Alsea SAB de CV

BMV:ALSEA

Q2-2025 Earnings Call

[Gerardo Lapati, executive]

Good morning, everyone, and welcome to Alsea's Second Quarter 2025 Earnings Video Conference. My name is Gerardo Lozoya, Head of Investor Relations and Corporate Affairs. Today, you will hear from our newly appointed Chief Executive Officer, Christian Gurría; and Federico Rodríguez, our Chief Financial Officer. I'd like to take a moment to warmly welcome Christian to his first earnings call as CEO.

With over 2 decades of experience at Alsea, he brings deep operational knowledge and strategic insight into this new leadership role. Before we continue, a friendly reminder that some of our comments today will contain forward-looking statements based on our current view of our business and that future results may differ materially from these statements.

Today's call should be considered in conjunction with disclaimers in our earnings release and our most recent Bolsa Mexicana de Valores report. The company is not obliged to update or revise any such forward-looking statements. Please note that unless specified otherwise, the earnings numbers referred to are based on pre-IFRS 16 standards. I will now hand it over to Christian for his initial remarks. Please go ahead.

[Christian Gurría, executive]

Thank you, Gerardo, and thank you all for joining us today. This is my first earnings call as CEO of Alsea. I am honored and excited to step into this role. After more than 25 years with the company, a journey that began as a manager in the Domino's Pizza store in Cuernavaca in Mexico.

Over the years, I've worked with exceptional teams across multiple brands and regions, gaining a deep understanding of our operations, culture and long-term potential. I want to sincerely thank Armando and the entire Alsea team for their trust and support in ensuring a smooth and successful leadership transition for the past 5 months.

It's an honor to build on the solid foundation they have set. I take on this new responsibility with a clear and strong commitment to continue building on Alsea's core strengths, operational discipline, a customer-centric approach and a long-term strategic vision. We remain focused on improving efficiency by making the organization more agile, driving disciplined organic growth in our highest value brands, reinforcing our core business and pursuing sustainable growth opportunities through the innovation and strong execution. All of this is supported by the best talent in the industry.

Before we turn to the quarterly results, I want to outline the strategic priorities that will guide our focus going forward. First, disciplined organic growth and portfolio optimization. We will prioritize expansion and innovation in brands with a stronger market position. We will strengthen our customer engagement through digital loyalty and delivery channels, prioritize scalable and high ROI brands and rationalize noncore assets.

Second, disciplined capital allocation, invest in growth and productivity initiatives with clear return thresholds, maintain strong free cash flow generation and a healthy balance sheet. Third, build a high-performance organization, attract, retain and continue developing high-impact operational teams and top talent across all markets, promote agility and accountability throughout the organization.

Fourth, enhance profitability, drive cost discipline, enhance procurement efficiencies and optimize labor resources. And fifth, advance ESG commitments, leading sustainability and governance leadership integrate ESG into daily operations and strategic decisions. Now I'll provide an overview of our quarterly performance, including our financial results and key brand developments, along with updates on our digital transformation, ESG initiatives and expansion strategy.

In the second quarter, we reported a 4.2% year-over-year increase in total sales, reaching MXN 20.4 billion or an 8.9% increase when including foreign exchange effects. Same-store sales grew by 4.9%. This quarter reflects the calendar effect -- the calendar impact of Easter. EBITDA increased by 10.5% in the second quarter, reaching MXN 3 billion with a margin of 14.2%. The margin contracted by 40 basis points year-over-year.

We served nearly 35.3 million digital orders in the quarter, totaling MXN 7.7 billion, which represents 38.6% of our total sales. This performance demonstrates the ongoing success of our digital strategy. Regarding brand performance in the second quarter, Starbucks Alsea same-store sales increased by 4.4%. For Starbucks Mexico, same-store sales rose 3.8%, mainly driven by a loyal customer base and solid in-store performance.

For Starbucks Europe, same-store sales increased by 2.5%, reflecting a gradual recovery in France and a sequential improvement in Spain, driven by effective commercial strategies. Finally, in South America, same-store sales increased by 9.7% and declined 6%, excluding Argentina. This is mainly driven by lower traffic in Chile. Domino's Pizza Alsea posted a 6% increase in same-store sales. In Mexico, Domino's Pizza's same-store sales increased 8.9%, driven by strong performance in the delivery channel.

In Spain, same-store sales increased by 1.9%, reflecting effective promotional efforts and a positive customer response to product innovation. In Colombia, Domino's delivered strong results. Same-store sales increased 10.8%, supported by successful marketing initiatives such as Domino's Mania that boosted volumes and reinforced brand momentum. Burger King Alsea same-store sales, excluding Argentina, decreased by 6.1%. In Mexico, Burger King reported a same-store sales contraction of 6.8%. This was driven by continued underperformance in delivery in our premium offer.

The Full-Service Restaurants segment delivered 5.9% same-store sales growth. This segment has performed well with same-store sales growing at a mid-single-digit rate over the past 3 years. This consistent growth highlights the effectiveness of our value proposition and consistent execution across our core brands. Same-store sales for Full-Service Restaurants in Mexico increased by 6.1%, with most brands growing at a mid-single-digit pace, while Chili's and Italiannis achieved a high single-digit growth.

This performance was driven by the strength of our value proposition, product innovation, successful product launches and a favorable calendar effect. Same-store sales for Full-Service Restaurants in Spain grew 5.9% with Vips and Gino's delivering solid growth of 4.3% and 7.3%, respectively. Our global organic expansion strategy remains focused on prioritizing quality over quantity, targeting the most profitable opportunities across our key markets -- across our key markets.

