Core Insights - Fomento Economico Mexicano, S.A.B. de C.V. (FMX) is expected to report fourth-quarter 2025 earnings on February 25, with anticipated growth in both revenue and earnings [1][9] Revenue and Earnings Estimates - The Zacks Consensus Estimate for FMX's fourth-quarter revenues is $12.4 billion, reflecting a growth of 24.6% compared to the same quarter last year [1][9] - The consensus estimate for quarterly earnings is $1.53 per share, a significant increase from 46 cents reported in the previous year [2][9] - The earnings estimate has decreased by one cent in the past 30 days [2] Business Growth Factors - FEMSA is experiencing growth across its business units, supported by effective growth strategies and investments in digital and technology-driven initiatives [3] - The Digital@FEMSA unit is focused on creating a digital and financial ecosystem, with successful products like the OXXO digital wallet and loyalty program [3] - The company is expanding its footprint in the specialized distribution industry, which is part of its strategy to invest in adjacent businesses and leverage capabilities across different markets [4] Cost Pressures - FEMSA is facing cost pressures from inflation, rising labor expenses, and supply-chain inefficiencies, which may negatively impact profitability [5] Earnings Prediction - The company's Earnings ESP is +3.92%, and it holds a Zacks Rank of 3, indicating a potential earnings beat [6] Market Performance and Valuation - FEMSA's shares have increased by 8.4% over the past three months, while the industry has grown by 12.5% [7] - The company is trading at a forward 12-month P/E multiple of 24.64X, which is higher than the industry average of 20.08X [7]

Core Insights - FEMSA is set to hold its Fourth Quarter Conference Call on February 25, 2026, at 12:00 PM Eastern Time [1] - The quarterly results will be released on the same day before markets open [3] Company Overview - FEMSA operates in the retail industry through its Proximity Americas Division, which includes the OXXO small-format store chain, and Proximity Europe, which encompasses Valora, a European retail unit [3] - The company also has a Health Division that includes drugstores and digital financial services initiatives like Spin by OXXO and Spin Premia [3] - In the beverage sector, FEMSA is the largest franchise bottler of Coca-Cola products globally by volume through Coca-Cola FEMSA [3] - The company employs over 392,000 individuals across 18 countries and is recognized in various sustainability indices, including the Dow Jones Best-in-Class World Index and FTSE4Good Emerging Index [3]

Core Insights - FEMSA has completed the separation of the Grupo Nós joint venture in Brazil with Raízen S.A. [1] - As a result of this transaction, FEMSA retained the OXXO stores in Brazil and the distribution center in Cajamar, São Paulo [2] Company Overview - FEMSA creates economic and social value through its various companies and institutions, aiming to be the best employer and neighbor in its operational communities [3] - The company operates in the retail industry through its Proximity Americas Division, which includes the OXXO small-format store chain, and Proximity Europe, which encompasses Valora, a European retail unit [3] - FEMSA also has a Health Division that includes drugstores and digital financial services initiatives, as well as a beverage division through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products globally by volume [3] - The company employs over 392,000 individuals across 18 countries and is recognized in several sustainability and ESG indexes [3]

Group 1 - Oxxo USA has appointed Jaime Longoria as CEO, succeeding Hal Adams, who retired after leading the company's U.S. expansion efforts [6][5] - Longoria has been with FEMSA for about two decades and previously held various positions, including CEO of Oxxo Gas [7][6] - The company's strategy aims to establish a presence from the Southwest to the Southeast U.S., with ambitions to become a significant player in the North American market [4][3] Group 2 - The leadership change is part of FEMSA's strategy for growth and operational continuity in the U.S. market [5][6] - Longoria expressed pride in bringing Oxxo's culture and people-centered approach to the U.S. expansion [8][6] - Oxxo's expansion into the U.S. is a central topic in the convenience store industry [6]

