Fomento Económico Mexicano (FEMSAUBD) Q3 2024 earnings summary

Executive summary

• Consolidated revenues grew 8.3% and operating income rose 14.6% year-over-year in Q3, with margin expansion across most business units despite a soft consumer environment in Mexico.

• Net income declined 27.5% to MXN 9.2 billion, impacted by higher interest expense, non-cash FX losses, and a Ps. 3,873 million impairment from the Solistica divestment.

• Strategic focus includes optimizing the portfolio, emphasizing high-ROIC opportunities, and accelerating or decelerating investments by format and geography.

• Significant progress on strategic initiatives, including the divestment of Solistica and the acquisition of Delek’s 249 convenience stores in Texas.

• Digital and financial services, especially Spin by OXXO and Spin Premia, are key growth levers, with strong user adoption and increasing integration into retail operations.

Financial highlights

• Q3 total revenues: Ps. 196,771 million (+8.3% YoY); operating income: Ps. 17,374 million (+14.6% YoY); net income: Ps. 9,243 million (-27.5% YoY).

• Adjusted EBITDA: Ps. 28,909 million (+19.6% YoY); EBITDA margin: 14.7% (+140 bps YoY).

• OXXO added 367 net new stores in Q3 (273 in Mexico, 94 in South America); YTD, 1,266 net new stores.

• Proximity Europe revenue up 24% in pesos, with Valora operating income up 62.2% and margin up 100 bps.

• Health division revenue up 12.5%, same-store sales up 7.4%, operating income up 7.2%, but margin contracted 20 bps to 4.3%.

Outlook and guidance

• Management is focused on closing the year strongly and preparing for an improved 2025, with continued investment in store expansion, digital engagement, and operational efficiency.

• OXXO Mexico targets 1,100 net new stores in 2025; Bara aims for 40% store base growth; OXXO Colombia targets 15-20% store growth.

• Valora expects continued growth, especially in German retail and fuel station partnerships, with cautious expansion in high street locations.

• Capital allocation remains disciplined, with no immediate plans for further share repurchases until after the next shareholders meeting.