Fomento Económico Mexicano (FEMSAUBD) Q1 2025 earnings summary

Executive summary

• Consolidated revenues grew 11.1% year-over-year in Q1, with operating income up 4.9% and net income up 54.3%, driven by growth across all business units, favorable FX effects, and a gain from the sale of PTM.

• Navigated a challenging macro environment in Mexico, with Proximity Americas facing soft consumer demand, adverse weather, and unfavorable calendar effects, leading to a 1.8% contraction in same-store sales and a 6.6% drop in average traffic, partially offset by a 5.1% increase in average ticket.

• Implemented commercial and cost initiatives to drive traffic, expand gross margin, and contain costs, while maintaining store expansion and transformational investments.

• Spin by OXXO and Spin Premia saw active user growth of 20.9% and 15.9% year-over-year, respectively, with strong transaction growth.

• Outlook anticipates sequential improvement in top-line dynamics from Q2, with a base case for high single-digit revenue growth and stable operating margins for the full year.

Financial highlights

• Total revenues: Ps. 195,820 million (+11.1% YoY); operating income: Ps. 13,565 million (+4.9% YoY); net income: Ps. 8,943 million (+54.3% YoY), driven by operational gains, FX gains, and a gain from discontinued operations.

• Gross profit increased 15.8% and gross margin expanded 160 bps to 40.3%, reflecting margin gains in most divisions except Proximity Europe.

• Adjusted EBITDA: Ps. 25,303 million (+8.8% YoY); EBITDA margin: 12.9%.

• On a comparable basis, revenues grew 5.6% and operating income 1.7%, highlighting currency tailwinds.

• Effective tax rate was 42.2%, elevated by a one-time payment; excluding this, the rate would be ~37%.

Outlook and guidance

• Sequential improvement in top-line expected from Q2, peaking in Q3, with high single-digit revenue growth and stable operating margins for the full year.

• Management anticipates a recovery in Proximity Americas as the year progresses, with momentum expected in 3Q25 and beyond.

• Cost-cutting and revenue initiatives are being accelerated to mitigate higher labor and operating expenses.