Q1 2024 Fomento Económico Mexicano SAB de CV Earnings Call

Eugenio Garza Y. Garza: We are excited about the opportunities ahead and the clear path we're taking to capture them. I am fortunate to be surrounded by the best team in the business and to be part of an organization bound together by a strong and unique culture of collaboration and permanent cross-learning. I look forward to continuing our discussions with you going forward, and I will now turn the call over to Martin to talk about PEMSA's first quarter results. Thank you, Jose, and good morning, everyone.

Okay.

Melissa: Hello, and welcome to SAMHSA's first quarterly 2024 results conference call. My name is Melissa, and I will be your coordinator for today's event.

Melissa: Hello, and welcome to stem cells first quarter 'twenty 'twenty four results conference call. My name is Melissa and I will be your coordinator for today, it's about <unk>.

Melissa: Please note this conference is being recorded, and for the duration of the call, your lines will be in a listen-only mode. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star one on your telephone keypad to register your questions.

Speaker Change: Please note. This conference is being recorded and for the duration of the call your lines will be in a listen only mode.

Speaker Change: However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point. Please press star zero and you will be connected to an operator.

Martin Arias: I'm happy to be with you today to talk about this remarkable company that I have had the pleasure of calling home in one capacity or another for 25 years. As Jose just described, this is an exciting time to be a part of this team as we pursue compelling and unique opportunities at every one of our three core business verticals. The first message I want you to take from me is this.

Melissa: If you require assistance at any point, please press star zero, and you will be connected to an operator. I'll now turn the call over to Mr. Juan Fonseca, Head of Investor Relations. Please go ahead. Good morning, everyone, and welcome to FEMSA's first quarter 2024 results conference. Today we are joined by Jose Antonio Fernandez Garza Laguerra, CEO of our Proximity and Health Division; Martin Arias, our incoming CFO; and Jorge Collazo, who heads Coca-Cola FEMSA's investor relations.

Speaker Change: I'll now turn the call over to Mr. Juan Fonseca head of Investor Relations. Please go ahead.

Juan F. Fonseca: Good morning, everyone and welcome to <unk> first quarter 2024 results conference call.

Juan F. Fonseca: Today, we are joined by Chris Antonio Fernando <unk> CEO of our proximity and Health Division.

Martin Arias: The mandate I have received from our CEO and board of directors is to continue executing the capital allocation strategy that was announced as part of FEMSA Forward and to steer the finances of the company towards the leverage goal of two times net debt to EBITDA, excluding Coca-Cola FEMSA. We expect to reach by the end of 2026. As of the end of the first quarter, that ratio stood at 0.24 times compared to 0.1 times at the end of 2023.

Martine Ideas: Martine ideas, our incoming CFO.

Well, yes, well head to Coca Cola FEMSA <unk> Investor Relations team.

Juan F. Fonseca: As you know, one of SAMHSA's strategic priorities involves engaging more directly and proactively with our key stakeholders, and that includes providing more opportunities for you, our investors and analysts, to hear from and interact with the heads of our core business verticals. You already have that possibility with Ian Craig, given the public nature of Coke-SAMHSA, and we will increasingly work to provide broader access to Jose and Juan Carlos Guillermetti in their roles as heads of the other two core operations, proximity and health and digital, respectively.

Juan F. Fonseca: As you know one of them is a strategic priority involves engaging more directly and proactively with our key stakeholders and that includes providing more opportunities for you our investors and analysts to hear from and interact with the heads of our core business verticals.

Juan F. Fonseca: You already have that possibility with again, Craig given the public nature of Coke FEMSA and we will increasingly work to provide broader access to cost cutting to get messy in the ROFO sketch of the other two core operations proximity and health and digital respectively.

Juan F. Fonseca: Therefore, as a first step, the plan is for Jose to open today's conversation with a vision for proximity and health and the key elements of the strategy to move towards that vision. Going forward, Corsa will participate in two quarterly calls a year.

Juan F. Fonseca: Therefore, that's the first step.

Juan F. Fonseca: For the quarter to open today's conversation with a division for proximity in health and the key elements of the strategy to move towards that vision.

Juan F. Fonseca: Going forward of course, we will participate in two quarterly calls for years.

Martin Arias: To meet this mandate, our CEO has asked me to focus on disciplined, organic, and inorganic capital deployment, as well as to continue to monitor additional opportunities to return capital to shareholders. Prior to reviewing our quarterly results, I would like to provide you with an update on the FEMSA Forward initiatives relating to returning capital to shareholders and share some thoughts on capital deployment generally. As you know, we have been active on the share buyback front, and during the first quarter, we launched an accelerated share repurchase, or ASR, program through a financial intermediary.

Juan F. Fonseca: At a later date, we also plan for Juan Carlos to present his vision for the digital divide, with the expectation that he will also join our calls once or twice a year. After Jose's remarks, my team will provide an update on the business and our quarterly results. Finally, we will open the call to your questions. Post it, please.

Juan F. Fonseca: At a later date, we also plan for Juan Carlos to present his vision for the digital business with the expectation that he will also join our calls once or twice a year.

Juan F. Fonseca: After his remarks, Martin will provide an update on the business on our quarterly results.

Speaker Change: I know that we will open the call for your questions.

Juan F. Fonseca: Go ahead. Thank you, Juan. Good morning, everyone.

Speaker Change: Also please go ahead.

Speaker Change: Thank you Juan good morning, everyone.

Eugenio Garza Y. Garza: It is my great pleasure and privilege to be able to be here today to begin what I hope will be regular conversations with all of you as we move beyond the FEMSA forward transformation and focus on the future of our company. I relish the chance to help pursue and capture the substantial opportunities for growth and value creation that lie ahead for FEMSA, particularly as we continue to develop and strengthen our leadership in proximity and health.

Juan F. Fonseca: It is my great pleasure and privilege to be able to be here today to be in what I hope will be a regular conversations with all of you.

Speaker Change: As we move beyond the FEMSA forward transformation and focus on the future of our company.

Speaker Change: I relish the chance to help pursue and capture the substantial opportunity for growth and value creation that lie ahead for FEMSA, particularly as we continue to develop and strengthen our leadership in proximity and help retail.

Eugenio Garza Y. Garza: As many of you know from following us for many years, PEMSA has always had the pursuit of long-term, profitable growth hardwired into everything we do. And we have a clear and focused blueprint to keep achieving that objective as we build on PEMSA's successful track record in proximity reporting.

Speaker Change: As many of you know from following us for many years.

Speaker Change: As I have always thought the pursuit of long term profitable growth hardwired into everything we do.

Speaker Change: We have a clear and focused blueprint to keep achieving that objective as we built on our successful track record in proximity rebates.

Martin Arias: Through that program, we are buying back $400 million worth of FEMSA shares. Before the ASR was launched, we had also bought back approximately 73 million shares in the quarter. In addition, earlier in the year, we received shareholder approval to pay an extraordinary dividend of approximately $600 million during this year, the first installment of which was paid last week on April 18.

Eugenio Garza Y. Garza: The comprehensive long-range plan that we developed during the past couple of years provides us with a useful roadmap. We aim to accelerate earnings growth in the retail division, relying mainly on organic expansion and on continuously adding layers of value for consumers across formats and across markets. As you all know, OXXO Mexico is the mainstay of PEMSA's retail operations.

Speaker Change: The broker the comprehensive long range plans that were developed during the past couple of years provide us with a useful roadmap.

Speaker Change: Aimed to accelerate earnings growth at our retail division relying mainly on organic expansion and continuously adding layers of value for a consumer across formats and a growth market.

Speaker Change: As you all know OXXO, Mexico is the mainstay of temps as retail operations for the past 45 years, we have been evolving and improving its value proposition, while expanding its footprint and growing at scale.

Eugenio Garza Y. Garza: For the past 45 years, we have been evolving and improving its value proposition while expanding its footprint and growing its scale, always focused on understanding more of our customers' needs and finding new ways to serve them consistently better. As OXXO's store economics have improved over time, we have been able to increase our footprint in Mexico to the current level of more than 22,000 stores, while maintaining and even increasing store productivity. We have built capabilities to develop consumer insights that, in turn, are continuously applied in our segmentation efforts, and we are confident that we can keep the current pace of offshore expansion in Mexico for many years under the current value proposition.

Martin Arias: This means we are in the process of returning nearly $1.1 billion to shareholders during 2024 in addition to our ordinary dividend, which was itself increased by 20%, representing a total of approximately $800 million at current exchange rates. As for the deployment of CapEx, which is also a main component of our allocation strategy, we seek to prioritize its allocation towards core organic growth initiatives that offer the highest potential for long-term value creation.

Speaker Change: We focused on understanding more of our customers' needs and finding new ways to serve them consistently better.

Speaker Change: At OXXO store economics have improved over time, we have been able to increase our footprint in Mexico to the current level of more than 22000.

While maintaining and even increasing store productivity.

Speaker Change: We have built capabilities to develop consumer insights that in turn are continuously applying our segmentation effort and we are confident that we can keep the current pace of OXXO expansion in Mexico for many years under the current value proposition.

Eugenio Garza Y. Garza: In the process, we believe we have become more effective retailers, and this is now allowing us to find promising opportunities beyond the core OXO Mexico format. As you know, we are thoughtfully accelerating our organic expansion efforts with several markets in South America, having already reached the 500-store mark in Brazil and soon in Colombia. We believe South America could, on a combined basis, reach a scale comparable to that of Mexico over time.

Speaker Change: In the process. We believe we have become more effective retailer and this is now, allowing us to find promising opportunity beyond the core OXXO Mexico format.

Martin Arias: In the first quarter, our capex reached 7.4 billion pesos, representing 5.3% of total revenue and 45.1% growth over the comparable period of last year. Reflecting in part the accelerated expansion at proximity, as well as the increased investments in production and distribution capacity at cost, through these organic investments, we aim to enhance our competitive position and maximize returns for our shareholders while preserving a strong financial foundation. In the event that these organic investments are not producing the expected returns, we reassure you that we will re-evaluate the levels of capex.

Speaker Change: As you know we are thoughtfully accelerating our organic expansion expansion efforts with OXXO in several markets in South America, having already reached the 504 market in Brazil.

Speaker Change: Soon in Colombia.

Speaker Change: We believe OXXO in South America.

Speaker Change: Combined basis reached a scale comparable to that of OXXO, Mexico overtime.

Eugenio Garza Y. Garza: Moving on to other different formats, we are taking advantage of the Mexican consumer's increasing appetite for the proximity discount format with our Vara store. After many iterations and years of fine-tuning its value proposition, BADA is showing that it has the right unique economics and is ready for an accelerated rollout. We are also ramping up the development and deployment of other promising adjacent proximity formats, such as coffee drive-thrus with our Cafenio joint venture.

Speaker Change: Moving on to other different format, we are taking advantage of the Mexican consumer increasing appetite for that proximity discount format with our border stores.

Speaker Change: After many isolation and years of fine tuning its value proposition, but it's showing that it has the right unit economics and is ready for an accelerated rollout.

Speaker Change: We are also ramping up the development and deployment of other promising adjacent proximity formats, such as coffee drive throughs with our companion joint venture.

Eugenio Garza Y. Garza: Beyond Latin America, we also continue to advance with the Avalora platform in Europe, where, despite high inflation last year and generally macro headwinds, we are building on improving momentum and focusing on driving all three business platforms, our retail, food service, and our B2B business. While we will pursue and capture these opportunities mainly through organic expansion, we believe entering the United States could open a new and compelling avenue for growth and value creation for PEMSA.

