Fomento Economico Q2 2026 Earnings Call Transcript

Fomento Economico (NYSE: FMX ) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

2% growth in operating income for Q2 2026, with a significant boost from OXXO Mexico's strong performance and restructuring benefits. OXXO Mexico saw same-store sales approach double digits, driven by strategic adjustments, the World Cup, and a renewed focus on customer-centricity, resulting in traffic growth after eight quarters of decline. SPIN by OXXO recorded a 22% increase in monthly active users, with a strategic focus on monetization, customer engagement, and credit expansion, including a partnership with QED Investors for developing a lending platform.

The BADA discount format showed strong growth, with 112 net new store openings and double-digit same-store sales increases, driven by private label emphasis and improving unit economics. Coca-Cola FEMSA faced a soft consumer environment in Mexico but achieved strong performance in South America, with record volumes in Brazil and Colombia. The company expressed cautious optimism for the second half of the year, acknowledging the end of World Cup-related tailwinds and the need to sustain momentum amid a challenging consumer environment. 15 times.

Full Transcript Malou, Moderator Hello and welcome to the Fomento Economico second quarter 2026 conference call. My name is Malou and I will be your moderator for today's event. Please note that this conference is being recorded for the duration of the call. All participants will be in listen only mode.

You will have the opportunity to ask questions at the end of the presentation. To do so, please use the raise hand feature in Zoom and we will open the line. If you experience any technical issues during the call, please use the chat function to request assistance. I would now like to hand the call over to Mr.

Juan Fonseca, Investor Relations Director at Fomento Economico. Please go ahead. Juan Fonseca, Investor Relations Director Good morning everyone. Welcome to FEMSA second quarter 2026 results conference call.

Today we are joined by Jose Antonio Fernandez Garza, FEMSA CEO Martin Arias, our CFO Pamela Ortiz, who is now heading the investor relations team at Coca-Cola FEMSA, and Enrique Manero, who as many of you know, has rejoined us to replace Pamela on our investor relations team. The plan is for Jose Antonio to open the conversation with some high level comments on the quarter's performance and trends, followed by Martin who will provide more granular details on the results. Finally, we will open the call for your questions. Jose Antonio, please go ahead.

Jose Antonio Fernández Garza, Chief Executive Officer Thank you, Juan. Good morning, everyone. I would like to use my time this morning to give you a strategic update, focusing on some of the main components of our portfolio and the strategic pillars that we believe are most relevant in our effort to create value and shape the future of the company. Let me begin with OXXO Mexico, which delivered a strong second quarter.

Martin will elaborate on each line of the income statement in a few minutes, but I want to highlight the same-store sales performance that came very close to the double digits. It was particularly encouraging to see traffic growing at 2%, the first positive number in eight quarters. To be sure, part of this performance was explained by the uplift from the World Cup and we faced a demanding comparison base. But this growth also reflected the strategic adjustments we started to make during the second half of last year.

We estimate that at least 60% of this uplift was attributable to the World Cup, evenly split between the Panini collectibles and consumption, tied mainly to the four Mexico games played in June. However, the improved performance, as we have discussed in previous calls, reflects that we have invested significant time and energy designing, testing, and deploying strategic adjustments across our store base. And beyond the temporary boost from the World Cup, we are seeing signs that the changes we began to roll out last year are taking hold. The core purpose of this effort is to become more consumer-centric at OXXO.

Over time, we have successfully developed our commercial levers, but sometimes this has come at the expense of customer centricity, focusing on expanding our margins but steering us away from our customers and making us less competitive in certain key categories. We are embracing the strategic imperative to put our customers back at the center, and already we are starting to see that it translates into better performance and market share gains. Ultimately, we expect this renewed customer centricity to translate into stronger sustained traffic.

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 margins stable, and consistently ensuring we have the right assortment in place. The strategy rests on four pillars. First, impulse, our core, where we are sharpening price-pack architecture and promotions to achieve competitive price points, and optimizing our assortment to include lower-cost alternatives in key categories where the focus on convenience had reduced our competitiveness.

