FEMSA (FMX) Q3 2025: Proximity Americas Revenue Up 9.2% as Store Expansion and Affordability Drive Competitive Gains
FEMSA’s Q3 revealed a clear inflection in OXXO Mexico’s same-store sales, driven by affordability initiatives and category mix shifts, while international retail and discount banners accelerated expansion. Leadership transition signals strategic continuity with a sharpened focus on long-term value creation and operational urgency. Investors should watch for continued competitive gains in core categories and the scaling of digital and discount platforms into 2026.
Summary
- Store Expansion and Category Mix Shift: Proximity Americas outpaced the group, benefiting from new stores and targeted affordability efforts.
- Operational Discipline and Margin Management: Cost controls and SG&A initiatives offset wage pressure and enabled margin resilience across regions.
- Leadership Continuity, Strategic Evolution: Incoming CEO reinforces core retail and beverage focus, with an eye on digital ecosystem and international scaling.
Performance Analysis
FEMSA delivered consolidated revenue growth of 9.1% in Q3, with Proximity Americas (OXXO, OXXO Brazil, VARA, and OXXO USA) leading the way at 9.2% growth, or 4.8% on an organic, currency-neutral basis. This was powered by 1,370 net new stores and robust performance in Latin America, notably Brazil and Colombia, as well as the initial consolidation of OXXO USA. Same-store sales in OXXO Mexico turned positive (up 1.7%), marking the first such inflection since mid-2024, as ticket size increased and traffic declines moderated.
Despite top-line gains, net consolidated income fell sharply due to a significant non-cash FX loss on dollar-denominated cash, higher interest expense (mainly from lease accounting and U.S. consolidation), and lower interest income as cash balances and rates declined. Operating income grew 4.3% year-over-year, reflecting inflationary cost headwinds offset by expense efficiency efforts, especially in OXXO Mexico, Health, and Europe. Gross margin for Proximity Americas expanded by 80 basis points, even as affordability initiatives were rolled out, and operating margin was sustained by productivity gains and the mix benefit from higher-margin categories.
- Regional Divergence: Latin America and Europe outperformed, while Mexico retail and Health faced ongoing macro and competitive pressures.
- Margin Resilience: Expense discipline and mix management protected margins despite wage inflation and expansion costs.
- Capital Returns: FEMSA distributed 11.8 billion pesos in dividends, but paused buybacks, remaining behind schedule on repurchases.
Store expansion, disciplined category management, and international scaling remain the key levers sustaining growth as macro headwinds persist in Mexico and FX volatility impacts reported profit.
Executive Commentary
"Pensa Forward was all about maximizing long-term value creation by focusing on our core verticals, retail and beverages, enabled but digital, and setting out very clear capital allocation targets. In the past 32 months, we've been hard at work executing that plan. divesting nearly $11 billion of assets while in our core at the same time."
Jose Antonio Fernandez-Carvajal, CEO and Chairman
"This quarter was the first to show positive same-store sales growth since the middle of last year, and importantly, we believe a significant part of the improvement came not from a meaningful change in macro conditions, the weather, or the consumer environment, but rather from adjustments we made to address category and channel-specific challenges."
Jose Antonio Fernandez-Garza-Laguerra, CEO Proximity & Health Division; Incoming CEO, FEMSA
Strategic Positioning
1. Core Retail Platform Reinforcement
OXXO Mexico remains the anchor of FEMSA’s retail platform, with leadership emphasizing its multi-decade store growth runway, world-class returns on capital, and a robust pipeline for new formats and categories. The company is doubling down on affordability—adding lower-priced SKUs, value packs, and promotions across core categories (beer, soft drinks, snacks, tobacco)—to drive traffic and defend share against both traditional trade and emerging discount formats.
2. International and Discount Expansion
OXXO Brazil and VARA, discount retail banner, are identified as the highest-potential growth vectors. OXXO Brazil is approaching profitability, with management mapping new regions for expansion. VARA is scaling at a 30%+ pace, optimizing its private label and discount proposition, and expanding beyond core geographies. Both banners are positioned as billion-dollar value creation opportunities over the next decade.
3. Digital Ecosystem and Financial Services
SPIN, FEMSA’s digital wallet platform, is viewed as an essential lever for deepening customer engagement and driving incremental store visits. Early data shows SPIN and loyalty program users have significantly higher spend and frequency, and the company is embedding digital services across OXXO’s core missions. FEMSA is also piloting credit offerings but is delaying a full banking license application to build more operational visibility first.
