Alsea SAB de CV
BMV:ALSEA
Alsea SAB de CV
BMV:ALSEA
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Earnings Call Transcript
Other Earnings Calls
Welcome to Alsea's earnings conference call. With us are Alberto Torrado, Executive President of Alsea; Rafael Contreras, Chief Financial Officer; and Salvador Villaseñor of Investor Relations.
Our speakers will present the results for the first quarter of 2020. At the end of the presentation we will have a Q&A session. As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks outlined in Alsea's most recent annual report. At this time I will now turn the conference over to Mr. Alberto Torrado. Please go ahead.
Good morning, and welcome to Alsea's earnings conference call. We will be presenting the most significant events from the first quarter as well as our outlook for the future, to the best we can. Without doubt, this has been the most challenging period for the company in its 30-year history, due to the COVID-19 pandemic.
Since mid-March we have been obliged to close most of our restaurants and coffee stores in Europe and South America, and significantly reduce capacity in Mexico. As a result, our revenues have sharply declined. And given our fixed costs, our profits turned to losses.
What began as a very promising and positive quarter ended with running in the red. The second quarter will likely be even more challenging than the first, given that the first quarter benefited from a strong January and February and only suffered from a couple of weeks of pandemic that affected sales in March. For the second quarter, our total sales were down massively in April, and will only likely recover slowly in June.
To put some numbers on the current situation, from January and February, sales in Mexico were slightly above the last year figures. In March, sales in Mexico were 18.5% below prior year sales. And for April, 67% below. For Europe, sales in March were 54% below versus last year. And for April, 94% below prior year sales. A number more similar in South America.
On a month-to-month basis, the worst may be behind us. Even it's impossible to make confident forecast. Certain countries in Europe are planning to reopen their economies in a gradual manner from late April through May. And South America should follow in mid-May to June. In Mexico, around 60% of our units which remain open will likely see an easing of social mobility restrictions from the end of May. As that happens, our restaurants and coffee stores will slowly reopen, carefully following all government's ethics and social distancing.
As we have always done, we will only reopen stores that will contribute to profitable -- profitability, and expect capacity constraints to remain in place. Faced with such a situation, we have taken decisive and rapid steps to protect the health and wellbeing of our employees and customers. Maximize our online delivery revenues, reduce our cost destructor, enhance our liquidity and reach out to creditors and franchise stores for their support.
We outlined the initial measures in our press release of April 19, available in our website. We are confident that these measures will allow us to see through this crisis, and for normality returns be in an optimal position to serve our customers and our community and deliver attractive returns to the shareholders as we have done since the beginning of Alsea.
For the full first quarter, sales declined by 11.5%; same-store sales by 2.1%; and EBITDA by 20.5% with a margin of 10.2%. These figures [indiscernible] two very distant periods. In January and February, our sales grew by 4.1%; same-store sales by 5.5%; and EBITDA was up by 46.4 with a margin of 12.3% year-on-year. As this indicates, the year got off to a good start, extended by our improved sales in our main regions, driven by initiatives such as our Bake-in Store program in Starbucks and product innovation through all our brand portfolio. And our margins improved as fixed costs were diluted by higher sales, healthier costs and some -- on some imported products. Better implementation of promotion and efficiencies at our distribution center [indiscernible].
And then, by mid-March came the containment measures and the store closures. For March, sales declined 39.3%, and EBITDA was negative in MNX 672 million. This contributed to a net loss for the quarter of MNX 391 million.
As for the regions where we operate, in Mexico for first quarter 2020 total units reached 2,263, as we opened 12 new units and closed 21, in line with our strategy to focus on profitability. Our sales declined by 2.8%, and same-store sales by 2.6% in the first quarter, year-on-year. Until March, the Starbucks and Burger King in Mexico were performing well. And since March, Domino's has been the standout in Mexico since delivery is becoming the main sales channel.
Mexico's adjusted EBITDA margin reached 21.9% in the first quarter, versus 20.9% a year ago. With the margins of 22.5% in January and February helped by improvements in COA and the inventory management. COA, our distribution center, of course.
In Europe, total units reached 1,405, with 52 more units than first quarter of '19. And our sales declined by 17.5%, and same-store sales by 4.8% in the first year-on-year -- in the first quarter, year-on-year. While the EBITDA margin declined to 9.4% versus 16.2% a year ago. That quarter again got off to a good start as different initiatives to grow revenues and improve efficiency came into play. But as the store closures came into effect in March, sales plummeted, and then almost seized as the quarter ended.
In South America, total sales for the quarter declined by 22.9% in peso terms. Adjusted EBITDA by 69% with a margin of 5%. Same-store sales were up 6.8%. And units grew by 12. As with other regions, the quarter got off to a good start. Until March, containment measures came into effect and we continued to rationalize our operations in the region and implemented cost efficiencies.