Martin Arias: Let's turn now to FEMSA's consolidated quarterly results. Total revenues increased 11.3% and EBITDA rose 14.4% compared to the first quarter of 2023, reflecting strong growth and proximity to consumers and Coca-Cola FEMSE. Net consolidated income decreased 88.3% to 5.9 billion pesos, mainly explained by a challenging comparative base in the first quarter of 2023, which included a gain of 40.6 billion pesos from the reclassification of FEMSA's investment in Heineken to discontinued operations and also reflected an increase in the net financial expenses line, reflecting a wine time gain from the repurchase of our debt in the first quarter Excluding these effects, next consolidated income would have remained flat year over year.

Speaker Change: Beyond Latin America, we also continued to advance with our Lora platform in Europe, where despite high inflation last year and general macro headwinds.

Speaker Change: We are building on improving momentum and focusing on driving all three business platforms, our retail foodservice and our <unk> business.

Speaker Change: While we will pursue and capture this opportunity mainly through organic expansion.

We believe entering the United States could open a new and compelling avenue for growth and value creation for FEMSA, leveraging or capabilities are close enough to the U S market and our broad recognition of the oxo brand.

Eugenio Garza Y. Garza: Leveraging our capabilities closest to the U.S. market and a broad recognition of the OXO brand among key demographics, this initiative may require a moderately-sized inorganic component to achieve certain scale-up goals focused on border or near-border states and on assets with certain characteristics that would serve as a launching pad for an OXO-US value proposition, among other possibilities.

Speaker Change: Key demographics.

Speaker Change: These initiatives may require a moderately sized inorganic component.

Speaker Change: To achieve certain scale upfront focus on border or near border States.

Speaker Change: And on asset with certain characteristics that would serve as a launching pad for our Knoxville U S value proposition among other profitability.

Eugenio Garza Y. Garza: We still have work to do as we fine-tune our potential entry model, but always with a clear objective of long-term value creation for PEMS. However, we know this topic is top of mind for the market, so we will keep you posted as we continue to develop our strategy. Beyond the various opportunities across the proximity spectrum, we also continue to make progress in our health operations, where we're increasingly able to leverage our multi-country platform and scale to optimize purchasing, pricing, supply chain, and several other aspects of the business. However, we continue to operate in distinct, diversified, and sometimes challenging macro-operating and commercial environments. Something we're quite familiar with in our neck of the woods.

Speaker Change: We still have work to do as we fine tune our potential entry models.

Speaker Change: With a clear objective of long term value creation for FEMSA.

Speaker Change: However, we know this topic is top of mind for the market. So we will keep you posted as we continue to develop our strategy.

Speaker Change: Beyond the various opportunity for further proximity spectrum.

Martin Arias: Moving on to discuss the results of our operations, Proximity Americas delivered quite a strong set of numbers in the first quarter. The year-over-year growth was solid, but it looks even better when we consider the tough comparison base they faced after a banner quarter in 2023. OXO same store sales increased 9.7% in the first quarter. This was driven by an increase of 7.3% in the average customer ticket and 2.2% growth in traffic. Certainly, we have the small advantage of an extra day in February, as well as the full impact of Holy Week, which tends to help the average ticket.

Speaker Change: We also continue to make progress in our health operations, where we're increasingly being able to leverage our multi country platform and scale to optimize purchasing pricing supply chain and several other aspects of the business.

However, we continue to operate in distinct diversified and sometimes challenging macro operating and commercial environment.

Speaker Change: Something we're quite familiar with in our neck of the woods.

Eugenio Garza Y. Garza: In certain markets, our health division is currently navigating complex, competitive, and regulatory environments. But in every case, we're taking clear steps to address the challenges by adjusting and evolving our operating approach. To put all our retail opportunities into perspective, I can share with you that today, if we consider all formats and all markets, we're opening more than six stores per calendar day, or a new store every four hours on average. By the end of the five-year period covered by our current long-range plan, to the extent that we have further proven and improved the economics of our various formats in various countries, we could eventually increase that pace by up to 50%. These plans are certainly ambitious, and while ultimately dependent on improving the economics of certain formats in certain countries, we believe they are achievable.

Speaker Change: In certain markets, our health Division is currently navigating complex.

Speaker Change: <unk> and regulatory environment, but in every case, we're taking clear steps to address the challenges by adjusting and evolving our operating approach.

Speaker Change: To put all our retail opportunity into perspective, I can share with you that today, if we consider all formats in all markets. We're opening more than 60 stores per calendar day or a new store every four hours on average.

Martin Arias: But these are strong numbers nonetheless. This growth reflects multiple initiatives implemented relating to revenue management, as well as the results of our loyalty program that are driving increased visits and purchases by our most loyal customers. Gross margins expanded 170 basis points to reach 42%, the highest ever for a first quarter, which is normally the weakest of the year.

Speaker Change: By the end of the five year period covered by our current long range plan to the extent that we have further proven and improve the economics of our various formats in various countries. We could eventually increase that base by up to 50%.

Speaker Change: These plans are certainly ambitious and while ultimately dependent on improving the economics of certain formats in certain countries. We believe they are achievable.

Eugenio Garza Y. Garza: On the topic of growth and investment, I would like to highlight a couple of points. First, although these plans will require considerable CAPEX in the coming years, the organic and modular growth inherent in our business model puts us in a good position to capture high returns. Second, these investment plans are reviewed rigorously on an annual basis.

Speaker Change: On the topic of growth and investment I would like to highlight a couple of points.

Speaker Change: Although these plans will require considerable capex in the coming years, the organic and model our growth inherent in our business model puts us in a good position to capture high returns.

Martin Arias: Reflecting strong trends in commercial income, a positive contribution from financial services, our growing revenue management initiatives, and strong performance from gathering-related categories such as soft drinks, beer, and snacks, income from operations increased 11.5%. While the operating margin contracted 20 basis points to 7.1%, reflecting higher labor expenses and faster store growth across markets, including those in LAPAM that are still diluted to margins as they ramp up their scale, obviously all mitigated by effective expense containment on the store expansion front.

Speaker Change: Second these investment plans are reviewed rigorously on an annual basis.

Eugenio Garza Y. Garza: Thus, as we advance on each one of these organic growth initiatives, we may find that some opportunities become more compelling over time, and some fall short of expectations, and we will adjust our CAPEX accordingly. Therefore, I have asked our team to relentlessly focus on unit economics, cash flow generation, and achieving ROIC levels above our cost of capital to drive and guide our growth decisions. Finally, we should talk about the digital opportunities that exist in and around our retail platforms and which complement and expand the opportunities being developed by our digital division.

Speaker Change: As we advanced on each one of these organic growth initiatives, we may find that some opportunities become more compelling over time and some fall short of expectations and we will adjust our capex accordingly.

Speaker Change: Therefore, I have asked our team to relentlessly focus on unit economics cash flow generation and achieving ROIC levels above our cost of capital to drive and guide our growth decisions.

Speaker Change: Finally, we should talk about the digital opportunities that exist in and around our rebuild platforms on which complement and expand the opportunities being developed by our digital division.

Eugenio Garza Y. Garza: As you know, I had the chance to take a short break from our proximity business to help launch PEMSA's digital efforts a few years ago, and it is very rewarding to see how the SPIN ecosystem continues to thrive and develop by leaps and bounds.

Speaker Change: As you know I had the chance to take a short break from our proximity business to help launch FEMSA digital efforts a few years ago.

Speaker Change: It is very rewarding to see how that's been ecosystem continues to thrive and developed by leaps and bounds.

Martin Arias: OPSO also posted strong numbers, adding 495 net new stores during the quarter, which included 356 stores in Mexico and 139 stores in South America. This figure for South America includes 71 openings by Grupo Nelson in Brazil, where it has already surpassed the 500 store mark.

Eugenio Garza Y. Garza: Always leveraging the physical store network, multiplying the possibilities for our customers, our suppliers, our partners, and ultimately, our company. To take one example, less than three years after launching the SpinPremia loyalty platform, already more than a third of Oso Mexico's revenues are associated with the program, meaning that, on average, we have access to more than 4 million tickets every day that allow us to begin building compelling and valuable data.

Speaker Change: Always leveraging the physical store network multiplying the possibilities for our customers.

Speaker Change: Our suppliers, our partners and ultimately our company.

Speaker Change: To take one example, less than three years after launching that's been premier loyalty platform already more than a third of OXXO, Mexico as revenues are associated with the program.

Martin Arias: Historically, the first quarter has been a laggard in terms of store expansion, catching up during the second half. This year, the Proximity team did a great job of making sure that we hit the ground running as compared to the expansion of 254 stores in the first quarter of 2023. Moving on to Proximity Europe, total revenues grew 12.6% in local currency, translating to an 8.2% increase in This growth was driven by strong performance of the Swiss convenience business and good momentum in the B2B pretzel business, partially offset by lower demand in transportation hub stores affected by extended labor strikes in Germany. Gross profit grew 11% in pesos, while gross margin expanded by 100 basis points to reach 43.2%.

Speaker Change: Meaning that on average we have access to more than 4 million tickets everyday.

Allow us to begin building compelling and valuable that effect.

Eugenio Garza Y. Garza: And as we get closer to the point where we can begin moving from a pure customer acquisition mode into more of a monetization phase, we are developing new data-driven initiatives. For example, we have proactively invested in using AI to capitalize on the breadth and depth of this data. The density of our store network and the frequency of customer visits provide us with a unique perspective on Mexican consumer behaviors and trends. Over the last year, OXO has materially evolved its algorithms, IT systems, and data science capabilities to offer better and more effective assortment pricing and promotions, and to efficiently staff each store according to its unique transaction pattern. These AI-driven improvements are being rolled out across our store network in Mexico, resulting in measurable increases in profitability, as well as improved customer satisfaction. Coming up, we have our work cut out for us.

Speaker Change: And as we get closer to the point, where we can begin model moving from a pure customer acquisition mode into more of a monetization phase we are developing new data driven initiatives.

Speaker Change: For example, OXXO has proactively invested in using AI to capitalize on the breadth and depth of this data set.

The density of our store network and the frequency of customer visits provide us with a unique perspective of Mexican consumer behaviors and trends.

Speaker Change: Over the last year also has materially above its algorithms.

Speaker Change: Systems, and data science capability to offer better and more effective assortment.

Speaker Change: <unk> and promotions and to efficiently staff each store according to its unique transaction pattern.

Speaker Change: This AI driven improvements are being rolled out across our store network in Mexico, resulting in measurable increases in profitability as well as improved customer satisfaction.

Speaker Change: Summing up we have our work cut out for US we will drive our top line by increasingly expanding our store base and satisfying with excellent and meet the needs of our customers. We will drive our bottom line by constantly seeking efficiency and effectiveness as we evolve our operating model and we will catch.

Jose Antonio Fernandez Garza Laguerra: We will drive our top line by increasingly expanding our store base and satisfying with excellence the needs of our customers. We will drive our bottom line by constantly seeking efficiency and effectiveness as we evolve our operating models, and we will carefully pursue acquisitions where appropriate to increase our scale and drive the virtual circle that flows from it. We will keep you updated of our progress, and we will also expand and drill down on some of the opportunities discussed today, not only in future calls like this one, but through a more proactive stance where we generate recurring dialogue with the investment community.

Martin Arias: At the operating income line, Valora posted extraordinary growth, but we know that the B2B business had an outsized contribution to gains in the quarter's profitability at growth rates that would not necessarily be replicable going forward. Shifting focus to the health division, and following up on Jose's comments a few minutes ago on the challenges we currently face, total revenues contracted slightly by 2.3%, and same-source sales remain flat in Mexican pesos.