Core Insights - Barclays has lowered the price target for Fomento Económico Mexicano, S.A.B. de C.V. (FEMSA) from $107 to $105 while maintaining an Equal Weight rating [1][2] Financial Performance - FEMSA reported Q3 2025 results on October 28, with earnings per share (EPS) of 7 Mexican pesos, missing the analyst consensus estimate by 15.34% [2] - Revenue for the quarter was 214.64 billion Mexican pesos, exceeding the consensus forecast of 211.54 billion Mexican pesos, representing a 9.1% increase compared to Q3 2024 [2] - Net consolidated income fell by 36.8% year-over-year to 5.8 billion Mexican pesos, primarily due to a non-cash foreign exchange loss of 1.3 billion Mexican pesos related to the company's US dollar-denominated cash position [3] - The previous year, FEMSA recorded a foreign exchange gain of 4.3 billion Mexican pesos [3] - The company distributed dividends totaling 11.8 billion Mexican pesos for the quarter [3] Company Overview - FEMSA is a multinational Mexican conglomerate and operates the largest independent Coca-Cola bottling group globally [4] - The company also owns OXXO, which is Mexico's largest convenience store chain [4]

Group 1 - The article discusses the investment outlook for FEMSA, a well-managed Mexican retailer, highlighting a discrepancy between short-term and long-term perspectives [1] - There is a concern regarding the potential impact of weaker consumer conditions in Mexico on FEMSA's performance [1]

Core Insights - FEMSA reported third-quarter 2025 adjusted net majority earnings per ADS of 88 cents, down from $1.37 in the same quarter last year, missing the Zacks Consensus Estimate of $1.06 [1] - Net consolidated income was Ps. 5,838 million (US$318.2 million), reflecting a decline of 36.8% year over year [1] - Total revenues increased to US$11.7 billion (Ps. 214,638 million), a 9.1% rise year over year, surpassing the Zacks Consensus Estimate of $11.2 billion [2] Financial Performance - Gross profit rose 8% year over year to Ps. 85,709 million (US$4.67 billion), while the consolidated gross margin contracted 40 basis points to 39.9% [4][6] - Operating income improved 4.3% year over year to Ps. 18,126 million (US$988.1 million), with a consolidated operating margin decrease of 40 bps to 8.4% [8] - The company had cash and cash equivalents of Ps. 123,635 million (US$6.7 billion) and long-term debt of Ps. 130,822 million (US$7.1 billion) as of September 30, 2025 [16] Segment Performance - Proximity Americas: Revenues rose 9.2% year over year to Ps. 84,738 million (US$4.6 billion), with same-store sales growth of 1.7% [9] - Proximity Europe: Revenues grew 10.1% year over year to Ps. 14,837 million (US$808.8 million), benefiting from currency appreciation [11] - Health Division: Total revenues were Ps. 21,483 million (US$1.19 billion), up 2.9% year over year, with a same-store sales increase of 0.8% [12] - Fuel Division: Revenues rose 5% year over year to Ps. 17,933 million (US$977.6 million), with average same-station sales increasing by 8.3% [13] - Coca-Cola FEMSA: Revenues advanced 3.3% year over year to Ps. 71,884 million (US$3.9 billion), with an operating margin expansion of 50 bps to 14.3% [14][15] Capital Expenditure - Capital expenditure totaled Ps. 13,128 million (US$715.6 million), an increase from the prior year, primarily due to higher spending in Coca-Cola FEMSA [17] - Proximity Americas recorded slightly lower CAPEX in Mexico, focusing on selective store openings and optimization of existing locations [18]