In the second quarter, we opened 32 new stores, 24 corporate and 8 franchises with an emphasis on high traffic and high potential locations. We expect the pace of openings to pick up in the second half of the year. This approach reflects our commitment to long-term brand positioning and discipline, strategic growth to traffic flagship developments and selective market expansion. Given the profitability and payback of remodeling, such as increased customer satisfaction and higher sales, we will continue prioritizing a refreshed and modernized look across our locations.

Our digital transformation continues to drive growth. By the end of the quarter, loyalty sales increased 4.7%, reaching MXN 5.4 billion, representing 25.6 million orders and contributing 26.8% of total sales. We also surpassed 8 million active users across our loyalty programs, confirming the strength of our digital engagement. This quarter, we continue to strengthen our sustainability model by aligning our purpose with every aspect of our operations.

As part of this effort, we updated our double materiality assessment, which was published in our 2024 annual report. This analysis allow us to recalibrate our impact goals and move forward with greater precision toward a business model that fully integrates sustainability across all levels of our organization. Every step we take reflects our long-term commitment to responsible purpose-driven growth. Thank you. I will now hand it over to Federico.

[Federico Rodriguez, executive]

Thank you, Christian. Good morning, everyone. Sales increased by 14.2% in the second quarter, supported by a strong performance in Mexico, Spain and Colombia. Excluding the FX, sales increased 8.9%. We remain on course to meet our 2025 guidance and are seeing solid progress driven by disciplined execution across regions.

In the second quarter, sales in Mexico were up 9.1% to MXN 11.6 billion. In Europe, sales increased by 25.4% to MXN 6.4 billion, while in euro terms, sales increased by 5.2%. Finally, South America sales grew 12.8% to MXN 3.2 billion. The EBITDA increased by 10.5% with a margin contraction of 40 basis points, mainly due to the depreciation of the Mexican peso and increased labor costs in Europe and South America.

These impacts were partially offset by the favorable Easter calendar effect, the recovery of brands across most regions, disciplined revenue management and improved SG&A efficiency. In this context, we choose to be careful with pricing to protect traffic and sustain brand competitiveness. In Mexico, the adjusted EBITDA increased 4.6%, supported by strong operating discipline and continued SG&A efficiencies, partially offset by FX-driven input cost pressures.

In Europe, the adjusted EBITDA increased by 26.4% year-over-year, primarily due to positive same-store sales and improved traffic trends. In South America, adjusted EBITDA decreased by 11.4%, reflecting a lower consumption environment in the region, except for Colombia. Lower traffic, particularly in Argentina and Chile, weighted on operating leverage and contributed to the decline. The net income for the second quarter increased 552.7% year-over-year, reaching MXN 868 million, reflecting positive noncash effects, which reduced the cost of our U.S.-denominated debt in Mexican peso terms.

Regarding the CapEx, the CapEx for the first 6 months of the year totaled MXN 2.5 billion. Of this total, 70% was allocated to store development initiatives, including the opening of 24 new corporate units the renovation and remodeling of existing locations and equipment replacement across the brands. The remaining 30% was directed at the strategic projects focused on technological upgrades, process improvements, software licenses and the construction of the new facility in Jalisco, all of the above, reinforcing the long-term competitiveness and operational efficiency.

At the end of the second quarter, the pre-IFRS 16 gross debt increased by MXN 5.5 billion year-over-year, reaching MXN 34.8 billion. This increase reflects the bank loans used to settle the minority stake in the European operations, the impact of the Mexican peso depreciation on the foreign currency-denominated debt as well as short-term debt for working capital needs. The company's net debt, not counting the impact of IFRS 16 was MXN 29.9 billion, which is MXN 4.3 billion more than it was at the same time last year.

Consolidated net debt reached MXN 47.9 billion, including lease liabilities. At the end of the quarter, 76% of the debt was long term with 65% denominated in Mexican pesos and 35% in euros. We remain focused on maintaining a healthy capital structure supported by prudent financial management and a strong commitment to meeting all obligations. At the end of the quarter, the cash position stood at MXN 4.8 billion.

Turning to the financial ratios. The total debt to post-IFRS 16 EBITDA ratio closed the quarter at 3x, while the net debt-to-EBITDA ratio stood at 2.7x. As expected for the time of the year for the first half, cash usage was elevated during the first 6 months, reflecting the typical seasonality of the business and the temporary draw on working capital. We anticipate a gradual recovery like we had on the last year as sales volumes normalize and working capital efficiency improves. I will now pass you over to the operator for the Q&A session.

[Operator]

[Operator Instructions] The first question is from Mr. Ben Theurer from Barclays.

[Federico Rodriguez, executive]

We cannot hear you, Ben. [Foreign Language]

[Benjamin Theurer, analyst]

Better?

[Federico Rodriguez, executive]

Yes. No we can.

[Benjamin Theurer, analyst]

Okay. I don't know, I can't barely hear you, but we're getting there. Does it work?

[Federico Rodriguez, executive]

Yes it works.

[Christian Gurría, executive]

Yes. Perfect.

[Benjamin Theurer, analyst]

Technical issues. Well, we got this. First question, thanks for the patience as well here. So first question actually for you, Christian. Obviously, you got new into the role, but you're with the firm for many, many years. So maybe help us aside from what you've laid out within your prepared remarks about the strategic initiatives, et cetera. How do you look at the business as you came into the role, new CEO, where do you think are the biggest opportunities where you can potentially drive growth [Technical Difficulty]

[Christian Gurría, executive]

Thank you, Ben. Thank you for the question. Well, as you know, I -- beyond the 25...