Speaker Change: Fully pursue acquisitions, where appropriate to increase our scale and drive the virtuous circle that flows from it.

Speaker Change: We will keep you appraised of our progress and we will also expand on real down on some of the opportunities discussed today not only in future calls like this one but to a more proactive stance where will generate recurring dialogue with the investment community.

Speaker Change: We are excited about the opportunities ahead, and the clear path, we are taking to capture them.

I am fortunate to be surrounded by the best in the business and to be part of an organization bound together by a strong and unique culture of collaboration and fairly mundane cross learning.

Martin Arias: This was driven by an ongoing disruption within the institutional business in Colombia and a challenging competitive environment in Mexico as well as a tough comparison in Chile. These disappointing trends in the top line translated into weak operating results for the quarter as operating income fell 40% in pesos and operating margins contracted by 210 basis points to reach 3.3%. As you might imagine, we are focused on the situation at the health division.

Speaker Change: We look forward to continuing our discussions with you going forward and I will now turn the call over to Martin to develop expenses first quarter results.

Martin: Thank you Jose and good morning, everyone.

Martin: I'm happy to be with you today to talk about this remarkable company.

Martin: I have had the pleasure of calling home in one capacity or another for 25 years.

Martin: As Jose just described this is an exciting time to be a part of this team as we pursue compelling and unique opportunities at every one of our three core business verticals.

Martin Arias: We have a highly skilled team running that operation, and they are rapidly adjusting their country-specific strategies to mitigate and eventually revert these negative trends. For example, we are accelerating the retail component of our Columbia business, changing our mix to a more profitable, less structurally vulnerable operation. In Mexico, we are making important adjustments to our consumer value proposition following successful models used in Ecuador and Chile. We will keep you posted on the evolution of these strategies. Moving on to OxtoGAS, main station sales increased 6.9%, and total revenues increased by 13.9%, reflecting solid trends in our institutional sales. During the quarter, gross margin reached 11.6%, and operating margin was 3.5%.

Martin: The first message I want you to take from me is this the mandate I have received from our CEO and board of directors is to continue executing our capital allocation strategy that was announced as part of FEMSA forward.

Martin: During the finances of the company towards the leverage goal of two times net debt to EBITDA, excluding Coca Cola FEMSA, which we expect to reach by the end of 2026.

Martin: As of the end of the first quarter that ratio stood at <unk>, two four times compared to 0.1 times at the end of 2023.

Martin: To meet this mandate our CEO has asked me to focus on disciplined organic and inorganic capital deployment as well as to continue to monitor additional opportunities to return capital to shareholders.

Martin: Prior to reviewing our quarterly results I would like to provide you with an update on the FEMSA forward initiatives relating to returning capital to shareholders and share some thoughts on capital deployment generally.

Martin: As you know we have been active on the share buyback front during the first quarter, we launched an accelerated share repurchase or ASR program.

Martin Arias: Reflecting lower profitability from our institutional business, partially offset by operational efficiencies and strict expense control. Turning to visual FEMSA. We continue to make progress during the quarter; the number of active users for SPIN by OXO reached 7.4 million, or 77.9% growth year on year. Demonstrating steady trends in consumer adoption, but also experiencing increased transactions per user. For its part, our SpinPremia loyalty program has also experienced good growth of 71.3% year-on-year, reaching 21.7 million active users.

Martin: From a financial intermediary.

Martin: Through that program, we are buying back $400 million worth of FEMSA shares.

Martin: Before the ASR was launched we had also bought back approximately 73 million shares in the quarter.

In addition earlier in the year, we received shareholder approval to pay an extraordinary dividend of approximately $600 million. During this year. The first installment of which was paid last week on April 18.

Martin: This means we are in the process of returning nearly $1 $1 billion to shareholders. During 2024. In addition to our ordinary dividend, which was itself increased by 20% representing a total of approximately $800 million at current exchange rates.

Since the deployment of Capex, which is also a main component of our allocation strategy. We seek to prioritize this allocation towards core organic growth initiatives that offer the highest potential for long term value creation.

Martin Arias: Notably, approximately 35% of OXO's Mexico sales are now linked to Spins Premium, as are 40% of the sales of OXO Gas. Strengthening the Foundation for our Data Gathering and Utilization Capabilities. As we continue to prioritize the acquisition of higher potential users, we're also making strides in the evolution of our digital operations into an ecosystem that is focused and geared to deliver maximum value to our users while driving sustainable growth and profitability for FEMSA. From a financial perspective, We spent close to $50 million on the development and expansion of our digital ecosystem during the quarter. This is in line with previous quarters and below budget projections.

Martin: In the first quarter, our Capex reached seven 4 billion pesos, representing five 3% of total revenue and 45, 1% growth over the comparable period of last year.

Martin: Selecting and part D accelerated expansion at proximity as well as the increased investments in production and distribution capacity at cost.

Martin: Through these organic investments.

Martin: We aim to enhance our competitive position and maximize returns for our shareholders, while preserving our strong financial foundation.

Martin: In the event that these organic investments are not producing the expected returns. We reassure you that we will reevaluate the levels of Capex.

Martin: Let's turn now to FEMSA consolidated quarterly results.

Martin: Total revenues increased 11, 3% and EBITDA rose 14, 4% compared to the first quarter of 2023, reflecting strong growth at proximity and Coca Cola FEMSA.

Martin: Net consolidated income decreased 88, 3% to $5 9 billion pesos, mainly explained by a challenging comparative base in the first quarter of 2023, which included a gain of $40 6 billion pesos from the reclassification of fences investment in Heineken.

Martin Arias: Of note are the multiple insights that Juan Carlos Guillermetti has brought to the business, which have allowed us to contain costs and focus our efforts on those initiatives with the greatest potential. Finally, Coca-Cola FEMSA posted another set of remarkable results in the first quarter, with double-digit growth in revenues and EBITDA against significant foreign exchange headwinds, supported by volume growth across most of their markets, as well as revenue growth management initiatives. Congratulations to the Coke FEMSA team and the Coca-Cola company for such a strong quarter. You can listen to a replay of their quarterly call, which took place last Wednesday.

Martin: To discontinued operations.

Martin: And also reflects an increase in the net financial expenses line, reflecting a wind tax gains from the repurchase of our debt in the first quarter of 2023.

Martin: Excluding these effects net consolidated income would have been would have remained flat year over year.

Martin: Moving on to discuss the results of our operations proximity Americas delivered quite a strong set of numbers in the first quarter.

The year over year growth was solid, but it looks even better when we considered as a tough comparison base. They face after a banner quarter in 2023.

Martin: OXXO same store sales increased nine 7% in the first quarter.

Martin: Driven by an increase of seven 3% and the average customer ticket and two 2% growth in traffic.

Martin Arias: Coming up, PHMSA's first quarter results show that our two largest business platforms, OXXO and Coca-Cola PHMSA, remain operating at a very high level, generating great results by refining their tools and business models to go after an extended runway of opportunities. Meanwhile, we continue to nurture newer, smaller business units to get them ready for faster growth, and we tend to the few elements of the PHMSA platform that need some immediate As Jose mentioned at the outset, we look forward to a constant open dialogue with you as we continue writing FEMSA's next chapter.

Martin: Certainly we had a small advantage of an extra day in February as well as the full impact of Holy week that tends to help the average ticket.

Martin: But these are strong numbers nonetheless.

Martin: This growth reflects multiple initiatives implemented relating to revenue management as well as the result of our loyalty program that are driving increased visits and purchases by our most loyal customers.

Martin: Gross margins expanded 170 basis points to reach 42%.

Martin: Our highest ever for a first quarter, which is normally the weakest of the year.

Martin: Reflecting strong trends in commercial income a positive contribution from financial services are growing revenue management initiatives and strong performance from gathering related categories, such as soft drinks beer and snacks.

Martin: Income from operations increased 11, 5%.

Martin Arias: And with that, let's open up the call for questions. Operator, please. Thank you very much. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. To withdraw your question for any reason, you may press star two.

Martin: While the operating margin contracted 20 basis points to seven 1%, reflecting higher labor expenses and faster store growth across markets, including those in Latam.

Martin: There are still dilutive to margins as they wrap up their scale.

Martin: Honestly, all mitigated by effective expense containment.

Martin: On the store expansion front.

<unk> also posted strong numbers, adding 495 net new stores during the quarter, which includes 356 stores in Mexico and at 100 139 stores in South America.

Operator: We kindly request you limit yourself to one question. You will be advised when to ask the question. Our first question is from Carlos Laboy with HSBC. Please go ahead. Good morning, everyone.

Martin: This figure for South America, and incorporates 71 openings by Grupo <unk> in Brazil, where OXXO was already has already surpassed the 500 store Mark.

Martin: Historically, the first quarter has been a laggard in terms of store expansion catching up during the second half.

Martin: This year the proximity team did a great job of making sure that we hit the ground running as compared to the expansion of 254 stores in the first quarter of 2023.

Carlos Alberto Laboy: Jose, thank you so much for joining some of these calls and offering your insights. It's really, I'm sure, going to be super helpful. Taking a broader look, perhaps even beyond OXO as well and digital at the different types of businesses, what parts of the business are you perhaps most excited about? You covered a lot of ground. You talked a lot about a lot of things, but what are you most excited about? Hola, Carlos.

Martin: Moving on to proximity Europe.

Martin: Total revenues grew 12, 6% in local currency.

Martin: Translating to an eight 2% increase in pesos.

Martin: This growth was driven by strong performance of the Swiss convenience business and good momentum in the BTB pretzel business, partially offset by lower demand in transportation hub stores affected by extended labor strikes in Germany.

Martin: Gross profit grew 11% in pesos, while gross margin expanded by 100 basis points to reach 43, 2%.

Eugenio Garza Y. Garza: Thank you for that question. Obviously, we have a lot of challenges and outstanding opportunities. I would say I'm quite excited, first and foremost, about all of our opportunities in Mexico. I think also about the value proposition enhancement, the development in food, and just with all the data analytics that we're pursuing, I see tremendous growth ahead for OXXO-Mexico. And I see, and I'm beginning to get very excited about our opportunity with discount retailing.

Martin: At the operating income line below deck posted extraordinary growth, but we note that the BTB business had an outsized contribution to gains in the quarter's profitability.

Martin: At growth rates that would not necessarily be replicable going forward.

Martin: Shifting focus to the health Division.

Speaker Change: And following up on Jose's comments, a few minutes ago on the challenges we currently face.

Speaker Change: Total revenues contracted slightly by two 3% and same store sales remained flat in Mexican pesos.

Speaker Change: This was driven by an ongoing disruption within the institutional business in Colombia, and a challenging competitive environment in Mexico as well as a tough comparison in Chile.

Speaker Change: These disappointing trends in the top line translated into weak operating results for the quarter as operating income fell 40% in pesos and operating margins contracted by 210 basis points to reach three 3%.

Eugenio Garza Y. Garza: I wish it was still much more under the radar, but I still see a lot of opportunity for growth for discount retail in Mexico. I'm very excited about our South America expansion, particularly Brazil. I really think Brazil, if we can get it right, can be as big as Oaxaca, Mexico, if not bigger.

Speaker Change: As you might imagine we are focused on the situation at the health Division, we have a highly skilled team running that operation and they are rapidly adjusting their country specific strategies to mitigate and eventually revert these negative trends for.

Speaker Change: For example, we are accelerating the retail component of our Colombia business changing our mix to a more profitable less structurally vulnerable operation.

