Fomento Economico Mexicano S.A.B. de C.V. - ADR

Challenging Consumer Environment: FEMSA's first quarter results reflect a difficult consumer backdrop, particularly in Mexico, with Proximity Americas reporting a 1.8% contraction in same-store sales driven by a 6.6% decline in traffic. Elevated inflation, calendar effects, and geopolitical uncertainties continue to dampen consumer sentiment.

Forecast for Second Half Improvement: Jose Antonio Fernandez anticipates a better second half of 2025, projecting a high single-digit increase in revenues year-over-year, supported by cost containment initiatives and potential recovery in economic activity. The company aims for sequential improvements in top-line dynamics, particularly in Q3.

Gross Margin Expansion vs. Operating Income Decline: Although gross margins at Proximity Americas continue to expand, operating income experienced an 11.8% decline due to increased labor costs from a 12% minimum wage hike and lack of operating leverage. The company's focus remains on maintaining gross margin while addressing operating expenses.