Robert Ford

Robert Ford asked about OXXO's strategy in Brazil following the separation from Heineken, including how long it would take to cover central administrative and overhead expenses at the current same-store sales trajectory, and the most promising category, SKU, and service opportunities. He also inquired about the next strategic moves for FEMSA's Mexican drugstore business.

Answer

CEO José Antonio Fernández Garza-Lagüera expressed excitement for OXXO Brazil's enormous potential post-Heineken, noting double-digit same-store sales growth and a need for approximately 1,000 stores to cover overhead. He highlighted food offerings (pão de queijo, coxinhas, empanadas) and coffee as strong categories, along with the impulse occasion for beer. For the Mexican drugstore business, he admitted it's a tough business where FEMSA is not a leading player, suggesting a future more closely tied to OXXO's omni-channel approach or potential exit, though the business is stabilizing. CFO Martín Arias Yániz added that FEMSA never achieved critical mass in Mexico's scaled drugstore market.

Robert Ford asked about the strategy for OXXO Brazil following the separation from Heineken, including the timeline to cover overhead expenses, promising categories, and SKU/service opportunities. He also inquired about the next strategic moves for FEMSA's Mexican drugstore business.

Answer

CEO José Antonio Fernández Garza-Lagüera expressed excitement for OXXO Brazil's potential, expecting to reach over 1,000 stores to cover overhead, highlighting strong performance in food offerings (pão de queijo, coxinhas, coffee) and impulse categories like beer. For the Mexican pharmacy business, he admitted it's been tough, not winning against incumbents, and sees a future only if it's omni-channel or more closely related to OXXO, with the business stabilizing but not yet winning.

Robert Ford asked if any reclassifications or one-time items contributed to OXXO Mexico's gross margin improvement, about opportunities for further improvements in OXXO Mexico's value proposition, and for clarification on the charge in discontinued operations related to Solistica and the LDL business.

Answer

Martin Arias, CFO of Fomento Económico Mexicano, confirmed that reclassifications were in OXXO Latam, not OXXO Mexico, and OXXO Mexico's gross margin expansion was standalone. José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, identified opportunities in food (coffee and breakfast pairings), segmentation for affordability, expanding digital services via Spin by OXXO, and accelerating OXXO Nichos. Martin Arias also clarified that Solistica's transaction was completed in early July, impacting discontinued operations, with only the small less-than-truckload business in Brazil being reconsolidated.

Robert Ford from Bank of America inquired if any reclassifications or one-time items contributed to OXXO Mexico's gross margin improvement. He also asked about opportunities for enhancing OXXO Mexico's value proposition and sought clarification on the charge in discontinued operations, specifically regarding Solistica and the LDL business.

Answer

Martin Arias, CFO, confirmed that no reclassifications impacted OXXO Mexico's gross margin, which expanded on a standalone basis. José Antonio Fernández Garza-Laguera, CEO of Fomento Económico Mexicano, identified food (especially coffee and breakfast items), segmentation, and digital ecosystem integration with Spin by OXXO as key areas for value proposition improvement. He also highlighted the strong performance and acceleration of OXXO Nichos. Martin Arias clarified that the Solistica transaction was completed in early July, and only the less-than-truckload business in Brazil was reconsolidated, removing it from discontinued operations.

Robert Ford Aguilar from Bank of America asked about the sustainability and evolution of Spin's consumer fee-based revenue and requested details on the partnership with Mercado Pago, including its scope and financial impact.

Answer

Juan Carlos Guillermety, CEO of Spin, clarified that future monetization will shift from fees towards financial services like credit. He described the Mercado Pago deal as a standard agreement for cash-in/cash-out services, similar to other fintech partnerships, and mentioned early-stage pilots for package logistics. CFO Martín Yániz emphasized that for FEMSA, these are 'business as usual' platform access agreements, not unique strategic partnerships.

