Fomento Economico Mexicano Q3 Earnings Call Highlights

Key Points

• FEMSA delivered solid third-quarter growth: Revenue rose 9.8% and operating income increased 9.9%, while net income surged 81% to MXN 10.6 billion, helped by operating performance, favorable comparisons and a foreign-exchange gain.
• OXXO México showed improving momentum: Same-store sales grew 9.2%, driven by a 3.5% traffic increase and a 5.5% higher average ticket. FEMSA is pruning underperforming stores while prioritizing expansion of its Bara discount format.
• Management remains cautiously optimistic: FEMSA announced a new share-repurchase program alongside planned MXN 41 billion in dividends, but cited soft Mexican consumer conditions, Brazil volatility and tougher comparisons ahead.

Fomento Economico Mexicano NYSE: FMX reported third-quarter 2026 revenue growth of 9.8% and operating income growth of 9.9%, supported by results at OXXO México and Coca-Cola FEMSA, while management highlighted an improving traffic trend at its Mexican convenience-store chain.

Net consolidated income totaled MXN 10.6 billion, up 81% from a year earlier. CFO Martín Arias said the increase reflected operational performance, a favorable comparison with a prior-year loss from discontinued logistics operations, and a MXN 1.1 billion non-cash foreign-exchange gain. Those factors were partly offset by lower interest income, losses on financial instruments at Coca-Cola FEMSA Brazil, and a higher income-tax provision.

On a comparable, currency-neutral basis, FEMSA said revenue increased 9.4% and operating income rose 13.4%.

OXXO México Traffic Gains Momentum

CEO José Antonio Fernández Garza said OXXO México’s same-store sales increased 9.2% during the quarter, driven by a 5.5% increase in average ticket and a 3.5% gain in average traffic. Traffic growth was 150 basis points above the second-quarter level, despite limited benefit from the World Cup, he said.

Fernández Garza characterized traffic as the quarter’s main highlight, noting that average-ticket growth was nominal and included the effects of higher excise taxes on soft drinks and cigarettes. He said OXXO gained market share across relevant trade channels through August, particularly in its core impulse categories.

The company attributed the improvement to its strategy focused on four areas: impulse purchases, food service, daily replenishment, and services. Food-service traffic grew at a low double-digit rate, led by coffee, while early tests of the company’s Canasta OXXO offering of everyday essentials at accessible prices were modestly additive to traffic, management said.

OXXO México revenue grew 10.3%, while operating income rose 5.8%. Operating margin contracted 40 basis points. Gross margin declined 120 basis points, although management said the comparison was affected by an unusually high concentration of commercial income in the prior-year period. On a normalized basis, gross-margin contraction would have been in line with the 70-basis-point decline in the second quarter, according to the company.

OXXO México closed 140 older underperforming stores during the quarter as part of a broader pruning plan involving about 250 locations. The closures reduced operating margin by roughly 20 basis points; excluding the effect, operating income would have increased 8%, Arias said. FEMSA expects a similar impact in the fourth quarter as it completes the effort.

Year to date, OXXO México added 734 stores and closed 272, for a net increase of 462 stores. Arias said the company will likely fall short of its annual run rate of 1,000 net new stores this year, but maintained that target for next year and beyond.

Expansion Plans for Bara and International Operations

Bara, FEMSA’s discount-store format, delivered same-store sales growth of 10.3% and added 112 net new locations in the quarter. Fernández Garza said newer stores are maturing faster than legacy locations in the Bajío region, while the company expects to open more stores next year than it does this year.

Management described Bara as a major expansion priority, with Investor Relations Director Juan Fonseca saying its store base could grow more than 30% next year. The company said its focus is on improving private-label offerings, simplifying assortments, and building a cost-efficient operating model. Arias said newer Bara stores have reached break-even quickly even before reaching full maturity.

In Latin America, the Americas & Mobility segment generated MXN 29.5 billion in revenue, up 18.1%, or 10.9% on a comparable, currency-neutral basis. The company cited healthy volume growth at OXXO Gas and strong performance in Colombia, where mature-store traffic rose at a high single-digit pace.

OXXO Brazil posted a 5.1% increase in currency-neutral same-store sales, though the operation continued to weigh on consolidated profitability. Management said Brazil remains a significant opportunity but that expansion will be more cautious as the company navigates a 40-hour workweek and two-day-off requirements. FEMSA plans to add about 70 net new Brazilian stores next year, or roughly more than one per week.

Colombia, meanwhile, is ready for faster expansion, Fernández Garza said, provided the company can maintain store quality and operational capabilities.

Other Divisions Face Mixed Conditions

FEMSA’s Europe division reported revenue of MXN 14.1 billion, down 5.2% year over year but up 4% on a currency-neutral basis. Swiss retail performed solidly, while German retail and food service were affected by train-route closures and extreme weather that hurt train-station traffic. Operating income fell 24.8% to MXN 531 million.

The health division posted revenue of MXN 22.9 billion, up 7%, though operating income declined 63.2% to MXN 319 million. The results included an additional MXN 430 million non-cash credit-risk provision tied to uncertainty in Colombia’s healthcare system and the company’s institutional-business exposure. Excluding that provision, operating income was MXN 749 million, down 14%, with pressure from competitive initiatives in Chile partly offset by retail growth in Colombia and Ecuador.

Coca-Cola FEMSA reported 10.9% revenue growth and a 15.4% increase in operating income. Arias said operating income would have increased 7.4% excluding a one-time insurance-claim benefit. Mexico volumes remained resilient after the impact of excise-tax increases, while Colombia and Brazil delivered robust volume growth and double-digit operating-income growth.

Capital Allocation and Outlook

FEMSA deployed MXN 9.4 billion in capital expenditures during the quarter, equal to about 4% of revenue and down 28.3% from a year earlier, primarily because Coca-Cola FEMSA reduced spending after prior investments to expand capacity.

The company also announced a new share-repurchase program, in addition to approximately MXN 41 billion in ordinary and extraordinary dividends planned for the current distribution cycle. FEMSA said it has distributed MXN 30 billion of that amount, with the remaining MXN 11 billion expected early next year.

Net debt to EBITDA excluding Coca-Cola FEMSA was 1.19 times at quarter-end, or about 1.3 times on a pro forma basis after accounting for dividend payments. The company maintained its leverage objective of approximately two times net debt to adjusted EBITDA excluding Coca-Cola FEMSA.

Management said it remains encouraged by momentum across most businesses but continues to see a soft consumer environment in Mexico, volatility in Brazil, and increasingly difficult comparisons ahead. FEMSA plans to provide more details about its 2027 plans during its next earnings call.

About Fomento Economico Mexicano (NYSE:FMX)

Fomento Económico Mexicano, SAB. de C.V. (FEMSA) is a Monterrey, Mexico-based multinational company with operations focused on beverage bottling, retail and related consumer services. The company traces its origins to 1890, when it was established as a brewery in Monterrey, and has since developed into one of Latin America's largest consumer-facing businesses.

FEMSA's principal beverage business is Coca-Cola FEMSA, which produces, markets, sells and distributes Coca-Cola trademark beverages and other nonalcoholic drinks.

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