FEMSA struggles in Mexico as US expansion marches forward
Dive Brief:
Fomento Económico Mexicano S.A.B. de C.V. (FEMSA) has closed 432 'underperforming' pharmacies in Mexico over the past year as foot traffic in its home country has steadily declined, executives said during the company's second-quarter earnings call on Monday.
FEMSA has seen traffic declines for 'several quarters' in Mexico, which it attributes to 'a persistently weak consumer environment' and 'atypically adverse weather conditions,' CFO Martín Arias Yániz said during the call. The closures — as well as a 'significant overhead reduction' made during Q2 — aim to improve FEMSA's profitability in Mexico, he added.
The expansion of FEMSA's Oxxo c-store business in the U.S. has been a major storyline in the c-store industry over the past year. Although there's no indication of that process slowing down, FEMSA's 'sustained traffic weakness in Mexico is the clear focal point' for the retailer as it moves into the second half of 2025, Yániz emphasized during the call.
Dive Insight:
The past quarter was especially difficult for FEMSA and Oxxo in Mexico, where the retailer 'delivered a mixed set of results,' FEMSA Chairman and CEO José Antonio Fernandez Carbajal said in the company's earnings report.
While total revenue increased 6.3%, driven by FEMSA's operations outside of Mexico, revenue back home — where it operates over 23,000 Oxxo c-stores — only increased 1.4% year-over-year, while same-store sales in Mexico fell by 1.2%, according to FEMSA's earnings report.
'Our operations were geared to a stronger consumer environment than the one that materialized,' Yániz said during the call. 'Thus, our costs and expenses ran a bit ahead of actual volume and traffic.'
Carbajal and Yániz said that the difficult environment notably hurt Oxxo's soft drinks, beer and tobacco sales, and Carbajal added that FEMSA is focusing on getting these categories back on track.
'We are working hard together with our supplier partners to ensure we can adjust our assortment and price-package architecture to remain competitive in addressing our customers' needs as we advance through the summer and approach the key selling season in the fourth quarter,' Carbajal said.
Despite its underperformance in Mexico, FEMSA's leaders appear upbeat about the progress it's making in the U.S.
As of the end of last quarter, the company has rebranded 40 former Delek c-stores in West Texas to the Oxxo banner, a bump from the 15 it had as of late April, Yániz said during the call. Besides rebrands, new stores have incorporated 'several hundred' new items, including selections from Oxxo's proprietary Andatti coffee program.
FEMSA has rebranded Delek stores in the Midland, Odessa and Lubbock areas of Texas and is making its way towards El Paso, Yániz said.
'Early results in terms of incremental sales are promising,' he said.
Correction: A previous version of this story incorrectly stated the number of Oxxo c-stores in Mexico and that 432 Oxxo c-stores have closed over the past year.
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