is one of a total 25 in which Livepol holds a majority ownership, and the Livepol store located within the mall is one of a total 85 stores in such format (and 248 in total, including Fabricas de Francia and Suburbia); adding up, we estimate a joint contribution of just over 1% of consolidated sales would be lost if the Mall and the store were to remain closed, so we regard the impact as mostly negligible.

August 23, 2017

LIVEPOL (BUY P$ P$180.0) To invest P$8bn to P$9bn in 2018

The company confirmed that for 2018 its Capex program will add up to a range of P$8bn to P$9bn, including investments to be made in Suburbia, the acquisition it just concluded at the start of 2Q17. This amount would be, at the top end of the range, 50% above the P$6bn committed for 2017, in which the company is expecting the reach a second-consecutive year of record store openings with 11 units, most of them in the Fabricas de Francia format (7 out of the 11). It is important to note that the recent years a P$5bn to P$6bn capex program has been.

July 27, 2017

LIVEPOL (BUY, PT P$180.0) 2Q17 Report: Let’s get those doubts sorted out

We believe LIVEPOL’s 2Q17 earnings release will turn out to be the missing catalyst for the stock, looking as in our opinion it has just dissipated the fear of a rough integration of the Suburbia business, the risk of incremental expenses to cope with the new scale of the company, and the health of the company's credit portfolio. Livepol reached sales of P$29,903m that were up 23% and merely 1% off our expectations. Same store sales were up 6.1%, unusually below their recent trend given an adverse calendar effect and seasonal impacts (Easter Holidays)—this, though, was largely known beforehand given ANTAD’s monthly reports. EBITDA margin was, as expected, diluted by 50bp given the shift in the sales mix (Suburbia integration) and as a consequence stood at 14.9%. EBITDA was therefore up

20 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com 19%, just as projected. Credit portfolio rose 8.7% YoY (which is in line to the organic expansion) and non- performing loans stood at 5.0%, up 57bp from last year, but still a solid number for consumer portfolio. Management stressed it is strengthening its credit control and surveillance activities in order to keep non-performing loans in check, as they are now.

July 26, 2017

LIVEPOL (BUY, PT P$180.0) 2Q17 Report due out today

This will be Livepol’s first earnings release including the operating results of Suburbia, while the debt incurred for the transaction has been in the company’s books since 4Q16; we will finally see the brighter side of the deal. We expect SSS to be 5% higher YoY, an abnormally low level affected by the seasonal and calendar effects that were present in the quarter, but that nonetheless should not detract from overall performance. This, plus the addition of Suburbia, should drive sales up by 24%, while EBITDA should also rise notably (+20%), though reflecting a lower margin (14.9%, down 50bp) as Suburbia has modestly lower profitability, and also considering that extraordinary and/or integration expenses have been minimal. Our projection at the net level call for P$2,240m, flat YoY, as the increased operating results are counterbalanced by the financial costs. From now on, we expect to witness a downward trend in the company’s leverage ratios, starting with a ND/EBITDA ratio of 1.7x (up from 0.5x in 1Q17) now that the excess cash has been applied in the acquisition of Suburbia.

May 22, 2017

LIVEPOL (BUY; PT P$180.0) Finalizes agreement with Ripley

Livepol informed it has ended the shareholers agreement it had signed with Ripley last July, in order to eventually lauch a tender offer for Ripley’s shares in Chile’s Stock Market, with the intention to acquire up to a 25.5% stake in the company. As a result, the tender will no longer take place, and both companies will continue to work separately, though future opportunituies will be considered.

21 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com We expect a positive reaction in Livepol’s stock price, as the market price of Ripley’s shares had soared beyond the originally proposed CLP420.0, so the continuation of a deal following the latest extension to the agreement’s deadline (a second one was due for June 15, 2017) would have implied an upwards revision to what the market perceived as an already high price for Ripley’s stock. Livepol will now focus on the integration of recently-acquired Suburbia, which started to be consolidated last April, and will be able to regain its traditionally solid financial profile sooner than expected.

