FEMSA(US:FMX)2022-05-02 18:12Financial Data and Key Metrics Changes - Total revenues increased by 18.6% in Q1 2022 compared to Q1 2021, while income from operations rose by 24.9% [10] - On an organic basis, total revenues grew by 15.2% and income from operations increased by 22.2% [10] - Net income decreased by 6.6% to 5.8 billion pesos, impacted by a noncash foreign exchange loss [10] Business Line Data and Key Metrics Changes - OXXO opened 69 net new stores in Q1 2022, reaching 794 net openings over the last 12 months, with same-store sales up 12.7% [11] - Health operations expanded drugstore count by 66, with revenues increasing by 5.1% and same-store sales up 3.5% [13] - Logistics and distribution revenues increased by 48.3%, with organic growth of 12.2% [14] - Coca-Cola FEMSA volumes grew by 10.1%, with revenues up 14.6% despite supply chain disruptions [15] Market Data and Key Metrics Changes - OXXO's gross margin increased by 110 basis points to 41.1%, driven by improved commercial income [12] - Coca-Cola FEMSA's gross profit grew by 13.5%, reflecting solid raw material hedging strategies [15] Company Strategy and Development Direction - The company is focused on consolidating its logistics and distribution platform through acquisitions, such as Sigma Supply, to strengthen its presence in the U.S. market [7][20] - There is a commitment to expanding digital platforms, with significant growth in registered users for Spin by OXXO and OXXO Premia [8] - The company aims to increase store openings in international markets, particularly in Brazil, with expectations of reaching parity with Mexico in store numbers over the next five to ten years [54][56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sustained growth and recovery in consumer activity as the world reopens [4] - The company remains vigilant regarding macroeconomic challenges such as inflation and supply chain disruptions but is confident in its operational fitness [15] - The board is conducting a strategic review to address the share price discount to NAV and explore options for value creation [60][61] Other Important Information - The logistics and distribution segment is seen as a potential new core for the company, with significant growth opportunities through consolidation and cross-selling [49] - The company is adapting its value proposition in international markets to meet local consumer needs [57] Q&A Session Summary Question: Future growth of logistics segment and capital allocation strategy - Management highlighted the potential for mid-single-digit organic growth and mid-double-digit growth with inorganic opportunities in the logistics segment [19] Question: Impact of Spin and Premia on data capture and customer engagement - Management noted that Spin is capturing marginal consumers and increasing transaction frequency, while Premia is enhancing customer loyalty and engagement [22][24] Question: Traffic comparison to 2019 levels and inflation impact - Traffic remains below 2019 levels, but same-store sales are up due to increased average ticket sizes; management is strategically managing costs amid inflation [29][30] Question: Changes in consumer behavior regarding cash transactions - Management indicated that while cash transactions remain prevalent, there is a growing acceptance of digital transactions, particularly among small business owners [33][35] Question: Gross margin dynamics and pricing architecture - Management attributed gross margin improvements to increased commercial activity and effective cost management, with ongoing testing of pricing strategies for digital services [38][39] Question: Long-term vision for logistics and distribution - Management expressed confidence in the logistics division's growth potential and the ability to create a powerful national platform through acquisitions and synergies [48][49]