Fomento Económico Mexicano, S.A.B. de C.V. (FEMSAUBD) Earnings Call Transcript & Summary

Hello, and welcome to the FEMSA Second Quarter 2026 Conference Call. My name is Malu, and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead.

Good morning, everyone. Welcome to FEMSA's Second Quarter 2026 Results Conference Call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA's CEO; Martin Arias, our CFO; [indiscernible] Ortiz, who is now heading the Investor Relations team at Coca-Cola FEMSA and Enrique Monero who as many of you know, has rejoined us to replace Pamela on our Investor Relations team. The plan is for Jose Antonio to open the conversation with some high-level comments on the quarter's performance and trends followed by Martin, who will provide more granular details on the results. Finally, we will open the call for your questions. Jose Antonio, please go ahead.

Thank you, Juan. Good morning, everyone. I would like to use my time this morning to give you a strategic update, focusing on some of the main components of our portfolio and the strategic pillars that we believe are most relevant in our effort to create value and shape the future of the company. Let me begin with OXXO Mexico, which delivered a strong second quarter. Martin will elaborate on each line of the income statement in a few minutes, but I want to highlight the same-store sales performance that came very close to the double digits. It was particularly encouraging to see traffic growing at 2%, the first positive number in 8 quarters. To be sure, part of this performance was explained by the uplift from the World Cup, and we faced an on demanding comparison base. But this growth also reflected the strategic adjustments we started to make during the second half of last year. We estimate that at least 60% of this uplift was attributable to the World Cup evenly split between the Panini collectibles and consumption tied mainly to the 4 Mexico games played in June. However, the improved performance, as we have discussed in previous calls, reflects that we have invested significant time and energy designing, testing and deploying strategic adjustments across our store base and beyond the temporary boost from the World Cup we are seeing signs that the changes we began to roll out last year are taking hold. The core purpose of this effort is to become more consumer-centric at OXXO. Over time, we have successfully developed our commercial levers, but sometimes, this has come at the expense of customer centricity, focusing on expanding our margins, but steering us away from our customers and making us less competitive in certain key categories. We are embracing the strategic imperative to put our customers back at the center and already, we are starting to see that it translates into better performance and market share gains. Ultimately, we expect this renewed customer centricity to translate into stronger sustained traffic. The key is to find the right algorithm, the optimal balance of price and gross margin that will drive incremental traffic, while keeping our operating margins stable and consistently ensuring we have the right assortment in place. The strategy rests on 4 pillars. First, impulse, our core, where we are sharpening price pack architecture and promotions to achieve competitive price points and optimizing our assortment to include lower cost alternatives in key categories where the focus on convenience had reduced our competitiveness. Second, prepared food and coffee, where we are working to introduce better products on the food side, simplifying pricing and improving execution, including the optimal utilization of our coffee equipment. So far, our efforts are mostly concentrating on improving in-store execution, which has already translated into healthy growth in the coffee category during the quarter. Building on this momentum, we are now piloting targeted initiatives in coffee across a few regions and the early results are very encouraging relative to control stores where we have not yet made any changes. In Foodservice, we are focused on developing a set of winning products, Suite as well as salty that can strengthen our effort to enhance the overall food value proposition at OXXO, starting with breakfast as a natural complement to what we are already doing in coffee. Over time, we will be extending this approach to other food occasions, particularly lunch. Third, daily replenishment, a significant opportunity given our low market share in many of the categories that are relevant to these key grocery shopping mission. To capture this opportunity, we will need to work closely with our existing supplier base and potentially expand that base to restructure our assortment, including rethinking our price pack architecture in partnership with them and evaluating the role of private label in certain categories. Getting this right would allow us to become a more relevant destination for our customers, everyday grocery needs, expanding OXXO's role and unlocking a meaningful and durable avenue for growth. And fourth, what we refer to as beyond trade or services, where OXXO and Spin together are allowing us to digitize customers and extend our value proposition beyond the store. Speaking of Spin, the second quarter was a solid one with continued progress across our key indicators of user growth, engagement and transaction activity. In fact, monthly active users of Spin by OXXO grew 22% year-over-year, and Spin now ranks among the most relevant participants of the payment system in terms of processed transactions. Interestingly, we are seeing some service categories such as bill payments growing both at Spin and OXXO, underscoring the stickiness of cash in our ecosystem but also the growing relevance of Spin as a digital station tool for a broader consumer base. However, we recognize that payments