Fomento Económico Mexicano, S.A.B. de C.V. Q4 FY2025 earnings call

Operational results: OXXO Mexico saw improvement in same-store sales and traffic trends, with initiatives to address competitiveness issues. OXXO Colombia had positive EBITDA for full year and nearly breakeven EBIT in Q4. Bara showed strong momentum in discount space. Valora had record operating income. Strategic priorities: Focus on OXXO Mexico, Brazil, Colombia, U.S., and Europe. Organizational restructure: Integrating leadership teams, consolidating corporate functions, redefining OXXO and Spin ecosystem for omnichannel value proposition. Spin reduced negative EBIT, expecting further improvement in 2026.

Proximity Americas: Fourth quarter total revenues increased by 5.3% or 6.3% on a comparable basis, driven by same-store sales growth in Mexico and top line growth in OXXO Colombia and Peru. Gross margin 48.1%, operating income up 7.7%, operating margin 12%. Added 209 net new stores, closed underperforming stores. OXXO USA: Ended year with 50 converted stores, progressing in foodservice strategy. Bara: Added 63 net new stores in quarter, 157 full year, on track with growth ambitions. Europe: Valora revenue grew 2.5% in pesos, gross margin 37.9%, operating income up 10.8%, despite challenges. Health division: Fourth quarter revenues up 4.6% or 6.7% on comparable basis, but Health division had provision for uncollectible accounts and underwhelming result. OXXO GAS: Same-station sales up 8.7%, operating margin 4.8%. Coca-Cola FEMSA: Revenue growth 2.9%, operating income up 13.3%.

2026 aims to regain OXXO Mexico's growth with focus on traffic and same-store sales. OXXO Colombia to continue scaling. Bara to increase store base by ~1/3. OXXO Brazil to fine-tune value proposition and accelerate growth in Sao Paulo. Europe to continue strong performance. Restructuring initiatives expected to generate ~MXN 1 billion annual run rate savings from 2027. Capital allocation linked to traffic recovery, margin sustainability, and cash generation. Shareholder remuneration: Total capital returned to shareholders $3.1 billion from March 2025 to March 2026, with plans for further returns.

Health division's institutional business in Colombia and Mexico operations face challenges. Fourth quarter provision for uncollectible accounts in Health division. Disruptions in Mexico due to security issues affecting stores, though most stores reopened quickly.

Q: Balance between growth and profitability in OXXO Mexico, low-hanging fruit in categories; A: Obsessed with profitable traffic growth, reviewing expenses.

Q: Magnitude of initiatives and restructurings, why now; A: Renewed focus, structure changes, Spin's role.

Q: OXXO's financial services and cash in/out; A: Scratching surface of services, combining digital and physical.

Q: Shareholder distribution and excess cash; A: Dividends and buybacks planned, flexibility.

Q: KOF in new structure, security events in Jalisco; A: Coca-Cola FEMSA's position, security response.

Q: Fit for purpose, OXXO Brazil's trajectory; A: Structure works, OXXO Brazil's potential.

Q: Bara and OXXO cross-selling; A: Different value propositions, growth potential.

Q: M&A appetite and U.S. adaptation; A: Cautious, looking for value-creating opportunities.

Q: Big opportunities in next 5 years; A: OXXO Mexico and Coca-Cola FEMSA Mexico top priorities.

Q: Success criteria for 2026; A: OXXO Mexico same-store sales growth, market share, Brazil and Bara targets.

Q: OXXO Mexico's new consumption occasions; A: Work on coffee, breakfast, daily replenishment assortments and execution.