As we have already indicated, we are focusing on 5 areas to help mitigate the impact of the COVID-19 pandemic on our business. Let me go over them briefly. And I'm happy to take questions, to go into more detail later.
First, we have prioritized the health and wellbeing of our employees, customers and community, and implemented a strict sanitary and hygienic policies in all open stores and delivery channels, always in line with government ethics. All of our workers that can work remotely are doing so. We're also committed to supporting our collaborators at this time, and our suppliers, especially those locally.
We closed the quarter with 73,677 collaborators, of whom 311 -- 3,111 are in support center, and 70,556 in operations. Despite the fact that we are selling approximately a quarter of what we sold the previous year at this time, we have managed to keep 92% of our jobs globally, compared to the previous quarter, and they are all central to the past and future success of Alsea. We have been offering some workers [indiscernible] to the time being to Domino's where demand has been strong due to the hike in delivery. We have also signed agreements with leading retailers and pharmacies to temporarily absorb some of our employees, always on voluntary basis, aiming to allow people access to full-time employment and to keep the income unaffected.
We're working to establish a program for the benefit of our workers affected by COVID-19, and providing other significant support measure to the most in need. All our collaborators in Mexico are incorporated into the Social Security Institute, and store managers and support centers, all of them have additional private health insurance.
At the social level, at Fundación Alsea, through the Va por mi Cuenta movement, we continue to provide food to more than 5,000 children living in food poverty. By government order, we have been forced to close the 13 dining facilities. However, we continue to guarantee food support through the distribution of basic goods for each of the 2,400 families in the program. In addition to food, we are providing hygienic supplies such as soap and detergents to support sanitary measures that combat disease. We are committed to continue these and other social initiatives in line with our corporate values.
Second, we have sought to develop revenue initiatives over the short and long term, mainly through takeout and currently -- encouragingly in Mexico, we are seeing a surge in delivery of brands that have traditionally been largely on premises. To give you some examples, P.F. Chang's delivery sales have grown 70% during the quarter; Starbucks 80%; and Chili's, Vips and the Cheesecake Factory higher than 90%. In Spain, we were able to reopen Domino's Pizza in April and are already seeing positive results.
Since the quarter closed, we have been reopening stores. As of April 24, we have reopened in Spain 94 Domino's Pizza stores, 111 Burger King's, 8 Vips, 3 Ginos, and 5 Foster's; and in Holland, 4 Starbucks, all for delivery. This represents about 9% of the units in Europe. Elsewhere, in Mexico, as I said, about 60% of our units were open as of April. 9% in Argentina; 26% in Chile; 80% in Colombia, mostly because of Domino's; and 22% in Uruguay. However, sales [ level is ] close to 30% overall versus last year.
Third, we have focused on saving money, always respecting legal and social constraints. We are cutting almost all marketing and publicity costs, and evaluating all third party vendor contracts. At the same time, we are in negotiations with our landlords regarding rent reductions, and have already achieved important savings. We will minimize the impact of the devaluation of our currencies, on cost to pricing strategies, promoting locally sourced products, reducing SKUs, and optimizing inventory management for expected sales.
In some countries like Chile, France and Spain, among others, governments have implemented aid programs to help businesses tackle the pandemic economic contraction. As an example, labor payments of about 70% of total wages and benefits of collaborators will be taken care by these aid programs during pay period of the mandate closures, alleviating our pressures there, and providing important social support. The natural turnover in our industry also allow us optimize our labor force, as our labor force number to revenues over time. The significant decline in commodity prices will help offset currency weaknesses and protect our gross margins in the future.
For example, cheese prices have been -- have fallen to its lowest in over 2 decades. As described below, we expect some relief from our franchise source in terms of royalty payment deferrals.
To help investors understand the magnitude of these savings, I would like to share some numbers with you. We have already saved about MXN 113 million in rent. We have saved about around MXN 400 million from freezing new hires, salaries increase and reduction in corporate and operating expenses. We have saved MXN 200 million from reduced maintenance of our stores, and about MXN 85 million from reduced energy and water, among other things. All of these obviously will be in our numbers in the second quarter of the year.
Fourth, we have focused on strengthening our balance sheet and liquidity. Due to declining EBITDA, our net debt rose from 2.9 of EBITDA at year-end of 2019 to 3.5x at the end of the first quarter of 2020. Our gross debt rose to 3.97 of our EBITDA. Rafael will enter into more detail, but we're in negotiations with our banks to seek waivers on the covenant as this ratio will likely rise again in second quarter of 2020, given the continuation of containment measures in April, and possibly beyond.
