• Total Revenue Growth: 12.8% increase in the fourth quarter of 2024.
• Operating Income: Rose by 31.5% compared to the previous year.
• Net Consolidated Income: Increased by 78.3% to nearly MXN11 billion.
• Proximity Americas Revenue Growth: 13.2% increase, 8.1% on an organic basis.
• Proximity Americas Gross Margin: Expanded by 230 basis points to 47.7%.
• Proximity Americas Operating Margin: Expanded by 50 basis points to 11.7% of sales.
• OXXO Same-Store Sales Growth: 3.8% increase.
• OXXO Store Expansion: Added 205 net new stores in the quarter.
• Proximity Europe Revenue Growth: 21.5% increase in pesos, 5.3% on a currency-neutral basis.
• Health Division Revenue Growth: 13.3% increase in pesos.
• Health Division Same-Store Sales Growth: 9.4% increase.
• Health Division Operating Margin: Expanded by 250 basis points to 5.5%.
• OXXO Gas Same-Station Sales Growth: 9.7% increase.
• OXXO Gas Total Revenue Growth: 8% increase.
• Spin by OXXO Active Users: 8.6 million, reflecting 24.9% growth year on year.
• SPIN Premia Loyalty Program Active Users: 24.6 million, 27.5% growth year over year.
• Coca-Cola FEMSA Income from Operations: Increased by 25% in the fourth quarter.
• Capital Return Plans for 2025: Deploy MXN66 billion or $3.2 billion, including ordinary and extraordinary dividends and buybacks.
• Capital Return Plans for 2026: Deploy MXN41.4 billion or $2 billion, including ordinary dividends and extraordinary dividends.

• Warning! GuruFocus has detected 5 Warning Signs with BCCLF.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fomento Economico Mexicano SAB de CV (NYSE:FMX) reported double-digit growth across earnings line items and notable margin expansion for the full year 2024.
• The company successfully divested non-core assets, monetizing approximately $10.7 billion, and focused on core business units.
• Coca-Cola FEMSA showed strong digital capability evolution, contributing to business growth and momentum.
• The Proximity Americas division achieved a 13.2% revenue growth, driven by new store expansion and strong commercial income dynamics.
• The company plans to deploy nearly $5.3 billion in capital returns to shareholders over the next two years, representing approximately 17% of its market cap.

Negative Points

• The consumer environment in Mexico is soft, impacting traffic and sales performance.
• The company is still far from its leverage objective of 2 times net debt-to-EBITDA, requiring accelerated capital returns.
• OXXO's average traffic contracted by 2.8% due to a weaker consumer environment and cannibalization from new store openings.
• The fuel business in Mexico is facing distinct pressures, likely affecting short-term results for OXXO Gas.
• The company faces challenges in creating a platform for its US operations following the acquisition of Delek's convenience stores.

Q & A Highlights

Q: Can you expand on the buyback strategy for 2025, particularly the mix of local buybacks in Mexico and accelerated share repurchases (ASRs) in the US? A: Martin Arias, CFO, explained that the buyback strategy will likely involve a mix of purchases on the Mexican Bolsa and through ASRs in the US, similar to last year. The execution depends on trading windows and market conditions, with ASRs allowing for larger volume operations during closed windows.

Q: How do you view the aggressive expansion of OXXO stores in Mexico, especially considering same-store sales trends and store-level returns? A: Jose Fernandez Carbajal, Executive Chairman and Interim CEO, stated that they monitor expansion closely and do not see issues with the current pace. They plan to continue opening stores, focusing on new formats like OXXO Smart, which have shown growth with controlled cannibalization.

Q: How much of the traffic decline in proximity in Mexico is due to cannibalization from new store openings versus other factors? A: Jose Fernandez Carbajal noted that traffic decline is influenced by various factors, including increased rain and a slowdown post-elections. Cannibalization is monitored, but current numbers are not concerning. New formats and locations are being explored to mitigate this.

Q: What is the growth strategy for FEMSA in the US, particularly regarding organic versus inorganic growth? A: Martin Arias mentioned that FEMSA is conducting experiments with OXXO stand-alone stores and rebranding existing stores. The focus is on organic growth and small bolt-on acquisitions, with no large M&A deals planned, aiming for profitability and good returns.

Q: Can you provide insights into the financial services growth and potential bank license in Mexico? A: Jose Fernandez Carbajal explained that financial services continue to grow, with banks returning to their system and expansion in remittance services. FEMSA plans to apply for a banking license to offer financial services, focusing on responsible and quick credit solutions.

Q: How confident are you in maintaining gross margin expansion, and what are the key drivers? A: Martin Arias highlighted that gross margin expansion is driven by commercial income, financial services, and pricing capabilities. While 2024's expansion was extraordinary, future growth is expected to stabilize, with pricing playing a larger role.

Q: What are the current dynamics and future expectations for FEMSA's operations in Brazil? A: Martin Arias reported that OXXO stores in Brazil are performing well, with strong same-store sales growth. The focus remains on Sao Paulo, with plans to improve operational metrics before expanding further. Discussions with partners are ongoing regarding investment capabilities.

Q: What is the strategy for the Bara format, and how does it fit into FEMSA's growth plans? A: Martin Arias stated that Bara has hit a sweet spot, and FEMSA is working on separating its operations to develop distinct capabilities. The format is expected to grow, with a focus on private labels and expansion in key regions like Bajio.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.