Eugenio Garza Y. Garza: It will take us a few years, but I'm really excited about the opportunity. We have tremendous partners, and we have a tremendous team in place that keeps me really excited. And then I would say, I mean, it's again with food, but the food service component that I see that I'm learning from Europe that we have tremendous assets there that if we can eventually make them grow organically, could be a source of growth that will surprise us. That's what those are my most interesting things.

Speaker Change: In Mexico, we are making important adjustments to our consumer value proposition following successful templates used in Ecuador, and Chile, we.

We will keep you posted on the evolution of these strategies.

Speaker Change: Moving on to OXXO gas.

Speaker Change: <unk> sales increased six 9% and total revenues increased by 13, 9%, reflecting solid trends in our institutional sales.

Speaker Change: During the quarter gross margin reached 11, 6% and operating margin was three 5%.

Speaker Change: <unk> lower profitability from our institutional business, partially offset by operational efficiencies and strict expense control.

Eugenio Garza Y. Garza: Obviously, I'm carefully looking at the US but being very cautious as to when and where to get on that plane. That's help. Thank you so much.

Speaker Change: Turning to digital FEMSA.

Speaker Change: We continued to make progress during the quarter.

Number of active users for spin by OXXO reached $7 4 million.

Operator: Thank you, Carlos. You. Our next question is from Thiago Bortoluci with Goldman Sachs. Please go ahead. Good morning, everyone.

Or <unk> 77, 9% growth year on year.

Speaker Change: Demonstrating steady trends in consumer consumer adoption, while also experiencing increased transactions per user.

Thiago A. Bortoluci: Congratulations on the results. And thanks for taking questions on the numbers, right? Could you please help us understand the dynamics within your corporate expenses line? I'm calling the balancing right between consolidated results and the business unit. Since you had a huge expense in the fourth quarter, I think you were diving for something close to 1 billion pesos per quarter going forward in expenses. And it seems in the quarter, you had a huge reversion, right?

Speaker Change: For its part our spin.

Speaker Change: Loyalty program has also experienced good growth of 71, 3% year on year, reaching 21 7 million active users.

Speaker Change: Notably approximately 35% of OXXO in Mexico sales are now linked to spin premier as our 40% of the sales of OXXO gas.

Speaker Change: Strengthening the foundation for our data gathered gathering and utilization capabilities.

Speaker Change: As we continue to prioritize the acquisition of higher potential users. We are also making strides in the evolution of our digital operations into an ecosystem that is focused and geared to deliver maximum value to our users, while driving sustainable growth and profitability for FEMSA.

Martin Arias: So, If you could, we would welcome you to walk us through, explain what's happening there, and what the underlying basis we should expect from this number one. And, if I may, a second one: this is an oxhole, particularly in Mexico, right? You reported very good sensor sales, that comes particularly in traffic; you grew 220 base points in a quarter, so the calendar might have a small but positive benefit for you, right?

Speaker Change: From a financial perspective, we.

Speaker Change: We spent close to $50 million during the development and expansion of our digital ecosystem during the quarter.

Speaker Change: This is in line with previous quarters and below budget projections of note are the multiple insights that Juan Carlos <unk> Murphy has brought to the business, which have allowed us to contain cost and focus our efforts on those initiatives with the greatest potential.

Speaker Change: Finally, Coca Cola FEMSA posted another set of remarkable results in the first quarter with double digit growth in revenues and EBITDA against significant foreign exchange headwinds supported by volume growth across most of their markets as well as revenue growth management initiatives.

Martin Arias: So the question is, what is the underlying traffic level that you're seeing? And more importantly, going forward, how do you think about sensor sales having one of your peers just reporting and commenting on a team's growth for ADR? Thank you very much. Yes, hi, this is Martin.

Speaker Change: Congratulations to the Coke FEMSA team and the Coca Cola company for such a strong quarter, you can listen to a replay of their quarterly call, which took place last Wednesday.

Martin Arias: Thank you for your question. Mr. Corporate Expenses, I know it is hard to keep track of what's going on because that line item reflects a variety of things and not only includes corporate expenses; it also includes some of the smaller businesses that have historically been included with another. For example, Bara is there, the results of Bara, and the results of Digital are there.

Speaker Change: Summing up.

Speaker Change: <unk> first quarter results show that our two largest business platforms OXXO and Coca Cola FEMSA remained operating at a very high level generating great results by refining their tools and business models to go after an extended runway of opportunities. While we continue to nurture newer smaller business units to get them ready for faster.

Speaker Change: And we tend to the few elements of the FEMSA platform they need some immediate adjustments.

Speaker Change: As host I mentioned at the outset.

Speaker Change: We look forward to a permanent open dialog with you as we continue writing FEMSA his next chapter.

Martin Arias: Doa Tota is also there. And within our corporate expenses, the number we have always sort of guided to guide to is more or less a hundred million dollars. But it's hard to get to that number because there can be movements given the different businesses historically will not be the historical numbers will not be much of a guide because. For example, the other line used to include Zoristica at different times, Invera, PTMA, and so the historical numbers.

Speaker Change: And with that let's open up the call for questions operator. Please.

Speaker Change: Okay.

Speaker Change: Okay. Thank you very much.

Speaker Change: A reminder, if you would like to ask a question. Please press star one on your telephone keypad to withdraw your question for any reason you May press star two.

Speaker Change: We kindly request you limit yourself to one question you will be advised web two <unk>.

Speaker Change: Our first question is from Carlos Laboy with HSBC. Please go ahead.

Martin Arias: Going forward, it should remain stable, all those businesses remain there, and so you should be able to get a little bit more clarity, and we'll try in future calls to maybe be a little bit more specific or get back to you with any details. Yeah, I think on that, Thiago. I mean, obviously, we're lapping the most, I guess, volatile quarter, right, in terms of SAMHSA Forward. A year ago, there were a lot of things that were moved around in terms of, you know, reclassified to discontinued operations, to Martin's comment.

Carlos Alberto Laboy: Yes, good morning, everyone.

Speaker Change: Thank you so much for joining.

Carlos Alberto Laboy: Some of these calls and offering your insight, it's really I'm sure you're going to be Super helpful.

Carlos Alberto Laboy: Taking a broader look.

Carlos Alberto Laboy: Perhaps even beyond OXXO as well in digital.

Carlos Alberto Laboy: It's a different sensor businesses what parts of the business.

Speaker Change: Are you, perhaps most excited about you covered a lot of ground you talked a lot of things about a lot of things, but but what are you most excited about.

Speaker Change: I'll, let Carlos Thank you for that question.

Carlos Alberto Laboy: So arguably we have.

Speaker Change: A lot of challenges.

Carlos Alberto Laboy: Outstanding opportunities I would say.

Martin Arias: Recently, you know, we made some changes with Zoristica, with Envoy, so I think we're going to, you know, the next couple quarters are going to, I expect, trend to what becomes a more predictable number below the line, and, of course, we can, you know, we can follow up offline to try to kind of reconcile our model with yours, but this is really the most, the quarter with the most noise, I I mean, I would just add that I think traffic is getting better and better, but it's still going to be tough.

Speaker Change: Im quite.

Carlos Alberto Laboy: Quite excited first and foremost about all of our opportunities in Mexico.

Speaker Change: Thank you.

Speaker Change: So.

Speaker Change: The value proposition enhancements the development in food.

Speaker Change: And just with all the data analytics that we're pursuing I see tremendous growth.

Speaker Change: For OXXO Mexico.

Speaker Change: And in the beginning to get very excited about our opportunity with discount retailer with $3 billion.

Speaker Change: That was still much more under the radar, but I still see a lot of opportunity for growth for discount retail in Mexico.

Speaker Change: I'm very excited.

Speaker Change: Our South America expansion, particularly Brazil, I really think Brazil, if we can get it right.

Speaker Change: We can be we can be as big as OXXO, Mexico is not bigger it'll take us a few years, but and.

Speaker Change: I'm really excited about the opportunity we have tremendous partners when we call a tremendous team in place.

Martin Arias: The next few months, we have a strong comparison against next year. It was a very good quarter in terms of revenue, and we have some interesting, you know, extraordinary things. Like during the elections, we have a weekend where it's a dry weekend. There are no alcohol sales.

That kidney really excited.

Speaker Change: And then I would I would say.

Speaker Change: Its again with food, but food service component that I see that I'm learning from Europe that we're seeing we have tremendous assets. There that we can eventually make them grow organically could be a source of growth that will surprise us.

Speaker Change: That's those are my most interesting things obviously.

Martin Arias: We see that could affect us during the first weekend of June. So I think it will be a tough quarter, but I think given all that we are seeing in terms of our analytics and things to drive revenue into the store, we could be okay in terms of traffic. And we'll add to that. I mean, SpinPremia is helping a lot with that. From not being relevant at all, historically, we are now 35% of the purchases in the store are being done by people who are showing their Premia card or getting their points digitally.

I'm I'm carefully looking at the U S, but being very cautious as to when and where.

Speaker Change: To get into that playing field.

Speaker Change: That's helpful. Thank you so much.

Speaker Change: Thank you Carlos.

Okay.

Speaker Change: Thank you. Our next question is from Thiago part of Ritchie with Goldman Sachs. Please go ahead.

Thiago: Good morning, everyone. Congrats on the results and thanks for taking questions.

Thiago: The numbers right could you please tell us understanding the dynamics within our corporate expenses line and calling that balance right.

Thiago: <unk> consolidated results and the business.

Martin Arias: So that is an important driver of strategies to drive traffic. Yeah, I would just add Thiago, you know, we almost delivered 10% same-store sales growth on top of 18 and a half, or something like that, that we did a year ago. You know, we continue to perform above what I would have expected in terms of both the split of traffic and ticket prices. Obviously, inflation is down to four, four and a half, and our ticket price is three points north of that.

Thiago: <unk> had a huge expansion in the fourth quarter, I think toward guidance or something close to 1 billion peso per quarter going forward in expense on it.

Thiago: In the quarter Youll have opportunities where barge from whitestone.

Thiago: Sure.

Thiago: Global brands on the wall coach explaining what's happening there and why won't they are aligning basins with excellent number one Amit.

Thiago: They may have Jack on one this is on OXXO, particularly next call rights with lots of variable comps.

Thiago: Comps.

Thiago: If I keep flowing track, which will grow to 120 basis points.

Martin Arias: You're going to hear us talk a little bit more about revenue management, and Jose already mentioned some of the ways that we're using data for that. So, you know, I don't have a good handle on what the new kind of algorithm will be for same-store sales, but it's increasingly looking like we're going to be at a higher level than we were pre-COVID, right? You know, two points, two points something of traffic, several years after COVID ended and lapping what we were doing a year ago, that's above trend, and that's higher than I would have expected. So anyway, we'll keep talking, but things are looking quite robust. Oh, this is great. Thank you very much, everyone, and congratulations once again.

Thiago: In a quarter that the calendar might have had more bank for positive benefits for you right.

Thiago: Why didn't the underlying traffic that you're seeing and more importantly, going forward all of that.

Speaker Change: Do you think about our full patent one of your peers gets reporting making well Friday great. Thank you.

Speaker Change: Much.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes, Hi, this is Martin.

Thank you for your question as to corporate expenses.

Speaker Change: I know it is hard to keep track of what's going on because that line item reflects a variety of things that not only includes the corporate expenses. It also includes some of the smaller businesses that have historically been included within other for example.

Speaker Change: Is there the results of the <unk>.

Speaker Change: <unk> of digital are there.

Speaker Change: <unk> is also there.

Speaker Change: And within our corporate expenses.

Operator: Thank you. Our next question is from Ricardo Alves with Morgan Stanley. Please go ahead. Hi, everyone. Thanks for the call. Martin.