Robert Ford Aguilar inquired about the sustainability of Spin's consumer fee-based revenue and asked for details on the partnership with Mercado Pago, including its scope and financial arrangement.

Answer

Juan Carlos Guillermety, CEO of Spin, explained that future monetization will shift towards financial services like credit, and described the Mercado Pago deal as a standard cash-in/cash-out service similar to other fintech partnerships. CFO Martín Yániz emphasized that providing such access to OXXO's platform is 'business as usual' and not a unique strategic partnership.

Robert Ford asked about the monetization strategy for Spin and Spin Premia over the intermediate term. He also inquired about the drivers behind weak same-store sales at FEMSA Health Mexico and the turnaround strategy.

Answer

CFO Martin Arias Yaniz explained the Spin strategy involves creating a broad payment ecosystem beyond OXXO, using loyalty points as a key differentiator, and cautiously moving towards a full banking license over time. Regarding FEMSA Health Mexico, Jose Antonio Fernández, CEO of the Proximity and Health Division, stated the division is in a 'full turnaround mode,' restructuring its business model and store base to combat rising labor costs and improve competitiveness, drawing on successful two-format strategies from other regions.

Robert Ford from Bank of America inquired about OXXO Mexico's same-store sales performance in July, the company's strategy for proposed labor law changes like a reduced work week, and details on the evolving partnership with BBVA.

Answer

Executive Juan Fonseca described the relationship with banking partners like BBVA as dynamic, noting a recent increase in transaction limits for their customers at OXXO. For July sales, he suggested a potential slowdown consistent with historical post-election trends. CFO Martin Arias Yaniz stated that while a reduced work week is expected in the medium term, FEMSA is proactively managing labor costs through efficiencies like dynamic scheduling and sees rising minimum wages as a net positive for consumer spending.

Robert Ford inquired about Mercado Pago's AI assistant functionality beyond query handling, its impact on engagement, borrowing/savings behavior, and new financial product adoption. He also asked about personal agentic solutions for the marketplace, their functionality, and deployment timeline.

Answer

Fintech President Osvaldo Giménez highlighted Mercado Pago's AI assistant's ability to handle nearly all user interactions, with future plans for cross-selling credit offers and acting as a personal banker. President of Commerce Ariel Szarfsztejn noted the marketplace's AI-powered seller assistant, which advises 20% of GMV and helps sellers improve listings and reputation.

Robert Ford asked for more details on Mercado Pago's AI assistant, specifically how its sophisticated functionality is increasing engagement, impacting borrowing/savings, or promoting new financial product adoption. He also asked Ariel Szarfsztejn about personal agentic solutions for the marketplace, their functionality, and deployment timeline.

Answer

Osvaldo Giménez, Fintech President, explained that Mercado Pago's AI assistant already handles 87% of user interactions without human support, with impressive functionality for tasks like paying invoices. He noted that while not yet used for cross-selling, there's significant opportunity for proactive personal banking and merchant support. Ariel Szarfsztejn, President of Commerce, mentioned existing AI-powered features in the marketplace (search, recommendations) and highlighted the seller assistant, which advises 20% of GMV, helping sellers improve listings and customer support.

Robert Ford Aguilar of Bank of America Merrill Lynch questioned MercadoLibre's progress on its low Average Selling Price (ASP) selection compared to its long-term goals and competitors like Shopee in Brazil.

Answer

Ariel Szarfsztejn, Commerce President, stated his conviction that MercadoLibre has the widest selection in Brazil but acknowledged an opportunity to increase low ASP listings. He mentioned that the new free shipping policy, in place for only four weeks of the quarter, is already showing good traction in attracting new sellers and low-ticket items to the platform.

Robert Ford inquired about the fast-moving consumer goods (FMCG) category, asking about the total addressable market (TAM) in the region, its halo effect on other categories, plans for features like 'subscribe and save,' and its potential as an unlock for advertising.