could become commoditized over time. And so Spin is already preparing for that possibility by transitioning from a pace focused on gaining scale to one increasingly centered on monetization, which will become more relevant if cash utilization gradually declines. Our monetization strategy is encouraging customer engagement, credit and broader ecosystem opportunities. Credit in particular, is becoming a very strategic focus. We have been running a very small credit pilot that is already generating valuable learnings giving us greater confidence that the data we have on our millions of customers can produce high-quality underwriting insights. Just as encouraging, customer reaction to the pilot has been very positive, reinforcing our conviction in the opportunity ahead. On the subject of credit, as you know, during the quarter, we announced a partnership with QED investors to help us develop our lending platform bringing on board a very experienced partner with talent, expertise and execution capabilities that materially improve our odds of success in what can be a high-risk, high-reward business. We will be disciplined and cautious in how we roll this out and the fact that we chose QED as our partner reflects precisely how seriously we take the risks inherent in credit. Our approach will be based on a low and grow model, allowing us to scale gradually, learn as we go and manage our exposure responsibly. As the portfolio develop, we will continue to keep you informed of our progress. This strategy keeps us firmly on the path we laid out for Spin, leverage the OXXO ecosystem, build credit responsibly through the right partnership and maintain operating discipline as we unlock the platform's long-term value. Let me now turn to Bara, which is quickly becoming one of the most exciting long-term growth opportunities in our portfolio, positioned to take advantage of the consumer evolution toward discount proximity formats across the region as the consumer increasingly seek value in non-convenience groceries. Bara serves a distinct set of customer needs and its recent performance is exceeding our expectations, particularly in the newly opened regions. During the second quarter, we set a record for store openings, adding 112 net new stores, representing more than one new store per day, a pace that we will try to improve upon in the coming quarters. Just as encouraging as the pace of expansion is the growth of same-store sales that continue to increase by double digits, driven by resilient demand and sustained customer appeal in a competitive environment. Private label remains central to this story and continues to be a key growth driver, reinforcing its value-oriented proposition and standing out as what we believe will be one of the most important long-term differentiators for the format. This growth is coming alongside strong financial discipline and improving unit economics and our new store cohorts in particular, are showing faster maturation curve. Turning to OXXO in Latin America. Our conviction in the region continues to grow, particularly in Colombia and Brazil. Our effort in Colombia has required patients over many years to develop and fine-tune the right value proposition and the second quarter offered encouraging evidence that our work is paying off with revenues up approximately 30%, driven largely by same-store sales growth. More importantly, after a year in which we chose to prioritize refinement of the model over new openings, our value proposition in Colombia is now delivering solid [indiscernible] economics. That this gives us greater confidence that OXXO is increasingly resonating with the Colombian consumer and puts us in a stronger position to accelerate unit growth going forward. Of note, Colombia is where our prepared food offering is most developed, representing a double-digit contribution to revenues. We are confident that this operation will become a meaningful value driver for years to come. Brazil represents another relevant opportunity and one where we are equally deliberate in how we build. We closed the quarter with close to 640 stores, and each new cohort continues to perform better than the one before, which gives us confidence that we are learning and improving as we go. At this stage, our focus remains on getting the fundamentals right, continuing to develop and refine our value proposition, adjusting operational processes to increase efficiency and completing the organizational structure required to support accelerated expansion when the time comes. As in Colombia, we would rather earn the right to scale than rush the process because we are convinced that the discipline we apply today is what will allow Brazil to become a durable, meaningful long-term contributor to FEMSA. In both Brazil and Colombia, we expect to reach 700 stores by the end of the year. For each part at Coca-Cola FEMSA, Mexico still shown signs of a soft consumer environment and the impact of higher excise taxes offset by World Cup tailwinds and by a strong performance in South America with Brazil and Colombia leading the way, achieving record volumes and fueling a double-digit increase in operating income for that region. Summing up, we have a good operational momentum across most of our businesses, and we are working hard to continue improving our performance. However, as we look at the second half of the year, we know that some of the tailwinds we enjoyed in recent months will no longer be there. The World Cup was great, but it is over and our comparison base will get a bit tougher as we get into the final months of the year. The consumer environment remains sluggish, particularly in our core Mexico market, and therefore, sustaining our momentum will hinge our ability to continue executing our strategy. And with that, let me turn it over to Martin to go over the numbers in more detail.