Also, we have slashed our CapEx to MXN 1.7 billion, and reduced store openings to 20% of our initial plan for the year, and [ remodelations ] to 52 from 178. All of those well underway when the pandemic hit and too far advanced to stop.
Fifth. We're looking to position our self for a post-COVID-19 world. Our premise is that the consumer will change once the pandemic is over and be more focused on the health and hygiene, delivery, digital communication space and brands with strong reputations. Consumers will likely have less money and thus be more value-focused. The restaurant industry will experiment changes, and it will be decapitalized and less credit worthy. Meaning, almost certainly, a rationalization of brands and reduction in capacity overall.
Aggregators might struggle to obtain cheap capital to cover their losses. How will Alsea react to this? We aim to be the leaders in delivery. And we are creating the best digital experience for our customers, and will adapt our marketing and distributions to achieve these goals. We will grow our Wow Rewards platform, and there we'll build loyalty, an effective channel of communication and database analytics. We will ensure that our brands and menus are target at the value-conscious consumer. We will be highly disciplined in deploying capital, achieving maximum synergies between our different business units, minimizing unnecessary spending and optimizing our real estate footprint. We're working on a series of strategic alliances with banks, cinemas, retailers, and others to boost traffics when the moment comes.
Our delivery platform mix is very unique and has a huge potential to become even more effective, helped by our 30 years of experience with Domino's, and the skill we have from being the largest food operator in most of our regions. In addition, we are now working with the main third party aggregators and with our Alsea COA platform, our own delivery platform, that manage processes of orders placed to aggregators, becomes way more agile and labor efficiency, you don't need additional process to communicate between the third party aggregators platform and our points of sales.
Our data management is driven by Wow Rewards, which now has more than 400,000 active members coupled with our other loyalty reward programs such as Club Vips, Fosterianos and obviously my Starbucks Rewards. We can offer our clients a full digital experience from order, to menu, to payment. Smaller chains and even more so independent restaurants cannot compete with this. We manage the most hottest brand in the business such as Starbucks, Burger King and Domino's. And our own brands such as Vips and Foster's are top-in-class in their markets. Along with our focus on customer service, this puts us in a formidable position to deal with worried customers in the post-COVID-19 world.
Furthermore, post-COVID-19 we will -- we believe that the global franchisor will increasingly focus on fewer and better franchisees with strong operator experience, reliability and scale, giving Alsea a further edge. We expect that many countries will follow a gradual reopening of their economies, including mandating greater space between people and tables in restaurants. That have been the case normally. As well in some cases, compulsory face masks for all.
As always, Alsea will follow such ethics. While such measures will impact revenues and profitability in the short terms, we will adapt our model as much as possible. Over the medium term, such measures if in place may impact which brands and portfolios we decide to focus on. At Alsea we have always understood that our business is a dynamic one, and it is essential to adapt to new circumstances. Given that the whole restaurant industry will face the same constraints, we are confident we can gain share and deliver returns in such an environment.
In summary, Alsea is doing everything in its power to mitigate the impact of COVID-19 outbreak on its business and be prepared for the eventual reopening of the economy and business. As I mentioned, we believe that the worst is likely behind us, and that company is well-prepared to navigate and succeed in the post-COVID-19 world.
Now Rafael will give you a more detailed overview on our financial results. Thank you, please. Rafael?
Thank you, Alberto. Good morning, everyone, and thank you for joining.
To begin, I want to clarify that, as in the previous quarter, and in order to present a comparable analysis versus the financials on the previous year, all the explanations and notes reported in our earnings release exclude the effect from the statements related to the hyperinflation in Argentina as well as IFRS 16. These 2 factors were included in the financial statement issued to the corresponding authorities.
The impact of IFRS 16 on our financial results for the quarter are as follows. A positive impact of MXN 48 million on net income, which represent 12.4% of the total income. EBITDA had a positive effect of MXN 1.2 billion, increasing the EBITDA margin by 1,040 basis points to 20.6%. At quarter end, we were operating with 90% of our total units in Mexico. However, sales levels are close to 50% versus last year, and this number changes every day. As of today, we are operating with 62% of our total units, where 34% are open to the public with strict sanitary and hygiene measures, and 28% operate exclusively through delivery and takeout, with an approximate 50% increase in sales for these channels since the beginning of the contingency measures.
Likewise, in Europe, at quarter end our operations were 100% shut down, and has been since slowly reopening, up to 9% of our total units in the region. We are focused on recovering as much sales as we can, given the changes in consumption habits, resulting in a stronger focus, mainly on home delivery and on -- on-the-counter delivery. We will benefit from the competitive advantage of having established delivery strategies and agreements with the main aggregators' platform, which will give us a head start versus competitors and guarantees continuity to stay with these channels.
