Alsea SAB de CV Balances Growth With Discipline

Alsea SAB de CV ((MX:ALSEA)) has held its Q4 earnings call. Read on for the main highlights of the call.

Alsea SAB de CV’s latest earnings call struck a cautiously upbeat tone, underscoring resilient operations and margin gains despite macro turbulence in South America and brand‑specific softness. Management emphasized disciplined capital allocation, digital and loyalty outperformance, and accretive brand additions, while openly addressing free cash flow, leverage and underperforming markets.

Consolidated Sales Growth Amid FX Volatility

Alsea’s Q4 sales inched up 0.5% year over year to MXN 21.7 billion, but underlying performance was much stronger once currency swings were stripped out. On a constant‑currency basis, total sales advanced 12%, highlighting robust demand across key banners despite foreign‑exchange headwinds.

Same-Store Sales and EBITDA Margin Expansion

Group same‑store sales grew 3.3% in the quarter, reflecting steady traffic and ticket trends. EBITDA rose 2.9% to MXN 3.7 billion, lifting the margin to 16.8% and delivering a 40 basis‑point expansion versus last year as efficiencies and mix offset cost pressures.

Net Income Boosted by Nonrecurring FX Tailwind

Net income surged 32% year over year to MXN 812 million, helped by strong operating results and a favorable foreign‑exchange effect on U.S. dollar debt. Management stressed that the FX benefit is noncash and nonrecurring, so investors should not extrapolate this uplift into future quarters.

Domino’s and Full-Service Brands Drive Growth

Domino’s Pizza remained a standout, with systemwide same‑store sales up 5.2% led by Mexico at 6.3%, Spain at 3.3% and Colombia at 9.6%. Full‑service restaurants posted 3.0% same‑store growth as targeted value propositions and commercial initiatives successfully attracted mid‑income diners.

Starbucks and Loyalty Ecosystem Gain Traction

Starbucks Alsea delivered 2.9% same‑store sales growth, with Mexico advancing 2.6% despite a more normalized post‑pandemic base. Loyalty sales jumped 13.4% to MXN 8.2 billion, now 30.6% of total revenue, on 36.6 million orders and more than 8.2 million active users, underscoring deepening digital engagement.

Portfolio Optimization and Strategic Brand Moves

Management continued reshaping the portfolio, integrating growth brands such as Chipotle and Raising Cane’s while divesting noncore assets in South America and Europe. The group is pivoting from volume to quality, planning 169 openings in 2025 split between 127 corporate and 42 franchise stores with a heavier focus on remodelings.

CapEx Focus Shifts to High-Return Investments

Full‑year CapEx reached MXN 5.1 billion, with roughly 75% funneled into store openings, remodels and equipment and 25% into logistics and technology projects. Management highlighted historical remodeling uplifts, with Starbucks remodels adding 6–13% to same‑store sales and casual dining projects boosting sales 10–30%.

ESG Momentum and Sustainable Financing

Alsea deepened its ESG financing platform, closing EUR 273 million of sustainable funding in Europe tied to emissions and waste metrics and securing a large sustainability‑linked loan in Mexico. The company remains in the Dow Jones Sustainability Index, scoring 18 percentage points above the sector average and ranking in the global top decile.

Regional EBITDA Strength in Mexico and Europe

Mexico’s adjusted EBITDA climbed 17.1% year over year, supported by 3.1% same‑store growth and labor efficiencies that widened margins. In Europe, adjusted EBITDA grew 18.7% on a 1.7% same‑store increase, lower food costs and disciplined labor management, partially offsetting South American weakness.

Solid Liquidity and Managed Leverage

Alsea closed the quarter with MXN 5.7 billion in cash and consolidated net debt of MXN 45.2 billion, with leverage ratios broadly within guidance. Total debt‑to‑post‑IFRS16 EBITDA stood at 2.8x and net debt‑to‑EBITDA at 2.5x, indicating a manageable balance sheet despite recent investment and working capital needs.

South America Drag from Currency and Macro Strain

South America remained a clear weak spot as adjusted EBITDA fell 22.9% year over year, largely due to the sharp depreciation of the Argentine peso against the Mexican peso. Management cited the tough macro backdrop in Argentina as the main driver of reported profitability pressure in the region.

Persistent Challenges in Argentina and Chile

Beyond currency translation, Argentina’s operating environment continues to be volatile, weighing on volumes and costs. Chile showed some recovery but still lagged other regions, leaving South America as a portfolio drag that management is addressing through selective divestments and operational tweaks.

Burger King Same-Store Sales Under Pressure

Burger King underperformed, with same‑store sales down 3.9% excluding Argentina and a sharper 4.8% decline in Mexico alone. Despite ongoing operational improvements, the brand faces intense competition and consumer pressure, prompting targeted commercial and product initiatives to stabilize traffic.

Free Cash Flow Hit by Working Capital

Management acknowledged that free cash flow was softer than hoped, citing worse‑than‑expected working capital dynamics and early‑year EBITDA softness. These trends have accelerated efforts to refinance at better terms, with estimated annual savings near $25 million, and to rationalize CapEx heading into 2026.

Net Debt Creep and Short-Term Leverage Pressures

Pre‑IFRS16 gross debt increased by MXN 0.9 billion to MXN 34.0 billion, while pre‑IFRS16 net debt rose MXN 1.7 billion to MXN 28.3 billion. Management pointed to short‑term bank loans used to bridge minority stake sale processes and support working capital and investment, expecting leverage to normalize as these actions complete.

Incomplete Recovery in France Weighs on Europe

Within Europe, France remains a key friction point, with traffic still around 85% of pre‑boycott levels. Restoring the remaining 15% traffic gap by 2026 is a strategic priority, and management is deploying marketing and operational levers to fully rebuild customer flows.

Fewer Store Openings Reflect Quality-over-Quantity Strategy

Alsea opened 169 stores in 2025, including 55 in Q4, coming in below its initial internal target. The shortfall was deliberate as the company leaned into fewer, higher‑return projects, a shift that changes the growth cadence but is expected to enhance long‑term profitability.

Guidance and Outlook Center on Profitable Growth

Management said 2025 results landed broadly within guidance and signaled that detailed 2026 targets will follow later in March, with early direction pointing to low‑ to mid‑single‑digit same‑store gains and further EBITDA margin expansion. A more rational CapEx plan with about 30 fewer openings, heavier remodeling and ongoing refinancing savings, alongside continued digital and ESG momentum, underpins the medium‑term investment case.

Alsea’s earnings call painted a picture of a portfolio that is fundamentally healthy, with strong brands, expanding margins and disciplined capital deployment offsetting clear regional and brand‑level challenges. For investors, the story hinges on management’s ability to sustain digital and loyalty growth, execute its quality‑focused CapEx shift and navigate South American and Burger King headwinds while steadily deleveraging.