Alsea SAB de CV’s Earnings Call Highlights Growth Amid Challenges

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

Alsea SAB de CV’s recent earnings call painted a picture of robust growth and strategic advancements, tempered by regional challenges and currency impacts. The company reported strong revenue and EBITDA growth, driven by digital and loyalty program successes, alongside significant expansion efforts. However, difficulties in Europe and South America, coupled with a notable decline in net income due to currency effects, were highlighted as areas of concern.

Strong Revenue Growth

Alsea reported an impressive 11.1% year-over-year increase in total sales for the fourth quarter, reaching MXN21.7 billion. When excluding foreign exchange effects, this growth was even more pronounced at 12%. For the full year, sales increased by 6.3%, underscoring the company’s robust performance in driving revenue.

EBITDA Increase

The company’s EBITDA saw a significant increase of 13% in the fourth quarter, reaching MXN3.6 billion with a margin of 16.4%. For the full year 2024, adjusted EBITDA rose by 18.5% to MXN10.5 billion in Mexico, with a margin expansion of 180 basis points, highlighting operational efficiency and profitability.

Digital Sales Success

Digital sales played a crucial role in Alsea’s growth, with digital orders amounting to MXN7.3 billion in Q4, accounting for 33.5% of total sales. This trend was consistent throughout the year, demonstrating the success of the company’s digital strategy in capturing consumer demand.

Expansion and New Stores

Alsea’s expansion efforts were evident with the opening of 107 new stores in the fourth quarter, including 74 corporate units and 33 franchisees. For the full year, the company opened 275 stores, showcasing its commitment to growth and market presence.

Loyalty Program Growth

The loyalty program saw significant growth, with sales increasing by 33.1% to MXN5.1 billion, contributing to 26% of total sales. Notably, the Club By program in Spain surpassed 2.8 million members, reflecting strong customer engagement.

European Challenges

In Europe, Alsea faced challenges with a 2.1% decrease in adjusted EBITDA to MXN1 billion for the quarter, and a 9.7% decline in euros due to macroeconomic pressures and a brand boycott. For the full year, adjusted EBITDA decreased by 4.4%, indicating ongoing regional difficulties.

South America EBITDA Decline

The South American market also presented challenges, with adjusted EBITDA declining by 17% to MXN488 million in Q4, driven by reduced operating leverage and increased costs. For the full year, adjusted EBITDA decreased by 21.5%, highlighting the need for strategic adjustments.

Net Income Decline

Net income for the fourth quarter saw a significant decline of 45.3% year-over-year to MXN575 million, primarily due to a negative non-cash effect from currency exchange translation, impacting overall profitability.

Starbucks Europe Sales Decline

Starbucks Europe experienced a 7.4% decline in same-store sales, attributed to reduced consumer traffic in key tourist areas and a slow recovery from pre-COVID levels, posing challenges for the brand’s regional performance.

Forward-Looking Guidance

Looking ahead, Alsea provided guidance for 2025, focusing on sustainable growth and operational efficiency. The company anticipates mid-single-digit same-store sales growth and a low teens increase in top-line revenue. Plans include opening between 180 and 220 new stores, with a capital expenditure of around MXN6 billion. EBITDA is expected to grow by mid-single-digit, with a total debt-to-EBITDA ratio projected between 2.6 and 2.8 times pre-IFRS 16, and 3.0 to 3.2 times post-IFRS 16. Despite external challenges, Alsea remains confident in its strategic execution and ability to seize high-potential opportunities.

In conclusion, Alsea SAB de CV’s earnings call reflected a company in growth mode, with strong revenue and EBITDA performance bolstered by digital and loyalty initiatives. While challenges in Europe and South America and currency impacts on net income present hurdles, the company’s forward-looking guidance suggests a strategic focus on sustainable growth and market expansion.