Having a more efficient operationG4-EC1

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We reduced the dwell time of our

products within the supply chain

We extended the free wifi service

within self-service stores

We developed latest generation work tools

We opened Bodega number 500 in Mexico

We developed retail-ready packaging

We doubled the speed of our communication

network

This year we increased our investments to update, evolve, and expand our operation, including the development of digital functionalities focused on serving new consumer trends in Mexico and Central America.

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Digital transformationThroughout the year we continued with our priorities of driving digital transformation within the Company, improving interactions with our customers, making our operations more efficient and implementing more modern and effective technological platforms.

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We began operating our Digital Lab −an innovation center to generate digital solutions and drive the efficiency of our operations− producing a positive impact for our business. We developed latest generation work tools so as to help our associates simplify their activities, analyze the performance of the business, forecast the results of their actions, and improve the value proposition for our customers. In addition, we began implementing measures that would double the speed of our communication network in operating units and distribution centers, with the purpose of speeding up the transfer of information and decision-making processes throughout the business. We continue conducting multiple reviews, corrections and preventive measures in cybernetic security so as to reduce points of vulnerability throughout our network.

At the store level, our self-service units and warehouse membership clubs have been enabled as collection centers so customers and members may pick up orders made with our digital platforms. Following what we accomplished in our Sam’s Club units, we decided to extend the free wifi service to all our self-service units, so our customers may access our extended online catalogs.

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Openings and remodelingsOur physical presence in the six countries where we operate was reinforced through accelerated expansion rates and by consistently investing in our store base.

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+2.1 Billion Customers

125 Openings

26 New Cities

3,134 Stores

23 Distribution Centers

6 Countries

3 Digital Platforms

634 Cities

Omnichannel experience

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2,356 Stores

778 Stores

Mexico

Central America

Bodega Aurrera 503Mi Bodega 343Bodega Aurrera Express 974Walmart 270Sam’s Club 162Superama 94Medimart Pharmacies 10

Discount Stores 522Supermarkets 94Walmarts 29Bodegas 133

13 NewCities

13 New Cities

13 Distribution Centers

10 Distribution Centers

78 Openings

47 Openings

Omnichannel experience

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To continue building the future of our operation, we invested $17.4 billion pesos during the year, of which 42% was to improve and modernize the current store base; 36% invested in 125 new units that contributed 2.2 percentage points to the growth of total sales for the Company; and the remaining 22% was invested in eCommerce, Technology, Logistics, and Perishables.

Mexico closed the year with 2,356 units by opening 78 new stores. Bodega Aurrera was further positioned as the largest self-service format in the country. We opened Bodega Aurrera number 500, thereby totaling 1,820 stores under this banner. In addition, we concentrated our efforts on reinforcing the omnichannel shopping experience with new store prototypes with areas devoted to the pickup of orders made online, as well as the availability of free wifi service.

In Central America, more stores were opened in 2017 than in the last three years, adding 47 new units to the business.

This achievement was made possible through the positive performance of our expansion program, and it represented a major push towards solid sales growth in the region.

We continued assigning resources to the improvement of the operations of stores with over a year in existence. We worked together with commercial partners to develop retail-ready packaging, offering our field associates the ability to maintain enhanced product supplies through a presentation that serves as a means for merchandise transportation, a storage tool, and shelf display. These efforts translated into a 48 basis point-increase in On-Shelf availability of our items. Likewise, our UPLH indicator (units sold per labor hour) surpassed figures recorded for last year, a reflection of the proper implementation of productivity initiatives.

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Distribution networkWe drive our omnichannel shopping experience with operational improvements in Logistics, which has transformed into a reduction in operating costs and delivery times, always focusing on our promise of low costs for our customers.

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In 2017 we worked on modernization and improvement projects regarding capacity, service, and merchandise delivery costs. The mechanization of two distribution centers was completed; the expansion and development of new distribution centers are now underway. The fleet devoted specifically to serving the Mexico City metropolitan area was increased to further support units located in this area, together with improving eCommerce deliveries. A stategic alliance was also created to increase same-day and following-day deliveries. Moreover, the transportation fleet was improved through the use of multi-temperature trailers with hybrid engines −diesel & electric− and the number of seasonal warehouses was increased to better serve demand peaks.

For the second consecutive year we have been given the National Logistics Award, in recognition of our efforts to optimize the distribution network by making less empty hauls, and using less fuel.

ISO 9001:2015 certification was obtained, which is an International Standard for Quality Management Systems, making us the first retail importer and the sixth company in Mexico to accomplish this. In addition, we have made considerable improvements in product freshness by reducing the dwell time of our products within the supply chain. We guaranteed consistency in banana supply and quality and reductions in shrink, thereby achieving double-digit sales growth in all regions served with maturation chambers, located in different distribution centers.

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