Fomento Economico Mexicano S.a.b. De C.v. ((FMX)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Fomento Economico Mexicano S.A.B. de C.V. (FEMSA) recently held its earnings call, presenting a mixed outlook for the company. While there were significant achievements in the growth of Spin by OXXO and expansion efforts in Proximity Americas and Europe, the Mexican market posed substantial challenges, impacting net income and operating results across multiple segments.
Spin by OXXO Growth
Spin by OXXO has demonstrated robust growth, creating over 14.5 million accounts, with more than 9.4 million active in the last 56 days. Customer engagement is notably strong, with 3.5 million monthly users averaging over 21 transactions per month, highlighting the platform’s increasing popularity and utility.
Spin Premia and OXXO Sales Integration
The integration of Spin Premia with OXXO sales has been successful, with over 58 million accounts and 26.6 million active in the last 90 days. Nearly 46% of OXXO sales are identified through this loyalty program, indicating a strong connection between customer engagement and sales performance.
Proximity Americas Expansion
Proximity Americas continues to expand, adding 334 net new stores in the quarter, with a particular focus on the U.S. market. The initial results of OXXO USA conversion efforts are promising, suggesting potential for further growth in this region.
Valora’s Solid Performance
Valora in Europe reported a 31.4% increase in revenues, driven by strong retail performance in Switzerland and efficient cost management. This resulted in a 54.4% increase in operating income, showcasing the success of their strategic initiatives.
Challenges in Mexican Market
FEMSA faced a challenging consumer environment in Mexico, impacting both Proximity and Coca-Cola FEMSA. Traffic declined by 6.6%, and same-store sales saw a slight decline of 0.4%, reflecting the difficulties in this key market.
Significant Net Income Decline
The company experienced a significant decline in net consolidated income, decreasing by 64.3% to MXN 5.6 billion. This was primarily due to a MXN 10 billion swing in foreign exchange losses and lower interest income, underscoring the financial challenges faced by FEMSA.
OXXO Health Underperformance
OXXO Health, particularly in Mexico, underperformed with same-store sales declines and the closure of 432 underperforming stores. This resulted in a 30 basis point operating margin dilution, highlighting the need for strategic adjustments in this division.
Coca-Cola FEMSA Volume Decline
Coca-Cola FEMSA reported a nearly 10% volume decline in Mexico and Central America, attributed to adverse weather conditions and a tougher demand environment, impacting overall performance.
Forward-Looking Guidance
FEMSA’s strategic plans for Spin by OXXO were a focal point of the forward-looking guidance. The company emphasized its focus on financial sustainability and expanding financial services, with Spin by OXXO showing significant market penetration and a dynamic customer base. Initiatives to reduce cash burn and improve cost efficiency are central to Spin’s growth trajectory.
In summary, FEMSA’s earnings call reflected a mixed sentiment, with notable successes in Spin by OXXO and international expansion, countered by challenges in the Mexican market and significant declines in net income. The company’s forward-looking guidance highlights a strategic focus on financial sustainability and growth in financial services, positioning FEMSA for future opportunities.