Thank you, Jose Antonio. Good morning, everyone, and thank you for joining us today. Let me begin with FEMSA's consolidated financial results for the second quarter of 2026. Total revenues increased 9.3% over the year -- year-over-year, while operating income grew 7.2% reflecting OXXO Mexico's strong performance, contributions from our international operations and the benefits of our restructuring initiatives, partially offset by currency headwinds and the softer performance of Health in Europe and the consolidation of losses at OXXO [indiscernible]. Excluding the Brazil effect on a comparable currency-neutral basis, total revenues and operating income grew 10.1% and 11.7%, respectively, reflecting positive operating leverage. Net consolidated income amounted to MXN 9.2 billion, representing an increase of 64.9%. This increase was mainly explained by the operating income growth I just described and by lower net financing expenses, reflecting a significantly lower noncash foreign exchange loss of MXN 655 million compared to MXN 4.1 billion loss in the comparable quarter, driven by the appreciation of the Mexican peso against our U.S. dollar-denominated cash position, reflecting a more moderate appreciation of the peso approximately 2.2% in second quarter 2026 versus 8.4% in second quarter 2025 as well as a lower U.S. dollar cash balance versus the comparable period. [ Results ] also impacted by a positive participation in associate results of MXN 38 million compared to a loss of MXN 756 million in the second quarter of '25, which reflected the results of our joint venture in Brazil as well as the proportional results of our stake in Brady Plus. These 2 improvements that I just described were partially offset by decrease in interest income, driven by lower interest rates, a lower gain from other financial income of MXN 163 million compared to MXN 633 million in the second quarter of 2025, mainly because last year included a mark-to-market gain on the Heineken shares tied to the exchangeable bond we issued when we exited that position, shares that are no longer in our balance sheet. And finally, these improvements were partially offset by a higher income tax provision of MXN 4.9 billion compared to MXN 4.3 billion in the second quarter of '25. The effective income tax rate was 34.8% in the second quarter of '26. As we have discussed in past calls, the difference between our effective tax rate and the statutory rate of 30% reflects nondeductible items at OXXO Mexico, specifically labor costs and other expenses as well as non credible tax loss effects, mainly reflecting losses at Spin. These losses decreased this quarter, and we expect them to decrease further as an continues its significant efforts to reduce costs, advancing towards profitability. Turning to our operating results. OXXO Mexico delivered total revenue growth of 11.8%, driven by same-store sales growth of 9.5% with traffic growing 2% and average ticket increasing 7.4%. We also added 253 net new stores during the quarter. This strong performance was partially supported by the World Cup, particularly for Mexico matches played in June, which drove a consumption uplift in some of OXXO's most relevant categories and by World Cup-specific commercial initiatives such as the Panini Collectible stickers. Isolating these effects, we estimate traffic still grew by approximately 1% and ticket increased 6.2%. While still early, these are encouraging signs that the strategic adjustments as Antonio described earlier, are beginning to translate into better customer engagement and healthier underlying growth. Next quarter, you will see a more normalized number without most of the tailwind of the World Cup, and we are cautiously optimistic that while it may be lower than this quarter, we expect that it will continue to reflect progress from our initiatives. Gross margin was 44.8%, contracting 70 basis points year-over-year, mainly reflecting the impact of selected price rationalization initiatives and a higher mix of lower price point SKUs in key categories as we begin to adjust behind the customer centricity stance described by Jose Antonio. This was partially offset by solid growth in services and higher commercial and distribution income from key suppliers. Selling expenses grew 10.6%, below revenue growth, while administrative expenses decreased by 3.3% reflecting our multiple initiatives to obtain expenses and drive efficiency. As a result, operating income grew 12.3%, with operating and expanding 10 basis points to 10%. In sum, this quarter is a good example of the gross margin, traffic and profitability and long rhythm that Jose Antonio described earlier, selectively adjusting the value proposition to drive traffic and volume enhancing our relevance with our customers while enhancing profitability through operating discipline and efficiency gains. The Americas & Mobility segment delivered total revenues of MXN 28 billion, increasing 7.4% or 11.6% on a comparable and currency-neutral basis. Excluding the impact of consolidating OXXO Brazil revenues, the segment's top line benefited from a strong performance across OXXO LATAM, excluding Brazil, especially in Colombia. On a currency-neutral basis, same-store sales for the retail operations ex Brazil grew 17.6%. Gross margin for merchandise increased 40 basis points to 27.3% of revenues while in the fuel operations, it decreased 130 basis points to 10.9%, reflecting the inclusion of diesel and the maximum fuel price commitments at [indiscernible] together with higher costs for gasoline and diesel in Mexico general. Operating income was MXN 80 million with an operating margin of 0.3%, representing a decrease of 29% on a comparable basis, excluding currency translation effects and the operating losses from the consolidation of OXXO Brazil. The operating margin also reflects the impact from the diesel price commitments in Mexico, partially offset by narrowing losses across OXXO LATAM, excluding Brazil. Our operations in Europe reported total revenues of MXN 14.5 billion, up 3.2% on a currency-neutral basis, driven by a solid Swiss retail operation, partially offset by weak German retail and food service results across most formats, reflecting soft traffic impacted by bad weather and turning route closures. Our B2B business remains sluggish in this quarter, and we are reinforcing our commercial teams focused to reignite growth in this business. Regarding [indiscernible] gross profit, let me remind you that last quarter, we began reclassifying certain