Fomento Economico Mexicano S.a.b. De C.v. ((FMX)) has held its Q1 earnings call. Read on for the main highlights of the call.
FEMSA’s Latest Earnings Call Reveals Mixed Sentiments Amid Growth and Challenges
The recent earnings call from Fomento Economico Mexicano S.A.B. de C.V. (FEMSA) painted a complex picture, balancing notable achievements with significant challenges. While the company experienced impressive revenue growth driven by Coca-Cola FEMSA and Spin by OXXO, it faced hurdles in Proximity Americas and Europe, along with operational pressures from rising costs and a weak performance in Health Mexico. This mix of positive developments and ongoing challenges results in a cautious outlook for the company.
Revenue and Operating Income Growth
FEMSA reported an 11.1% increase in total revenues and a 4.9% growth in operating income for the first quarter of 2025. On a comparable basis, these figures grew by 5.6% and 1.7%, respectively. This growth underscores FEMSA’s ability to drive revenue even in a challenging economic environment.
Strong Performance in Coca-Cola FEMSA
Coca-Cola FEMSA delivered a robust quarter with a 10% increase in top line growth, driven by effective revenue management initiatives. Despite facing soft volume trends in Mexico, the division’s strategic efforts paid off, contributing significantly to the company’s overall performance.
Spin by OXXO Growth
Spin by OXXO continues to gain momentum, with its active user base experiencing double-digit growth, reaching 8.9 million active users. Additionally, the Spin Premia loyalty program now accounts for 42.5% of OXXO Mexico sales, highlighting the success of FEMSA’s digital initiatives.
Successful Store Base Expansion
OXXO Mexico’s expansion efforts were evident with the opening of 361 net new stores during the first quarter. This aggressive growth strategy reflects FEMSA’s commitment to increasing its market presence and accessibility to consumers.
Positive Trends in Health Division
The Health division reported a commendable revenue growth of 21% in pesos, or 7% on a comparable basis. Strong performances in Colombia, Chile, and Ecuador contributed to this success, showcasing the division’s potential in international markets.
Proximity Americas Challenges
Proximity Americas faced a decline of 1.8% in same-store sales, with average traffic contracting by 6.6%. This was attributed to a challenging consumer environment in Mexico, highlighting the need for strategic adjustments in this segment.
Operational Pressure from Cost Increases
Higher operating expenses in Proximity Americas, driven by increased labor costs and reduced operating leverage, led to an 11.8% decline in income from operations. This pressure underscores the operational challenges FEMSA faces in maintaining profitability.
Weak Financial Performance in Europe
Proximity Europe experienced an 18% increase in revenues in pesos but saw a 14.6% decrease in income from operations. This reflects the difficulties in the higher margin B2B foodservice segment, indicating a need for strategic realignment.
OXXO Traffic Decline
Traffic at OXXO Mexico has been declining for four consecutive quarters, affected by a soft consumer environment and increased competition from traditional trade. This trend poses a significant challenge for FEMSA’s retail operations.
Weak Performance in Health Mexico
FEMSA Health in Mexico underperformed, with an 11.5% decline in same-store sales. This prompted the company to initiate a full operational turnaround strategy, aiming to revitalize this segment.
Forward-Looking Guidance
In response to the challenging environment, particularly in Mexico, FEMSA has launched initiatives to drive traffic and top line growth while maintaining gross margin expansion and containing costs. The company aims to increase affordability across categories and expand its retail media and financial services. Despite a slow start, FEMSA anticipates a high single-digit revenue increase and stable operating margins for the full year, expecting improvements in the second half of the year.
In conclusion, FEMSA’s earnings call highlighted a mix of growth and challenges. While Coca-Cola FEMSA and Spin by OXXO showed strong performance, issues in Proximity Americas and Europe, along with operational pressures, present hurdles. The company’s strategic initiatives and forward-looking guidance aim to address these challenges, offering a cautious yet optimistic outlook for the future.