Grupo Chedraui Earnings Call Shows Resilient Margins

Grupo Comercial Chedraui SAB de CV Class B ((MX:CHDRAUIB)) has held its Q4 earnings call. Read on for the main highlights of the call.

Grupo Comercial Chedraui’s latest earnings call struck a broadly upbeat tone, with management emphasizing resilient profitability and disciplined execution despite several temporary headwinds. Margin expansion, stronger gross profit, robust store openings, and healthy cash generation stood out, even as U.S. operations faced softer transactions and currency translation dragged reported sales.

Mexico Same-Store Sales Beat the Market

Chedraui continued to outperform the Mexican self-service market, with Q4 2025 same-store sales up 3.0%, beating ANTAD by 164 basis points. This marked the 22nd straight quarter of outperformance, and for the full year, the chain exceeded ANTAD by 140 basis points, its fifth consecutive year of relative gains.

Consolidated EBITDA and Margin Edge Higher

Consolidated EBITDA rose 9.7% year over year, showing the company’s ability to protect profitability in a choppy macro environment. EBITDA margin expanded by 101 basis points to 8.6% before extraordinary items, underscoring tighter cost control and better operating leverage across formats.

Strong Mexico Sales and Aggressive Store Expansion

In Mexico, total sales advanced 6.9% in Q4 2025, powered by same-store growth and a 4.4% increase in selling space. The company opened 65 stores in the quarter and 142 in 2025, ending the year with 1,067 locations and outlining plans for 147 new stores in Mexico in 2026, a signal of confidence in long-term demand.

Gross Profit Strength and Operating Margin Gains

Gross profit climbed 2.9%, with gross margin widening to 23.2% from 21.8% a year earlier, reflecting better mix and commercial execution. Consolidated operating income jumped 19%, pushing operating margin up 101 basis points to 5.5%, a clear indication that efficiency initiatives are gaining traction.

U.S. Division Margins Recover Despite Sales Headwinds

Chedraui USA managed to lift its EBITDA margin by 178 basis points to 8.6%, or 6.9% including noncash claim accruals. This improvement came even as sales momentum slowed, highlighting the benefits of disciplined expense management and efficiencies from the regional distribution center project.

Smart & Final Delivers Standout Margin Improvement

Smart & Final was a bright spot, with EBITDA margin improving to 8.7%, a 379 basis point jump year over year. Even after factoring in extra claim accruals, the banner posted a 171 basis point margin gain, supported by RCDC-driven savings and pricing actions that sharpened competitiveness without sacrificing profitability.

Digital Growth and Loyalty Data Enhance Commercial Execution

E-commerce penetration in Mexico rose 70 basis points to 3.9% in Q4 2025, as online channels became a larger contributor to sales. The company is also leveraging a base of roughly 40 million loyalty customers to run more targeted promotions, boosting promotional efficiency and strengthening customer engagement.

Stronger Cash Position and CapEx Discipline

Chedraui closed 2025 with a net cash position of MXN 6,923 million, improving its net cash-to-EBITDA ratio to –0.28x from –0.18x, reinforcing balance sheet strength. Capital expenditures totaled MXN 8,549 million, or 2.9% of sales, somewhat lower than the prior year as heavy RCDC investments in 2024 tapered off.

Long-Term Profitability and Returns Continue to Improve

Net income has grown at a 17.4% compound annual rate over the past four years, illustrating consistent value creation. Return on equity increased by 167 basis points since 2021 despite transitional RCDC costs and other nonrecurring items, pointing to structurally higher profitability versus prior years.

Reported Sales Hit by Peso Strength

Consolidated Q4 2025 sales fell 3% to MXN 75,221 million, largely due to a 10% appreciation of the Mexican peso against the U.S. dollar. This currency move translated into an 11.6% decline in U.S. sales when expressed in pesos, masking underlying operational improvements in the U.S. segment.

U.S. Same-Store Sales Weighed by Macro Frictions

In the U.S., same-store sales dropped 2.8% in dollars and total sales slipped 2.2% in Q4 2025, reflecting fewer transactions. Management attributed the pressure to stricter immigration enforcement, timing effects around the government shutdown’s impact on SNAP benefits, and tough comparisons versus a strong prior-year period.

Liability Claim Accruals Compress Reported U.S. Margins

Additional noncash accruals for general liability and workers’ compensation claims shaved roughly 171 basis points from quarterly EBITDA margins. Management noted that claim resolution costs have roughly tripled over four years, creating notable pressure on reported U.S. profitability even as underlying operations improve.

One-Time Mexican Tax Charge Skews Adjusted EBITDA

In Mexico, a one-off tax payment related to prior fiscal years reduced reported EBITDA margins by about 20 basis points. Including this extraordinary item, Mexico’s EBITDA margin slipped 9 basis points to 8.5%, slightly tempering what was otherwise a solid improvement in underlying performance.

Extraordinary Items Trim Headline Profitability Metrics

When all extraordinary items are included, consolidated EBITDA declined 2.2% year over year and operating income fell 1.4% to MXN 3,403 million. The figures underscore how nonrecurring charges temporarily obscured the underlying margin expansion achieved in the core business.

Regional Sales Pressure in Key U.S. Banners

El Super and Fiesta saw weaker transaction counts, pulling their combined EBITDA margin down to 8.5% from 8.9%, or 7.2% including claim accruals. Smart & Final also posted a modest sales dip, with same-store sales down 0.9% in dollars in Southern California, reflecting a cautious consumer in core markets.

Sluggish Mexican Consumption, but Growth Target Intact

Management acknowledged a slow consumption backdrop in Mexico and expects only a modest boost from events like the World Cup. Even so, the company is holding to its internal goal of delivering at least 3% same-store sales growth for the year, banking on commercial initiatives and network expansion.

Guidance: Faster Organic Growth and Digital Push

Looking ahead to 2026, Chedraui plans to accelerate organic growth with 147 new stores in Mexico and 5 in the U.S., while targeting at least 3% same-store sales growth in its home market. The company aims to lift e-commerce penetration toward roughly 5% this year with double-digit online growth, supported by efficiency programs and a solid net cash position and recent CapEx discipline.

Chedraui’s earnings call painted a picture of a retailer balancing aggressive expansion and margin enhancement against near-term macro and one-off challenges. With a strong balance sheet, improving returns, and clear plans for more stores and higher digital penetration, the company appears well positioned, though investors will watch U.S. traffic trends and claim costs closely in coming quarters.