Regarding our sales expectation compared to the sales registered in 2019, for consolidated Alsea during the first 2 months of 2020, we were above sales levels for the same period in 2019. However, in March, we were reporting around 60% of this sales reported in March last year.
Looking forward, as we have mentioned before, we expect the worst to come during the second quarter, which means that for April we expect to be around 18%, the May slightly above 20%, and close to 50% in June. As Alberto mentioned, given the negative impact on our EBITDA of temporary unit closures and the peso devaluation that led to an increase of our debt by MXN 2 billion due to our euro debt FX translation, we have seen our total debt EBITDA rise to 3.9x at the end of this quarter, and 3.5x net debt-EBITDA as the same as last quarter. We are indulging in talks with our leading brands regarding both waivers to our current covenants and increased financial flexibility in general, so that we have appropriate financial stability through 2020 and 2021.
We expect to be able to communicate the agreement within the second quarter. And we are confident these talks will have a constructive outcome given the excellent long-term relationship Alsea has developed with its lenders, our strong track record and the solvency of the company. The debt structure at the end of 2019 was 93% long-term, with 57% in Mexican pesos, 43% in euros, and less than 1% in Chilean pesos.
Turning to our liquidity. At the end of first quarter, we had MXN 3.8 billion in cash, out of which 64% was in Mexico, 20% in Spain, 7% in Colombia, 5% in Chile, 4% in Argentina, and 0.2% in Uruguay. Rolling our numbers, this will be enough to get us through [indiscernible] scenario for the full year. To help keep liquidity and as I previously communicated, our planned CAPEX for 2020 has been slashed to MXN 1.7 billion, and about 80% of our planned new openings will be postponed.
We continue to receive a lot of questions on the [ ALFT ] tax liability of MXN 3.8 billion arising from the purchase of Vips and El Portón from Calle Porton, New Mexico.
We remain highly confident that we will prevail. All our legal opinions are unanimous in the strength of our case, and are thus not provisioning for this, and expect a favorable resolution. Finally, we have decided to withdraw our previously published 2022 guidance due to the uncertainty and volatility caused by the COVID-19 pandemic, which makes it quite difficult to determine reliable future estimates.
Now we would like to open the call to Q&A.
[Operator Instructions] The first question is from Mr. Andres Ortiz from Credit Suisse.
I would like you to -- to ask about your OpEx control initiatives, particularly the ones related to labor costs. I just wonder if you could share with us what was the amount that you paid in labor cost in 2019. And what are the expectations of those cost cuts that you have received from both governments supports in Europe and in Chile, and disagreement with retailers and conformities in Mexico.
Andres, our level first quarter of –- our level of all 2019 was MXN 13 billion, which was 22.9% over sales. Our forecast for this year is around MXN 11.5 billion. So it will be around 15% less than it was last year. So let me tell you also what are we doing. Obviously, in the geographies where the governments are giving us support, as I can -- I can mention the IRTA in Spain, the government would be paying all Domino's Pizza employees around 70% of their salary. And that also includes, and correct me, Rafael, if I'm right, the GMA office level salaries from our senior executive to a certain level. And it doesn't apply in other geographies.
Obviously the biggest problem that we have is in Mexico because around, as I said, around 40 -- 39,000 people or team members are in Mexico. So what we are doing in Mexico, we are doing several things that I already mentioned. The first one is we're talking on with other retailers that are open and that are requiring people, and we've been sending some of our team members, if they accept, to go and work with them. I believe that we have a little bit less than 400 people that have been already -- accept these invitations for these companies to work from.
We are also letting all the normal turnover of the business without hiring new people. And what we plan to do in the future, which I think is the most important thing, is that our system is more efficient in geographies -- and when I mean efficient, it's more productive in geographies where labor is more expensive than Mexico. For example, we are more productive in France and in Spain in terms of number of hours paid and number of people in the stores. So we are adapting those measures in Mexico. So we will be getting out of this crisis with new staff [Foreign Language] in most of our business units in Mexico because brands like Starbucks, Burger King or the same Domino's are completely comparative and we can benchmark. So we already have a team working in the comeback plan. And we expect to have an important efficiency in labor in that sense.
The other thing that we are doing, obviously, and I know we have been very criticized in the media. But to be honest, I don't think the media has really got the reality. It's that even though we have 30% of sales today in Mexico, we've been able to maintain close to 93% of our workforce. And the way we are doing that is obviously with some, I would say, important adjustments in our G&A structure but not -- and in the -- at store levels we are working with the unions to have an agreement so our people can work some days on the week, no? And that's what we are doing.
Our next question is from Mr. Luis Willard from GBM.