Speaker Change: The.

Speaker Change: The number we have always sort of guided to guided to is more or less.

Speaker Change: $100 million, but it's hard to get to that number because there can be movements.

Speaker Change: Given the different businesses historically will not be the historical numbers will not be much of a guide because.

Ricardo L. Alves: It's nice talking to you. We wish you all the best in the position. I had a question on OXO's top line as well. Appreciate the commentary on same-star sales, but I wanted to discuss new store openings and if we can go into more details on the strategy around new openings. I mean, over 400 stores in the first quarter was quite remarkable to us. I think that that was one of the biggest surprises that we had.

Speaker Change: The other line used to include solid sticker.

Speaker Change: At different times in beta.

Speaker Change: And so the historical numbers going forward it should remain stable, while those businesses remain there and so you should be able to get a little bit more clarity and we will try in future calls to maybe be a little bit more specific or get back to you with any details.

Ricardo L. Alves: Your same-store sales have been running above expectations, and to the points that were made in the preliminary remarks, it really sounds like we're getting to a new pace, a new reality of Oksu expansion across the board. So, I wanted to take advantage of the management here. If we can talk on a per-country basis, you know, what's really driving that? I mean, of course, Mexico has been stronger. I'm sure that that's part of that, but are you stepping up more aggressively in other countries? I heard the comments around Brazil, but I understand that Brazil is not in these numbers of proximity.

Speaker Change: Diego.

Speaker Change: Obviously, we're just one we're lapping the most.

Speaker Change: Volatile quarter right in terms of FEMSA forward a year ago. There were a lot of things that were moved around in terms of in a reclassified to discontinued operations to marketing to comment recently, we had made some changes with holistic with envoy.

Speaker Change: So I think we're going to the next couple of quarters are going to get.

Trend to what becomes.

Speaker Change: A more predictable number below the line.

Speaker Change: Of course, we can we can follow up offline and to try to kind of reconcile our model with yours, but.

Speaker Change: If this is really the most.

Speaker Change: The quarter was the most noise I think.

Speaker Change: Given what happened a year ago.

I mean, I would just add I think.

Speaker Change: <unk> traffic.

Ricardo L. Alves: So, I mean, it seems that it's across the board. So, just taking advantage of this call, if we can go into more details on that, and if the impression that we have is kind of valid that we're probably talking about a new pace, you know, new targets in the long run as it pertains to where Oksu could be in Latin America overall. So, more of a strategic question, if I may. Thank you so much.

Speaker Change: Is it.

Speaker Change: Getting better and better, but it's still going to be tough. The next few months we have.

Speaker Change: Comparison.

Again next year with a very good.

Speaker Change: Quarter in terms of revenue and we have some interesting.

Speaker Change: Since the extraordinary things like India elections, we have a weekend.

Speaker Change: Dry weekend, there's no alcohol sales, we see that could affect us.

Speaker Change: On the first weekend of June so I think it will be a tough quarter, but I think.

Speaker Change: Given all that we are seeing in terms of.

Eugenio Garza Y. Garza: Thank you, Mr. Alves. Thank you, Ricardo. A few things. So we had an extraordinary quarter for growth of store units in Mexico, and we expect that during the rest of the year that will normalize.

Speaker Change: Analytics and things to drive our revenue into our store, we could be okay in traffic.

Speaker Change: I would add to that.

Speaker Change: Premier is helping a lot of that.

Speaker Change: From not be relevant at all as vertically. We're now 35% of the purchases in the store are being done by people, who are showing their premier card or getting their points.

Eugenio Garza Y. Garza: We still plan for 1,000, maybe 1,100, a store opening in Oaxaca, Mexico this year. We are really enjoying the traction that they are getting. The cohort of stores is maturing incredibly well with the value proposition that we have put in place with assortment and segmentation. We feel more and more confident that our stores are becoming profitable and maturing quite rapidly. But I don't expect to accelerate that pace in Mexico other than maybe trying to accelerate opening the most stores as early in the year as possible.

Speaker Change: So that is an important driver of strategies to drive traffic.

Speaker Change: I would just add thiago.

Speaker Change: We almost delivered 10% same store sales growth on top of 18, and a half or something like that that we did a year ago.

We continued to perform.

Speaker Change: Above what I would have expected in terms of both the split of traffic and ticket obviously inflation is down to four four and a half on our ticket is three points north of that you're going to hear us talk a little bit more about revenue management and of course already mentioned some of the ways that we're using data for that.

Eugenio Garza Y. Garza: That always helps us with momentum, and stores tend to mature better the earlier in the year we open them. We are accelerating in South America, particularly Colombia and Peru. We're hitting a stride, and we see a lot of opportunity.

Speaker Change: So I don't I don't have a good handle on what the new kind of algorithm will be for same store sales, but it's increasingly looking like we're going to be at a higher level than we were pre COVID-19 right.

Speaker Change: Two points two point something of traffic.

Speaker Change: Several years after Covid ended and lapping.

Eugenio Garza Y. Garza: After 15 years in Colombia, I think we now have a value proposition that is a winning value proposition. It's where our food convenience business is better developed. We have a profitable business in food in Colombia, and we're very excited about the traction that we're seeing. We plan on growing in Colombia and Peru, and we still have to fix some things in Chile.

Speaker Change: We were doing a year ago that that's above trend and that's higher than I would've expected so anyway.

Speaker Change: Keep talking but things are looking quite quite robust.

Speaker Change: Carl This is great. Thank you very much and congrats once again.

Okay.

Speaker Change: Thank you. Our next question it sounds like cargo Alvarez with Morgan Stanley. Please go ahead.

Ricardo L. Alves: Hi, everyone. Thanks for the call Martin Nice talking to you.

Ricardo L. Alves: We saw the best on the position.

Ricardo L. Alves: I had a question on OXXO top line as well.

Eugenio Garza Y. Garza: After the acquisition of OK Market, I think there are some things to structurally fix before we accelerate growth. But overall, we plan to have several thousand stores in South America, and that's not counting Brazil. So, yeah, I plan to accelerate growth in South America, as well.

Ricardo L. Alves: I appreciate the commentary on same store sales, but I wanted to discuss.

Ricardo L. Alves: New store openings.

Speaker Change: And if we can go into more details on the strategy.

Speaker Change: Around new openings I mean over 400 stores in the first quarter was quite remarkable towards I think that there was one of the biggest surprises that we had.

Eugenio Garza Y. Garza: I think on what Jose just said, obviously, the hardest thing that you can do or that takes you the longest time is to get the value proposition right and to get the four-wall economics right. But once you have that, then it really becomes a function of scale and, obviously, finding the right locations and getting your expansion team and the supply chain. I mean, it's very systemic.

Speaker Change: And your same store sales have been running above expectations into the points that were made in the preliminary remarks, it really sounds like we're getting to a new.

Speaker Change: A new face a new reality of expansion of OXXO across the board. So I wanted to take the advantage of the management here. If we can talk on a per country basis.

Speaker Change: What's really driving that I mean of course, Mexico has been stronger I'm sure that that's part of that but are you stepping up more aggressively in other countries.

Eugenio Garza Y. Garza: But I think in a couple of countries, as Jose said, we're at that point where it really moves from fine-tuning, and you never finish fine-tuning the value prop, but moving more to a replication mode of just getting more scale, and then the margins and the reworks begin to look a lot better. Thank you very much, you. Our next question is from Robert Ford with Bank of America. Please go ahead. Thank you very much. And good morning, everybody. Jose, you mentioned your excitement for discount retailing, but you didn't use the term hard discounting, and I was curious as to why.

Speaker Change: I heard the comments around Brazil, but I understand that Brazil is not in these numbers of seamless. So I mean, it seems that it's across the board. So just taking the advantage of this call. If we can go into more details on that.

Speaker Change: And if the impression that we have is kind of valid that we were probably talking about a new pace new targets in the long run as it pertains to where OXXO could be.

Speaker Change: In Latin America overall, so more of a strategic question if I may thank you so much.

Speaker Change: Okay.

Speaker Change: Thank you Mr. Alba is doing.

Speaker Change: Got it got it.

Speaker Change: So.

Speaker Change: A few things so we had a extraordinary quarter and growth of store unit in Mexico.

Robert Erick Ford Aguilar: And then how are you thinking about body growth in the context of possible OXO cannibalization? And then the press release also cites soft drinks as being a driver of Bada and the Quarter. What percent of sales at Bada are soft drinks? And how are you addressing the private label and the opening price point opportunity in the beverage category at Bada? And I'll leave it there.

Speaker Change: We expect in that in the rest of the year that will normalize.

Speaker Change: We'll plan for 1000, maybe 11 11 Congress.

Speaker Change: Stores opening in OXXO, Mexico. This year, we are really enjoying the traction that they are the cohort of stores are maturing incredibly well.

Speaker Change: With a value proposition that we have put in place with our assortment and segmentation, we feel more and more confident.

Speaker Change: Our stores are becoming.

Speaker Change: Roughly double in maturing quite rapidly.

Eugenio Garza Y. Garza: Okay. Thank you. Thanks for that question. So, yeah, that's a very good point. Obviously, BADA is, I wouldn't say, and it's a very good definition.

Speaker Change: Don't expect to accelerate up phase in Mexico other than just maybe trying to accelerate on opening the most stores earlier in the year as possible that always helps us.

Speaker Change: With momentum.

Speaker Change: The stores tend to mature more better the earlier in the year, we open them.

Speaker Change: We are accelerating in South America, particularly Colombia and Peru.

Eugenio Garza Y. Garza: Is it already a hard discount retailer? No, I think it's in the process of getting there. We still have, I mean, our private label percentage of total sales is growing every quarter, but it's still in the high 20s in percentage. But I think as we move forward, we're putting together a team to grow our private label business, and we see a huge opportunity to keep growing that business. In terms of cannibalization, as you know, BADA has been in this business for over 20 years or more.

Speaker Change: We are hitting our stride and we see a lot of opportunity.

Speaker Change: After 15 years in Colombia, I can we now have a value proposition that is a winning value proposition.

Speaker Change: Our food.

Our <unk> business better.

<unk> is better developed we have a profitable business.

Speaker Change: In food in Colombia, and we're very excited about the traction that we're seeing we plan on growing in Colombia and Peru.

Speaker Change: We still have to fix some things being in Chile.

Speaker Change: After the acquisition of Okay market I think.

Speaker Change: There is something structurally fixed before we accelerate growth, but overall, we plan to have several thousand stores in South America, and that's not counting Brazil, So I plan to accelerate.

Eugenio Garza Y. Garza: But in a true sub-discount or discount matter, it's been over the last five years, and we see a lot of BADAs in Guanajuato, in Querétaro, next to Oksos, and they drive both of them. Obviously, there is some cannibalization, but it's minor.

Speaker Change: In Brazil.

Speaker Change: South America.

Speaker Change: As well.

Speaker Change: I think on.

Speaker Change: But also just said.

Speaker Change: Obviously, the hardest thing that you can do or.

Speaker Change: Thanks for the longest time is to get the value proposition right and to get the four wall economics right.

Speaker Change: But once you have that.

Speaker Change: It really becomes a function of scale and obviously finding the right locations on getting your your expansion team on the supply chain I mean very systemic.

Eugenio Garza Y. Garza: I think it's much more geared towards the socioeconomic level that really requires everyday purchases. It is still about 25% of its revenue is convenience, and in that sense, we do sell a lot of soft drinks, but it's more and more geared towards convenience stores or multi-serve options. We do see a lot of growth in beverages, just as we are seeing also a growth in foods. So I think it has to do a lot with the competitive dynamics of that sector and not so much that they are cannibalizing also. In that, in that segment.

