EM LATAM CREDIT: Liverpool: 3Q Results Disappointing - Negative

(LIVEPL; NR/BBB/BBB+)

• Major Mexican retailer Liverpool maintained low leverage, reported at net debt/EBITDA of .79% so disappointing earnings not going to impair the credit profile, especially since its so far only one bad quarter in what was a pretty good year so far, and no market impact expected. LIVEPL 37s were last quoted T+179bp, 21bp tighter since June 30th and 26bp tighter since new issue January 2025.

• The company added to their investment in U.S. retailer Nordstroms in 2Q 2025, taking their stake up to 49% and so far, that has worked out well, contributing MXN1.2bn (USD65.6mn) of earnings in 3Q.

• Revenues grew 4.4% YoY which was slower than previous quarters this year when growth was 8-10%. Same store sales also were less robust, only growing 2-4% vs earlier this year 5-8%. EBITDA also continued to contract in 3Q, which has been a persistent trend, falling 14.8% YoY as the EBITDA margin dropped 300bp to 13.3% from 16.3% a year ago.

• The retail finance book looked solid, with total cards increasing 6.5% and revenue rising 15.7% YoY. The company intentionally took more risk in the loan portfolio, so non-performing loans rose 34bp to 4.4% but provisions also increased commensurately and overall higher revenue more than offset the increase in provisions.

• LIVEPL 37s have loosely tracked the Mexico (MEX; Baa2neg/BBB/BBB-) sovereign, trading through by as much as 38bp in August 2025 and now at the recent tights of 2bp through the sovereign which we suspect is due to the U.S. Treasury rally that has caused more liquid MEX to rally more recently so all things being equal we would expect Liverpool bonds to catch up.