I wanted to delve a little bit deeper on the G&A reduction that you mentioned, the MXN 400 million that you related to freezing hires and not making salary increases and all that. Can you quantify, please, with us, how much of this is really a saving and how much is this nonincurred expense? I would imagine on freezing hires it's something that -- I mean you don't expand in 2020, but probably the reduction in G&A is a saving. Do you have some sort of color on that part?
Let me see if I understand. You want to know what is the saving and what are we deferring?
What is the nonincurred expense? I mean if you don't hire anyone else, I understand that would turn over, you save that salary eventually but I…
I'll give you a number that I think will help you. We expect to spend in G&A in 2020 around 20% less than what we spent in 2019. That's a savings of around MXN 850 million. And I think this is important to mention. We are doing adjustments in the structure that we don't plan when we -- if these and when these get back to normal, we don't plan to hire these people. And we did the same. Even before the COVID-19 we were working with a program that we call [ Alsea Safe ], which was to, exactly as we did in the stores, this is a point that happened more than a year now. When we did the acquisition in Europe, we hired people Deloitte to do the merge between Grupo Vips and Grupo Zena, you remember that. And we talk about the synergies that we were looking for, that we were able to reach up to $80 million in synergies including 2020. So we found out that we could run the company with a more efficient structure and with less people. So we were working on that to make the adjustments in Mexico. But obviously with this crisis we decided to do them immediately. And just an example, we had an area of strategic planning that we took off. We have training in different brands, and we create some synergies in that. So what we actually did is generate -- replicate the model that Alsea was doing in other geographies to Mexico. So we do expect in the future to have an important reduction of G&A even after the crisis. So to get -- to answer you short, it's around MXN 850 less than 2019.
Our next question is from Mr. Rodrigo Echagaray from Scotia Bank.
On my end, I guess just to clarify, so you've said that right now we're anywhere from 25% to 30% of sales versus pre-COVID-19 levels. And we've also heard that there is about MXN 850 million of savings on the OpEx for the remainder of the year. Can you perhaps help us understand, how does the EBITDA look for Q2? How should we think about Q2 EBITDA given that it's going to be hopefully the bottom? And if we can tie that up with the liquidity. There's MXN 3.8 billion on the balance sheet but there's some CapEx left. And once we include some, hopefully, minor losses in Q2 at the EBITDA level, how do you think about that liquidity evolving throughout the year?
I will let Rafael go in detail, but I would like to comment one thing before. As I state in my initial remarks, and I've been telling these to the Board and everybody, I really believe that the second quarter is going to be very, very hard. And I think it's our responsibility to assume this. That doesn't mean we are not doing the best to be efficient, to sell more and get profits. But in the situation that we are today, it's so hard to predict what will happen in May and June. Even though, as Rafael mentioned, I believe that we will be around a negative EBITDA in the second quarter, probably close to MXN 2 billion. And again, please, I - it's hard to predict because there are so many things that we cannot control, especially in the top line. The rest we can control. But that's more or less my number. And I will let Rafael [indiscernible] about the rest.
Yes, in terms of liquidity, as mentioned, we are at the end of March with MXN 3.8 billion. In the second quarter we already took MXN 1.7 million in terms of our short-term credit here in Mexico. And in Europe, we're going to take around MXN 1.5 million in Europe because in Europe we have some, also some short-term credit loans. And in the third quarter, we will need in Europe around MXN 1.3 million also. And we are going to take that. At the end of the year, we expect to end with a cash of around MXN 3.5 billion.
In Europe, we had more short-term credits that we can use in case we need it. And also in Mexico, we have some other short-term credits that we can use, no? So I feel comfortable that the cash that we have right now and the short-term loans that we can use in the second and third quarter can support us to end the year with a cash of MXN 3.5 billion.
That's very helpful. And just one additional question. I mean how do you think about the relationship, I guess, now and in post-COVID-19 with the brand owners? Starbucks has spent about MXN 1.8 billion repurchasing shares. Their dividend has been confirmed. Meanwhile, there is restaurant operators that globally are facing significant distressed situations. Needless to say, doesn't seem fair, maybe is the word, I don't know. What other sources of support can you get from the brand owners other than delaying royalty payments? Or how do you think about this relationship? Because clearly they need you. Yet, so far what we have seen, in my opinion, is not enough given the extent of the crisis. How do you guys think about this?
Yes. Thank you for your question. I think it's very interesting to comment on that. As I mentioned, and I'm going to focus on the main brands, which is obviously Starbucks, Domino's and Burger King. I think I'll say it's in a good position in that sense. The first reason is because these are very powerful and big brands. That are global brands that mainly -- well, not mainly, not necessarily all of them, but they get income from royalties and they get income from their same operations, you know they are different. So these brands are big companies that needs franchisees like us or licensees like us. So I am personally having these discussions at the higher level to see how they can help. And this is public, Starbucks has offered some relief on royalties in the second quarter already to some of our licensees. So we are talking with all of them for different things. First, release some royalties.
