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

FEMSA Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Total Revenues: Increased by 6.1% year-over-year; 8.5% on a comparable and currency-neutral basis.
• Operating Income: Grew by 5.5%, with a 12.1% increase on a comparable basis.
• Net Consolidated Income: Reached 17.6 billion Chilean pesos, a 97.3% increase due to a one-time non-cash accounting gain; excluding this, net income would have declined by 36.4%.
• OXXO Mexico Performance: Revenue growth of 8.3% driven by same-store sales growth of 6% and 158 net new store openings.
• Gross Margin: Expanded to 46.2% for OXXO Mexico, up 140 basis points year-over-year.
• Effective Tax Rate: Reported at 17.1% due to the non-cash gain; would have been 37.9% without it.

2. Strategic Updates and Business Highlights

• New Reporting Structure: OXXO Mexico is reported separately, and a new segment, Americas & Mobility, includes OXXO operations outside Mexico and fuel business.
• OXXO Mexico Recovery: Continued recovery with strong revenue growth, particularly in tobacco and soft drinks, despite some traffic challenges.
• Americas & Mobility Segment: Total revenues increased by 12.9%, with same-store sales growth of over 20% in Latin America (excluding Brazil).
• Bara Performance: Achieved double-digit same-store sales growth and expanded its private label revenue mix to nearly 30%.
• Spin by OXXO: Gained traction with 11 million active users and over 100 million monthly transactions, positioning itself as a significant player in the fintech space.

3. Forward Guidance and Outlook

• CapEx Expectations: Anticipated to accelerate towards a typical ratio of 5-6% of total revenues for the year.
• Shareholder Returns: Planned deployment of 15.2 billion pesos in ordinary dividends and an extraordinary dividend of 25.8 billion pesos, totaling approximately 41 billion pesos in capital distributions.
• Cautious Optimism: While the company is optimistic about growth opportunities, particularly with the upcoming FIFA World Cup, there is caution regarding the macroeconomic environment's impact on performance.

4. Bad News, Challenges, or Points of Concern

• Traffic Challenges: Average traffic remained slightly negative in Q1, although improved from previous declines; ongoing efforts are needed to enhance customer traffic.
• Health Division Performance: Continued underperformance with soft margins in Chile and losses in Mexico; institutional business in Colombia facing funding gaps and credit risks.
• Currency Headwinds: A stronger peso impacted financial results, particularly in international operations.
• Potential Margin Compression: Concerns regarding the sustainability of gross margin expansion, particularly in light of competitive pressures and the need to maintain affordability for consumers.

5. Notable Q&A Insights

• Traffic Recovery: Management acknowledged that while traffic improved compared to last year, it remains a focus area, especially in regions affected by security issues.
• OXXO Store Performance: New store openings are performing below expectations compared to same-store sales; management is considering closing underperforming locations.
• Spin's Growth Potential: Spin is expected to enhance customer engagement and store traffic, with ambitions to increase its share of transactions significantly.
• Portfolio Simplification: Management remains open to evaluating the business portfolio for potential simplifications, particularly in underperforming segments like health.

Overall, FEMSA reported a solid quarter with significant revenue growth driven by OXXO, but faces challenges in traffic recovery and health operations, alongside cautious optimism for future growth amidst macroeconomic uncertainties.