[Benjamin Theurer, analyst]

First question and then I have one for Federico.

[Federico Rodriguez, executive]

We stopped hearing you, but we understood the first question, the priorities for Christian, and we couldn't hear the second question. But Christian, if you want to answer?

[Christian Gurría, executive]

Thank you, Ben. And well, as you know, beyond the 25 years I've been part of the Alsea family, I spent the last 5 months in a deeper onboarding across all the businesses. And aligned with the priorities I shared at the beginning of my intervention, for me, same-store sales growth to traffic is one of the #1 priorities. And this is what. But how is through the development and intentional focus on elevating the talent of our operators in our stores and the operational base that supports our brands and our business.

Talking about store managers mainly. Our store managers manage businesses around $800,000 per year. And we know that by unlocking their potential, we will, for sure, unlock the growth at our store levels. And this will also intentionally elevate our district managers and regional directors of operations through the system. That is one part of the answer.

And the other one is through remodelings. We know we are preparing a ratio of 2:1 store opening to remodeling because we know this not only enhances the experience of our customers and brings additional traffic at the stores, but it also has a really good ROI and a very good payback. So those are part of the key strategies and focuses that we will be working on as we move forward.

[Benjamin Theurer, analyst]

Okay. Perfect. And then I hope you can hear me. Just one second, real quick. As you look into the performance in Mexico, we've had a lot of other companies that called out adverse weather as a very negative effect, but it feels like you were a little more isolated. Maybe any comment you can share as to why the performance actually was fairly decent in terms of traffic data, same-store sales within the operations in Mexico?

[Federico Rodriguez, executive]

Yes. Well, Ben, as we told in the first quarter, we have a positive calendar effect, not only in Mexico, but in the rest of the regions too. And obviously, that helps because Easter passed from March to April. But additionally, we have seen the resiliency and the positive trends that we have seen in a lot of brands.

Obviously, we are still suffering in Burger King. In Burger King, we have the negative side of the story, but Starbucks is performing slightly better than in the first quarter with respect to the same-store sales. We have a mid-single digit in there. Domino's Pizza had a super strong recovery, now performing in the high single digit and a significant part of this with the transactions and the strength of the Full-Service Restaurants in Mexico, but in Europe, too. it is really significant, the trend that we had in that pillar for Alsea.

We have from mid-single-digit same-store sales to high single-digit depending on the brand. And we are happy because of the innovation, the consistency in the message. So I think we have a clear path. Obviously, in the third quarter, we are -- and we have only 3 weeks of the month of July. We still have 2 months in front, but we are seeing the same trend that we had in the second quarter.

[Christian Gurría, executive]

And if I may complement, Federico, also, we were able to understand better what was the consumer needing. And with some value-driven campaigns, we were able to activate traffic, and we have some examples of what we have done in Vips in Spain with some of the higher value-driven dishes.

And also in Vips Mexico is another example of many of the day and how we have been able to respond to what the customer is looking for and several initiatives like 3 for Me in Chili's, which has been really driving growth in these particular brands. And like that, we have many other examples in the other brands, how we reacted after seeing the trend that we were looking at the beginning of the year.

[Operator]

Our next question is from Alejandro Fuchs from Itau BBA.

[Alejandro Fuchs, analyst]

Christian, Federico, congratulations on the results and Christian on the new role. My first question is for Christian, also a little more strategic, similar to Ben. And then I have a follow-up. Christian, you've been at the company, obviously, more than 2 decades, right? You have seen many cycles going, not only in Mexico, the sector, but also the company.

So I wanted to maybe pick your brain a little bit on where do you see Alsea in the next 10 years, right? You already shared with us some of the key strategies that you're going to be focusing on. which is very appreciated. But if you could take us 10 years from now, where would you see the company? What would be, let's say, the goal for you over that period? That will be the first question.

[Christian Gurría, executive]

Thank you, Alejandro. From my view and my perspective, I believe it's an evolution and continuation of the current strategy we have in Alsea. First of all, by a very disciplined organic growth, prioritizing quality over quantity.

Second, continuous and ongoing analysis of our existing portfolio of stores and brands, which is something, as you know, we work on this every day to improve performance and deliver stronger results. The third one, I would say is we know that talent will be part of our success and has been so far. And one of the biggest confirmations through my -- these years is that the biggest asset we have in Alsea is our people and our talent. So we will intentionally and continuously invest on developing the stronger talent.

In this process of this portfolio management, we will also continue working on finding the right brands that are accretive to our portfolio, but at the same time, understand when is the life cycle of a brand into our portfolio coming to an end. So I can tell you that to summarize is a very strong and solid portfolio of brands driven by the best talent and delivering the best cash conversions and returns in the industry with a very solid and disciplined plan for the next years.

[Alejandro Fuchs, analyst]

That was very clear. And just one very quick follow-up, if I may. I want to touch upon maybe the part of the business that is going through a little bit of a slowdown, right? I think Mexico and Europe, very good and very impressive performance. But maybe we can discuss a little bit of South America with excluding Argentina, negative semester sales in some of the brands. Maybe can you elaborate a little bit more on what's going on in Chile, in some of the other countries, Colombia that you're seeing and maybe what you expect for the second half?

[Federico Rodriguez, executive]

Well, you heard what happened in Mexico regarding Europe. We increased in a mid-single digit the same-store sales with a significant recovery in Spain given the positive calendar effect a better performance of Starbucks across the region, not only in Spain, but in France, too, we're improving sequentially the same-store sales and the same for Portugal. And as said before, the Full-Service Restaurants pillar, which is, I would say, around 50% of the total EBITDA for the region in Europe, the performance is great.