We're asking them also to defer some payments. We're also asking them to help us navigate the devaluation situation in some of our geographies, not in all, especially in Latin America, with the ones that are selling us some products. We are asking them to help us to authorize local suppliers to produce some of the products that we were importing. We are also talking to them about stopping our development agreements and reschedule them next year when things are clear, so we can stop our development or organic growth without having any problem with them. We're also asking them to give us information on how other markets are starting to open, so we learn from the best. We're also asking them to give us information about technology and things that they are doing in other geographies to learn, best practices.
And obviously in the case of Domino's, which is a completely different scenario because other than Spain where we had to close our Domino's operations, in most of the country, in Colombia and in Mexico, Domino's is doing great. We're even asking Domino's to help us. So to be honest with you, I have not finished negotiations with them. And obviously, I am sure any negotiations that I've been able to achieve with them will have to be confidential. But what I can tell you is that I've been talking with all of them, and they are very open to help. They understand the situation. And they want us to -- not only to be -- to survive, let me put it that way, the crisis, but we are also talking about how we're going to get out of these stronger as ever. So I feel confident, and that's -- that's something that we don't have in our projections, of course. But I'm sure that by the second -- by the end of the second quarter we will -- we can comment about that. But I feel lucky that we have them and that we are so important for them.
[Operator Instructions] Our next question is from Mr. Álvaro García from BTG Pactual.
My question is on your talk to banks. I mean, I was wondering if you can maybe expand on what banks are looking for per se. You're obviously going to reach covenants significantly this year from a net debt-EBITDA standpoint. As much as you feel, liquidity under your base case scenario today will be okay. I'm wondering what banks are looking for as to what normalization might look like into next year to give you waivers and to give you sort of [indiscernible] that everything will be okay into next year? So that's my first question. A little bit more details on your discussions with banks.
We were talking with all of our banks. Our main banks are a Santander, [ Beruvia ], Bank of America and Scotia. They are the ones that are the ones that -- they are the leaders of the syndicated credit that we have. And we have all others that we had some other small credit, no? But we already had a lot of talks with Santander, Beruvia, BofA and Scotia. They are very open and they want to help us to give us the waivers that we need. And also if we need some other short-term credit, they allow us to give us something else. We already send them the waiver that we need. And we are in the process to give us the -- all the things that they need in terms of information and talk with them to be sure that we're going to have the waiver. We already talked with the CEO of each bank and they support us and give us their commitment that we are going to have the waivers and also their support for 2020 and 2021.
Okay. And just one for, one on Domino's. Obviously it's a brand that's going to pull you forward during these tough times. I was wondering if you could sort of compare. We've seen very strong dynamism in the U.S., the Domino's, and just sort of compare what we're seeing there, sort of what you're seeing in Colombia next? How the lockdowns impacted delivery. Would you have expected greater performance or just sort of comparing what we've seen across different Domino's formats around the world?
Yes. First, let me tell you, our business model in Domino's in Mexico is a little different from the one in the U.S. Not only in Mexico, but also in Spain, because our participation of dine-in and takeout against delivery is a little higher. So what I can tell you in Domino's Pizza is that the growth that we have had in April compared to January in terms of delivery, it's around 22%. With that said Domino has been able to keep it selling, right in our budget a little bit, 1% or 2% less than last year, because we have a lot of stores of Domino's still closed where we used to do dine-in and carry out. So mainly delivery. So Domino's is selling a 98% of what it was selling last year, more or less, which -- it's a very good number, taking in consideration that their service is limited, and it's limited also state by state. So there are different regulations. So that's good news. But I can give you some other information. For example, as I was saying, Burger King right now has 36% participation on delivery on sales, compare April to January. So those are the numbers. In Colombia, as I was telling you, we are selling 80% of what we were doing last year, mainly because that's a Domino's Pizza market. So those are good news. The bad news is now Domino's is not the biggest brand in our portfolio. The biggest brand in our portfolio is Starbucks. So even having Domino's fully, that will not be enough for us to have good numbers.
Our next question is from Mr. Rodrigo Alcantara from UBS.
First I would like to thank you for the level of disclosure in your press release. Very useful. Thank you for that. Just a follow-up on the comment, Alberto, that you mentioned for the EBITDA. That possibly we could see in 2Q of minus MNX 2 billion, right? I know it's difficult to forecast, impossible, right? And we are working just with assumptions, right? Just curious about the scenario that you're foreseeing to get to this number. I mean based on my numbers, perhaps could possibly sales below 50% versus 2019, right? I don't know if that's the assumption that you are working on, or possibly lower sales, higher sales. So if you could comment a bit on this, would be helpful. And the second one would be regarding the new reality rather we can have in the next months, long-term, which brand which -- any particular brand that you see that could possibly under-perform, particularly delivery or -- in this new reality that you mentioned in your press release?