distribution expenses from SG&A to cost of sales, and that will be the case for the rest of the year. This change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense. There is no impact on operating income because of this reclassification. However, as a mechanical effect of this change, gross margin was impacted by MXN 230 million in the second quarter. Gross profit decreased by 6.6% with a gross margin of 40.2% on the same accounting presentation basis. The gross margin expanded by 40 basis points, driven by higher promotional income and a positive sales mix effect. Operating income was MXN 638 million, which on a comparable basis that excludes currency headwinds, was flat year-on-year as expense containment measures were offset by onetime expenses driven by a reorganization of [indiscernible] management structure. Operating margin was 4.4%, representing a contraction of 20 basis points versus the previous year. For its part, the Health Division delivered total revenues of MXN 22.3 billion, growing 2.2% year-over-year or 4.8% on a currency-neutral basis. Same-store sales were positive across Colombia, Ecuador and Chile and local currency, while Mexico continue to face headwinds. As was the case with [indiscernible] in Health, we also reclassified distribution expenses from SG&A to cost of goods sales, mechanically reducing gross margin by approximately MXN 543 million and reflecting the proportional shift to these expenses into cost of sales. Gross profit decreased by 8.7% with a gross margin of 26.6%, a contraction of 310 basis points. On the same accounting presentation basis, gross margin in the second quarter contracted by 60 basis points. As we discussed last quarter, as part of our strategy to reduce exposure to the institutional business in Colombia. At the beginning of April, we notified EPS [indiscernible], our largest counterparty in this channel by a significant margin, and we will not renew our agreement upon its expiration in September. Given the continued uncertainty in Columbia's health care system and our need to manage potential EPS and solvency risk, we recorded a noncash credit risk provision of approximately MXN 408 million during the quarter. We will continue to actively manage this exposure, remain disciplined in our capital allocation and keep the market informed of any relevant developments as we continue to prioritize our retail drugstore business, which was -- which has better profitability, cash generation and more attractive long-term returns. Operating income reached MXN 346 million, a decline of 57.7% and 54.1% on a comparable basis with an operating margin of 1.5%. Excluding the noncash credit risk provision, operating income reached MXN 754 million, a 7.9% decrease versus last year, driven mainly by operations in Chile, where we saw profitability pressure by commercial initiatives to maintain our market position in a highly competitive environment, partially offset by strong growth in Colombia, retail and Ecuador. Mexico will continue stabilizing its operation, reducing its losses significantly versus last year. For its part, Coca-Cola FEMSA delivered a sequential recovery. It highlights the strength of its diversified market presence. Across its territories, Coke continued to grow volume in most markets, gain market share and advance its digital agenda. While Mexico continued to navigate a challenging consumer environment and the effects of the excise tax increase, Coca-Cola FEMSA's affordability strategy segmentation and disciplined commercial execution enabled it to further strengthen its competitive position. At the same time, South America delivered a solid quarter. Colombia and Brazil achieving record second quarter volumes that ultimately resulted in double-digit operating income growth in those business units. As always, we encourage you to listen to their earnings call hosted yesterday. On the FEMSA corporate front, as you might recall, last year, we launched a corporate reorganization and savings plan, and we continue to advance in this effort, making good progress and in line with our expectations. This progress reflects the benefits of a leaner structure and non-headcount saving initiatives that remain underway. At the same time, as I mentioned a few minutes ago, Spin has continued to gradually narrow its losses as the own reorganization takes hold. While it is still early, we are encouraged by the progress we are seeing and remain focused on executing the plan with discipline. Before closing, let me briefly update you on capital allocation. During the second quarter, we deployed approximately MXN 8.9 billion in CapEx, representing approximately 3.8% of total revenues and a 3.6% decline compared with last year. This was primarily driven by lower CapEx at Coca-Cola FEMSA, partially offset by continued investment in OXXO Mexico and growth platforms -- and other growth platforms. With respect to shareholder returns. During the quarter, we concluded a $300 million buyback through an accelerated share repurchase program that was launched at the end of last year. Once we consider the ordinary and extraordinary dividends being dispersed this year, the total expected capital distributions for the cycle from March 2026 to March 2027 will reach approximately MXN 41 billion. Regarding leverage, our net debt-to-EBITDA ratio decreased to 1.15x from 1.24x in the prior quarter. This reflected a 3.2% increase in last 12-month EBITDA, excluding Coca-Cola FEMSA as well as a reduction in FEMSA ex [indiscernible] net debt. The latter was driven primarily by a 2% sequential decrease in gross debt, reflecting the depreciation of the Mexican peso against our U.S. dollar denominated debt. That said, our leverage target remains unchanged. As we look ahead, we remain focused on executing against our strategy. We are pleased with the momentum we saw in the second quarter across most of our business units. But as Jose Antonio mentioned, we are very aware that the external tailwinds we enjoyed will taper off soon, and we will continue to face a challenging consumer environment, particularly in Mexico. Having said that, there are many tactical and strategic levers at our disposal and early results from our recent tests and adjustments are promising. Before we open the call for your questions. A reminder to please limit yourself to one question at a time like we did on our previous call. We received positive feedback and would like to make that practice permit. And with that, we are ready to open the call. Operator, please go ahead.