Speaker Change: But I think in a couple of countries are supposed to said we are at that point, where it really moves from fine tuning or you never finished fine tuning the value prop.

Speaker Change: Moving more to a to a replication.

Speaker Change: Our replication mode of just get more scale and then.

Speaker Change: The margins and the ROIC begin to look a lot better.

Thank you very much.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question is from Robert Ford with Bank of America. Please go ahead.

Robert Erick Ford Aguilar: Thank you very much and good morning, everybody.

Robert Erick Ford Aguilar: You mentioned your excitement with discount retailing, but you didn't use the term our discounting and I was curious as to why.

Robert Erick Ford Aguilar: Then how are you thinking about <unk> growth in the context of possible OXXO cannibalization and then the press release also cite soft drinks as being a driver of BARDA in the quarter what percent of sales.

Eugenio Garza Y. Garza: I would also comment on that also. We have a unique opportunity in that format that others don't. A typical hard discount does not have convenience categories.

Eugenio Garza Y. Garza: Part of the reason they don't do that is because of the distribution model and a variety of other reasons. We already have that. It's already built. So adding the convenience categories to our BADA offering just strengthens the BADA offering. But we like to refer to it internally more as a soft discount because we don't necessarily feel the need to follow every single rule of hard discounting.

Robert Erick Ford Aguilar: Our soft drinks and how are you tackling the private label in the opening price point opportunity in the beverage category.

Robert Erick Ford Aguilar: By that.

Speaker Change: And I'll leave it there thank you.

Speaker Change: Thank you. Thanks for that question. So yeah, that's a very good point, obviously, but I wouldn't say.

Speaker Change: It's a very good.

Speaker Change: Precisely.

Speaker Change: Already a higher discount retailer no I think it's in the process of getting there we still have.

Speaker Change: <unk>.

Speaker Change: Our private label.

Speaker Change: As a percentage of total sales is growing every quarter, but it's still on the on.

Eugenio Garza Y. Garza: And we tend to be a little bit more pragmatic and agnostic about certain things, particularly because we can bring a whole set of capabilities to that business that others can't. Another example is financial services and executing services within the store. Very few people can bring that to a hard discount model and create that network effect that we have today at OPSO and, marginally, doesn't have any cost to what we're doing enough.

Speaker Change: Hi, Duane.

Duane: And <unk>, but I think as we move forward, we're assigning a team to grow our private label business and we see a huge opportunity.

Duane: To keep growing that business in terms of cannibalization as you know <unk> has been part of the of this business for over 20 years or more.

Duane: But in our Peru southeast under discount mater.

Duane: And over the last five years.

We see a lot of bought us in one our platform get apparel mix to OXXO and they thrive.

Eugenio Garza Y. Garza: I would add that that competitive advantage is an important segment. The services part of Vara is an important it doesn't isn't as big as in Anoxo, but it's growing. And we've been very smart about making sure it doesn't interfere with the rest of the value proposition of Vara to not affect the discount buyers of the store. So I think we serve both consumer occasions very well in Vara. And that's something that only Vara can do.

Duane: Both of them. They do I mean, obviously there is some cannibalization, but its minor.

Duane: These are very different demographic they serve very different.

Duane: Purchase decisions.

<unk>.

Duane: I think is much more geared to work.

Duane: They're not.

Duane: The socioeconomic level that really requires.

Duane: Everyday purchases.

Duane: It is.

Duane: Still about 25% of its revenue is convenience and in that sense, we do sell out a lot of soft drinks.

Duane: More and more geared towards.

Duane: And familiarity.

Duane: Multi serve.

Duane: Options.

Duane: We do see a lot of growth.

Duane: In beverage as just as we saw a slowing Knoxville our growth in beverage. So I think it has to do a lot with our competitive dynamics.

Duane: That sector.

Duane: Im not so much that they are cannibalizing OXXO.

Eugenio Garza Y. Garza: Those are very important points of differentiation. And then, just with respect to how you're tackling the beverage category in BADA, you know, in terms of the importance of private label and how you're finding your opening price points, or do you stick to, you know, all branded? Unknown Speaker My belief, based on talking to experts in the industry, private label works fantastically in almost all categories, one of the toughest ones. And you've seen it in Walmart, you've seen it in other discounters.

Duane: In that in that segment.

Speaker Change: I will cover that also.

Speaker Change: We have a unique opportunity in that format that others don't.

Speaker Change: <unk> hard discount does not have convenience categories.

Speaker Change: Part of the reason they don't do that is because of the distribution model and a variety of other reasons. We already have that it's already built so adding the convenience categories to our BARDA offering just strengthens the bond offering.

Speaker Change: <unk>.

Speaker Change: But.

Speaker Change: We'd like to refer to it internally more as a soft discount in there because we don't necessarily feel the need to follow every single rule of hard discount.

Speaker Change: And we tend to be a little bit more pragmatic and agnostic about certain things, particularly because we can bring a whole set of capabilities to that business that others can one. Another example is financial services and executing services within the store very few people can bring that to a hard discount model and create that network effect.

Eugenio Garza Y. Garza: It's beverages. I am of the belief that private labeling in beverages, other than water and other categories, we like working with the big players that, you know, the cost of carrying that and putting that cost in place, I'd much rather stay with the big players in beverages. I do think private label serves a huge purpose in almost all other categories, and it has nothing to do with our ownership over Velofenza.

Speaker Change: We have at OXXO and marginally.

Speaker Change: It doesn't have any cost of what we're doing at OXXO.

Speaker Change: I would add that as we got that competitive advantage is an important segment of service as part of BARDA is and importantly, it doesn't it's not as big as in in OXXO.

Speaker Change: It's growing.

Speaker Change: And we would be very smart about making sure. It doesn't intervene with the rest of the value proposition of <unk> do not affect that.

Eugenio Garza Y. Garza: It just really what the consumer is demanding in those products are national brands, and so we will provide them. The fact is OXO does have some private label beverages, but they are generally a very small niche of the total beverage portfolio that we offer. Makes sense. Jose and Martin, thank you both very much.

Speaker Change: That discount buyers of the of the store. So I think we serve both.

Speaker Change: Consumer locations very well environment, that's something that only <unk> can do.

Speaker Change: Those are very important points of differentiation and then just with respect to how you're tackling the beverage category and BARDA.

Speaker Change: And in terms of the importance of private label and how you're finding your opening price points or do you stick to our branded.

Operator: Thank you. Thank you. Our next question is from Rodrigo Alcantara with UPS. UPS, please go ahead.

Speaker Change: And paper route.

My belief from talking to experts in the industry private label were fantastic in almost all categories. One of the toughest one and Youll see meeting Walmart Infinity another discounter.

Rodrigo Alcantara: Thanks for taking my question, Juan and Jose. My question would be for you, Jose, just if I understand correctly Carlos Laboy's question, I mean, you mentioned focus on NOXO, LATAM, right, and the U.S. could be over time. I mean, does this mean that, in your view or, you know, the U.S. as a priority maybe gets a step backwards in terms of priorities, perhaps if I perceive correctly or not, and on the other hand, I'm curious that we have not heard about Europe, perhaps Valora, which has performed amazingly well over the last few quarters, a very, very nice surprise. So also, just curious here is why it's just a coincidence that Valora was not being discussed here.

Speaker Change: Yes.

Speaker Change: Beverages.

Speaker Change: Yeah.

Speaker Change: I am of the belief that the private labeling in beverage other than water another category.

Speaker Change: We like working with the big players.

Speaker Change: Dr.

Speaker Change: Cost of carrying that I'm, putting that cost in place I'd much rather stay with with a with a with a big player in beverages I do think private label surf a huge purpose.

Speaker Change: Almost all other categories.

Speaker Change: And it has nothing to do with our.

Speaker Change: Ownership will recover Villa FEMSA.

Speaker Change: Really.

Speaker Change: What the consumers, depending and those prospects are the national.

Speaker Change: All our brands and so we will provide them. The fact this Oxford does have some private label beverages.

Speaker Change: But they generally are very small niche.

Speaker Change: Of the total beverage portfolio.

Eugenio Garza Y. Garza: That would be my question, Jose. Thank you very much. Thank you, Rodrigo, for your question. It's good for me to clarify. First, I am very excited about the U.S., but I think the U.S. In general terms, when you talk about convenience, it's like saying, it's a very generic term.

Speaker Change: Awesome.

Speaker Change: It makes sense for semi team. Thank you both very much.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is from Rodrigo Alcantara with UBS UBS. Please go ahead.

Speaker Change: Yeah.

Rodrigo Alcantara: Hi, guys. Thanks for taking my question.

Rodrigo Alcantara: My question would be towards your close rate.

Rodrigo Alcantara: Okay.

Eugenio Garza Y. Garza: The U.S. is huge in the convenience store market. It's 160,000 convenience stores with very different dynamics and demographics and styles of stores as you move geographically and from rural to urban. So I would say, am I excited about that U.S.? It's very general.

Rodrigo Alcantara: Despite perceived correctly on on tableau stabilized class Shannon and then you mentioned focus on OXXO.

Rodrigo Alcantara: Latam right U S could be over time.

Rodrigo Alcantara: Does this mean that in your view or use of a priority may be get a step backwards in terms of priorities, perhaps for Steve correctly or not.

Eugenio Garza Y. Garza: I am very excited about certain parts of the U.S. Particularly, I am very excited about the border towns, towns that I know well, that I've known forever, and they are very much familiar with the OXO brand and the OXO capability. And I believe, and we've talked to people in those border towns, they will be very excited to have the opportunity to have the OXO value proposition on both sides of their, basically, their own city already.

Rodrigo Alcantara: The other hand.

Rodrigo Alcantara: Tourists that we have not care about Europe, perhaps below that which has.

Performed amazingly right over the last few quarters.

Rodrigo Alcantara: A very nice surprise. So just curious curious why it just coincidence that by Laura was not BD Scott's discussed here.

Speaker Change: Those will be that will be my question Javier Thank you very much.

Javier: Thank you Rodrigo for your question.

Eugenio Garza Y. Garza: So I'm very excited about the potential of the border towns or near border towns for OXO expansion. And we have a team in place, and we're working hard on how to tackle that. I am also excited about exploring. Certain regions of the U.S. where I see interesting dynamics are still very attractive for convenience store expansion. If you look at the southwest without California and the southeast without Florida, there's not a lot of density where there's less competition. That's where I see the fuel dynamics taking a longer time to change.

Speaker Change: It's good for me to clarify.

Speaker Change: I am very excited about the U S, but I think the U S.

Speaker Change: In general terms when you talk to convenience is like saying.

Speaker Change: It's a very generic term U S is huge in the convenience store market, it's 160000 convenience stores with very different there.

Speaker Change: The dynamics in demographics and style of.

Speaker Change: Sure.

Speaker Change: As we move geographically and from rural and urban.

Speaker Change: So I would say I am I excited in that U S is a very general I am very excited about certain parts of the U S, particularly I am very excited about the border towns tons that I know well known team ever and they are very much <unk>.

Speaker Change: <unk> with the OXXO brand and the OXXO capability and I believe I'm like week to week.

Eugenio Garza Y. Garza: I think that fuel as a value for traffic will keep, I mean, I think for many, many years in the U.S., but particularly in those regions, it will be very resilient. So I'm also exploring, not necessarily with the OXO brand, but are there any value or interesting small or medium potential acquisitions where we could transfer the capabilities that OXO has and provide value. I'm excited about some of our assortment capabilities, our pricing capabilities, and, frankly, our purchasing negotiation capabilities because we're a huge player in many beverage and tobacco categories and many of the categories that are already here south of the border, and maybe we can make a play.

