FMX — Fomento Económico Mexicano, S.A.B. de C.V.

Summary of FEMSA's Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue Growth: Increased by 9.1% year-over-year.
• Operating Income: Grew by 4.3%, reflecting inflationary pressures but offset by efficiency efforts.
• Net Consolidated Income: Decreased by 36.8% to MXN 5.8 billion, primarily due to a noncash foreign exchange loss and higher interest expenses.
• Effective Tax Rate: Improved to 29.3%, down from significantly higher rates earlier in the year.
• Proximity Americas: Same-store sales increased by 1.7%, with average ticket up 4.9% but traffic down 3.1%. Total revenues grew 9.2%.

2. Strategic Updates and Business Highlights

• FEMSA Forward Strategy: Successfully divested nearly $11 billion in assets while focusing on core retail and beverage verticals.
• OXXO Performance: Positive same-store sales growth was noted for the first time since mid-2024, driven by tactical adjustments in product offerings and pricing strategies.
• Expansion Plans: Continued store growth with 198 new stores added in the quarter, including the ongoing conversion of DK stores to the OXXO brand in the U.S.
• Digital Ecosystem: Spin is being positioned as a digital extension of OXXO’s value proposition, enhancing customer engagement and loyalty.

3. Forward Guidance and Outlook

• Optimism for Q4 2025: Encouraging traffic trends in October suggest potential for improved performance as the year closes.
• Long-Term Growth: Management expects OXXO to maintain a decade of growth, with significant opportunities in Brazil and Colombia.
• Capital Allocation: Plans to distribute approximately $7.8 billion through dividends and share buybacks from March 2024 to March 2027.

4. Challenges and Points of Concern

• Net Income Decline: The significant drop in net income is a concern, primarily due to foreign exchange losses and increased interest expenses.
• Tax Rate Volatility: The effective tax rate has shown volatility, raising concerns about future predictability.
• Competitive Pressures: The introduction of discount brands is increasing competition, necessitating OXXO to adapt its pricing and product strategies.
• Health Division Struggles: Mixed performance in the health sector, particularly in Mexico, where underperforming stores were closed.

5. Notable Q&A Insights

• Traffic Dynamics: Management acknowledged the need for improvement in traffic at OXXO but noted recent positive trends and market share gains in key categories.
• Food Strategy: There is renewed focus on food offerings, particularly around coffee and breakfast items, which are seen as key growth areas.
• Digital Strategy: Spin is viewed as a critical component for enhancing customer loyalty and engagement, with ongoing developments expected to drive future growth.
• Long-Term Vision: The incoming CEO emphasized a commitment to long-term value creation while maintaining a sense of urgency in operational execution.

Overall, FEMSA's Q3 2025 results reflect a mix of positive growth in revenue and strategic initiatives, tempered by challenges in net income and competitive pressures. The company remains focused on leveraging its strengths in retail and beverages while navigating a complex market landscape.