Fomento Económico Mexicano (NYSE:FMX) Q4 2025 Earnings call February 25, 2026 12:00 PM ET Speaker7Hello, and welcome to FEMSA 4th quarter 2025 conference call. My name is Alger, and I'll be your moderator for today's event. Please note that this conference is being recorded. For the duration of the call, all participants will be in listen-only mode. You have the opportunity to ask questions at the end of the presentation. To do so, please use the Raise Hand feature in Zoom, and we will open up your line. If ...

Financial Data and Key Metrics Changes - In 2025, Kraft Heinz experienced a significant year-over-year decline in both top-line and bottom-line results, with organic net sales pressured by market share losses, particularly in the U.S. retail sector [4][5] - Adjusted EPS for 2025 was $2.60, reflecting a 15% decline compared to 2024, driven by a higher effective tax rate and increased investments in marketing [5][26] - Free Cash Flow improved nearly 16% year-over-year, totaling $3.7 billion, with a Free Cash Flow conversion rate of 119% [5][26] Business Line Data and Key Metrics Changes - Organic net sales in North America retail declined by 5.2%, primarily due to share loss in Lunchables, Spoonables, and frozen meals and snacks [5][6] - Global away-from-home organic net sales decreased by 1.5%, impacted by lower traffic trends in the U.S., although international markets showed growth [6][7] - Emerging markets saw organic net sales increase by 4.6%, driven by double-digit growth in LATAM and East regions, despite a decline in Indonesia [7][8] Market Data and Key Metrics Changes - North America organic net sales declined by 5.4%, with significant losses in the U.S. cold cuts and away-from-home segments [23] - International developed markets experienced a 2.4% decline in organic net sales, primarily due to softness in the U.K. meals categories [24] - Emerging markets' organic net sales increased by 2.2%, with growth in LATAM and East regions offset by a decline in Indonesia [24] Company Strategy and Development Direction - The company aims to return to organic, profitable growth by contemporizing brands, differentiating products, and improving commercial execution [3][4] - A significant investment of approximately $600 million is planned for 2026 to support the operating plan and drive recovery [9][10] - The focus will be on enhancing brand alignment with consumer preferences, improving marketing and sales capabilities, and refining pricing strategies [12][18] Management's Comments on Operating Environment and Future Outlook - The management acknowledged a challenging operating environment with worsening consumer sentiment and industry trends [10][11] - There is a commitment to prioritize resources for executing the operating plan while pausing work related to the company's separation [11][12] - The outlook for 2026 anticipates organic net sales to decline by 3.5%-1.5%, with expectations for gradual recovery in the second half of the year [30][32] Other Important Information - The company plans to increase R&D investments by approximately 20% in 2026 to drive innovation and product superiority [13] - Marketing investments will be raised to approximately 5.5% of net sales, targeting major growth opportunities [16] - The company aims to improve its promotional spend ROI and focus on providing affordable choices to consumers [18][29] Q&A Session Summary Question: What are the expectations for the 2026 outlook? - The company expects organic net sales to decline by 3.5%-1.5%, with a gradual recovery anticipated in the second half of the year [30] Question: How will the company address the challenges in the North American market? - The focus will be on executing the operating plan, enhancing brand alignment with consumer preferences, and improving marketing and sales capabilities [12][18]

Financial Data and Key Metrics Changes - Total sales for the third quarter grew 10% to $5.6 billion, with comparable store sales increasing by 7% [5][6] - Earnings per share for the third quarter were $1.58, compared to $1.48 in the prior year, with net income of $512 million [6][7] - For the first nine months, earnings per share were $4.61, up from $4.53 in the same period last year, with net earnings of $1.5 billion [7] Business Line Data and Key Metrics Changes - Strongest merchandise areas in the third quarter included cosmetics, shoes, and ladies' apparel [8] - The branded strategy has positively impacted the ladies' business, which comped above the chain average [10] Market Data and Key Metrics Changes - Geographic performance showed broad-based strength, particularly in the Southeast and Midwest regions [8][12] - The company opened 36 new Ross and four dd's DISCOUNTS stores during the third quarter, completing its expansion program for 2025 [9] Company Strategy and Development Direction - The company has fully embedded its branded strategy into its merchandising approach, focusing on delivering high-quality branded bargains [9][10] - The marketing campaigns have been updated to resonate with younger customers, aiming to enhance customer engagement [27][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fourth quarter, raising the comparable store sales forecast to 3-4% and earnings per share guidance for fiscal 2025 to $6.38-$6.46 [13][14] - The company expects tariff-related costs in the fourth quarter to be negligible, indicating improved cost management [14] Other Important Information - The company repurchased 1.7 million shares for an aggregate cost of $262 million, remaining on track to buy back a total of $1.05 billion in shares this year [13] - Total consolidated inventories were up 9% versus last year, with average store inventories up 15% as the company prepared for the holiday season [8] Q&A Session Summary Question: Can you break down the inflection in same-store sales? - Management noted broad-based strength across all major merchandise categories and regions, attributing some improvement to internal initiatives and favorable weather conditions [20][22] Question: What are the major drivers of the improvement in momentum? - Management highlighted the sophistication of the merchandising team and the importance of aligning merchandising, marketing, and store operations for growth [25][26] Question: How are you addressing the marketing changes? - The company is focused on creating a refreshed marketing message to engage both new and lapsed customers, with early positive results [41][42] Question: What is the outlook for the branded strategy? - Management sees continued opportunity for growth in the ladies' business and believes the branded strategy will yield further improvements [48][50] Question: How are you managing tariff-related costs? - The company has successfully mitigated tariff impacts through strategic vendor partnerships and closeout opportunities, expecting negligible costs in the fourth quarter [34][82] Question: What is the status of self-checkout implementation? - Self-checkout has been rolled out to 80 stores, showing positive customer adoption and sales impacts, with plans for further expansion [78] Question: How is the home business performing? - The home business has shown sequential improvement, and management feels well-positioned for the holiday season despite previous weaknesses [112][113]

