FEMSA(US:FMX)2024-10-28 19:25Financial Data and Key Metrics Changes - In Q3 2024, total revenue grew by 8.3%, while operating income rose by 14.6% compared to the same period last year, indicating strong performance across business units [25] - Net consolidated income decreased by 27.5% to MXN 9.2 billion, primarily due to higher interest expenses and lower foreign exchange gains [26] - Gross margin expanded by 300 basis points to reach 44.2%, driven by healthy dynamics in commercial income and financial services [27] Business Line Data and Key Metrics Changes - Proximity Americas reported total revenue growth of 4.8%, with same-store sales flat due to a challenging comparison base and a 5.7% contraction in average traffic [27][6] - The Health division saw total revenues increase by 12.5% in pesos, with same-store sales growth of 7.4%, driven by strong performance in Colombia [32][21] - OXXO Gas posted a 7.6% increase in same-station sales and 8.2% in total revenues, with stable gross margin at 12.4% [33] Market Data and Key Metrics Changes - Average ticket grew by 6.1%, reflecting successful revenue management initiatives despite flat same-store sales [8] - In Europe, Valora's total revenues increased by 20.4% in pesos, driven by growth in retail and B2B foodservice, although traffic dynamics remained challenging [30] - The Colombian health sector is shifting towards private sector growth, benefiting FEMSA's retail operations [63] Company Strategy and Development Direction - The company is focusing on return on invested capital by format and line of business, with plans to accelerate, decelerate, or eliminate initiatives based on performance [9] - OXXO Mexico aims to expand its store base by approximately 1,100 net new stores in 2025, with a focus on enhancing its value proposition [12] - The company is deemphasizing expansion in certain Latin American markets like Chile and Peru, focusing instead on improving profitability [17][88] Management's Comments on Operating Environment and Future Outlook - Management noted a slowing consumer environment in Mexico, typical for the second half of an electoral year, but expects improvement in the economy and consumer environment [7][44] - The company remains optimistic about the performance of its flagship drugstores in Mexico, despite intense competition [66] - Management highlighted the importance of strategic adjustments in the Health division to navigate ongoing challenges, particularly in Mexico [32] Other Important Information - The company allocated MXN 12.1 billion in CapEx, representing 6.2% of total revenues, to drive operational efficiency and maintain competitive advantage [36] - FEMSA plans to return MXN 50 billion to shareholders over two to three years, with MXN 30.7 billion already allocated [37] - The company is focused on leveraging data analytics to enhance promotional offerings and improve customer engagement [34] Q&A Session Summary Question: OXXO same-store sales performance - Management acknowledged disappointing traffic numbers in Q3 but expects a better comparison in Q4, with plans for smart promotions to enhance December sales [44][45] Question: Digital initiatives and cash burn - Digital operations have seen a reduction in cash burn, focusing on leveraging existing customer base rather than aggressive acquisition [50] Question: Activation capabilities within Spin Premia - Management is optimistic about the data capabilities of Spin Premia, which is expected to enhance promotional targeting and revenue generation [57][58] Question: Health division same-store sales drivers - Strong performance in Colombia's retail segment and successful wholesale distribution in Chile contributed to the Health division's growth [63][64] Question: Plans for Bara format - Bara has been performing well with a focus on hard discount strategies, and management plans to accelerate its expansion while ensuring operational separation from OXXO [70][72]