Second, prepared food and coffee, where we are working to introduce better products on the food side, simplifying pricing and improving execution, including the optimal utilization of our coffee equipment. So far, our efforts have mostly concentrated on improving in-store execution, which has already translated into healthy growth in the coffee category during the quarter. Building on this momentum, we are now piloting targeted initiatives in coffee across a few regions and the early results are very encouraging.

Relative to control stores where we have not yet made any changes, in food service we're focused on developing a set of winning products, sweet as well as salty, that can strengthen our effort to enhance the overall food value proposition at OXXO, starting with breakfast as a natural complement to what we are already doing in coffee. Over time, we will be extending this approach to other food occasions, particularly lunch. Third, daily and replenishment, a significant opportunity given our low market share in many of the categories that are relevant to this key grocery shopping mission.

To capture this opportunity, we will need to work closely with our existing supplier base and potentially expand that base to restructure our assortment, including rethinking our price-pack architecture in partnership with them and evaluating the role of private label in certain categories. Getting this right would allow us to become a more relevant destination for our customers’ everyday grocery needs, expanding OXXO’s role and unlocking a meaningful and durable avenue for growth. And fourth, what we refer to as beyond-trade or services, where OXXO and SPIN together are allowing us to digitize customers and extend our value proposition beyond the store.

Speaking of SPIN, the second quarter was a solid one with continued progress across our key indicators of user growth and engagement and transaction activity. In fact, monthly active users of SPIN by OXXO grew 22% year over year, and SPIN now ranks among the most relevant participants of the SPEI payment system in terms of processed transactions. Interestingly, we're seeing some service categories such as bill payments growing both at SPIN and OXXO, underscoring the stickiness of cash in our ecosystem, but also the growing relevance of SPIN as a digitalization tool for a broader consumer base.

However, we recognize that payments could become commoditized over time, and so SPIN is already preparing for that possibility by transitioning from a phase focused on gaining scale to one increasingly centered on monetization, which will become more relevant if cash utilization gradually declines. Our monetization strategy is anchored in customer engagement, credit, and broader ecosystem opportunities. Credit in particular is becoming a very strategic focus.

We have been running a very small credit pilot that is already generating valuable learnings, giving us greater confidence that the data we have on our millions of customers can produce high-quality underwriting insights. Just as encouraging, customer reaction to the pilot has been very positive, reinforcing our conviction in the opportunity ahead.

On the subject of credit, as you know, during the quarter we announced a partnership with QED Investors to help us develop our lending platform, bringing on board a very experienced partner with talent, expertise, and execution capabilities that materially improve our odds of success in what can be a high-risk, high-reward business. We will be disciplined and cautious in how we roll this out, and the fact that we chose QED as our partner reflects precisely how seriously we take the risks inherent in credit. Our approach will be based on a low-and-grow model, allowing us to scale gradually, learn as we go, and manage our exposure responsibly.

As the portfolio develops, we will continue to keep you informed of our progress. This strategy keeps us firmly on the path we laid out for SPIN: leverage the OXXO ecosystem, build credit responsibly through the right partnership, and maintain operating discipline as we unlock the platform's long-term value. Let me now turn to BADA, which is quickly becoming one of the most exciting long-term growth opportunities in our portfolio, positioned to take advantage of the consumer evolution toward discount proximity formats across the region as the consumer increasingly seeks value in non-convenience groceries.

BADA serves a distinct set of customer needs, and its recent performance is exceeding our expectations, particularly in the newly opened regions. During the second quarter we set a record for store openings, adding 112 net new stores, representing more than one new store per day, a pace that we will try to improve upon in the coming quarters. Just as encouraging as the pace of expansion is the growth of same-store sales that continue to increase by double digits, driven by resilient demand and sustained customer appeal in a competitive environment.

Private label remains central to this story and continues to be a key growth driver, reinforcing the value-oriented proposition and standing out as what we believe will be one of the most important long-term differentiators for the format. This growth is coming alongside strong financial discipline and improving unit economics, and our new store cohorts in particular are showing faster maturation curves. Turning to OXXO in Latin America, our conviction in the region continues to grow, particularly in Colombia and Brazil.