Answer

Ariel Szarfsztejn, EVP of Commerce, stated that e-commerce penetration in FMCG is very low, representing a huge long-term opportunity. He confirmed a measurable 'halo effect,' where CPG buyers increase their spending on general merchandise. While a 'subscribe and save' feature is on the product roadmap, the current focus is on building more basic features.

Robert Ford asked about expectations for quarterly net credit card investments, the maturation period for younger cohorts, and the penetration rate of MercadoLibre's own financial products for funding marketplace purchases.

Answer

Osvaldo Giménez (Executive) explained they are being more restrictive on new card issuance but are aggressively expanding limits for existing users, and confirmed that cohorts older than two years are profitable. Martin de Los Santos (CFO) estimated that 'blue money'—payments from MercadoPago's wallet, credit card, and consumer credit—now accounts for roughly 18% to 25% of marketplace TPV, varying by country.

Robert Ford inquired about the adoption rate of the Melimise loyalty program in Brazil and Mexico. He asked how user behavior changes after subscribing, particularly regarding marketplace activity and signs of increased 'principality,' and how the program impacts funding.

Answer

Executive Martin de Los Santos noted positive adoption of the new two-tiered loyalty program but did not disclose specific numbers. He confirmed that enrolled users show higher engagement, conversion, and usage, consistent with past observations. Regarding the cashback feature paid in 'Meli dollars,' he mentioned it's still too early to report significant trends, though users are currently accumulating balances more than spending them.

Robert Ford Aguilar from Bank of America Merrill Lynch asked about the primary drivers for the acceleration in same-store sales, seeking details on ticket versus traffic trends, the impact of inflation, and the progress of the meat and produce pilot programs.

Answer

CEO Anthony Hatoum attributed the strong same-store sales to an improving value proposition that boosts customer traffic and increases the number of items per ticket. He noted that inflation's impact was minimal. Regarding the fresh food pilots, Hatoum stated they are in a cautious test phase and are not yet significantly impacting overall sales figures, reflecting the company's conservative approach to scaling new categories.

Robert Ford Aguilar from Bank of America Merrill Lynch inquired about the primary drivers behind the accelerated same-store sales growth, specifically asking for details on ticket vs. traffic trends, items per basket, and the impact of inflation. He also asked for an update on the development of the meat and produce pilots and their current impact on performance.

Answer

CEO Anthony Hatoum attributed the strong same-store sales growth to continuous improvements in their value proposition, which drives more customer traffic and increases the number of items per ticket. He noted that inflation has a minimal impact, and the company may even be experiencing internal price deflation. Regarding the fresh food pilots, Hatoum described them as being in a cautiously optimistic test phase and not yet a material contributor to current sales figures, though they are expected to increase ticket sizes in the future.

Robert Ford Aguilar asked about the primary drivers behind the acceleration in same-store sales, seeking details on ticket versus traffic trends, items per basket, and inflation. He also inquired about the development and potential impact of the company's meat and produce pilots.

Answer

CEO Anthony Hatoum attributed the strong same-store sales growth to continuous improvements in the company's value proposition, which drives more customer traffic and increases the number of items per ticket. He noted that inflation was a minimal factor, with the company even experiencing some internal price deflation. Regarding the fresh food pilots, Hatoum described them as being in a cautious, test-level phase that is not yet materially impacting sales results.

Robert Ford from Bank of America Merrill Lynch inquired about the scale and capabilities of investments in talent, the strategy for new distribution centers regarding density versus new markets, and the expected functionalities from upcoming systems investments.

Answer

Executive Kamal Hatoum explained that all investments, including in talent and technology, are driven by return on investment and planning for future growth. He noted that new distribution centers are placed to maximize logistics efficiency by compacting distances to stores, which can increase density in existing regions. Regarding technology, Hatoum highlighted that new systems are more efficient, enable the use of big data and AI, and will create a competitive advantage despite a temporary overlap in expenses during the transition.

