Fomento Económico Mexicano, S.A.B. de C.V. (FMX) Q4 2022 Earnings Call Transcript

For the period ending December 31, 2022

February 24, 2023 9:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Eugenio Garza

Moving on to discuss our operation, beginning with Proximity Americas. We added 559 units during the fourth quarter to reach 1,027 net new stores for the last 12 months. This includes 120 stores from our OK Market acquisition in Chile that we began consolidating during the second quarter.

In Mexico, we get up a little bit short of our target of 800 net additions, but the pace keeps improving. The pipeline is looking good for the next 12 months, and the productivity of our new stores continues to materially exceed that of previous new store cohorts.

OXXO same-store sales were up 11.4% for the fourth quarter, driven by an increase of 6.8% in average customer ticket and again, a strong 4.3% growth in traffic. This continues to reflect a pickup in the recovery pace of mobility and the gathering consumption location that has continued to perform at a very strong level.

Gross margin was 44.2%, continuing a recent trend where our fast-growing loyalty program and slightly lower contribution from financial services more than offset healthy commercial income dynamics. Despite the margin pressure at the gross level, income from operation increased 17.4%, while operating margin increased 10 basis points compared to the same period of 2021 to reach 12.7%, driven by a structurally leaner expense structure and the resulting operating leverage.

At Proximity in Europe, we began consolidating Valora in early October, so we are showing 84 days of results. We closed the year with 2,766 outlets. Revenues came in at MXN 9.8 billion, reflecting a recovery in traffic and ticket driven by improved customer mobility.

Gross margin was 46.9% and operating margin was 3.4%, driven by the contribution of foodservice as well as the integration of recent acquisitions. At OXXO gas, revenues maintained the recent uptrend and increased 25.4% and same-station sales grew 19.7% relative to the fourth quarter of 2021 as vehicle mobility continued to improve.

Retail volumes were again supported by a robust pickup in corporate and wholesale activity. During the quarter, gross margin was 13.2%, while operating margin was 4.4%, reflecting tight expense control and improved operating leverage.

Moving on to FEMSA's health operations. During the third quarter, we expanded -- sorry, fourth quarter, we expanded our drug store count by 124 net additions to reach a total of 4,095 units across our territories at the end of December and 434 total net new stores for the last 12 months, exceeding our target for the year of over 400 new drug stores.