The openings are having a better payback, improving ROI -- ROI sorry, the innovation that we are taking to the customer is amazing. As Christian mentioned, we are changing -- we did a completely change of the menu in Vips and in Gino's, and that is bringing, again, more traffic and traffic for the stores. We have improved the remodelings, and we are having a double-digit increase in the same-store sales where we have performed a change in the look and feel of the unit. And regarding Domino's, you can remember that last year, we launched the Croissantizzima dough pizza, that activate the brand, and we are seeing an increase in the same-store sales trend, especially in the delivery part. So we are quite happy regarding what is happening, not only in Europe, but in LatAm too.

And unfortunately, the negative side of the story in South America, Argentina, Argentina has sequentially recovered a part. But obviously, the inflation, it is still showing traffic pressure as the cost of living has been increasing, creating challenges for the consumption and the economy overall. And Colombia, as mentioned before, obviously, we're improving. We have seen a positive trend in the Domino's Pizza business during the last 12 months. So we are quite happy with the part of Colombia, but obviously, Argentina and Chile are still suffering.

[Operator]

Our next question is from Mr. Tiago Harduim from Citi.

[Tiago Harduim Alves de Mello, analyst]

[Foreign Language] I would like to explore 2 points here. The first one, so you were mentioning a little bit about the Domino's performance in Mexico, fantastic performance, by the way, congrats. And just wondering if we could maybe discuss a little bit about the competitive market here. So how you're seeing competition, how that played out in this quarter? In the previous 1Q, we saw the brand, if I'm not mistaken, posting same-store sales at 1.5%. This quarter, 8.9%.

So just wondering if this gap it should continue going forward because it's a fantastic level. And yes, I have a second question. I think I'll just make it right now. Just if we can maybe discuss a little bit the Full-Service Restaurants also had a fantastic performance, both Mexico and Spain. Just wondering what you're seeing on specific brands, what are the top performance and maybe opportunities you're seeing here?

[Federico Rodriguez, executive]

Do you want to start?

[Christian Gurría, executive]

Yes. Thank you, Tiago. Well, to your first question in terms of Domino's Pizza and the performance of the brand, as we mentioned before, we are working in a very -- in an approach around the revenue management and the way and product innovation. And this has clearly been recognized by the customer. And in the beginning of the year, we were more following other type of initiatives.

And by this shift into this revenue management approach, sticking to our core, to our business, which is about the quality of our product, the elevating the experience, the delivery experience in our stores for our customers. clearly, this is showing how the customer is positively responding.

And this is, as mentioned before by Federico, initiatives like we had, particularly in Spain with Croissantizzima and a solid portfolio of offers in Mexico for takeaway and also in delivery. This has clearly driven the additional traffic and shifted the trend that we had at the beginning of the year, again, by listening and understanding better what the customer needs were and the moment we were living and the ability or agility to adapt.

On your second question about the performance on our casual dining or Full-Service Restaurants, I believe part of the answer is consistency. We have been driven by consistency across the last years and taking the necessary decisions internally to the brands that we were having some gaps to catch up. And there are several examples of like in Spain with Foster's Hollywood and the introduction of chicken in our portfolio. It was originally a very beef-driven, hamburger-driven brand.

And now chicken has become with this Nashville chicken campaign, we have seen clearly the customer responding in a very favorable way. And in the case of Mexico, the possibility to have clearly a value offer where we could provide a Full-Service Restaurants experience with very competitive and accessible prices has clearly been recognized by the customer and continue building on our platforms, like I mentioned before, like 3 for Me in Chili's, like many of the day in Vips and Paradiso Italiano in Italiannis, which clearly the customer has recognized and continues driving traffic and a solid consistent performance also by having strong operators in these brands and making sure that the stability on our managers and having the best talent has also been paying.

[Federico Rodriguez, executive]

And to complement Chris and Tiago, all of the brands of the Full-Service Restaurants portfolio are performing from a mid- to high single-digit same-store sales trend. So we are quite happy from P. F. Chang's, the Cheesecake Factory. So we have -- we never talk a lot from this part of the business from this segment, but we are quite happy.

Last week, we opened one unit of the Cheesecake Factory in Puebla, and it has been amazing the response of the people 6,000 people per week. Obviously, that drives a lot of increase into the penetration of the brand. So we have a lot of white space.

And that we're talking for the Cheesecake Factory, while Vips in Spain this year, we'll open from 15 to 20 units. Obviously, the specifications to open one of these units is totally different from a Domino's Pizza or Starbucks Coffee store. So we are quite happy, and I think we are in the right path, especially with consistency. We do not want to increase prices, we want to preserve the traffic, as we have mentioned from last quarter of 2024 as of today.

[Operator]

Our next question is from Mr. Thiago Bortoluci from Goldman Sachs.

[Thiago Bortoluci, analyst]

It's always a pleasure to talk to you. Christian, congrats on the new role. Best of luck. It's a good way to start with a very solid quarter. Congrats on the results. I would just like to explore a little bit more the discussion we had year-to-date on coffee prices, right? If I recall correctly, when we were in the first quarter conference call, you were mentioning that you were just sitting with Starbucks to negotiate coffee prices for the year, and we might start to see some of this pressure or some of this impact flowing into the P&L from the second quarter.