[Operator Instructions] Our first question comes from Thiago Bortoluci from Goldman Sachs.

Congrats on the results. I'll like explore a little bit more on the team opportunity you got. Obviously,the are a lot of moving parts and a lot of growth avenues for FEMSA. But more recently, I think you have delivered and announced good development in expanding the ecosystem, right? So I don't know what you can give us in terms of additional information on how you're thinking about the partnership with QED, how we're thinking about using balance sheet to expand the value proposition and what is the road map for evolving the ecosystem would be greatly appreciated very much.

Thank you, Thiago. I will begin and let either Martin or Juan to help me. But it's very early in the venture with QED. We are very excited for the partnership. We had a long [indiscernible] chip to get to know each other, and we were quite impressed by the level of detail and all the start issues that these guys have developed over many, many years of developing soft prime credit in all parts of the world in ecosystem very similar to ours. So we really like that growth on the table. We had begun already using some data and sharing some of the data to them, and they were very impressed by the quality of the correlations that they were seeing between good credit and good credit responses. And so we are -- I think the partnership is up to a good start. The level of talent that they're able to bring [indiscernible] mortgages and many of his partners and female partners in QED are legends in their field. And so they are able to attract very impressive talent, and that was very important for us. I would say, as team continues to become more and more relevant in the ecosystem, we're in -- we're at the point where we are enjoying the best of both worlds. Transactions in services are still growing in the physical world in OXXO even with a decline in top-ups or cell phone payments. We're still growing in cash in, cash out in the physical store. But in Spin, this is growing dramatically. So I think there is a moment that we are in the sweet spot where Spin and OXXO can complement each other dramatically, and I think that will continue for the next several years. There's people more aggressive that things will change in the next couple or 2 or 3 years. And there's other people that think this will remain for many, many years. So I think as Spin becomes more relevant as Spin loyalty becomes also -- continues to increase ever number of users, and we changed the game -- the dynamics in which we give rewards. I think all of this is giving us a very good platform to begin monetization. We're already doing it with retail media, but now we are very excited with what could become a very interesting thing with credit. As you know, there's a lot of people trying to give a credit in Mexico. There's very good players already in the space. I think we have several things that makes us unique for a level of the population that still underserved. But it's still -- we are very conscious of the risks inherent in credit, especially in this segment. So we will proceed very slowly with our low and grow model, as I mentioned before. I think for now, that's all I could give unless Martin or Juan want to complement me a little bit.

Yes, I would just comment on two things. Jose, I think you do a comprehensive job of prescribing all the external looking things that are happening internally as a result of the reorganization that was undertaken. Today, both the physical and digital payments in FEMSA report to one organization. That is giving that team the ability to make judgments about changes in pricing and creating use cases that are very user-friendly and which try to resolve some of the paradigms of having both the physical and a digital payment system. That's also happened at Spin [indiscernible], where we've created an area of customer value management, where we're taking a broader sort of more holistic integrated view of our consumer. We're -- obviously Spin [indiscernible] is the main contact point and one of the main ways that we collect data and provide promotions to the consumer. On the credit issue, the credit over time has to become nonrecourse to FEMSA. It's going to start up very small, very contained and over time, to the extent that we can be successful, we'll start thinking about off-balance sheet financings against the portfolio of credits that we're extending. And eventually, we'll have to find sources of funding, which may include obtaining a leasing -- a banking license. We're still in early days. As we promised, we'll continue to communicate this and be very transparent. But the numbers really today don't really move the needle in any significant way from the perspective of the credit portfolio.

Our next question comes from Mr. Rodrigo Alcantara from UBS.

Congrats again, Pam. Welcome back [indiscernible] to have you back. I guess I'll leave the question on gross margins to my colleagues here. I'm pretty sure they're going to ask about this. So let me ask you this -- to you, Jose. It's been a while, right, you have taken the role of CEO of FEMSA consolidated. And also you brought -- or well, FEMSA brought a very high-quality guy, right, to lead the OXXO Mexico operation, right? Carlos, [indiscernible]. So my question would be on -- or if you can comment on how you are shifting the responsibilities from retail to FEMSA consolidated. What would be the main contributions in your view that Carlos has achieved so far, anything that you may highlight that we -- that you can comment would be very, very, very helpful.