Speaker Change: Thoughtful to two people in those border towns they will be very excited to have the opportunity to have the OXXO value proposition on both sides of their basically their own studio already so I'm very excited about the potential of the border towns are near border towns for OXXO expansion.

Speaker Change: And we have a team in place and we're working hard on how to tackle that.

Speaker Change: I am also excited about exploring.

Speaker Change: Certain regions of the U S.

Speaker Change: Yes.

Speaker Change: Interesting dynamics.

Speaker Change: Very attractive for convenience store expansion, if you look at the southwest without California, and the southeast without Florida Theres not a lot of density is where there is less competition, that's where I see the fuel dynamics, taking a longer time to change.

Speaker Change: I think I did.

Speaker Change: Fuel fuel is a.

Speaker Change:

Speaker Change: As a value for graphics will keep.

For many many years in the U S, but in particularly in those regions.

Speaker Change: The very resilient.

Speaker Change: So I'm also exploring not less R&D with the OXXO brand work.

Eugenio Garza Y. Garza: So I'm excited about it. I'm just super excited about how close we are to a very interesting expansion in South America, and Europe is a very interesting place for us. We bought a company that has superb management, and you're seeing that in the results.

Are there any value are interesting.

Small or medium.

Speaker Change: Potential acquisitions, where we could transfer the capabilities that OXXO half and provide value I'm excited about some of our assortment capability, our pricing capability and frankly, our purchasing negotiation capabilities because.

Speaker Change: Huge player of many of the beverage.

Eugenio Garza Y. Garza: They've done a tremendous job of really finally capturing the potential that they have. And I still see a lot of potential for bottom-line growth. We have some assets in the Valora portfolio input service that are quite frankly impressive in terms of profitability for a while. And one of the big challenges that the team has is, can we grow them? Can we grow them organically?

Speaker Change: Debacle in many of the categories that are already.

Speaker Change: Yourselves over the border and maybe we can we can play a place.

Speaker Change: Excited about it I'm just super excited Hello Tao.

Speaker Change: Close we are to a very interesting expansion in South America.

Speaker Change: And Europe is a very interesting flavor.

Speaker Change: We bought a company that has superb management Andrew.

Speaker Change: And you're just seeing it with our results.

Speaker Change: Tremendous job.

Eugenio Garza Y. Garza: If we begin to grow organically, our Bretschel-Koenig business, our Friedenberg business, I think there could be a very interesting surprise for Valora going forward and many more quarters like this one. So I'm very excited about Valora as well. Awesome. That was a great call to understand your thinking. And last one, apologies for violating the rules.

Speaker Change: And really finally, capturing the potential that they have and I still see a lot of potential bottom line growth.

Speaker Change: We have some assets in the Lora portfolio in foodservice that are quite frankly impressive inherent in terms of.

Speaker Change: Four wall profitability and one of the big challenges.

Speaker Change: That the team has is can we grow them can we grow them organically, we begin to grow organically our breath organic business.

Speaker Change: Our <unk> business I think there could be a very interesting surprise.

Speaker Change: For <unk> going forward on many more quarters like this month, so I'm very excited about below that as well.

Rodrigo Alcantara: I mean, we have seen you very naturally from the health division, right? You were recently in Chile visiting Cruz Verde, etc. I mean, just curious about your thoughts on what to do or the areas for improvement in Mexico in the health division, and how you see M&A feeding in the health division. That would be my last question. Thank you very much.

Speaker Change: Awesome, great color just to understand your thinking and the last one I apologize.

Thank you Darryl.

Speaker Change: We have seen youre very negative on the <unk> cost burden et cetera, just curious your thoughts on what to do or be areas for improvement in Mexico, How big region. How do you see M&A feeding in the foundation that will be my last question. Thank you very much closer.

Eugenio Garza Y. Garza: So, as you know, the health division, particularly in Mexico, is going through some challenges in terms of competition. I mean, let's not forget we had very successful years, many years of profitable growth and hitting our stride. But I think we had one type of pharmacy format in Mexico.

Speaker Change: So as you know the health division and particularly in Mexico.

Speaker Change: Going through some challenges in terms of competition.

Speaker Change: Okay.

Speaker Change: I mean, let's not forget we had a very successful years, many years of profitable growth and hitting our stride, but I think we had one one type of pharmacy format in Mexico, and we believe now we have the right.

Eugenio Garza Y. Garza: And we believe now we have the right system in place to begin to develop another type of pharmacy format that has worked fantastically for us in Chile. We're really turning around Chile and Ecuador with our more, you know, better-developed store version. And we think Mexico is ready for a Nisa or Cruz Verde store version that really captures all the value that we can bring in health and beauty and pharmacy. And so we are planning to roll out organic expansion on that level.

Speaker Change: System in place to begin.

Speaker Change: To develop another type of pharmacy format that hard work.

Speaker Change: SPP for us in Chile, we're really turning around Chile, Ecuador, with our with our more.

Speaker Change: Better develop store version and we think Mexico is ready for.

Speaker Change: For a knee sour crudes.

Speaker Change: Our version that really captures all the value that we can bring health and beauty.

Speaker Change: In pharmacy.

Eugenio Garza Y. Garza: We've always looked for potential opportunities in organic opportunities in Mexico. But right now, we're very much focused on getting more accelerated expansion in a bigger format of stores in pharmacies in Mexico. Awesome. Thank you very much, Chris.

Speaker Change: And so we are planning to rollout organic expansion on that level, we've always.

Speaker Change: Always look for potential opportunities in inorganic opportunity in Mexico, but right now we're very much focused.

Speaker Change: In in getting more accelerated expansion in in a bigger but bigger format of stores in pharmacies in Mexico.

Speaker Change: Awesome. Thank you very much.

Operator: Thank you. Our next question is from Renata Cabral with Citigroup. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question is from Renata Cabral with Citigroup. Please go ahead.

Renata Cabral: Hi everyone. Thanks for taking my question. This is about STEAM by Oxxo. The platform was launched in 2021, and it reached an impressive number of almost 11 million users. So I'd like to ask you if you can share the opportunities you are seeing going forward in terms of eventual partnership with banks, extension of the service, and even evolution of the number of users that have already reached 11 million right now. So, thank you.

Speaker Change: Okay.

Renata Cabral: Hi, everyone. Thanks for taking my question.

Renata Cabral: This is about steam by OXXO. So the plot the formalized the 2021 and it reached an impressive number at all almost 11 million users.

I'd now like to ask Keith can you share the opportunity we're seeing going forward.

Speaker Change: <unk> zinc Dwaal Park nation with banks.

Speaker Change: Service uneven evolution of the number of users that alright.

Keith: And I think right now.

Keith: Kim.

Martin Arias: Yeah, I'll take that question. Look, the entire spin ecosystem is not only a great financial opportunity for FEMSA or a business opportunity for FEMSA. It's a strategic necessity. And I would look at it as an entire ecosystem. I think it all works together. So I wouldn't focus just on spin by OXO.

Keith: Yes.

Keith: Take that question look the entire spin ecosystem is not only a great financial opportunity for FEMSA <unk> business opportunity for subset, it's a strategic necessity.

Speaker Change: And I would look at it as an entire ecosystem I think it all works together.

Martin Arias: The idea is that eventually that ecosystem will grow outside of the store, so the store is indispensable for it. It contributes to the store in very positive ways. For example, as I mentioned earlier, the loyalty program. But our vision of combining SpinBioxo, SpinPremia, and our NetPay business is to be able to go outside the store to offer a complete solution to other, particularly small businesses, where they can also have their own loyalty program, where they can also have their point-of-sale terminal through which they can transact and provide services themselves, payment of services.

Speaker Change: <unk> focused just on spin by OXXO.

Speaker Change: The idea is that eventually that ecosystem.

Speaker Change: No.

Speaker Change: Grow outside of the store.

Speaker Change: Stores indispensable for it contributes to the store in very positive ways. For example, as I mentioned earlier the loyalty program.

Speaker Change: But our vision of combining spin by OXXO.

Speaker Change: <unk>.

Speaker Change: And our net pay business is to be able to grow outside the store to offer a complete solution to other particularly small businesses.

Speaker Change: They can also have their own loyalty program.

Speaker Change: Where they can also have their point of sale.

Speaker Change: Terminal.

Speaker Change: Through which they can transact and provide services themselves a payment of services.

Martin Arias: And our idea is, as a strategic necessity, we need this business to protect and enhance the value proposition of OXO. And as a business opportunity, it's taking it outside the store with all these different components that I've mentioned. Our new CEO in that business, Juan Carlos Guillermete, will be speaking on this call at some point during this year, and he will share with you his vision.

Speaker Change: And our idea is as a strategic necessity, we need this business to protect and enhance the value proposition of OXXO.

Speaker Change: As a business opportunity it's taken it outside of the store with all these different components that I've mentioned.

Speaker Change: Our new CEO and that business Juan Carlos <unk> will be speaking on this call at some point during this year and he will share with you. His vision. He has brought a new focus on very specific areas of opportunity for that business, which you will share with you. The next time.

Martin Arias: He's brought a new focus on very specific areas of opportunity for that business, which he will share with you the next time when he participates on this call. And, in addition, I have been very pleasantly surprised at how he has taught the organization about key areas where we can be saving a significant amount of money, which is obviously the money that we can redeploy in more productive efforts. I hope that answers your question.

Speaker Change: When he participates on this call and in addition, I have been.

Speaker Change: Very pleasantly surprised at how he has taught the organization about key areas, where we can be saving.

Speaker Change: Significant amount of money, which is obviously the money that we can redeploy.

Speaker Change: And more productive efforts.

Martin Arias: I think I would just add to what Martin just said, Renata. We mentioned a little bit in the opening remarks how we are, you know, after a few years, which you alluded to where a lot of the focus was put on acquiring customers, right? And we had our theories of what kind of a role the store network would play as a tool to help us acquire customers. Obviously, those questions have been very favorably answered.

Speaker Change: I hope that answers your question.

Speaker Change: I think I would just add to what Marty said.

Speaker Change: We mentioned a little bit in the opening remarks, how we are.

Speaker Change: After after a few years award.

Speaker Change: Alluded to where.

A lot of the focus was put on acquiring customers right in a week, we had our theories of how what kind of a role of the store network would play as a tool to help us acquire customers. Obviously those questions have been very favorably answered.

Martin Arias: But eventually, as you move more towards monetization, and these are questions that we get all the time, you know, how do you monetize this? Do you eventually, there's digital media that is, you know, how to begin to use that data. We're already beginning to do that and monetize it with CPG companies and other initiatives. And eventually, to Martin's point, lending, right? And how do we eventually move in that direction? Do we do it ourselves? Do we do it, you know, with a partner?

Speaker Change: But eventually as you move more towards monetization and these are questions that we get all the time.

Speaker Change: How do you monetize it is do you eventually.

The digital media.

How to begin to use that data we are already beginning to do that and monetize it with CPG companies.

Speaker Change: Other initiatives.

Speaker Change: And eventually to marketing point.

Speaker Change: Lending right and how we eventually move in that direction.

Martin Arias: We will cross those bridges when we get there. But right now, I think it's very satisfying that on the question of whether we could acquire a lot of SOBs and be one of the fintechs or one of the, you know, players that would be left standing. I think the answer has been a resounding yes, and there are just a lot of things that we can do. We mentioned at the outset the number of data points, right?

Speaker Change: We do it ourselves do we do it with a partner we will cross the bridge when we get there but.