4. Productivity and Overhead Efficiency
The Fit for Purpose program is targeting SG&A savings at both the OXXO Mexico and group levels, with overhead reductions expected to materialize by year-end and into 2026. Leadership is also re-prioritizing projects to focus resources on food, services, and affordability, while pausing or rescoping non-core initiatives.
5. Capital Allocation and Portfolio Discipline
FEMSA’s capital allocation framework, established in 2023, continues to guide asset divestitures, leverage reduction, and shareholder returns. The group has divested nearly $11 billion in non-core assets and is on track to distribute 7.8 billion in capital through 2027, balancing ordinary and extraordinary dividends with opportunistic buybacks.
Key Considerations
FEMSA’s Q3 was shaped by a blend of tactical execution and strategic continuity, with the leadership transition reinforcing a decade-plus growth ambition anchored in retail and beverages. The company is navigating a sluggish Mexican macro, but is offsetting with international and discount-led expansion and robust cost controls.
Key Considerations:
- Affordability as a Competitive Lever: Price-pack architecture and targeted promotions are reversing traffic declines and winning share in key categories.
- Store Growth Pipeline: Management sees at least 10,000 more OXXO stores in Mexico, with niche and proximity formats driving incremental white space.
- Digital Platform Optionality: SPIN’s integration with loyalty and payment is raising customer LTV and could mitigate future declines in cash-based services.
- International Scaling Risks and Rewards: OXXO Brazil and VARA offer outsized growth, but require continued operational refinement and local adaptation.
- Margin Management Complexity: Gross margin expansion is possible, but must be balanced with affordability and promotional intensity as competitive dynamics evolve.
Risks
FEMSA faces ongoing macro headwinds in Mexico, including consumer weakness and wage inflation, as well as FX volatility impacting reported earnings. Competitive intensity from discount and digital-first entrants is rising, while regulatory changes (such as beverage taxes) could pressure profitability at Coca-Cola FEMSA. Execution risk remains in scaling new banners and digital initiatives, and international expansion brings integration and margin dilution risk.
Forward Outlook
For Q4 2025, FEMSA leadership signaled:
- Continued improvement in OXXO Mexico traffic and market share, with positive early October trends.
- Tailwinds from the FIFA World Cup expected to boost beverage and convenience sales.
For full-year 2025, management maintained guidance:
- Mid-30s effective tax rate under current legislation
- Store expansion in line with plan; VARA on track for 30%+ growth
Management highlighted several factors that will shape the outlook:
- Affordability and new category initiatives are expected to further strengthen competitive position.
- Expense efficiency and Fit for Purpose program to drive SG&A savings into 2026.
Takeaways
FEMSA’s Q3 marks a clear inflection in core retail performance, with tactical affordability and mix actions reversing negative traffic trends and supporting margin stability. The leadership transition brings renewed operational urgency and strategic continuity, with a long-term focus on scaling high-return retail and digital platforms.
- Inflection in OXXO Mexico: Same-store sales growth returned, driven by affordability, mix, and tactical execution, not macro tailwinds.
- International and Discount Outperformance: OXXO Brazil and VARA are emerging as next-decade growth engines, with rapid expansion and improving economics.
- Digital Optionality and Efficiency: SPIN is deepening customer engagement, while Fit for Purpose cost actions support future margin resilience.
Conclusion
FEMSA’s Q3 results reflect a business in strategic transition but operationally regaining its footing, with affordability and international growth offsetting Mexican macro drag. Leadership continuity and an intensified focus on execution and capital discipline position FEMSA to sustain growth and margin expansion into 2026 and beyond.
Industry Read-Through
FEMSA’s ability to reverse negative traffic trends in Mexican convenience retail through affordability and mix management is a key signal for other Latin American retailers facing similar macro and competitive pressures. The acceleration of discount and digital initiatives (VARA, SPIN) suggests that scale players with data and supplier leverage can outpace legacy grocers and traditional trade in both urban and rural markets. Beverage tax headwinds and FX volatility will remain sector-wide challenges, but disciplined capital allocation and a focus on cost structure are emerging as the critical differentiators across Latin American consumer and retail businesses.