That's a very interesting question. So I think, obviously, the shift from heading proximity and Health to shift to running FEMSA is a very dramatic shift, and I'm still on, I hope in my early stages of that shift. And I would say the biggest change in my order is I'm now going to spend a lot of time in big strategic discussions with my -- all of my CEOs, but particularly a lot of time with Ian, a lot of time with the Chairman and the Board a lot of time with the retail guys on drafting strategy, on shaping culture and on building and mapping talent. That's where I spend most of my time. I would say, Carlos brought -- first of all, Carlos has much more experience in retail than I did while a new retail since -- from leaving it and reading it in my household, it was -- I don't come from the retail background. I got to meet Carlos. Carlos and I actually go a little bit way back when I was running Coca-Cola FEMSA Central America. Carlos run Walmart in that region. And we used to argue a lot -- and I learned about his negotiating capacity, his real ability to fight every cent to run a very lean, efficient machine. And I always like what I see. And I think what Carlos has brought beyond these things that I've already mentioned. I would say he surround with himself with people that are smarter than him, which is a characteristic that I love about leaders, big leaders and executives. It really has surrounded himself with a stellar team. He knows the importance of a super -- I mean, top 1% of supply chain capacity. I think that comes from a good school. I will not mention which, but it's obvious in understanding that supply chain you have to -- especially in the world, we are entering with such a competitive dynamics and where we see ourselves as under docs, where we see ourselves that we are only beginning the race towards transforming retail in Mexico. We need a supply chain that's best in the world. And while we have a very good supply chain, we didn't have a top 1%. And I think Carlos is investing a lot behind that. And it's the backbone of a food strategy. It's a backbone of a grocery strategy. It's the backbone of obviously, keep winning at impulse and beer and soft drinks. There's much more to say about Carlos, but I will leave it at that for now. I think those are the main contributions that he has brought. And obviously, he's delivering we're gaining share, and I like what we're -- the progress we're making.

Our next question comes from Mr. Ben Theurer from Barclays.

Jose Antonio, Martin and Juan, thank you as well as congrats on those very strong 2Q results. I wanted to dig in and stay a little bit within some of the strategic pillars that you've laid out at the beginning and one caught my attention a Lids was all about that price pack -- price pack architecture as well as assortment optimization. So I wanted to understand a little bit more of what you've kind of like learned from the past. And I remember we've talked a lot about in the past about competitive pressure against the informal market. I just wanted to understand what proactively you've been doing over the last couple of quarters and where there is still room to further drive maybe traffic by just having more competitive pricing on certain categories? And if so, which categories those are. So what have you done? Where are we going?

Thank you, Ben. And I think, look, we -- we've always been very, very good in the big, big categories in making sure we have an assortment to tailor to everybody. But over time, we got a little bit complacent and saying, hey, we're so big in this -- for example, we're so big in that beer category that we can allow ourselves either a little bit of extra margin in a very important SKU or we are willing to not live with this value price because it will hit our BPS or gross margin in a certain way. And I think it's very smart to do from time to time. But if you overdo it, especially when you have a consumer that's more value centric, et cetera, you can begin to lose very important profitable traffic. And I think that's one of the things that we've been saying in all the calls. We've been adjusting price back to allow for a certain value packs, especially in [indiscernible], in soft drinks and everything. And then I think the other one we were very good at selling prime real estate within the store in categories that are not so relevant in the store right now, but that they were paying premium positioning to be center stage. And while we recognize that that's a very -- we continue to do a little bit of that, especially in certain categories. It is very important, first of all, to serve our customers what -- where they meet the customers where they want to be met. And that requires maybe simplifying the portfolio, maybe we don't need 14 types of mail the other [indiscernible] or different brands because they all pay. Maybe we need to extract a little bit more value from certain suppliers, but then have a price pack architecture that serves all of our customers. And there's a type of customer that is willing to pay [indiscernible] tax of mail the other one to go to their home, but there's someone that needs a value the other one because they need to change. So all these things are becoming more and more important in our price pack architecture. So it's very hard for me to tell you a target of gross profit that we're going to hit. We are maximizing profit or income from operations, but now putting into the mix that we want to grow traffic profitably. We want to continue to expand our relevance in categories where we are now not as big, like groceries and daily replenishment and that will take us on a path that over time will increase our profitability. It will increase our stickiness. We will continue to gain share, and we will monitor share against this the supermarkets against the traditional trade against the discounters. But obviously, gross profit could ebb and flow from the percentage where we are, we're really not managing for maximizing gross profit but maximizing operating income over a multi-decade period. I don't know if that answers.

It does.

Yes, I would just add -- Ben, this is Juan. I think it's an important segue talking about the price pack architecture and having the discussion on margins because what -- the mist want to be clear is, this was not about lowering prices. I think with very, very few exceptions. I think coffee is one where we've said we've been testing things at a lower price point. But most of it has to do with bringing in those low price point in the tobacco, in beer and snacks. So again, not lowering prices, but rather changing the mix. to something that is a better match for what the consumer is asking for. So that was just one clarification I wanted to make.

Our next question comes from Mr. Ricardo Alves from Morgan Stanley.