Fast forward to the end of the second quarter, actually, when I look at your gross margin performance in Mexico, right, year-on-year, it's getting better, right? And then I think the question is, when I try to tie up this with this speech where we're being prudent on pricing, trying to protect traffic, and we know coffee probably is one of the most important raw materials adding pressure to your cost structure in the year. How much of this is already in the P&L in the numbers, right? Or how incrementally more this could weigh on the results by the back end of the year? This is my number one question.

And then the second point, maybe it's more for Federico. I know you reiterated the guidance and particularly on the top line, FX is playing a positive role so far. But then Federico, when I look to your pre-IFRS EBITDA, particularly, right, it's virtually flattish on the year-to-date comparison, right, up by low single digit.

And obviously, I know when we have been extensively discussing this, and thank you very much, Gerardo, for the patience on going through this all over again in all the conversations we have, there's a difference between lease accounting, right, and the post and pre-IFRS trends and recognition. But particularly on the pre-IFRS, which is the one that matters for free cash flow, right, how confident you are with the mid-single-digit growth guidance?

[Federico Rodriguez, executive]

Okay. Regarding the second question, Thiago, regarding the guidance, obviously, right now, we have tailwinds because of the average FX that we use to build the guidance. As you can remember, we use MXN 20.8 per dollar, around 30% of the total food basket of Alsea is dollar index. And right now, we are below MXN 19. There's a lot of volatility. I don't know how long it's going to last is part of the equation.

But as mentioned in the last quarter, with all the negative results and the contraction of around 300 basis points from a pre-IFRS 16 view, we are quite positive that we will achieve the guidance. I think we have done all the job and a lot of reports from the different people covering the share are telling about the SG&A. I will say that, obviously, as mentioned, we are not putting the 100% of the inflation, the internal inflation increase to the ticket. We want to have positive trends because of the traffic.

But additionally, we have a lot of levers from our rent expense part, obviously, all the costs of the structure inside Alsea, the ways to do a different scheduling into the stores. We have 3 main levers into the P&L. The revenue, the cost of food and the labor. We are increasing productivity using tools using digitalization, trying to measure on a better way, the peak hours, the rush hour into our stores and could offset part of the increase of the FX.

But I will tell you that, obviously, we manage the business from a pre-IFRS 16 part. We never see the post-IFRS 16, and we are quite positive regarding achieving the guidance, as we mentioned. Right now, we are having a low single-digit in terms of EBITDA. But as you can remember, we have a lot of seasonality, sorry, in this business. we have a relevant part of the revenue going from the beginning of January to the end of -- sorry, the beginning of November to the end of January.

So I am quite positive. Obviously, we are putting all the campaigns informed to be relevant this part. But with the trend that we see in the same-store sales, I'm quite positive that we will achieve the guidance. Sorry for the extension on the answer. Christian?

[Christian Gurría, executive]

Thank you, Federico. Thiago, in the case of coffee, as you know, this commodity has been -- we are seeing increments out there in the market of almost 100%. Fortunately, due to the -- we are taking the leverage that we have with Starbucks and the high volumes of coffee they purchased, we have not felt this level of -- or this percentage of increment. We had felt some of it.

But the way -- first of all, by leveraging this, we are able to offset some of these high increments on this particular commodity. We are expecting for the second half of the year, particularly the fourth quarter, an improvement on this particular coffee prices. But nevertheless, what we can control is where we focus and put our energy, trying to avoid to pass this to the customer by working on our cost of food control, enhancing and putting focus on making sure that the controls we have at the store level are in place and are being strictly followed by a very disciplined revenue management strategy, which includes pricing, category management, optimization of our core portfolio and LTOs.

And so all this combined together with campaigns that are more, I would say, more effective, all the combined allow us to offset these types of things. And as you know, sometimes it's coffee that goes up, sometimes other goods go down. So it's an always-on game. And I believe that we know how to manage that without passing the cost directly to the customer.

[Federico Rodriguez, executive]

And complementing, Christian, we have a lot of different effects during a normal year. Right now, we have the pressure of the coffee. I would say that more than 50% of the price increase we have seen into the P&L of the first half. There's a part of the increase only on coffee that we will see over the second half. But we did not count with the positive FX. Right now, we are seeing some decreases in some of the main SKUs that we use into the food basket of Alsea.

Only to give you one figure, we have more than 4,000 SKUs into the total composition of the portfolio. Obviously, coffee, cheese, syrups are relevant because all the pizzas have cheese. But I would say that we have a lot of levers. And for example, we have an increase into the beef right now. We are -- we recently launched the Nashville chicken into the Foster's Hollywood.

So we can change the mix, and that's part of the revenue management of this business. Maybe we do not talk around the changes on the revenue management, the mix that we use, but all the value campaigns, the promotions are thinking from a gross margin protection. So we have less impact into the total mix of the EBITDA figure.

[Thiago Bortoluci, analyst]

No, this is great. And if I may, just a very quick follow-up here. This is same-store sales, right? 4.5% in the quarter, very nice sprint. As you recalled in the opening remarks, clearly benefited by a positive calendar, which hurt you in the beginning of the year, right? If I assume more or less 100 basis points, then your underlying same-store sales would be close to inflation in the quarter, right? What makes you think that we should see real same-store sales growth in Mexico by the back end of the year?

[Federico Rodriguez, executive]

Well, as you know, we do not split or we do not deliver the split among transactions and tickets. So I would say that we are not obsessed to have a positive figure or a real figure because it is not only a ticket. And I would say that less than 50% of this figure is coming from tickets as in the first commentary, the mid-single digit that we have across all the Full-Service Restaurants portfolio, 80% is coming from traffic.

