Irma Sgarz

Irma Sgarz asked about the direct contribution margin compression in Argentina, seeking a breakdown of pressures and an outlook for 2026. She also inquired about MercadoLibre's strategy regarding AI deployment and the long-term opportunity and risks for ad monetization in an agentic commerce world.

Answer

Martín de los Santos, CFO, attributed Argentina's margin compression to fulfillment costs from new centers, bad debt provisions from the credit card launch, and higher year-on-year funding costs. Ariel Szarfsztejn, President of Commerce, addressed AI, emphasizing MercadoLibre's focus on providing the best end-to-end customer experience, not just search. He highlighted their development of an internal agentic experience using first-party data and sees agentic commerce accelerating the shift from offline to online retail, creating incremental ad opportunities for Meli's tech stack with third parties.

Irma Sgarz questioned the direct contribution margin decline in Argentina, specifically regarding pressures from fulfillment, credit card provisions, and funding costs. She also explored MercadoLibre's strategy for AI deployment in commerce and its implications for ad monetization amidst agentic commerce trends.

Answer

CFO Martín de los Santos attributed Argentina's margin compression to new fulfillment centers, credit card provisions from the mid-year launch, and higher year-on-year funding costs. President of Commerce Ariel Szarfsztejn addressed AI, emphasizing MercadoLibre's focus on providing the best end-to-end customer experience and leveraging first-party data for its own agentic platform, while also seeing external agentic commerce as an incremental ad revenue opportunity.

Irma Sgarz inquired about the impressive growth in Mercado Libre's active user base, seeking a breakdown of new versus reactivated users, their demographics, potential churn risk from promotion-focused users, and the outlook for marketing spend into next year.

Answer

Incoming CEO Ariel Szarfsztejn clarified that out of 75 million active buyers, 7.8 million were new buyers (4 million in Brazil), with the rest being reactivated users. He attributed healthy growth to improved value propositions across countries. CFO Martin de los Santos added that marketing spend remained around 11% of revenues, with increased investment in affiliate channels targeting younger demographics, affirming confidence in the investment level to acquire profitable users.

Irma Sgarz inquired about the impressive growth in MercadoLibre's active user base, seeking a breakdown between brand new users and reactivated users, the demographics of new users, potential churn risk from promotion-focused users, and the outlook for marketing spend into next year.

Answer

MercadoLibre Incoming CEO Ariel Szarfsztejn clarified that out of 75 million active buyers, 7.8 million were new users (4 million in Brazil), attributing healthy growth to value proposition improvements and strong performance across Latin America. CFO Martin de los Santos added that marketing spend remained around 11% of revenues, with increased investment in performance and affiliate channels (4x YoY growth) effectively attracting younger demographics, and confirmed a continued disciplined approach to user acquisition to ensure profitability.

Irma Sgarz from Goldman Sachs asked if the quarter's high sales and marketing spend was an outlier and questioned the potential for AI to improve the efficacy of both internal ad spend and the ad inventory offered to clients.

Answer

EVP & CFO Martín de los Santos attributed the increased spend to a combination of one-off, high-profile campaigns for Mercado Pago and the new free shipping policy, alongside ongoing investments in user acquisition. Commerce President Ariel Szarfsztejn added that they are bullish on AI's potential, citing its use in creating and testing multiple ad creatives and helping sellers optimize their ad bidding and onboarding.

Irma Sgarz asked for details on the drivers of the strong growth in 1P (first-party) GMV, the contribution of specific categories like supermarket, and the margin evolution for the 1P business, including its path to breakeven.

Answer

Ariel Szarfsztejn, EVP of Commerce, explained that 1P GMV growth was broad-based across multiple categories, driven by improved selection, pricing, and automation. He highlighted that the supermarket category grew 65% year-over-year, faster than the marketplace average, due to better selection, navigation, and an increased share of 1P sales, which offer superior unit economics. He confirmed that margins in the supermarket category are improving.

Irma Sgarz inquired about the margin outlook for Argentina given its strong performance and whether the contribution margin compression in Brazil was primarily due to investments in the credit card business.

Answer

Martin de Los Santos (CFO) confirmed optimism for Argentina, citing a strong recovery with 18% item growth in Q4 and a 4x increase in its profitable credit book. He noted Argentina's higher-margin profile positively impacts consolidated margins. For Brazil, he affirmed that the margin compression was mostly a result of conscious, strategic investments in the credit card business, noting that older cohorts are already becoming profitable.

Irma Sgarz inquired about the drivers behind the accelerated growth of MercadoLibre's credit card portfolio in Q3, asking which geographies or customer cohorts were targeted. She also asked for more detail on the strategy of extending larger, longer-duration loans to lower-risk users and why the company isn't targeting higher-risk classes.

