Alejandro Fuchs

Alejandro Fuchs asked about any observed differences in competition across new regions Tiendas 3B is entering. He also sought clarification on the proportion of same-store sales growth driven by volume (number of tickets) versus mix (more SKUs per ticket).

Answer

CEO K. Anthony Hatoum stated that Mexico has always been a competitive market, and Tiendas 3B has not seen any increase or change in the competitive landscape as it expands, noting that 3B itself is becoming more competitive. CFO Eduardo Pizzuto explained that same-store sales growth is consistently driven by both more transactions and more products in the basket, but did not disclose specific percentages. Hatoum added that this growth is against minimal price inflation.

Alejandro Fuchs inquired about any differences in competition depending on the region Tiendas 3B is entering in Mexico, particularly new regions. He also asked about the drivers of same-store sales, specifically whether volume (number of tickets) or mix (more SKUs in the ticket) is contributing more.

Answer

K. Anthony Hatoum, Founder, Chairman, and CEO, Tiendas 3B, noted that Mexico has always been a competitive market and they have seen no increase or change in the competitive landscape in new regions, with 3B becoming more competitive. Eduardo Pizzuto, CFO, Tiendas 3B, explained that same-store sales are driven by both more transactions and more products in the basket, consistent with past trends, without disclosing specific percentages. Anthony added that this growth is against minimal price inflation.

Alejandro Fuchs from Itaú BBA asked about the competitive landscape and whether competitors were reacting to Tiendas 3B's outperformance. He also inquired about the location of the new regions and if store performance was expected to differ from existing central Mexico locations.

Answer

CEO Anthony Hatoum responded that while the market remains highly competitive, he has seen no fundamental change in the competitive dynamics. He explained that the company expands by 'stretching' into adjacent areas, ensuring consistent customer behavior and predictable store ramp-ups, as they sell basic goods with universal appeal. Performance is expected to remain consistent with their established stores.

Alejandro Fuchs from Itaú BBA asked about the competitive landscape, wondering if competitors were reacting differently to Tiendas 3B's outperformance. He also inquired if the performance dynamics of stores in the new regions were expected to differ from those in the center of the country.

Answer

CEO Anthony Hatoum responded that there has been no significant change in the competitive environment, which remains highly competitive as always. He also noted that store performance and customer behavior have been remarkably consistent across all geographies, as they sell basic necessities and expand adjacently from existing regions, ensuring a stable and predictable ramp-up.

Alejandro Fuchs asked if competitors were reacting differently to Tiendas 3B's consistent outperformance and whether the new regions would face different competitive dynamics or store performance compared to the core central Mexico market.

Answer

CEO Anthony Hatoum stated that there has been no real change in the competitive environment, which remains highly competitive. He emphasized that the company's strategy of expanding into adjacent areas ensures consistent customer behavior and predictable performance, as they sell basic goods with universal appeal across geographies.

Alejandro Fuchs from Itau BBA asked for a breakdown of same-store sales between traffic and ticket, and questioned whether the strong free cash flow generation seen in the quarter is sustainable.

Answer

Executive Kamal Hatoum stated that same-store sales growth was driven roughly 50/50 by increases in traffic and ticket size. CFO Eduardo Pizzuto added that strong cash flow is a core feature of the negative working capital model and, while variable quarter-to-quarter, the upward trend is expected to continue, ensuring growth remains self-funded.

Alejandro Fuchs from Itaú BBA asked for elaboration on the gross margin expansion seen in the quarter, focusing on the role of supplier relationships and private labels, and whether this trend is expected to continue. He also inquired about the competitive landscape and 3B's performance outlook, given the broader context of slowing consumption and economic activity in Mexico.

Answer

Executive Kamal Hatoum explained that gross margin improvements are a natural result of scale, which increases purchasing power and efficiency. The company uses elasticity testing to decide how much of this gain is passed to customers via lower prices versus retained as margin. He stated that while gross margin will be volatile quarter-to-quarter, the long-term trend is upward. Regarding the economy, he noted that 3B has not seen a slowdown in its own numbers and historically thrives in downturns as consumers seek value, while competition remains robust as always.

Alejandro Fuchs from Itaú asked about the drivers behind OXXO Mexico's strong gross margin performance, including the impact of service mix and pricing, and the future outlook for these margins. He also sought insights into the strategic priority and long-term potential of Bara and OXXO Brazil over the next decade.