And that's where we want to set Alsea, not only for 2025, but for the future. I know that the rest of the players, the main competitors in terms of coffee or pizza are doing a pass-through of the 100% of the increases in coffee and cheese. We do not want to move to that position because we can save this year, but we are going to suffer in the long term.

[Operator]

Our next question is from Mr. Antonio Hernandez from Actinver.

[Antonio Hernandez, analyst]

Congrats on your results and Christian, welcome to this new position. Just a quick one regarding your CapEx plans for the future, I mean, beyond 2025 in light of -- I mean, considering digitalization, remodeling just as you mentioned, innovation as well. What are your plans going forward? Or where do you see them maybe as a percentage of sales, maybe as a total amount and maybe a potential breakdown as well?

[Federico Rodriguez, executive]

Well, Antonio, as you know, the guidance for CapEx in 2025 is around MXN 6 billion. 1/3 of that figure is coming from openings, another 1/3 is coming from maintenance when you change the AC or when you paint the wall, et cetera, et cetera. And the remaining part for new projects, digitalization projects, the new facility in Guadalajara, et cetera. I would say and maybe Christian can add something regarding the opening remodelings for the future, both for 2026 and ongoing, we'll explain that figure. Obviously, it was inflation, et cetera.

But we are on the range to open around 200 new stores year-over-year to fulfill the more than 2,000 white spaces that we have delivered in the last days, Alsea days for the different brands. And the breakdown will be pretty much the same, 1/3 openings plus remodelings plus the maintenance another 1/3. That is -- that would be the idea.

[Antonio Hernandez, analyst]

I don't know if you want.

[Christian Gurría, executive]

Yes, for sure. And to complement Federico's answer and a little bit following up on the breakdown. In the case of openings, we will clearly prioritize quality over quantity and the right brands and the right geographies. In terms of technology and the projects of technology, we will also focus on what can add technology for the customer and technology for our members, our team members, how to make their life easier, how to allow them to focus on the customer and on the business and try to simplify and reduce admin tasks and in the case of the customer, obviously, the loyalty programs are, as you have seen, clearly driven traffic and we continue building a strong base.

So clearly, we are going to prioritize on the excess. And as I mentioned before, in the case of remodelings, we have clearly seen a very positive ROI and positive payback on remodelings. Clearly, on the FSR segment, we see a stronger response from our customers due to the nature of the business when we remodel a store. So we are going to continue to expand. And as I mentioned before, a ratio of 2:1, so 2 remodelings for every single opening. So that's where we are going to beyond the maintenance CapEx that is part of our business. Antonio, sorry -- I'm so sorry, Antonio.

[Antonio Hernandez, analyst]

And just a quick follow-up. You also mentioned in terms of digitalization and how you're working on these different tech initiatives to reduce maybe staffing in certain hours and so on. How advanced are you in these type of programs, maybe from a format or unit perspective?

[Christian Gurría, executive]

There are certain geographies where we are fully implemented. We have fully implemented these tools like in the case of Europe. In Mexico, we are more advanced in some brands than others, but this is work in progress. And likewise in South America. Obviously, productivity has become more and more relevant in the past year.

Years, we know that there is labor reforms across different geographies, and we continue trying to be ahead of the curve. And when we talk about productivity, we are also learning and we have previous experiences in last 6 years, I was based in France. So this is one of the big learnings that we can bring and leverage to other geographies.

And again, one is through how can we become more productive in terms of hands, but also how we can become more productive in terms of how do we make the life of our customers easier and the life of our staff at the stores more easier so they can focus on the customer and not on the task. So this is ongoing on work in progress. And again, how can we get ahead of the curve and achieve this balance?

[Operator]

Our next question is from Mr. Froylan Mendez from JPMorgan.

[Federico Rodriguez, executive]

I think we cannot hear you.

[Fernando Froylan Mendez Solther, analyst]

Can you hear me now?

[Federico Rodriguez, executive]

Yes.

[Fernando Froylan Mendez Solther, analyst]

Congrats on the appointment and your first earnings call. I have 2 questions, one more of a follow-up to Antonio's question. This 2:1 ratio on remodeling versus opening, how does this compare to the past? Is this, let's say, a higher ratio than before? So we should expect something incremental going forward on the remodeling side? And how does this compare to the industry standards in this ratio? And the second question is on the portfolio optimization, a clear focus on your new strategy, Christian. Is this only Burger King and some of the Full-Service offerings in South America? Or how much, let's say, VAT do you see in the portfolio that needs to be optimized? And what is the timing to reach the ideal setup?

[Christian Gurría, executive]

If you want to answer the second question?

[Federico Rodriguez, executive]

Well, Froylan, good morning. As we have mentioned before, obviously, we cannot disclose what are we thinking regarding the whole portfolio. We have a lot of collaborators. We have to improve the operations and to maximize EBITDA of these businesses. But we are actively looking for new brands, portfolio optimization regarding brands and stores.

And obviously, we want to unlock all the value for the investors, for the shareholders. And we are obviously looking to sell some of the brands because we are focusing in 3 main strategies, the Quick Service, the Full-Service Restaurants and the coffee shop. But if we have something we'll tell you in the next months regarding the first one.

[Fernando Froylan Mendez Solther, analyst]

Regarding the first one?

[Christian Gurría, executive]

And regarding the first question about the ratio of Froylan, in the past, we had -- we were prioritizing in a way new store openings. And right now, we are going to, as I mentioned before, prioritize in the terms of the organic growth, quality over quantity, the right brands in the right geographies and with the best cash conversions. And likewise, in the case of remodelings, it's the same approach, understanding that the ratio and the number of -- if we know we open an average of 200 stores, this means an average of 400 remodelings per year, so which is a higher number that we used to have in the past.