April 27, 2017

LIVEPOL (BUY, PT P$180.0) A Positive Bottom Line Surprise - 1Q17 Results

LIVEPOL reported a better-than-expected 1Q17 result, mainly given a solid operating performance that withstood cost and expense pressures and achieved flat margins when we had projected a dilution. Sales were up 8.2% on the back of 4.1% rise in SSS, which show the adverse effect of a missing Easter Holiday season this year; this is especially important to Department Stores. EBITDA at P$2,591m grew 8%, and was 5% better than our estimate. While expenses keep a brisk pace in line to the expansion program, notable savings at the gross level make up for the improvement. Most of the improvement at the gross level, 86%, is the result of transferring the Aéropostale and Cole Haan boutiques to third parties, while expenses for such move were recorded in 4Q16 figures. While the credit portfolio grew a mere 2.8%, credit reserves nearly doubled as the NPL rate was 40bp up to 4.5%, showing what seems a far conservative stance from the company. Net profit was down 43% at P$792m, yet excluding the FX impact this number would be up by 2%.

April 26, 2017

LIVEPOL (BUY, PT P$180.0) 1Q17 Results Due Today AMC

Livepol will have a tough act to follow on this 1Q17 report. The lack of Eater Season shoppers and the baseline of a 9.5% SSS reported in 1Q16 will mean that our projected 4% SSS increase should be seen as a positive

22 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com development, in spite of it being merely matching inflation. Our sales projections adds a 5% sales floor expansion and the corresponding curve seeing the normal late-year inauguration from 2016’s program that could mean total sales rise close to 9%. We look for a 60bp decline in EBITDA margin, limiting EBITDA growth to 3% as the company faces a larges expense base from the recent openings (9 stores in 2H16) and a higher credit reserve that reflect a slower growth in the company’s credit portfolio and thus, the natural effect of “older” receivables. We project Net profit will be down 19% at P$1,119m as the company carried the leverage put in place for the Ripley and/or Suburbia acquisitions, and neither will be recorded in the top line yet.

April 5, 2017

LIVEPOL / WALMEX (BUY / BUY; PT P$180.0 / P$44.0) Suburbia transaction formalized.

Walmex informed that effective yesterday it has completed the sale of Suburbia to Livepol. The Net amount for the transaction added to P$15.7bn, including capital leases for approximately P$1.4bn that will be assumed by Livepol. Additionally, a P$3.3bn dividend will be paid to Walmex in the coming days, and Livepol will reimburse P$80m pertaining to changes in the value of properties under construction since the deal was first agreed on August 2016. Walmex stated that the sale of Suburbia ends the divestiture program started a few years back, and which included the sale of Vips, Banco , and now Suburbia. The company has reinformced its commitment to its core business and the target to double its size in the 2014-2024 period.

March 16, 2017

LIVEPOL (BUY, PT P$180.0) 2017 Capex program down 15% at P$6.0bn, to open 11 stores, up by one.

The company informed it plans to invest P$6.0m during 2017, including resources allocated to the opening of 11 new units. The amount is 15% below last year’s program, but store additions are actually higher with one additional unit (11 vs 10). It seems clear that such divergence comes

23 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com from the focus on Fabricas de Francia stores, which aim to smaller cities and require lower investment compared to flagship Liverpool format. Even though, no specifics were provided regarding the company’s boutiques, a format that received especial attention in 2016 with the opening of 18 of such small-format units. We would expect no impact on the share price form the news today, and continue to be vigilant to any updates on the Ripley acquisition proposal, for which Livepol expects Chilean Authorities comments before proceeding with a tender offer.

March 10, 2017

LIVEPOL (BUY, TP P$180.0) Antitrust authorities approve the sale of Suburbia to Livepol.

This morning Walmex and Livepol distributed press releases informing that COFECE, Mexico’s antitrust authority, has approved the sale of Suburbia to Livepol. No additional conditions have been imposed on the deal. The closing of the transaction will take place in the next few days; Livepol has financing already in place. For Livepol, this will translate into an incremental 15% in sales and EBITDA. This has yet to be incorporated into our projections and target price; we expect a positive effect on Livepol’s valuation, given the cheaper ratios at which Suburbia has been acquired. For Walmex, the sale had already been contemplated in an extraordinary dividend of P$0.96 per share that will be proposed on the upcoming Shareholders meeting to be held on March 31st. We will publish a detailed report once further information is available.