Answer

José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, explained that OXXO Mexico's gross margin gains were primarily due to commercial income growth, mix, and profitable promotions on affordable SKUs. He anticipates continued gross margin expansion but noted some will be reinvested in consumer affordability. For Bara and OXXO Brazil, he described them as exciting long-term growth avenues, expressing confidence in OXXO Brazil's path to profitability and significant store expansion potential, and highlighting Bara's progress in return on invested capital and private label strategy.

Alejandro Fuchs inquired about the drivers behind OXXO Mexico's strong gross margin performance, including the contribution from service mix and pricing, and the future outlook for gross margins. He also asked about the long-term priority and best-case scenario for Bara and OXXO Brazil over the next decade.

Answer

José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, attributed OXXO Mexico's gross margin gains to commercial income growth, mix, and profitable affordability promotions. He expects continued gross margin expansion, with some gains reinvested in consumer affordability. He emphasized Bara and OXXO Brazil as exciting long-term growth avenues, noting OXXO Brazil's progress towards profitability and mapping new growth areas, while Bara focuses on improving ROIC, private label expansion, and geographic growth beyond El Bajío.

Alejandro Fuchs from Itaú asked for more details on Coca-Cola FEMSA's plans to rethink CAPEX for next year, specifically where the savings would come from and if it represents a delay in investments due to anticipated volume recovery.

Answer

CEO Ian Craig clarified that the CAPEX adjustments are primarily in Mexico and other countries with lower-than-expected volumes, such as Guatemala. He gave the example of delaying construction of new distribution centers in Mexico, while lines proceed, to avoid unproductive assets given an expected low to mid-single-digit volume decline next year due to the excise tax. This effectively pushes out Mexico's CAPEX two years.

Alejandro Fuchs asked for more details on Coca-Cola FEMSA's revised CapEx plans for 2026, specifically where savings would come from and if these reductions represent a delay in investments rather than a cancellation.

Answer

CEO Ian Craig clarified that the CapEx adjustments are primarily delays, particularly in Mexico and Guatemala, due to anticipated volume declines from the excise tax. He gave an example of delaying distribution center construction in Mexico to avoid unproductive assets during a period of expected low to mid-single-digit volume contraction, effectively pushing out these investments by two years.

Alejandro Fuchs asked about the timeline for rolling out the Juntos+ adviser tool in Mexico and inquired about the drivers behind the worsening working capital dynamics, particularly days of payables.

Answer

CEO Ian Marcel Craig García confirmed the Juntos+ adviser tool, already successful in Brazil, is scheduled for rollout in Mexico around June or July of 2025. CFO Gerardo Celaya explained that the working capital changes were by design, driven by two factors: the necessary replenishment of inventories and lower accounts payable resulting from the ongoing migration to a new SAP S/4HANA ERP system.

Alejandro Fuchs from Itau BBA inquired about Coca-Cola FEMSA's 2025 volume expectations for Mexico amid slower macroeconomic dynamics and asked for the net impact of one-off events on the company's EBITDA during the quarter.

Answer

CEO Ian Marcel Craig García projected mid-single-digit volume growth for Mexico in 2025, citing a robust plan to recover market share and accelerate key brands, which offsets a lower GDP forecast. CFO Gerardo Celaya quantified the net impact from weather-related one-offs on EBITDA as a MXN 206 million expense for the quarter and a MXN 56 million positive effect for the full year.

Alejandro Fuchs from Itau BBA sought to understand the drivers behind strong volumes in Mexico and Brazil, questioning the contribution from Juntos+ and multi-category initiatives. He also asked for clarification on one-off financial impacts during the quarter.

Answer

Management explained that Juntos+ provides a volume uplift of around 6%, complemented by a strong macro environment. Multi-category initiatives currently contribute about 1.3% of revenue. CFO Gerardo Celaya clarified the one-offs: a MXN 400 million non-cash FX loss in Mexico and a MXN 130 million net impact from the flooding in Brazil.

Alejandro Fuchs asked for clarification on the 5% year-over-year increase in the national carrier tariff and sought more detail on the strategies driving the 15% growth in non-aeronautical revenue per passenger, including any influence from VINCI.

Answer

CFO Ruffo Pérez del Castillo explained that the aeronautical yield increase was primarily due to a favorable basis of comparison from last year's tariff adjustments. He attributed the strong non-aeronautical performance to aggressive renegotiations of commercial spaces and new outlet openings, developed in close collaboration with VINCI, and expects this strong performance to continue.