Answer

Osvaldo Giménez, an executive, explained that the Net Interest Margin (NIMAL) of 13% was affected by three factors: the ramp-up of the lower-spread credit card business (now 39% of the portfolio), a strategic move upmarket to lower-risk customers with longer-duration loans, and higher provisioning due to accelerated portfolio growth. He noted that asset quality remains solid. Regarding credit cards, he expressed excitement about the evolution in Brazil and Mexico, highlighting that early cohorts are already profitable and drive higher user engagement and transactionality across the ecosystem.

Irma Sgarz from Goldman Sachs asked about the Mercado Livre partnership, seeking clarity on the profitability of sales through the platform, whether these sales are incremental or represent a migration from in-store purchases, and the strategy behind the two private label brands (Sheffy and Econobom) in addition to the new Assaí brand, focusing on diversification and margin improvement.

Answer

CEO Belmiro Gomes stated the Mercado Livre partnership is expected to generate incremental sales, targeting different purchase occasions and non-perishable products, without compromising margins. Regarding private labels, he explained the strategy to launch the main Assaí brand for core products, Sheffy for food service, and Econobom for first-price items. The goal is to leverage Assaí's high volume and density in key regions to improve margins and increase competition with national brands.

Irma Sgarz inquired about the profitability and incrementality of sales generated through the Mercado Livre partnership, and whether it might lead to a migration from in-store to online sales. She also asked about the strategy behind using multiple private label brands (Sheffy, Econobom, and the Assaí brand) and the rationale for this diversification.

Answer

Belmiro Gomes (CEO, Assaí Atacadista) stated that the Mercado Livre partnership is expected to drive incremental sales by targeting different purchase occasions without compromising margins. Regarding private labels, he explained that Econobom will target first-price products, Sheffy will focus on food service, and the Assaí brand will be launched for core categories to improve margins and increase competition, leveraging the company's high volume and efficient logistics in dense regions.

Irma Sgarz from Goldman Sachs delved into the 'trade down' phenomenon, asking if it's a cyclical or structural trend and whether it prompts a shift towards regional or private label brands. She also inquired about the new partnership with iFood, seeking details on its economics and the customer profile it attracts.

Answer

CEO Belmiro de Gomes suggested the trade-down has structural components beyond just inflation, pointing to shifts in consumer spending habits. Executive Wlamir dos Anjos added that Assaí is adapting by adjusting purchase volumes towards regional brands, which are already a core part of their assortment, rather than making major changes to the product mix. Private label is not a current focus. Executive Anderson Castilho described the iFood partnership, now in 60 stores, as a successful last-mile service that attracts a diverse customer base across different income levels, serving as another valuable service offering.

Irma Sgarz asked about the typical customer journey, including what initially attracts customers, the path of category migration within their basket, and learnings from older cohorts. She also inquired about how Tiendas 3B adapts its product mix to demographic shifts in Mexico and specific trends they are monitoring. Finally, she asked if operating expense leverage is expected to grow below same-store sales next year, given recent structural investments.

Answer

K. Anthony Hatoum, Founder, Chairman, and CEO, Tiendas 3B, explained that the customer journey typically begins with word-of-mouth, leading to initial purchases of basic goods due to price and freshness. Trust is built through a 100% money-back guarantee, encouraging migration to more sensitive products like cosmetics. He noted ongoing tests in perishables and other categories, with stores designed to absorb more SKUs efficiently. Eduardo Pizzuto, CFO, Tiendas 3B, stated that while operating leverage is strong for older stores, rapid growth (50% of stores opened in the last three years) temporarily masks overall leverage, but it significantly increases shareholder value. He deferred specific guidance for next year.

Irma Sgarz inquired about the typical customer journey, including what initially attracts customers to the store and how they migrate to new categories. She also asked about Tiendas 3B's strategy for adapting its product mix to demographic shifts in Mexico and whether operating expenses are expected to grow below same-store sales next year, given recent structural investments.

Answer

CEO K. Anthony Hatoum described the customer journey as starting with word-of-mouth, leading to purchases of basic goods, and then gradually migrating to more sensitive products and new categories, supported by a 100% money-back guarantee. He noted stores are designed to absorb more SKUs without operational inefficiencies. CFO Eduardo Pizzuto explained that operating leverage is strong for older stores but is masked by the rapid pace of new store openings (50% of stores opened in the last three years), which, while reducing short-term leverage, significantly increases shareholder value.

Followed up on the CapEx question, asking for the specific investment level for the 7 stores currently under construction, given recent cost inflation. She also asked if the current logistics network is sufficient to support future store openings or if new investments in distribution centers are planned.

Answer

The company stated the total investment for the 7 stores under construction is BRL 450-500 million, noting that construction costs per square meter have actually decreased by about 8% from their peak. On logistics, the current infrastructure is sufficient as it was prepared for the recent large expansion. The business model is not heavily reliant on DCs, and future investments will be gradual, low-CapEx (leased facilities), and made as needed, with a potential small project for the Midwest region under study.