I have -- I think that this question is a follow -- to some extent, a follow-up to the previous one. It is -- it was a quite impressive same-store sales indeed. So it's great to see the turnaround there. Now with the 8% or near 8% ticket boost, significantly above inflation naturally. I guess that we thought the gross margin could have been higher. And appreciate all the commentary that was just made around the gross margin and the strategy of the company prioritizing operating income that makes perfect sense. But when we look at that number, when we look at the gross margin, our first reaction was maybe the affordability measures that we've been talking about, Juan, was just mentioning the change in mix, for example, all of that could explain. But when we look at your average ticket. That doesn't seem to be the answer. So beyond what we already discussed, is there something near term, I don't know, maybe on the commercial income, not on the side of the revenue on the commercial income, but discount from from suppliers, I think that Jose Antonio even referred to some of maybe these supplier contracts that you have, maybe commercial income is hurting a little bit more in this moment where you are adjusting the strategy. I just wanted to understand that dynamic a little bit better on the same-store sales not translating necessarily right now or the average ticket into higher gross margin as well?

So with all -- thank you, Ricardo. It's a very good question, obviously. With all that -- I think the quarter obviously has some things that are affecting it more than normal. First of all, you have to include that there is yes in 2 of our big categories like soft drinks and CR. So that could have an effect a little bit on the way the ticket is being affected. On the other hand, if you look, I would say the assortment -- the assortment helped us a lot during the quarter, given the Panini, the [indiscernible] cargo helped a little bit and probably also had an effect on the margin, but increase the ticket which by the way, Panini was a record thing for OXXO as I'm sure, for many retailers across the globe throughout the World Cup. And so all of these things had an effect. We -- while we are happy with the 2% traffic growth because it really changes 8 quarters of missing traffic. And we are happy that even during July, even the second -- later part of July, we're still seeing good traffic numbers in after the World Cup. So we are confident that some of the levers that we pulled are being -- are working. We're not satisfied for sure. We have a long way to go to have the traffic growth numbers that we ambition. And I think the ticket should also, I mean, come at the expense of -- or should be balanced by more -- doing more value-driven things like what we're doing in expanding coffee at an attractive price and more value categories in beer and cigarettes. But in general, I would say the quarter did have a few mixes that did not help the number as much as you would expect. So we're still fighting with improving traffic. But obviously, we had a very good quarter then the World Cup and other tailwinds.

Just to complement you, Jose, Ricardo. The inflation that you see is the headline consumer inflation number for Mexico, is not necessary the inflation number that gets passed on in the categories that we sell to the store. So you need to be a bit careful. There are categories where the cost that's being passed on by the supplier is somewhat higher than the consumer inflation that you see in the newspaper. We follow this on a quarterly basis in our quarterly meetings where we check the cost that was passed on to us by the consumer, by the supplier and the cost that we passed on to the consumer. And with the exception of the categories wholesale mention, specifically cigarettes and soft drinks, where we were passing on a tax, which is not to anybody's benefit other than the tax question for the government. And all of them, we were either passing on only what was passed on to us or in some cases, passing slightly lower than what was passed on to us. And that could be also effective mix on a category-by-category basis. So once you take that out, you take out the World Cup the bigger tickets from people going for runs for the parties that we're having at their home, so on and you stripped that out and the benefits of that and some other mix effects of top-ups coming down and financial services going up. And so you take that all in, we are very comfortable that we are improving significantly the affordability proposition for our consumers.

One final comment on that is that the excise tax effect will remain for the next couple of quarters as well, right, until we cycle in next January.

Our next question comes from Mr. Bob Ford from Bank of America.

Congratulations on the quarter. How do you feel about price deltas and overlapping small box values in areas where investment has been made. I think Martin was moving in that direction, but I just want to get other sense of where you are right now and how you're thinking about elasticity. And as you expand that investment, how do you think about the TAM in grocery in the pantry segments and then you haven't really touched on Brazil, but I was very curious about same-store sales in Brazil and then the path and time line to profitability there.

I understood the Brazil part. Can you repeat the first one?

Sorry. Sure, it was -- no, no. I was probably speaking too quickly, but it was really about the price deltas that you have with overlapping competitors, whether it's the informal segment competing CSDs -- or sorry, convenience stores and other channels. But how are you thinking about your price gaps right now in areas where you've made investment. Do you feel that you're at an equilibrium? Or do you think there's a need to make some additional price investment? How should we think about the price elasticity in those areas? And then as you expand -- and I think what I'm hearing is you're going to expand that activity in opening price points and price investments selectively in other categories, right? You mentioned grocery and pantry segments. And I was just curious how you're thinking about the addressable market in those areas as well.

