The segmentation is working fantastic. So again, positive, but we remain conscious of all the external factors that are around us and that we have to juggle at the same time.
Eugenio Garza: I would add that, I mean, if you look at what’s happening over the past three quarters, Diego I think it is a reversal of the trend we saw during the pandemic of consumption patterns shifting from the small bucks to the larger bucks. And now that’s coming back with a vengeance. And that is coming back higher than we anticipated, frankly. So we’re seeing traffic trends pick up, and also tickets and pricing stick to what we have. So I don’t know if this is a secular trend or if it’s a temporary trend, but it is what causing the short-term results. Having said that, with the value growth that we have and with the unit economics we’re getting, we’re comfortable that we can continue on that path going forward. I think you mentioned Bara and the other multi-formats.
I think we’re growing there as well, and we see a lot of promise, having said that they’re still too small to make any kind of cannibalization threat to the expansion path we see in OXXO. Again, there are more than a million non-impossed in Mexico, tens of thousands of larger formats and stores across Mexico. So I think there’s room for all of the formats to continue to grow in this way. And the second part of the question was with regards to Brazil. And again, what I can say is from a four-wall perspective, the stores are performing much better than we expected when we originally entered into the partnership with Raízen. It’s still an issue of scale. As you know, our model is distribution driven and distribution investments are front loaded.
You have to put the distribution center first and then fill it up. So there’s still a big runway of stores before we can get to the economics we expect for the region. But the fact that the four-wall model is working well gives us a high sense of confidence that we will get to these numbers and that we will be able to replicate these units of distribution centers/stores in the region of Sao Paulo and hopefully more regions in the future. And to what extent we can export that to the US, I think the US is a different market and we’ll get to that. But — that’s the learning so far in Brazil.
Juan Fonseca: Yeah. I would just add, Diego, this is Juan. I mean, going back, I’m kind of guilty of charge because I remember six months ago sitting in this same conference room on the call and telling all of you to not put into your model kind of a teens number. And then I’ve been wrong for the following two quarters, because we’ve delivered 15. I think to range’s point, Jerry is still out in terms of how much of this is sustainable. But it increasingly looks like there’s a lot of structural reasons why things are as positive as they are as opposed to just the bounce back from COVID. As we begin to look at 2024, again, I would — I think the numbers are going to continue to trend down. So in my mind, it would probably — we’d probably be thinking more about a very high single-digit same-store sales growth, and we’ll revise that in February.
But I don’t think double digits or out of the question, at least for the early stages of 2024, we’ll see. But the deceleration has certainly been a lot less rapid than we expected six months ago. So that’s all very good news.
Thiago Bortoluci: That’s super clear. Thank you very much, everyone.
Eugenio Garza : Thanks, Karl.
Operator: Before we proceed to the following questions, a final reminder. [Operator Instructions] The next question comes from Álvaro García from BTG. Please go ahead.
Álvaro García: Hi guys. Thanks for the question. My question, we haven’t focused on margins at OXXO, profitability came down a bit. SG&A accelerated sequentially. You mentioned the release sort of increased labor expenses in connection with labor reform. But I was wondering if there’s any other dynamic going on there, maybe sort of quicker growth outside of mix? I know it’s still very, very small, but I’m not sure if that’s starting to maybe move the needle a bit? Or is it really solely a people thing in Mexico? Thank you very much.
Eugenio Garza : I would say, Álvaro, thank you for the question. First, primarily, it is labor, as we said. Having said that, a lot of these initiatives in the strategic plan including we are looking at better methods for recycling cash for cash in, cash out in the stores. We are — we — I mean, rejiggering the operational model with regards to how many people, I mean, operate the store, how many are fixed, how many are variable in terms of shift, et cetera. And all that is experimentation, as we look to build, I mean, more resiliency from a cost perspective going forward. And all those experienced — all these experiments are flowing through P&L as OpEx. So that is a little bit of the factor that you also see there. There is, as you said, also just a mix effect with regards to South America, which is less profitable than Mexico at the margin. But I would say, I mean, 80/20, it’s labor 20% the rest of the stuff I just talked about.
Juan Fonseca : I would add one more thing, Alvaro, this is Juan. Gross margin historically has been the main source of margin expansion at OXXO. And usually, we do very well at the growth level. And then we lose some of it in the SG&A, and we end up with a smaller expansion at the operating level. I was personally very happy to see this quarter as going back to an expansion at the growth level. We’ve talked about services, having been volatile, similar correspondent banks coming and going. We now have Banorte back. We talked for a number of quarters about Premia, the impact of how we were booking the points this prior to us moving the whole loyalty program outside of OXXO and into the digital P&L. But to have them exited those to kind of noisy situations, at least right now, it looks like we’re back to a place where commercial income begins to be strong enough that it helps expand the margin at the growth level.
And if we were able to continue that, then that bodes well to our ability to then offset labor pressures, which, as you know, going into 2024 there are outstanding questions in terms of Congress and what’s going to be passed around Laser Legislation. So we’ll see. But we’re much better going into that situation with an expanding gross margin coming from commercial income, which is where we are right now.
Álvaro García: Great. Thank you very much for the color.
Paco Camacho: Thanks, Alvaro.
Operator: The next question comes from the line of Alan Alanis at Santander. Please go ahead.
Alan Alanis: Yes. Thank you so much. Good morning. Congratulations for the results. My questions got to do with Bara and the fact that it’s growing 50 — more than 50% faster than the rest of the supermarkets. I mean I understand what Jorge said that the remain spending and so forth. So you see that on the traffic but clearly, you now have a winning model on Bara on the supermarket. So what are the ambitions with this change? How fast can you grow it and how much this changes your strategic thinking regarding moving to different formats? That would be my question. And if you could also just quickly comment on the trend on spirits demand in Mexico in the last quarter in OXXO or in Bara that will be highly appreciated. Thank you so much.
Paco Camacho: Yes, Alan, let me take the first part of the question about Bara. First, I mean Bara is — we don’t consider Bara to be a supermarket. I mean we — Bara is a completely different format. It is a small box. It has a limited assortment in — it meets very specific consumer needs related to their shopping routine. So I would say that there is no comparison versus what we know as a regular supermarket. It’s a different segment, different format. As for the opportunities, I mean, obviously, the fact that we are accelerating the store opening, the fact that the performance is good, we feel confident that we state that we have a value proposition that is relevant that is tested and approved by consumers, liked by consumers, and that’s why our intention is to accelerate that.