[Federico Rodriguez, executive]

Yes, that is not changing the needle for the CapEx. Obviously, in the last couple of years, maybe we're having a lower ratio, but it is not changing. Obviously, when we remodel a store, it is not like you are building a new store. So maybe you are spending around 15% to 20% depending on the brand of initial CapEx and the returns, as Christian mentioned, are amazing. You improve, for example, in the Full-Service Restaurants above 8% in terms of traffic. So that is the planned part of the strategy of Christian for the future.

[Operator]

Our next question is from Mr. Ulises Argote from Santander.

[Ulises Argote Bolio, analyst]

I echo my colleagues in wishing you all the best in your new role, Christian. Just maybe taking advantage of you seeing the business here with a fresh set of eyes. I wanted to pick your brain further on Burger King and maybe kind of following there on Froylan's last question. So obviously, the format continues to be challenging in Mexico, in particular, but you also mentioned Chile with some very challenging trends there. Any plans that you can share maybe if there's drivers for a turnaround? Or should we think more this going the avenue of what you guys did in Europe for the format?

[Christian Gurría, executive]

In the case of Mexico, particularly, as mentioned before, we have been able to shift the direction as we saw the trends at the beginning of the year, and we will continue following up the current strategy with the different examples that we have shared in terms of the FSR or Starbucks or Domino's Pizza to continue delivering this performance.

As we said before, we are seeing a very similar trend in Q2 to the one -- in Q3, sorry, to the one we saw during Q2. So we are confident that this is working. And also, as mentioned before, our last quarter, starting the last late October and end of the year is where we have the stronger campaigns and now we have had the time to do the work to have and prepare stronger campaigns.

In the case of Burger King, as we mentioned before, we continue seeing a not clear recovery. So we are working with the teams and with the brand to continue understanding how we can drive and reactivate the traffic and focusing again on what we can learn and understand and listen to the customer. But we see a more flat trend as we move forward.

And in the case of Chile, we had this effect from the from the strike, particularly in Starbucks, we have seen a slower recovery than what we expected. But there is -- the recovery is there, but it's slower. So we expect to continue following this trend with a slight recovery and with a positive trend as we go through the year.

[Operator]

Our next question is from Mr. Álvaro García from BTG Pactual.

[Alvaro Garcia, analyst]

Can you hear me?

[Christian Gurría, executive]

Yes.

[Federico Rodriguez, executive]

Yes.

[Alvaro Garcia, analyst]

Great. I have 2 questions, one for Christian and one for Federico. one for Christian on Starbucks in France, we seem to have found a floor on store productivity in France. And I would love to sort of gauge where you are from a conviction standpoint on new openings. Obviously, a couple of years ago, a big chunk of your openings were going to come from France. How do you feel sort of finding this floor on new openings in Starbucks in France?

And then for Federico on SG&A in Mexico, we were a bit surprised with yes, how low SG&A was this quarter, both on sort of non-operational expenses and operational expenses. If you could maybe comment and give some more details on how that happened, that would be very helpful.

[Christian Gurría, executive]

Thank you, Alvaro. In the case of France and Starbucks, we continue seeing a positive trend in terms of traffic recovery, which has been slower than we expected. Nevertheless, we continue seeing a positive trend on this -- on traffic. We also expect that the summer is going to be stronger by -- when we compare to previous year with the impact -- negative impact of the Olympic games. So we know there will be additional traffic, and we know there will be better performance in terms of same-store sales.

We have -- we launched a very specific plan, a 3-year plan to drive and to change this -- to shift this trend, and we are already seeing how this is paying off with the figures we're seeing. In the case of store growth, as you answered -- as you asked, again, we are going to continue prioritizing quality over quantity and continue growing through our franchisees and through company-owned stores.

As you know, in France, it's the only market where we have a franchisee model in Starbucks, and we are working with our franchisees to continue driving this growth and at the same time, continue gaining market share in the market with a very, I would say, boutique approach in the market.

[Federico Rodriguez, executive]

And for the second question, Alvaro, as I mentioned, more than 18 months ago, I knew that there was a little bit of gravy into the bottom part of the P&L. Obviously, we have been growing during the last 20 years crossing the Atlantic, going to France, acquiring a lot of different transactions. And we were not available to consolidate all the synergies.

And what I'm talking about, it is not around the service on the stores. Obviously, we want to increase productivity because it is good, and we have a lot of different roles, not only internal, but from Domino's Pizza, from Starbucks, et cetera. And we have to lever the business in there to have so much partners as we can behind the bars for Starbucks Coffee in the rush hour to have less people when we are opening the stores, for example, in the case of Burger King restaurants or Full-Service Restaurants in Mexico or Europe.

So I would say one of the levers is the productivity. We are increasing the productivity across all the different regions and brands. The second one, we are renegotiating all the different fixed services costs that you can imagine, all the marketing agencies that we have, all the lawyers' fees that we used to pay. Obviously, we want to have cross-services in the different areas, in the different regions. For example, one treasury that can cover Alsea, not one in Spain, one in Mexico, one in Chile, one in Argentina.

Obviously, it is not easy to do, but that's part of my job. And that's the kind of efficiencies that we are finding in the bottom part. Obviously, we have more efficiencies in the long term. We are not capture that in the next 3 or 6 months, but it is an ongoing process of finding these kinds of efficiencies. And obviously, Christian has found a lot of potential synergies across productivity, revenue management into the different stores with the induction process that he has lived during the last 6 months.