Our effort in Colombia has required patience over many years to develop and fine-tune the right value proposition, and the second quarter offered encouraging evidence that our work is paying off, with revenues up approximately 30%, driven largely by same-store sales growth. More importantly, after a year in which we chose to prioritize refinement of the model over new openings, our value proposition in Colombia is now delivering solid four-wall economics. This gives us greater confidence that OXXO is increasingly resonating with the Colombian consumer and puts us in a stronger position to accelerate unit growth going forward.

Of note, Colombia is where our prepared food offering is most developed, representing a double-digit contribution to revenues. We are confident that this operation will become a meaningful value driver for years to come. Brazil represents another relevant opportunity and one where we are equally deliberate in how we build. We closed the quarter with close to 640 stores, and each new cohort continues to perform better than the one before, which gives us confidence that we are learning and improving as we go.

At this stage, our focus remains on getting the fundamentals right, continuing to develop and refine our value proposition, adjusting operational processes to increase efficiency, and completing the organizational structure required to support accelerated expansion. When the time comes, as in Colombia, we would rather earn the right to scale than rush the process, because we are convinced that the discipline we apply today is what will allow Brazil to become a durable, meaningful, long-term contributor to Fomento Economico. In both Brazil and Colombia, we expect to reach 700 stores by the end of the year.

For its part, at Coca-Cola FEMSA, Mexico is still showing signs of a soft consumer environment and the impact of higher excise taxes, offset by World Cup tailwinds and by a strong performance in South America, with Brazil and Colombia leading the way, achieving record volumes and fueling a double-digit increase in operating income for that region. Summing up, we have good operational momentum across most of our businesses and we are working hard to continue improving our performance. However, as we look at the second half of the year, we know that some of the tailwinds we enjoyed in recent months will no longer be there.

The World Cup was great, but it is over, and our comparison base will get a bit tougher as we get into the final months of the year. The consumer environment remains sluggish, particularly in our core Mexico market, and therefore sustaining our momentum will hinge on our ability to continue executing our strategy. And with that, let me turn it over to Martin to go over the numbers in more detail. Juan Fonseca, Investor Relations Director Thank you, Jose Antonio.

Good morning, everyone, and thank you for joining us today. Let me begin with FEMSA's consolidated financial results for the second quarter of 2026. 2%, reflecting OXXO Mexico's strong performance, contributions from our international operations, and the benefits of our restructuring initiatives, partially offset by currency headwinds, the softer performance of Health in Europe, and the consolidation of losses at OXXO Racin. 7%, respectively, reflecting positive operating leverage.

9%. S. S. dollar cash balance versus the comparable period.

It was also impacted by a positive participation in associate results of 38 million pesos compared to a loss of 756 million pesos in 2Q25, which reflected the results of our joint venture in Brazil as well as the proportional results of our stake in Brady Plus. 3 billion pesos in 2Q25. 8% in 2Q26. As we have discussed in past calls, the difference between our effective tax rate and the statutory rate of 30% reflects non-deductible items at OXXO Mexico—specifically labor costs and other expenses—as well as non-creditable tax loss effects, mainly reflecting losses at SPIN.

These losses decreased this quarter, and we expect them to decrease further as SPIN continues its significant efforts to reduce costs, advancing towards profitability. 4%. We also added 253 net new stores during the quarter. This strong performance was partially supported by the World Cup, particularly the four Mexico matches played in June, which drove a consumption uplift in some of OXXO's most relevant categories, and by World Cup—specific commercial initiatives such as the Panini collectible stickers.

2%. While still early, these are encouraging signs that the strategic adjustments, as Antonio described earlier, are beginning to translate into better customer engagement and healthier underlying growth. Next quarter you will see a more normalized number without most of the tailwind of the World Cup, and we are cautiously optimistic that while it may be lower than this quarter, we expect that it will continue to reflect progress from our initiatives.