Yes, I know that it's hard to make predictions, but I -- as you know, we like to be very open and as always, communicate as much as we can with you guys. So what I'm expecting to see, as I said, is a very bad second quarter. So our numbers is that May will be -- April is around 18% of sales, total sales compared with '19, 2019. May, we estimate around 20%, and June about 50%. I mean there are many opinions here in the company from our different regional managers and brand managers that they can do better than that. But I believe this is conservative. I believe that we don't know what can happen. So 18% in April, 20% May, and 50% in June, as Rafael stated, that's second quarter.
Lower than.
30%. So lower than 30% all quarter.
Right.
Lower than 40% you said, sir?
30%.
Yes.
Yes.
Yes, yes. Yes, it looks like quite conservative.
And then, what we are doing, I am assuming that the third quarter will be a quarter, will slowly recover. And then, what we are aiming to achieve is to have a very strong fourth quarter. And when I say a very strong fourth quarter, it's sales around 80%…
85%.
85%, which obviously is not very strong, but it's very strong when you compare to third and second quarter. We are not expecting, and I hope we are wrong because we are doing the best to be, to have a very strong fourth quarter, but we are not even expecting to have a similar sale that we did in 2019.
Sure, sure, completely agree. And that's very helpful. So on the second question, which brands you may see that could under-perform in this newer scenario that we are seeing.
See, about -- again, we're -- I mean, we have brand managers of all the brands, all the brands are doing their best to give us the best numbers they can. But we are focusing on the big brands because the big brands in Alsea are the ones that move the needle. Starbucks, Burger King, Domino's, Vips, Foster's. I think the ones that are going to be more affected are the Casual Dining brands. Fortunately, Alsea is not the biggest participation in our portfolio because they have the higher ticket -- the higher ticket, and a lot of those brands are brands where a lot of people gather. So we think that's going to be a challenge. But at the end, I think those brands are going to be doing great if all these pandemics finish in the third quarter because people want to get to out, because people want to entertain. And because even though people are not going to have enough money, those brands are not high-class restaurants, are reasonable ticket, average, and we can gain a lot of that because there will be not many competition out there. So we are preparing for those brands to pick up very strong in the last quarter of the year.
Our next question is from Mr. Ron Dadina from MUFG.
When we met in December I was very impressed by Alsea's franchise and business. Sorry to hear about the current state of affairs, but I know you have a great management team and you'll get through this. I have a couple of questions. You gave us an idea about the expected drop in sales in second quarter and the rest of the year. Just to have a better apples-to-apples comparison, if your sales are down 30%, 50%, what is the expected drop in cost? Like are costs dropping at a similar level? Are costs only expected to drop at a much higher level? Can you give us a little bit more idea and color on that so at least we can have a better handle on things? And my second question is, you also mentioned that you have access to unused bank lines and facilities. Can you give us an idea of the size of those lines and whether they are committed or uncommitted?
In terms of the committed lines, in Europe we have around EUR 70 millions with committed lines that we can use when we need it. Here in Mexico because they are not committed, that's why we took MXN 1.7 billion the first day of April. And the other ones that we have here in Mexico that are not committed, no. The only ones that are committed are the ones in Europe.
And regarding…
Any idea on the cost? Yes.
Yes, of course. Well, let me address two things. I mean cost of goods, you mentioned cost of goods. The cost of goods, we are -- we don't have a good news for the second quarter. Even though through the year we expect to have a similar cost, last year we have a food cost of around 29.5. And this year we expect to have around 29.9. So that's all the year. But if we talk about the second quarter of the year, that second quarter is affected by two reasons. We expect to have a little bit close to 32%, 33%, for two reasons. First, there has been a lot of pressure in exchange rate in Mexico and in Latin America, as you know. And also we had already inventories of cheese and other products and other prices, and also it's not the right moment to increase prices in any market. So we want to increase prices, we are going for volume and margins, not necessarily for margins, sorry. But throughout the year we expect to have a similar one. Where we are going to get the benefits is in expenses because we're stopping all the expenses that I mentioned in the second quarter. So the difference in cost will be mitigated by the efficiencies in expenses, labor, rent, advertising and maintenance and others.
So net overall cost of goods sold and other expenses is -- they're going to be higher than the…
No, it's going to be a little lower or more or less the same as in the first quarter. But I have to check that. Again, we are forecasting -- the situation is we don't know sales. So as a percent it will be hard to tell you. But I will tell you that at store -- let me give you a number, at store level expenses, we expect to have around 30% less than what we had in the first quarter. Total store expenses.