March 10, 2017

LIVEPOL (BUY, TP P$180.0) / WALMEX (BUY, TP P$44.0) Antitrust authorities approve the sale of Suburbia to Livepol.

This morning Walmex and Livepol distributed press releases informing that COFECE, Mexico’s antitrust authority, has approved the sale of Suburbia to Livepol. No additional conditions have been imposed on the deal. The

24 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com closing of the transaction will take place in the next few days; Livepol has financing already in place. For Livepol, this will translate into an incremental 15% in sales and EBITDA. This has yet to be incorporated into our projections and target price; we expect a positive effect on Livepol’s valuation, given the cheaper ratios at which Suburbia has been acquired. For Walmex, the sale had already been contemplated in an extraordinary dividend of P$0.96 per share that will be proposed on the upcoming Shareholders meeting to be held on March 31st. We will publish a detailed report once further information is available.

March 02, 2017

LIVEPOL (BUY, PT P$180.0) / WALMEX (BUY, PT P$44.0) COFECE to discuss the suburbia transaction today.

The agreement in which Livepol intends to acquire Suburbia from Walmex has been included in COFECE’s daily agenda for today, so it is probable that a final resolution is near. Livepol has already secured financing for the deal, while Walmex has already mentioned it intends to distribute proceedings as part of its annual dividend. Out of the P$2.50 dividend to be proposed in this month’s Shareholders Meeting, P$0.96 are attributed to the sale of Suburbia. The transaction was first agreed on August 2016.

February 23, 2017

LIVEPOL (BUY, PT P$180.0) 4Q16, a solid performance within a decelerating environment; adjusting TP to P$180.0

Livepol’s 4Q16 earnings report came in line to both our expectations and market consensus, including an 8% rise in revenues and a milder 6% hike in EBITDA, which suffered a 40bp dilution driven by cost pressures concentrated in logistics, credit card provisions, and leasing expenses. Notably, merchandise margin even improved YoY as Livepol has managed promotional campaigns to sustain gross margins and build on them; yet, the inherent cost pressures from the previous items did offset the savings recorded in the merchandise margin.

25 Disclaimer: https://goo.gl/6b8m3o www.actinverresearch.com Sales were bolstered by a 5.8% increase in SSS and the opening of 10 stores throughout the year; SSS were 7.6% up for the year. Four of such new stores were inaugurated in the 4Q, so their contribution should have been still marginal, in our view. We have adjusted our sales forecast to reflect a milder SSS expectation (5%, with no advantage to our general industry expectation), but the maturity of recent units, plus the opening of seven stores in 2017, should still be enough to reach a double-digit sales expansion in 2017.

December 23, 2016

LIVEPOL (BUY, TP P$185.0) Livepol and Ripley extend the deadline to start the public offer on Ripley shares, to April 30, 2017.

In a statement sent by Ripley to the Santiago Stock Exchange today, it is informed that Livepol and Ripley have agreed to extend the deadline to start the public tender offer for Ripley shares that is contemplated under the Partnership Agreement initially announced on July 5. As a result, Livepol has until April 30, 2017 to start the offer. Initially the term was set at 120 days counted from the signing of the agreement. There are no additional developments in the Association Agreement, although local press has repeatedly reported on the pressure of a group of minority investors for a better price than the one offered by Livepol (CLP $ 420.0). In fact, the clauses of the agreement give Livepol the possibility of canceling it in case of significant changes in market, economic, or other conditions, that alter the perspective of the business or that affect the cost of the offer for Livepol. We believe there is a material chance that the takeover bid by Ripley will not materialize and we remain vigilant to the completion of the acquisition of Suburbia, in which the approval by the antitrust authorities in Mexico is still pending. Our recommendation on Livepol remains as BUY, with a target price of P$185.0 that incorporates the change in economic outlook after the elections in the US, but does not yet reflect the additional value that Suburbia would bring to Livepol.

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