[Alvaro Garcia, analyst]

Great. I'm going to do one other follow-up because we've been asked this a lot. We've seen a lot of weakness from beverage players. That was a great answer, Federico. Thank you for that. We've seen a lot of weakness from beverage players in the second quarter. Obviously, a lot of rain in June in the center of the country and sort of across the whole country. So in the context of Starbucks Mexico, obviously, the mix of beverages, specifically cold beverages has really picked up over the last couple of years. Was that a specific category that saw weakness or not really at Starbucks Mexico this quarter?

[Christian Gurría, executive]

No, I believe -- on the contrary, I believe it's one of our strongest categories due to the mix that we have -- and the offer, both core and LTO offer that we have -- when I mean LTO is the seasonal offerings, sorry. We have a very, very strong portfolio that not only responds to seasonality and weather changes, but also responds to day parts and moments of consumption.

So we have a very strong cold beverage portfolio, which responds not -- because it's not only a specific city, sometimes you can be having 40 degrees in the South and 10 degrees on the north. So this core offer together and complemented by our seasonal offerings I would say, which includes both innovation and our core portfolio are clearly drivers of traffic, not only today, but historically. So we continue on this trend and adjusting and adapting to trends on ingredients, to trends on the beverage profiles and having the support of a partner like Starbucks clearly allows us to push on that very many months ahead of the curve.

[Federico Rodriguez, executive]

And if I may add, complementing Christian's answer, the hard figure, obviously, I have just asked for this figure, we have increased more than 50% the cold beverage for Starbucks Coffee in Mexico. I don't have obviously the categories for the rest of the regions, but Starbucks Mexico is most 80% of the total mix of the pillar, that's it. It's positive.

[Christian Gurría, executive]

And we can adapt to either geographies, you can see different behaviors in Europe, 60% of the traffic is driven more in the afternoon with a more focus on cold beverages. In the case of Mexico, it's more a morning traffic, more on the espresso category. So I believe this ability to adjust and adapt and to continue always innovating is one of our stronger assets.

[Gerardo Lapati, executive]

And if I may, Alvaro, related to your question, and this is not for Starbucks, but for Domino's Pizza, some of the good performance of the quarter, it was also related to a very strong June month that I would say, the rainy season on the delivery type of orders excel. So that was also one of the reasons why Domino's to some other question that we received, it was also driven by this effect.

[Operator]

Our next question is from Mr. Julio Cesar Martinez Castro from SURA Investments.

[Julio Cesar M., analyst]

My question is related to Alsea's overall growth strategy for 2026. Will the company prioritize growth through innovation, such as introducing new brands and exploring new segments rather than focusing primarily on increasing market share through pricing strategies?

We saw a reduction in the Burger King brand and we later saw an announcement of introducing Chipotle into the Mexican market. And my follow-up question is specifically regarding to Chipotle. What was the overall rationale and strategic vision behind bringing Chipotle into the Mexican market for 2...

[Federico Rodriguez, executive]

Okay. I will answer the first question regarding capital allocation, Julio. We have 3 main levers for the capital allocation. Obviously, the organic growth. As mentioned before, we have more than 2,000 openings footprint for the next 10 years. I will say that the rhythm will be from 200 to 220 stores year-over-year, including the franchisees. The second one is portfolio management.

Obviously, we are looking, as I said before, to what to introduce into the portfolio as we did with Chipotle a couple of months ago. And what are the stores that we are going to close because the neighborhood has changed or the kind of brands where we want to rationalize the portfolio. Obviously, it is not only Burger King or the casual dining part in South America, we are analyzing the 100% of the portfolio where we should be, why we should compete in that sector. And if we are going to grow because obviously, maybe we have an extraordinary performance of the unit, but we have 3 units, and we are not available to open 100 in the upcoming future.

So we are not -- we do not want to compete in there. That would be regarding portfolio management. And the third part is to return to shareholders through the payment of dividends. We started in 2024 with the payment of dividends. This year, we have canceled around 11.7 million shares in the last quarter, and we will continue with the buyback/dividend strategy for the upcoming years. And regarding the second question for Chipotle and the rationale?

[Christian Gurría, executive]

Yes. In the case of Chipotle, our DNA is always looking for opportunities. And this is part of the dynamics of Alsea, and we have always been looking for opportunities. There are not too many brands out there with the size of Chipotle and the potential. And we clearly see in Chipotle a very strong potential. It's also important to mention that we are not competing with Tacos. This is not our focus.

Here is about bringing a brand in what is called the fast casual segment, where we can have a very high-quality product with extraordinary ingredients, proteins with a healthy profile that will be complementing the existing offer that there is in the market. We clearly see a very big potential with a very good value proposition, which is what Chipotle is going to bring. So we are very -- obviously, we have a very non-CapEx-intensive commitment with Chipotle to develop the brand, and we are very optimistic of what the results that we can expect.

[Operator]

That was the last question. I will now hand over to Mr. Christian Gurría for final comments.

[Christian Gurría, executive]

Thank you very much, everyone. And before we conclude, we would like to thank you for your participation and interest in our quarterly conference call. We deeply value your trust, the trust you place in our company. And as the new CEO, I reaffirm our commitment to transparency and sustainable growth. If you have any additional questions or require further information, our Investor Relations team is always available to assist you. We wish you an excellent day and look forward to having you join us for our next quarterly call update in October. Thank you very much. Thank you, Gerardo. Thank you, Federico.

[Gerardo Lapati, executive]

Thank you very much.

[Federico Rodriguez, executive]

Thank you very much.

[Operator]

Alsea would like to thank you for participating in today's video conference. You may now disconnect.