All right. So, you're saying there's hope for one name in the space. I think it's a name that a lot of people like to shop at, maybe get gas at.What's the name and why is there hope for this one name. >> Yeah, it's it's Costco. So, yesterday we added Costco top pick list.And as you look at Costco has more of an affluent customer, uh, you know, more of a the best value proposition I think across retail and you've seen consistent strength while other retails have struggled. So, in the last month, Costco put u ...

Branding & Positioning - Early-stage companies should avoid overly narrow market segment focus in their branding and positioning [1] - A more horizontal value proposition allows for multiple entry points to attract different customer segments [1] - Targeted entry points, reflecting specific use cases, can effectively engage customers [1] User Behavior & Conversion - Over 50% of users arriving from specific landing pages navigate to the homepage as their second action [2] - The homepage plays a significant role in driving overall conversion rates [2] - The homepage boosts conversion rates by showcasing the broader product value proposition [2]

Learn to craft a powerful value proposition that highlights your product's unique benefits and sets it apart from the competition. Includes practical examples. https://t.co/pQZa6S3QXr ...

Core Insights - Chipotle Mexican Grill (CMG) is focusing on menu innovation to maintain its competitive edge in the fast-casual dining sector [1][11] - Recent product launches, such as Chipotle Honey Chicken and Adobo Ranch dip, have shown positive early feedback and contributed to a rebound in comparable sales momentum [2][11] - Despite these innovations, comparable sales declined by 4% in the latest quarter due to broader consumer pressures and competition from lower-priced rivals [3][11] Menu Innovation and Promotions - The introduction of new menu items is paired with loyalty-driven promotions like the Summer of Extras, which has increased active rewards members and visit frequency [4] - Limited-time offerings and sides are currently effective in lifting comparable sales, but sustaining this momentum will require clearer communication of Chipotle's value proposition [5] Competitive Landscape - Competitors like Sweetgreen and Brinker International are also enhancing their offerings, focusing on culinary creativity and value promotions to attract budget-sensitive diners [6][7] - The competition emphasizes the need for Chipotle to balance culinary novelty with affordability to defend its market share [8] Financial Performance and Valuation - Chipotle's stock has decreased by 19.2% over the past six months, compared to a 5.9% decline in the industry [9] - The company trades at a forward price-to-sales ratio of 4.13X, which is above the industry average [12] - The Zacks Consensus Estimate predicts a year-over-year earnings increase of 7.1% for 2025 and 17.7% for 2026 [16]

Core Insights - The restaurant industry is increasingly focusing on value offerings to attract budget-conscious consumers, with McDonald's leading the charge by reintroducing its Extra Value Meals, which provide an average savings of 15% compared to purchasing items separately [1][9][14] - Industry experts predict that McDonald's strategy will compel its competitors to implement similar discount strategies, particularly during breakfast hours, to retain and attract customers [2][4][13] Industry Response - Following McDonald's announcement, IHOP introduced an everyday value menu featuring four complete breakfast meals for $6, available daily from 7 a.m. to 10 p.m. [5][8] - Jack in the Box plans to increase cup sizes by approximately 25% and lower prices across its drive-thru menu, with over 60% of its combo meals priced under $10 [11] - Burger King has also launched promotional deals for its loyal customers, offering free items tied to a $1 order during a week-long celebration [12] Market Conditions - The fast-food sector is currently facing challenges such as margin pressures from supply chain issues and rising labor costs, alongside a general decline in customer traffic, with exceptions noted for brands like Chipotle and Cava [16] - As of July, menu prices at limited-service restaurants rose by 3.3% year-over-year, peaking at 8.2% in April 2023, indicating a trend of increasing costs in the industry [17]