Thank you very much for your question. Our next question is from Mr. Miguel Ulloa from BBVA.
And the first one would be regarding Europe. Could you provide a little more color of how you envision the opening of the country and the opening of operations down there and how things should evolve for you guys there?
Well, in terms of your Europe, obviously our main business in Europe, as you know, is Spain. You probably have read what the government said about the process of -- and how they plan to open the market. As I mentioned in my earlier statement, we are already opening stores in Spain. And what we expect to do is to have all the Domino's Pizza system open. Right now we have 94 stores of Spain already opened of Domino's, 111 Burger Kings, 8 Vips, 3 Ginos, 5 Foster's. So we are opening as we can, always depending on the circumstances to make sure that we are having positive cash flow. But we are going to follow the government authorizations to open those markets. There is a partial opening that the government has announced actually yesterday. I don't have here the documentation with me. But we…
They are going to start 11th of May.
Of May. That supposedly to have 11 of May, slowly they will be opening. So we're going to do what the government let us do. It's not really something that it's in our hands, it's in their hands. But we will open all the restaurants that we can leave on delivery and carry on as long as they are producing positive cash flow.
Okay. And in that regard, how many restaurants do you think there will be delivering the positive cash flow?
Today, as I tell you, we have close to 200 restaurants operating already in Europe. And the reason why they are open is because we expect all of them to give us a positive cash flow. It's important to say that we start to opening these restaurants in the last 2 weeks. So it will be hard for me to tell you as of today how much cash flow these restaurants have generated. But by May, we will know exactly what are the resources. And we are following these week by week. But to give you an example for -- just to give you, we are estimated that in Europe sales May are less than 10%. And in June were are estimated that sales in Europe will be close to 50%. That's our, more or less our numbers. No, sorry, no, I said May 5%, June 7% and -- okay.
5% and 7%?
Sales in April in Europe, 5.2%. I'll give you the three months -- 5.2%, May 7.3% and June around 40%.
[Operator Instructions] Our next question is from Mr. Álvaro García from BTG Pactual.
I wanted to ask on sort of two questions, those are related. On sort of your portfolio management, Alberto, you mentioned that you're going to focus on your big brands. And I was wondering sort of taking a more medium-term view, if you're willing to potentially sell some of your smaller assets now, given what's going on? Obviously, that's not the focus now, but if this might accelerate, another wave of rationalization within your portfolio. And then, my second question is, if you can give -- maybe give us an update on the selling process for your old COA distribution center, and how much that might represent in terms of some form of cash inflow during the year?
First, as we mentioned even last year before the COVID-19 crisis, we are taking out of Alsea everything that is not strategic or that is not producing positive cash flow. As last year, at the beginning of the year, we had close to 90-something stores that were not producing cash flow that we were thinking about closing. And with this crisis, that number will increase, around 20 more stores that we are analyzing. So you might be taking the opportunity with the landlords to close some of those stores even faster. So probably in this quarter, and I'm pushing to close as much stores as I can, so we don't get distracted operating restaurants that we have tried to fix in the past and we haven't been able to do that. But now, I mean if there is something -- is there an opportunity here is that because of the situation we will be able to close those stores. And that's not only -- that's not specifically a brand or a geography, it's some restaurants in our portfolio that are not performing well. And we're going to use those assets to open the other stores in the future when things get to normal. That's one thing.
The other thing is that, I also mentioned last year and early this year, that we had other assets that are trying to sell. We were able to sell another location, another property that we have in Interlomas, that we mentioned, MNX 120-something million. We decided not to sell [ Clavak ], that's important. We got a penalty from the agreement that we had with Fibra Uno. And they pay us that because we make the numbers and we had -- we've been renting a lot of other spaces, facilities, for equipment, for cheese, and other things. So we decided to keep that. And we're going to be saving close to MXN 2 million to MXN 3 million in a quarter. So we'll keep that. We still have other assets, especially real estate that we're selling. And I hope that we -- it's not the right moment to sell things, but hopefully we have good news each quarter, one or two properties that we can sell. And the other thing is, yes, we are analyzing again our portfolio. And you will see probably us taking decision of other brands before the end of the year. We still have some brands in Europe that we wanted to get out of the portfolio like wagamama, that we haven't. And that's really the only brand that we are looking at right now.
That was the last question. I will now handover to Mr. Torrado and Mr. Contreras for final comments.
Thank you. Well, first, thank you everybody for the time. As I mentioned, it's a tough time for everybody. We are doing what we always do, work hard and try to get out of these. And please let us know if you have any questions in the future, and we are always here to answer them. So thank you again and have a good day. I hope everybody's safe.
All conference hosts have hung up. This conference is over. Thank you.