FEMSA Buys Its Traffic Back — and Admits It Understaffed the Stores
OXXO's first positive traffic print in eight quarters came with a 70bp gross-margin bill, a reversal on third-shift labor, and a quiet pivot into consumer credit
FMX · Earnings Call · 2026-10-28
A trade, not an accident
The single most important sentence in FEMSA's second-quarter call was not about revenue. It was this: “It was particularly encouraging to see traffic growing at 2%, the first positive number in eight quarters.” — José Antonio Fernández Garza, CEO · 2026-10-28 For a company whose prior four calls were essentially a running argument with analysts about whether Mexican shoppers would ever come back, that is the change that matters. And José Antonio Fernández Garza was careful to break the number down honestly: about 60% of the uplift came from the World Cup, split between Panini collectibles and consumption around the four Mexico matches, leaving roughly 1% of genuine traffic improvement. That residual 1% is the whole thesis. It is the first hard evidence that the customer-centricity reset — sharpened price pack architecture, low-price-point SKUs in beer, tobacco and soft drinks, cheaper coffee, and an opening bid at daily replenishment — is doing something other than rearranging the P&L. OXXO Mexico revenue rose 11.8% on 9.5% same-store sales, with ticket up 7.4%. Crucially, the margin cost was not a surprise. Last quarter, after a 140-basis-point gross-margin expansion, the CEO effectively pre-announced this: “if we are planning to remain ambitious on our affordability. Some of our margin expansion should be given back to our consumers in SKUs that our consumer team are more elastic to them.” — Jose Antonio Garza-Laguera, Chief Executive Officer (CEO) · 2026-04-30 This quarter the bill came due — gross margin of 44.8%, down 70 basis points — while operating margin expanded 10 basis points to 10% on selling expense growth of 10.6% and a 3.3% absolute decline in administrative spend. That trade — “this quarter is a good example of the gross margin traffic and profitability algorithm that José Antonio described earlier” — Martín Arias, CFO · 2026-10-28 — is now the company's stated operating model, not a one-off. The honest caveat: the World Cup is a decaying asset, and management said so repeatedly. Juan Fonseca's guidance was refreshingly unheroic — mid-single-digit same-store sales, roughly inflation plus one, or about 5% if Mexican inflation sits near 4%. Read that against a 9.5% print and you get a second half that looks nothing like the second quarter.What management stopped defending — and started admitting
The most interesting turn was on labor. For at least two years, the OXXO story on the cost side was efficiency: fewer heads per store, dynamic shift start times, a leaner operating model. Analysts probed it directly in April 2025 — “it's a bit strong, it's a difficult for me to understand how much more lean could the staff, the stores, the labor structure of a store could get” — Rodrigo Alcantara, Analyst · 2025-04-28 — and management argued the answer was more, with Martín Arias describing shifts staggered by the data rather than by the clock. That has now been reversed. Asked about the third shift, the CEO said plainly: “We let that slip in many regions. We were squeezing as much or trying to reduce our operating head in many places, I think we overdid it.” — José Antonio Fernández Garza, CEO · 2026-10-28 The open 24 hours proposition had been allowed to erode into a self-fulfilling decline, and reopening staffed third shifts in the northeast produced a striking result — first-shift traffic and sales rose too, because a properly staffed overnight prepares the store for the morning. That is a real reversal of a multi-quarter narrative, and it carries a cost: higher SG&A against a Mexican minimum wage that keeps climbing. It is also, quietly, an admission that the traffic problem was partly self-inflicted merchandising and service decay rather than purely a weak consumer. A second, smaller tell: mid-Q&A the CEO had to walk back his own prepared description of Brazil. “Let me just clarify, because I was corrected by Juan Fonseca, OXXO Brazil grew same-store sales in the double digits the last quarter.” — José Antonio Fernández Garza, CEO · 2026-10-28 Colombia (revenue up roughly 30%) and Brazil (about 640 stores, both markets targeting 700 by year-end) are real, but the story is still being assembled in real time.Spin grows a balance sheet
The genuinely new strategic item is credit. FEMSA has talked about Spin for years — Spin by OXXO monthly actives grew 22% — but the partnership with QED Investors converts a pilot into a capital-markets question. José described a deliberately slow low-and-grow ramp; Martín Arias supplied the part that matters to equity holders:That is a multi-year option on monetizing transaction data from a store network of over 25,000 doors, aimed at a segment the incumbents underserve. It is also, as management repeatedly conceded, "high-risk, high-reward" — subprime lending in Mexico with a partner whose track record is entirely in subprime elsewhere. The banking license idea was floated on the October 2025 call as an ambition; it is now being framed as a funding mechanism. That is a meaningful shift in how seriously management is treating it.the credit over time has to become non-recourse to FEMSA... Eventually, we'll have to find sources of funding, which may include obtaining a banking license.