Financial Data and Key Metrics Changes - Total revenue growth for the third quarter of 2025 was 9.1%, driven by solid trends outside Mexico and currency tailwinds, particularly in Europe [30] - Operating income increased by 4.3% year over year, reflecting inflationary effects on costs and expenses, partially offset by efficiency efforts [30] - Net consolidated income decreased by 36.8% to 5.8 billion pesos, primarily due to a non-cash foreign exchange loss of 1.3 billion pesos [31][32] Business Line Data and Key Metrics Changes - Proximity Americas reported same-store sales growth of 1.7%, with average ticket rising 4.9% and average traffic contracting 3.1% [19][34] - Total revenues for Proximity Americas grew 9.2%, driven by the expansion of the store network and strong performance in LATAM markets [35] - Operating income for the health division declined by 4%, with same-store sales growing 0.8%, primarily due to strong performance in Chile and Colombia [39][40] Market Data and Key Metrics Changes - In Mexico, OXXO continues to experience a decade of continuous store growth, with a leadership transition to Carlos Arroyo [10] - Coca-Cola FEMSA showed gradual improvement in volume, particularly in South America, despite a slight decline in Mexico [41] - Valora in Europe reported total revenues increased by 10.1% in pesos, driven by higher Swiss retail sales [38] Company Strategy and Development Direction - The FEMSA Forward strategy focuses on maximizing long-term value creation by concentrating on core verticals: retail and beverages, supported by digital initiatives [8] - The company plans to distribute approximately $7.8 billion in capital through dividends and share buybacks between March 2024 and March 2027 [8] - Future growth opportunities are seen in OXXO Brazil, OXXO Colombia, and Bara, with significant potential for value creation [11][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of business units despite a sluggish year in Mexico, with positive signs of recovery in traffic and market share gains [9][20] - The company is cautiously optimistic about the upcoming year, anticipating improvements in the operating environment and benefiting from the FIFA World Cup [42] - Management acknowledged challenges from a recent tax increase in Mexico but believes adjustments can be made to maintain return on investment [12] Other Important Information - The company distributed a total of 11.8 billion pesos in dividends during the quarter, with no share buybacks executed [41] - The effective tax rate for the quarter improved to 29.3%, following a spike in the first half of the year [32][33] Q&A Session Summary Question: Insights on same-store sales performance and traffic dynamics at OXXO - Management noted a reversal of trends in OXXO Mexico, with improved traffic performance compared to the first half of the year, and expressed optimism for the fourth quarter [46][49] Question: Details on gross margin performance at OXXO Mexico - Management indicated that gross margin improvements were driven by commercial income growth and a favorable service mix, with expectations for continued gains [54][57] Question: Update on the health business in Mexico and Chile - Management reported strong growth in Chile despite a competitive environment, while acknowledging challenges in Mexico and the need for operational improvements [70][71] Question: Corporate restructuring and SG&A reduction plans - Management discussed ongoing efforts to streamline corporate overhead and indicated potential for significant savings, with further details expected in future calls [78][79] Question: Interest expense increase and its drivers - Management explained that the increase in interest expense was primarily due to lease accounting under IFRS and the consolidation of U.S. operations [95][96]

Financial Data and Key Metrics Changes - Total revenue growth for the third quarter of 2025 was 9.1%, driven by solid trends outside Mexico and currency tailwinds, particularly in Europe [30][31] - Operating income increased by 4.3% year over year, reflecting inflationary effects on costs and expenses, partially offset by efficiency efforts [30][31] - Net consolidated income decreased by 36.8% to 5.8 billion pesos, primarily due to a non-cash foreign exchange loss of 1.3 billion pesos [31][32] Business Line Data and Key Metrics Changes - Proximity Americas' same-store sales increased by 1.7%, with average ticket rising by 4.9% and average traffic contracting by 3.1% [19][34] - Total revenues for Proximity Americas grew by 9.2%, driven by the expansion of the store network and strong performance in LATAM markets [35] - Operating income for the health division declined by 4%, with same-store sales growing by 0.8%, primarily due to strong performance in Chile and Colombia [39][40] Market Data and Key Metrics Changes - In Mexico, OXXO continues to experience sluggish growth, but there are signs of improvement in market share for key categories like beer and snacks [10][20] - Coca-Cola FEMSA showed gradual improvement in volume, particularly in South America, despite a slight decline in Mexico [41] - Valora in Europe reported a 10.1% increase in total revenues, driven by higher retail sales in Switzerland [38] Company Strategy and Development Direction - The company is focused on maximizing long-term value creation through its FEMSA Forward strategy, which includes divesting nearly $11 billion in assets and setting clear capital allocation targets [8][9] - There is a strong emphasis on expanding the OXXO platform in Brazil and Colombia, with significant growth opportunities identified [10][26] - The company aims to enhance its digital capabilities and improve the value proposition of its retail offerings, particularly in coffee and food categories [24][17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the upcoming year, noting signs of improvement in October data and the potential positive impact of the FIFA World Cup [42] - The recent tax increase in Mexico is expected to present challenges, but management believes they can adapt and maintain return on investment [12][30] - The incoming CEO emphasized the importance of urgency and excellence in management to drive future growth [94] Other Important Information - The company distributed a total of 11.8 billion pesos in dividends during the quarter, with no share buybacks executed [41] - The effective tax rate for the quarter improved to 29.3%, following a spike in the first half of the year [32][33] Q&A Session Summary Question: Insights on same-store sales performance and traffic dynamics at OXXO - Management noted a reversal of trends in OXXO Mexico, with improved traffic performance compared to the first half of the year, and expressed optimism for the fourth quarter [46][49] Question: Gross margin performance at OXXO Mexico - Management indicated that gross margin improvements were driven by commercial income growth and a favorable service mix, with expectations for continued gains [54][57] Question: Update on health business in Mexico and Chile - Management reported strong growth in Chile despite a competitive environment, while acknowledging challenges in Mexico and the need for operational improvements [70][71] Question: Corporate restructuring and SG&A reduction - Management discussed ongoing efforts to streamline corporate overhead and indicated potential for significant savings in the future [78][79] Question: Interest expense increase and its drivers - Management explained that the increase in interest expense was primarily due to lease accounting under IFRS and the consolidation of U.S. operations [95][96]

