Froylan Mendez

Froylán Méndez asked if Mexico's record December volume was due to overstocking ahead of tax hikes, and for clarification on price gaps and competitive reactions, particularly regarding market share gains post-IEPS implementation.

Answer

CEO Ian Craig believes there was no significant overstocking effect in Mexico's December volume, as trade adjustments were staggered. He confirmed December was a record month for Mexico and Q4 for other key markets. He stated price gaps are generally stable or slightly improved, varying by channel and competitor. CFO Gerardo Cruz Celaya added that the Mexico team recovered share from the Q2 2025 backlash, providing a strong starting position for 2026.

Froylan Mendes asked if the 'highest monthly volume in Mexico' in December was due to overstocking ahead of tax hikes. He also inquired if manageable price gaps implied they were reduced, leading to share gains, and how competitors reacted.

Answer

CEO Ian Craig stated there was no significant overstocking effect in December volumes due to staggered channel adjustments. He clarified that price gaps vary but the overall mix is stable or slightly improved, with no overall deterioration. CFO Gerardo Cruz Celaya added that the Mexico team recovered share lost in Q2 2025, providing a strong base for 2026 despite the IEPS challenge.

Froylan Mendez asked for a deeper breakdown of OXXO Mexico's growth, including store expansion, same-store sales, commercial income, and the acceptable level of cannibalization, as well as the ROICs of newer stores versus older ones.

Answer

José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, projected at least 10,000 more stores in 10 years (60% normal, 40% OXXO Nichos), expecting same-store sales to be flat or slightly growing with inflation. Juan Fonseca, Head of Investor Relations, added that new stores contribute about 4% growth annually, with same-store sales targeting mid-single digits. Martin Arias, CFO, noted a shift towards OXXO Nichos (15-20% of new stores) and potential OXXO Smart Stores. Juan Fonseca also stated that cannibalization typically represents about 30 basis points of overall growth.

Froylan Mendez from JPMorgan Chase & Co. inquired about OXXO's ability to maintain its growth pace for another decade, seeking a breakdown of this growth across store expansion, same-store sales, and commercial income. He also asked about the adequate level of cannibalization and the return on invested capital (ROIC) for the newest stores compared to older ones.

Answer

José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, projected at least 10,000 more stores over the next decade, with 60% being normal stores and 40% OXXO Nichos, and expressed optimism for flat to slightly growing same-store sales with inflation adjustments. Juan Fonseca, Head of Investor Relations, clarified that new store growth (4%+) and mid-single-digit same-store sales (4% inflation + 1% mix/pricing) are separate components. Martin Arias, CFO, added that the composition of stores will shift towards more Nichos and potentially Smart Stores, creating new white spaces. Cannibalization is estimated at 30 basis points of overall growth.

Froylan Mendez from JPMorgan Chase & Co. asked for a regional view on ticket versus traffic trends and for more detail on NOLAD's performance, specifically how much of Mexico's growth was due to a favorable calendar effect.

Answer

CEO Luis Raganato detailed the regional sales mix, noting NOLAD's growth was two-thirds from average check, while SLAD's was more balanced. CFO Mariano Tannenbaum added that NOLAD's margin improved by 450 bps despite Mexican peso depreciation, driven by leverage on fixed costs, lower royalty rates, and a gain from a restaurant transaction.

Froy Mendez asked for details on how beef costs impacted Brazil's margin in Q1 and how those costs were trending in the second quarter and for the remainder of the year.

Answer

CFO Mariano Tannenbaum confirmed that higher beef prices were the main cause of margin contraction in Brazil during Q1. He emphasized that this was offset by margin growth in NOLAD and SLAD, showcasing the strength of their diversified footprint. He stated the company does not expect further gross margin deterioration in Brazil and anticipates stabilization through pricing and supplier negotiations.

Froy Mendez of JPMorgan Chase & Co. asked about Arcos Dorados' ability to pass through rising beef costs in Brazil, the tangible top-line and margin effects of growing identified sales, and the recent drivers of sales performance in Brazil.

Answer

CFO Mariano Tannenbaum expressed confidence that since rising beef costs will affect the entire industry, Arcos Dorados can manage the impact through pricing and mix. COO Luis Raganato explained that identified sales, now at 25% system-wide, boost frequency and average check, leading to improved margins and top-line growth. He also highlighted that Brazil's Q3 comp sales grew 1.6x inflation on top of a strong prior year, driven by both volume and average check, leading to continued market share gains.