Fomento Economico Mexicano Q2 Earnings Call Highlights

Key Points

• FEMSA delivered strong Q2 results: Revenue rose 9.3% year over year, operating income increased 7.2%, and net consolidated income jumped 64.9% to MXN 9.2 billion, helped by lower foreign-exchange losses and associate contributions.
• OXXO Mexico returned to traffic growth, with same-store sales up 9.5% and traffic up 2%, although management expects post-World Cup normalization. The company is adjusting prices, product assortments and promotions to improve competitiveness while protecting margins.
• FEMSA is expanding its growth platforms: Spin’s active users increased 22% as the company cautiously develops consumer lending, while Bara, OXXO Colombia and OXXO Brazil continued adding stores. FEMSA also completed a $300 million share repurchase and expects roughly MXN 41 billion in capital distributions through March 2027.

Fomento Economico Mexicano NYSE: FMX reported 9.3% year-over-year revenue growth in the second quarter of 2026 and said operating income increased 7.2%, supported by OXXO Mexico, international operations and restructuring initiatives. Net consolidated income rose 64.9% to MXN 9.2 billion, aided by lower foreign-exchange losses and a positive contribution from associates.

Chief Executive Officer José Antonio Fernández Garza said the company saw positive operational momentum across most of its businesses, while cautioning that World Cup-related demand benefits have ended and Mexico’s consumer environment remains sluggish.

OXXO Mexico returns to traffic growth

OXXO Mexico posted revenue growth of 11.8%, with same-store sales rising 9.5%. Traffic increased 2%, marking the first positive traffic result in eight quarters, while average ticket rose 7.4%. The chain added 253 net new stores during the quarter.

Management estimated that the World Cup accounted for at least 60% of the traffic uplift, split between Panini collectible sales and consumption associated with Mexico’s four June matches. Excluding the tournament’s effects, Chief Financial Officer Martín Arias said OXXO Mexico’s traffic would have risen about 1% and its average ticket would have increased 6.2%.

Fernández Garza said the traffic improvement also reflected changes launched during the second half of last year to make OXXO more consumer-centric. The company is refining price-pack architecture, promotions and assortment in its impulse categories, while introducing lower-priced options in areas where it believes convenience-focused pricing had weakened its competitiveness.

“The key is to find the right algorithm, the optimal balance of price and gross margin that will drive incremental traffic while keeping our operating margin stable,” Fernández Garza said.

The company’s initiatives are organized around four areas: impulse categories; prepared food and coffee; daily replenishment and grocery products; and services enabled by OXXO and the Spin digital platform. Management said coffee sales grew at a healthy pace during the quarter, with targeted regional tests producing encouraging early results. Prepared food and coffee currently represent a mid-single-digit percentage of OXXO Mexico revenue, compared with mid- to high-teen percentages in Colombia and Europe, according to the CEO.

OXXO Mexico’s gross margin declined 70 basis points to 44.8%, reflecting price rationalization and a greater mix of lower-price products. However, selling expenses grew more slowly than revenue and administrative expenses fell 3.3%. Operating income increased 12.3%, and operating margin expanded 10 basis points to 10%.

Management emphasized that its changes are generally focused on assortment and entry price points rather than across-the-board price cuts. Fernández Garza said OXXO expects to remain competitive in core traffic-driving categories such as beer, soft drinks, snacks and tobacco, while becoming more aggressive on pricing in pantry and replenishment categories.

Spin shifts toward monetization and credit

Spin by OXXO continued to expand, with monthly active users up 22% from a year earlier. Fernández Garza said the platform has become one of the more relevant participants in Mexico’s payments system based on transaction processing, while bill payments and other services continue to grow in both physical OXXO stores and Spin.

The company is increasingly focused on monetizing the platform through engagement, credit and broader ecosystem opportunities. FEMSA announced a partnership with QED Investors during the quarter to help develop its lending platform.

Fernández Garza said FEMSA has begun sharing data with QED and has seen encouraging correlations related to credit underwriting. Still, he stressed that the company would proceed cautiously through a “low-and-grow” approach due to the risks inherent in consumer lending.

Arias said the credit operation is currently small and contained, and that the longer-term goal is for lending to become non-recourse to FEMSA. Potential future funding sources could include off-balance-sheet financing and, eventually, a banking license, though he said the business remains in its early stages.

Bara and Latin American expansion

FEMSA’s Bara discount proximity format added 112 net new stores during the quarter, a record pace of more than one opening per day. Same-store sales continued to grow at double-digit rates, while private-label products remained a central part of the format’s value proposition. Fernández Garza said newer store cohorts are showing faster maturation and improving unit economics.

In Latin America, FEMSA said Colombia and Brazil remain important long-term opportunities. Revenue in Colombia rose about 30%, largely driven by same-store sales growth. After slowing expansion to refine the format, management said OXXO Colombia is now delivering solid overall economics and is positioned to accelerate unit growth. Prepared food represents a double-digit share of Colombian revenue.

OXXO Brazil ended the quarter with nearly 640 stores. Fernández Garza later clarified that Brazilian same-store sales remained in the double digits, slowing from the high teens to the low teens. The company expects both Colombia and Brazil to reach 700 stores by year-end, while management said it remains focused on refining Brazil’s model before accelerating openings.

Other businesses, capital allocation and outlook

The Americas and Mobility segment reported revenue of MXN 28 billion, up 7.4%, or 11.6% on a comparable currency-neutral basis. Operating income was MXN 80 million, with profitability affected by diesel price commitments in Mexico and losses from consolidating OXXO Brazil.

Europe generated MXN 14.5 billion in revenue, up 3.2% on a currency-neutral basis. A solid Swiss retail operation was partly offset by weak German retail and food-service performance, which management attributed to soft traffic, poor weather and train route closures. FEMSA also cited sluggish business-to-business demand.

The health division’s revenue rose 2.2% to MXN 22.3 billion. Operating income fell 57.7% to MXN 346 million after the company recorded a non-cash MXN 408 million credit-risk provision tied to its institutional business in Colombia. FEMSA said it notified EPS Sanitas, its largest institutional counterparty in Colombia, that it will not renew their agreement when it expires in September.

Coca-Cola FEMSA, meanwhile, benefited from strong South American performance, with Brazil and Colombia reporting record second-quarter volumes and double-digit operating-income growth. Mexico continued to face a softer consumer environment and higher excise taxes.

FEMSA deployed about MXN 8.9 billion in capital expenditures during the quarter. It also completed a $300 million accelerated share repurchase program. Including ordinary and extraordinary dividends, expected capital distributions between March 2026 and March 2027 are projected to total about MXN 41 billion. Net debt to EBITDA declined to 1.15 times from 1.24 times in the previous quarter.

Looking ahead, executives said OXXO Mexico’s same-store sales will likely normalize following the World Cup, but pointed to improving post-tournament traffic trends and continued market-share gains as encouraging indicators.

About Fomento Economico Mexicano (NYSE:FMX)

Fomento Económico Mexicano, SAB. de C.V. (FEMSA) is a Mexican multinational company active primarily in the retail and beverage sectors. Headquartered in Monterrey, Mexico, FEMSA's operations span convenience store retailing, beverage bottling and distribution, and related logistics and consumer services. The company's business model combines high-frequency retail outlets with large-scale beverage production and a regional supply chain network.

FEMSA Comercio, the company's retail arm, operates a large chain of convenience stores under the OXXO brand and has expanded its retail footprint with complementary formats and services.

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