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

Summary of FEMSA Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenues: Increased by 5.7% year-over-year, driven by improved trends in Proximity Americas and growth outside Mexico.
• Operating Income: Rose by 8.5%, aided by cost containment initiatives despite gross margin pressures.
• Net Consolidated Income: Reached MXN 12.7 billion, a 33.6% increase compared to Q4 2024, primarily due to higher operational income and reduced non-operating expenses.
• Proximity Americas Revenue Growth: Up by 5.3% (6.3% on a comparable basis) with same-store sales in Mexico growing by 4.4%.
• Gross Margin: Improved to 48.1%, reflecting better scale and disciplined supplier negotiations.

2. Strategic Updates and Business Highlights

• OXXO Mexico: Experienced a turnaround in same-store sales and traffic trends, implementing affordability-focused initiatives that included expanding returnable beverage packages and introducing low-price SKUs.
• OXXO Colombia: Achieved positive EBITDA for the first time in 2025, with a focus on enhancing the value proposition.
• Bara: Continued to grow with double-digit same-store sales, increasing private label offerings to 30% of sales mix.
• Coca-Cola FEMSA: Focused on volume growth, leveraging AI for enhanced customer value, and fostering a customer-centric culture.
• Health Division: Faced challenges with a provision for uncollectible accounts in Colombia, indicating ongoing struggles in that market segment.

3. Forward Guidance and Outlook

• 2026 Goals: Aim for same-store sales growth in OXXO Mexico, targeting improved customer experience and operational execution. Plans to expand OXXO's store base by over 1/3 in the next decade.
• CapEx: Over $1 billion deployed in organic growth across business units, with expectations for continued investment in growth initiatives.
• Efficiency Initiatives: Expected to generate approximately MXN 1 billion in annualized savings by 2027, driven by restructuring and operational efficiencies.

4. Bad News, Challenges, or Points of Concern

• Health Division Struggles: Continued issues with uncollectible accounts and underwhelming results in Mexico, highlighting a need for stabilization.
• Traffic and Sales Concerns: Although there was improvement, traffic at OXXO Mexico remained negative, indicating ongoing challenges in consumer engagement.
• Competitive Pressures: The need to enhance value propositions in core categories to compete with traditional trade and discount retailers remains critical.
• Weather and Economic Factors: Poor weather earlier in the year impacted traffic, and the macroeconomic environment in Mexico continues to be soft, affecting consumer sentiment.

5. Notable Q&A Insights

• Growth vs. Profitability: CEO Jose Antonio Garza-Laguera emphasized the focus on regaining traffic and market share over short-term profitability, indicating an ongoing commitment to enhancing customer engagement.
• M&A Strategy: FEMSA is cautious about pursuing M&A opportunities in the U.S., citing high seller expectations and a focus on finding value-creating opportunities.
• Operational Changes: There is a strong emphasis on integrating Spin with OXXO to enhance the omnichannel experience, with expectations for improved performance from Spin in 2026.
• Future Initiatives: Plans to enhance breakfast offerings and daily replenishment categories at OXXO were discussed, with a focus on improving customer experience and capturing new consumer occasions.

This summary encapsulates FEMSA's performance and strategic direction, highlighting both achievements and challenges as the company navigates a complex market landscape.