Robert Ford from Bank of America Corporation inquired about the drivers behind the sequential gross margin decline and the simultaneous step-up in operating leverage. He also asked about competitive dynamics, specifically the number of stores overlapping with Netto, Netto's recent performance, and whether 3B is seeing any signs of financial distress from them. Finally, he questioned the outlook for the pace of new store openings in 2025, given the current accelerated rate.

Answer

Executive Kamal Hatoum explained that gross margin fluctuates quarterly due to dynamic, product-level pricing decisions aimed at maximizing volume and peso profit, not as a change in strategy. He noted approximately 1,500 stores are near a Netto and expressed confidence in 3B's superior value proposition. Regarding store growth, he confirmed they will meet 2024 guidance and aim to increase the pace over time. CFO Eduardo Pizzuto attributed the strong operating leverage to ongoing efficiency efforts, particularly in reducing sales expenses as a percentage of revenue.

Robert Ford asked about the expected evolution of gross sales and EBITDA in the second quarter following the normalization of accounts receivable, the drivers behind increased Q1 expenses, and the strategic importance of the muscular Neosaldina launch.

Answer

Executive Breno Pires de Oliveira stated that Q2 results will be more normalized, with gross margins expected to be above 60% and EBITDA margins around 35%. Executive Ramon Frutuoso Silva explained that Q1 expense increases were due to phasing compared to a low-spend Q1 2024 and should level out. Breno Pires de Oliveira added that the company is shifting to an 'always on' marketing strategy and is very excited about the potential of the muscular Neosaldina launch in a BRL 1 billion market.

Robert Ford of Bank of America asked about the expected evolution of gross sales and EBITDA in Q2 following the working capital adjustments. He also inquired about the drivers behind increased Q1 marketing and G&A expenses and the significance of the muscular Neosaldina launch.

Answer

Executive Breno Pires de Oliveira stated that Q2 results will be more normalized, with gross margins expected to return to above 60% and EBITDA margins around 35%. Executive Ramon Frutuoso Silva explained that Q1 expense increases were due to phasing compared to a lower base in the prior year. Breno Pires de Oliveira added that the company is adopting an 'always on' marketing strategy and is very excited about the potential of the muscular Neosaldina launch in a BRL 1 billion market.

Robert Ford inquired about the expected evolution of gross sales and EBITDA in Q2 following the normalization of accounts receivable, the drivers behind increased Q1 operating expenses, and the strategic importance of the new muscular Neosaldina launch.

Answer

Executive Breno Pires de Oliveira projected a more normalized Q2, with gross margins returning to over 60% and EBITDA margins around 35%. Executive Ramon Frutuoso Silva attributed higher Q1 expenses to phasing compared to a low Q1 2024, expecting more balanced spending ahead. Breno Pires de Oliveira added that the muscular Neosaldina launch is a key strategic initiative targeting a BRL 1 billion market.

Robert Ford asked about the expected evolution of gross sales and EBITDA in the second quarter following the achievement of accounts receivable goals, the drivers behind the Q1 increase in marketing and G&A expenses, and the strategic importance of the muscular Neosaldina launch.

Answer

Breno Pires de Oliveira, an executive, stated that Q2 will be more normalized with gross margins expected above 60% and EBITDA margins around 35%. He also highlighted the muscular Neosaldina launch as a very important entry into a BRL 1 billion market. Ramon Frutuoso Silva, an executive, explained that the Q1 expense increase was due to phasing compared to a lower base in Q1 2024 and that expenses should be more level going forward, supported by a new 'always on' marketing strategy.

Asked about the long-term maturity curve for newer stores, potential for further cost structure improvements, and the impact of the 'Meu Assai' app on sales and customer behavior.

Answer

The company expects the 2023 store cohort to follow a similar maturity ramp-up as the 2022 one. They will continue to focus on expense control, which has been sustainable. The 'Meu Assai' app now identifies 28% of customers, who exhibit 50% higher frequency and 33% higher spending, making it a key tool for growth.