Financial Data and Key Metrics Changes - Total revenue growth for the third quarter of 2025 was 9.1%, driven by solid trends outside Mexico and the consolidation of OXXO USA [29] - Operating income increased by 4.3% year over year, reflecting inflationary effects on costs and expenses, partially offset by efficiency efforts [29] - Net consolidated income decreased by 36.8% to 5.8 billion pesos, primarily due to a non-cash foreign exchange loss of 1.3 billion pesos [29][30] Business Line Data and Key Metrics Changes - Proximity Americas reported same-store sales growth of 1.7%, with average ticket rising 4.9% and average traffic declining 3.1% [19][33] - Total revenues for Proximity Americas grew 9.2%, driven by the expansion of the store network by 1,370 stores year on year [34] - OXXO Mexico continues to show strong performance with a decade of continuous store growth and world-class returns on capital [9] Market Data and Key Metrics Changes - In Europe, Valora's total revenues increased by 10.1% in pesos, driven by higher Swiss retail sales [37] - Coca-Cola FEMSA experienced a slight decline in total volume, primarily due to a challenging environment in Mexico, while South America showed resilient performance with volume growth [40] Company Strategy and Development Direction - The company is focused on maximizing long-term value creation through its FEMSA Forward strategy, which includes divesting nearly $11 billion of assets and a capital allocation framework targeting $7.8 billion in capital distribution by 2027 [6][7] - There is a strong emphasis on expanding the OXXO platform in Brazil, Colombia, and the U.S., with significant growth opportunities identified [25][57] - The company aims to enhance its value proposition in food and coffee categories, with ongoing experimentation to launch new offerings [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of business units despite a sluggish year in Mexico, highlighting improvements in competitive positions in key categories [8][20] - The company anticipates a better operating environment in Mexico, aided by the FIFA World Cup and improvements in consumption trends [41] - Management acknowledged challenges from a recent tax increase in Mexico but believes adjustments can be made to maintain return on investment [11] Other Important Information - The company distributed a total of 11.8 billion pesos in dividends during the quarter, with no share buybacks executed [40] - The effective tax rate for the quarter was 29.3%, showing improvement from earlier in the year [30] Q&A Session Summary Question: Insights on same-store sales performance and traffic dynamics at OXXO - Management noted a sequential improvement in traffic and market share gains in key categories, with optimism for the fourth quarter [44][46] Question: Details on gross margin performance at OXXO Mexico - Management indicated that gross margin improvements were driven by service mix and pricing strategies, with expectations for continued gains [51][54] Question: Update on health business performance in Mexico and Chile - Management reported strong growth in Chile despite a competitive environment, while acknowledging challenges in Mexico that require operational fixes [61][63] Question: Corporate restructuring and SG&A reduction plans - Management outlined plans for fit-for-purpose initiatives to streamline corporate overhead and achieve significant cost savings [68][70] Question: Increase in interest expense and its drivers - Management explained that the increase in interest expense was primarily due to lease accounting under IFRS and the consolidation of U.S. operations [85]