Core Insights - The company is focusing on driving innovation and growth under the leadership of the new CEO, Tarun Lal, who emphasizes the importance of brand strengths and social connections [2][4][21] - The strategic plan aims to address executional failures and enhance operational excellence, with a clear focus on guest experience and financial success [5][9][21] Company Strategy - The company has identified key areas for improvement, including marketing, food and beverage offerings, operations, game introductions, and remodels [29][30][31] - A back-to-basics approach is being implemented to stabilize same-store sales and improve guest engagement [26][21] - The company plans to enhance its marketing strategy by simplifying messaging and leveraging its national sports viewing platform [29][78] Financial Performance - In Q2 2025, the company reported revenue of $557 million, with a net income of $11 million and adjusted EBITDA of $130 million, resulting in a 23% adjusted EBITDA margin [13][14] - Comparable store sales decreased by 3% year-over-year, impacted by the timing of the July 4 holiday [11][12] - The company generated $34 million in operating cash flow during the quarter, ending with $12 million in cash and $443 million in total liquidity [14][35] Operational Developments - The company has opened three new stores in Q2 2025 and plans to open a total of 11 new stores in fiscal 2025, with a strong pipeline for future openings [18][19] - A sale-leaseback transaction for two operating stores generated approximately $77 million, enhancing liquidity for future investments [16][17] Market Positioning - The company recognizes challenges in brand distinctiveness, retail marketing, and customer experience, which are critical for unlocking business potential [10][21] - The introduction of a revamped menu and focused promotions has shown positive results, particularly in the special events business, which has seen a 10% year-over-year revenue increase [27][28] Future Outlook - The company aims to grow same-store sales and free cash flow by focusing on five strategic areas: marketing, food and beverage, operations, games, and remodels [30][31] - The CEO believes the stock is undervalued and sees significant upside potential based on achievable financial results [21][36]

Financial Data and Key Metrics Changes - In Q2 2025, comparable store sales decreased by 3% compared to the prior year period, with a noted decline of 2.2% in the first five weeks of the quarter [11][12] - Revenue for the quarter was $557 million, with a net income of $11 million or $0.32 per diluted share, and adjusted EBITDA of $130 million, resulting in an adjusted EBITDA margin of 23% [13][14] - The company generated $34 million in operating cash flow during the quarter, ending with $12 million in cash and $443 million in total liquidity [13][14] Business Line Data and Key Metrics Changes - The special events business saw a revenue increase of nearly 10% year-over-year, contributing positively to overall performance [25] - The company opened three new stores in Q2 and has a total of eight new store openings year to date, with expectations for 11 new store openings in fiscal 2025 [17][18] Market Data and Key Metrics Changes - The company is focusing on international franchising as a growth driver, with agreements for over 35 additional stores in the coming years [18] - The company has seen a significant improvement in its special events business, which is driving brand engagement and awareness [25] Company Strategy and Development Direction - The management is committed to reinforcing a guest-first culture, delivering memorable experiences, and driving growth in sales and shareholder value [9][10] - The strategic focus includes improving marketing effectiveness, enhancing food and beverage offerings, and introducing new games to attract customers [26][28] - The company aims to simplify its marketing message and improve value perception among customers [38][79] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic headwinds but believes that delivering value will help the brand prosper [78] - The company is optimistic about improving performance through focused execution and believes the stock is undervalued with significant upside potential [20][32] Other Important Information - The company has implemented a new prototype for remodels that is expected to drive better results at a lower cost [23] - A sale-leaseback transaction for real estate assets has provided approximately $77 million in funds, enhancing liquidity for future investments [16] Q&A Session Summary Question: What are the comparable store sales trends for Q3? - Management did not quantify the numbers but indicated trends are consistent with Q2 [35] Question: Can you elaborate on value perception challenges? - Management believes the confusion in marketing has affected value perception and is working on simplifying messaging [36][38] Question: What are the near-term margin expectations? - Management anticipates moderated EBITDA margins in the second half of the year due to improved top-line performance and fewer one-off costs [44] Question: How is the eat and play combo performing? - The eat and play combo is seeing an 8% to 10% opt-in rate, with food upgrades contributing positively to sales [45] Question: How does the brand's transformation compare to past experiences? - Management sees similarities in brand distinctiveness and value perception challenges but acknowledges the complexity of the entertainment aspect [49][51] Question: What is the outlook on new store growth and CapEx discipline? - Management remains bullish on new store growth, expecting to maintain a 6% to 7% growth rate through new unit additions [53][55] Question: What changes have been made to game pricing? - The company has simplified game pricing to enhance value perception and increase customer dwell time [58][60] Question: Will marketing investments need to increase? - Management believes the current marketing spend is sufficient and will focus on refining the media mix for effectiveness [66] Question: What is the new adjusted EBITDA target? - The new target is set at $675 million, which management believes is achievable within the committed timeline [75]