That's -- okay. very, very clear. I would say, first of all, when we look at a price point in our in our business. We have to look at the overall cost of going to an OXXO store and being served versus going to a supermarket chain or driving or getting on a bus to go to longer distance. But we also compete against the mom-and-pop and the discount store. And so we put all those categories into play and we sell the coldest beer probably out there even more than the retailers owned by the beer guys. So we put all that into the equation. And what we want is to be able to have a price pack architecture that tailors the the top e-com segment of Mexico, but also the bottom 10% and 20% income segment of Mexico. And that's very evident across our core categories, our imports, where we make the big growth of our categories, beer, soft drinks, snacks, tobacco. In those categories, we are so well known. We are so well like that we are willing to have some price differentiation. But I think we are already where we want to be in the core driving traffic drivers like the 16-ounce Coca-Cola bottle or the 6-pack of beer of a leading beer brand. I'm not suggesting any -- I'm not supposing we're going to have any price contraction there other than mix. We can -- we may introduce value brands at a very attractive price, and I don't -- but we are not seeing a big cannibalization effect in those. In the -- where we do need to be much more aggressive is as we expand into the pantry development. We are not the winners there. We are not well known. And we need to -- first of all, we're not going to -- maybe we don't need a 12 pack of X, but we need to have a very competitive price, 6 pack of X, and we will have the best price much better than the traditional trade and maybe in part with some of the discounters in certain categories as we become well known that for daily replenishment OXXO is a much better alternative than the corner store or even some of these customers. And we will go all in, in winning our space in pantry. And I know I'm not only talking to investors when I say, we're going only. In terms of OXXO Brazil, it's too early. We are getting better and better. We're improving. We had a couple of quarters that were not as -- we have been growing double digits over the last couple of years, double-digit revenues. We had a slowish quarter when we grew mid-single-digit same-store sales. We are still iterating the model. But I think OXXO Brazil, what we like is that every cohort, every new generation of stores keep getting better and better. And so we think it's going to take us a few years, but eventually, we're going to find a sweet spot when we can accelerate expansion as we feel Colombia is ready now. Colombia now can really accelerate. And hopefully, we will show begin to show an increasing faster pace of growth in Colombia.

Our next question comes from Mr. Alejandro Fuchs from Itau BBA.

Congratulations on the results. My question is on OXXO Mexico, I wanted to maybe take you back, Jose Antonio, to the end of last year when you guys were preparing the budget for this year and seeing all of these changes that you wanted to make, right? I think that was very clear, the 4 pillars. Can you elaborate maybe Jose Antonio which of the pillars or which of the changes are working better maybe than you expected? And maybe which ones do you think there's opportunity to maybe even improve more when we look at these very strong semi-store sales and traffic performance.

So again, I think I'm still confident that the pillars will all work out and seeing positive signs in all of them. But obviously, I will tell you on impulse becoming excellent or best-in-class in something that you were already great, but now you're becoming best -- has become the one that most quickly turn the middle. We're gaining share like never before in beer. We're gaining share in tobacco. We're gaining share in soft drink. We're being in what we are already well known for. We are doing very well, even in the first quarter and obviously continue with the second quarter, probably helped by the World Cup. But I mean, the World Cup was there for many of the [indiscernible] and other supermarkets, and we clearly won a lot of market share in our core categories. I think -- we have a few trials in [indiscernible] and daily replenishment. Both the -- both trials include execution teams, assortment things and pricing things and opinions, especially on coffee, just getting coffee right, which is probably the easier part because we are already well known in coffee. -- is showing the biggest dramatic increase. We still have a long way to go in developing what we call hero products that OXO can get very well known for and use its scale to get very good quality, good pricing and really few millions of Hungary Mexicans. I think that's going to take a lot of time, and it requires a lot of infrastructure that we need to build in the supply chain and the supplier infrastructure side. And I think daily replenishment, it's the one that you can start more quickly even than premiums with pricing even if you don't have the market ready for it, we are doing some trials in some parts of Mexico with promising results, but I think it's further down the line in terms of really moving the needle. It's going to take us longer and what we call beyond trade, I'm really excited by what we are seeing in terms of encouragement of the new things coming in the pipeline for Spin [indiscernible] and for Spin by OXXO. But just by itself, it's getting a lot of momentum, and we are reducing our expenses there dramatically and still providing you an exciting product. So I think we are off to a good start.

You know I'd just like to add, Alejandro, I mean, obviously, we've just been talking about the drivers for top line growth. But I also think, I mean, looking at the overall results, everything that happened below the gross margin, right, because to come -- to have a small contraction at the gross, but actually a small expansion at the operating level and at the EBITDA level. There are a lot of work that's being done on the expenses side, on the cost side, on the efficiency side that we've spoken about before in terms of these programs that are in place regarding corporate overhead and regarding all kinds of efficiencies on the labor front. So just to highlight that, it hasn't just been the top line efforts, which obviously -- that come first but also the work that's being done kind of behind the scenes that's helping us to put out what I think is a very, very well-balanced quarter for OXXO Mexico.

Our next question comes from Mr. Hector Maya from Scotiabank.