Speaker Change: Right now I think it's a very satisfactory that on the on the question of whether we could acquire a lot of subs and be one of the fintech or one of the play.

Speaker Change: Players that will be left standing I think the answer has been a resounding yes.

And Theres just a lot of things that we can do.

Martin Arias: The millions of tickets every day that are enriching our databases that we're putting to work in various ways. So, lots of upside there and lots of things to do. I would just add, I think Juan Carlos and I are working together to push this number. But we are very proud of our tender, which has been premia with 35% and growing every month, and people are getting more accustomed. And that's obviously a general average, but there are parts of Mexico that have been premia, the tender is over 50%, almost reaching 60%.

Speaker Change: We mentioned at the outset, the number of data points right million millions of tickets to everyday that are enriching our databases.

Speaker Change: We're putting to work in various ways. So.

Speaker Change: Lots of upside there.

Speaker Change: Lots of lots of things to do I would just add I think.

Speaker Change: On Carlos and I are working together in pushing this number but.

We are very proud of our tender, which in premier with 35% and growing every month and people are getting more adopted and Thats, obviously, a general average, but there are parts.

Speaker Change: Parts of Mexico, Thats been perennial.

Martin Arias: So, that's an impressive amount of people in certain cities in Mexico who are already used to the premia loyalty program, and they take it with them everywhere. But still, if you add our tender in financial services within the store, it's still very low. It's, I think it's in the five percent.

Speaker Change: Defender, it's over 50% almost reaching 60%. So that's an impressive amount of people in the industry in certain cities in Mexico were already used to that does athene premier loyalty program and they take it with them everywhere.

Speaker Change: But still if you add our tender in financial services within the store is still very low.

Martin Arias: And we, we put our focus on that, and Juan Carlos and I are working together to devise something to accelerate that, our value, and that info that we'll have that will be very valuable for not only retail media but especially for more financial services and lending. That's going to explode in potential. So, that's when I think conversations with other players and potential partners will become much more interesting, and they'll be more eager to do things with us. So, we look forward to keeping you updated on how that number increases for us. Really helpful. Thank you, you. Our next question is from Ben Theurer of Barclays. Please go ahead.

Speaker Change: I think it's been in the 5%.

Speaker Change: As we.

Speaker Change: We've put focus on that and can Carlos <unk>.

Speaker Change: They are working together in devising something to accelerate our value that info that we will have that will be very valuable for not only our retail media, but especially for more financial services and lending that is going to explode in potential so.

Speaker Change: <unk> <unk> hundred 19.

Speaker Change: Conversations with other players on potential partners will become much more interesting and there'll be more eager to do things with us. So we look forward to keeping you updated on how that number.

Speaker Change: Increases.

To us really helpful. Thank you.

Speaker Change: Thank you. Our next question is from Dan.

Dan: Lawyer of Barclays. Please go ahead.

Benjamin M. Theurer: Good morning, and thanks for taking my question. A lot has been answered, but one question I still have pending is just around capital allocation in general, as it relates to your leverage targets. And it seems like you've toned down a little bit in terms of what you would like to do on the M&A side. Clearly, we have seen you active on the buyback side; you've done a little bit more on the dividend side.

Dan: Hi, good morning.

Dan: Thanks for taking my question.

Dan: A lots been answered, but one question I still have pending is just around the.

Dan: The capital allocation in general as it relates to your leverage targets and it seems like your.

Toned down a little bit in terms of what you would like to do on the M&A side clearly we have you seen active on the buyback side you've done.

Benjamin M. Theurer: But if we look at the amount of leverage we're leveraging, and I think you're still due to get some incremental cash, it really feels like it's still a long runway until the end of 2026 to kind of get to your target leverage. So maybe help us understand how you think about getting to potentially the $2 billion on the buyback side, at least as one lever. And if you're considering maybe another extraordinary dividend, what are the things you're focusing on to add to that? Yeah, that's the issue of the tone of M&A. I wouldn't call it an issue of tone.

Dan: Bit more on the dividend side, but if we look at where leverage is I think youre still do get some incremental cash it really feels like it's still a long runway until the end of 2026 to kind of get to your target leverage so maybe help us understand how you think about <unk>.

Dan: Adding to potentially have a 2 billion on the buyback side at least as one lever and if you're considering maybe another extraordinary dividend what are like the things you're focusing on to to add to that.

Yes.

Martin Arias: But the reality is we have strategically declared that our focus will be on the three corporate birds. And in each one of those verticals, it's pretty clear what would be available in terms of mergers and acquisitions. It's always going to be within the Coke system, and anything that's really outside of the Coke system, more likely than not, will almost surely, and sort of more likely than not, be together with a Coca-Cola company in the typical way we do transactions of that nature.

Dan: The tone of M&A.

Speaker Change: I wouldn't call it an issue of ton, but the reality is we have declared strategically our focus will be on the three core verticals and each one of those verticals, it's pretty clear what would be available in terms of mergers and acquisitions of bank blood cancer.

Speaker Change: <unk> always going to be within the Coke system and anything that's really outside of the coke system more likely than not.

Will almost surely instead of more hydrogen will be together with the Coca Cola company and the typical way we've done transactions of that nature.

Martin Arias: In the case of digital, I don't today see any sort of immediate need for M&A, as in going out and acquiring assets. There may be joint ventures and there may be partnerships, but I don't really see a need for M&A. And then on the retail side, you know, the one issue that I know concerns people, that people are monitoring, is the issue of the U.S.

Speaker Change: In the case of digital I don't today see any sort of immediate need for M&A as in going out and acquiring assets. There may be joint ventures, and there may be partnerships, but I don't really see and then on the.

Speaker Change: On the retail side.

The one issue that I know concerns people that people are monitoring is the issue of the U S and I think wholesale spoke about what his objectives are and give you some sense of sizing what we're.

Martin Arias: I think Jose spoke about what his objectives are and gave you some sense of the size of what we're thinking about. So, and there are opportunities in retail with regard to health. In Mexico, for example, somebody asked the previous question about that, and there are opportunities, and we will always look at them, obviously, always with a value creation lens. There isn't much to be done in Latin America in the convenience space.

Speaker Change: Thinking about.

Speaker Change: So and there are opportunities in retail.

Speaker Change: With regards to how.

Speaker Change: In Mexico for example, somebody asked the previous question about that there are opportunities and we will always look at them, obviously always with value creation lens.

Martin Arias: All of them tend to be generally small. And we are having enough success with our organic growth that it would have to be an interesting and compelling opportunity in order to forego what is always, on a risk-adjusted basis, you know, organic growth only provides an overall greater return in the shorter term. In terms of capital allocation and returning capital to shareholders, as we announced in FEMSA's forward, there are two ways we can do that: extraordinary dividends and buybacks. And we're agnostic really, it really is not; we will always be evaluating what is the most efficient way and what provides the best return.

Speaker Change: There isn't much to be done in Latin America in the convenience store space all of them tend to be generally small.

Speaker Change: And we are having enough success with our organic growth that it would have to be an interesting and compelling opportunity in order to forego what is always on a risk adjusted basis.

Speaker Change: Organic OLED provides the overall greater return in the shorter term.

Speaker Change: In terms of capital allocation and returning capital to shareholders as we announced in terms of forward.

Speaker Change: There are two ways, we can do that extraordinary dividend.

Speaker Change: And.

Speaker Change: Buybacks and we're agnostic really it really isn't.

Speaker Change: We will always be evaluating.

Martin Arias: So, given our stock price, we're always, we use opportunities when the stock price goes down, and you can hear from our presentation that we're bullish on the business. So, we will probably always use tips in the stock market to take opportunities, and we'll do it through opportunistic purchases in the market during the windows and through these more formal ASR programs that meet all the legal requirements, which are quite detailed to work out between the U.S. and the Mexican market and the U.S. and Mexican authorities. And, you know, we have been very, very clear that we want to grow by two times in 2026. And I have my work cut out for me in this new role. Thank you very much.

Speaker Change: What is the most efficient way and what provides the best return so given our stock price.

Speaker Change: Louise.

Speaker Change: We use opportunities and our stock price goes down and you can hear from our.

The presentation that we're bullish on the business. So we will always use dips in the stock probably to take opportunities, we'll do it through opportunistic.

Speaker Change: Purchases in the market during the Windows and through these more formal ASR programs that meet all the legal requirements, which are quite detailed.

Speaker Change: To work out between the U S and the Mexican market in the U S and the Mexican authorities.

Speaker Change: And we.

Speaker Change: We have been very very clear that we want to reach two times by 2026 and I have my work cut out for me and this new rule.

Operator: Thank you. As a reminder, if you'd like to ask a question on today's call, please press star one on your telephone keypad to register your question. Our next question is from Alejandro Fuchs with Itaew. Please go ahead.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you as a reminder, if you'd like to ask a question on todays call. Please press star one on your telephone keypad to register your question.

Alejandro Fuchs: Hello, Jose Antonio, Martin, Juan, Jorge, Tim, thank you for the call and the space for questions. I have two very brief ones on Oxxo. The first one is that we saw very strong top-line growth during the quarter, and congratulations on that, but a slight drop in EBITDA margin, right? So I wanted to pick your brains a little bit on how you guys are seeing the different strategies now with continuous pressure in terms of, you know, payroll and expenses in Mexico.

Speaker Change: Our next question is from Alejandro Fuchs with <unk>. Please go ahead.

Alejandro Fuchs: Hello, Hassan talking about it being one Jorge and team. Thank you for the call them the space for questions I have two very brief ones on OXXO and the first one.

Alejandro Fuchs: Very strong top line growth during the quarter and congratulations on that.

Alejandro Fuchs: A slight drag on EBITDA margin right. So so I wanted to pick your brain a little bit on how you guys are seeing the different strategies.

Alejandro Fuchs: Now with continuous pressure in terms of payroll and expenses in Mexico. How do you see this going forward what is the company thinking about maybe efficiencies and although you mentioned some of the AI initiatives, maybe at the store any more than you have been or share with us would be very helpful and the second one maybe to maintain very quickly on gross.

Alejandro Fuchs: How do you see this going forward? You know, what is the company thinking about maybe efficiencies? And then I know that you mentioned some of the AI initiatives, maybe at the store. Any more that you can share with us would be very helpful.

Alejandro Fuchs: Also a very impressive expansion year over year at OXXO and wanted to understand how much R&D is already premier with a 35% tender.

Eugenio Garza Y. Garza: And the second one, maybe for Martin, very quickly on gross margin. Also, a very impressive expansion year-over-year at Oxxo. I wanted to understand how much of this is already premia with a 35% tender, and how much is, maybe, the commercial agreements, and if you see this as a sustainable level going forward. Thank you. So, um, Thank you, Alejandro.

Alejandro Fuchs: And how much is maybe the commercial agreements that <unk> seen is a sustainable level going forward. Thank you.

Alejandro Fuchs: So.

Speaker Change: Thank you Alejandro.

Alejandro Fuchs: I would I would.

Speaker Change: Say on <unk>.

Speaker Change: The EBITDA really as you know there has been labor.

Speaker Change: Pressure.

For the last few years.

Speaker Change: I think we were very good at controlling controlling a little bit of that labor pressure.

Eugenio Garza Y. Garza: I would, I would say on the data, obviously, as you know, there's been labor pressure for the last few years, and I think we were very good at controlling a little bit of that labor pressure. And some of the labor modifications that we did at the end of last year that are helping us to withstand our cushion a little bit, and I am very confident that, I will emphasize our AI initiatives are being very helpful in understanding transaction patterns, and we're being much smarter about how to close the stores with some of these AI initiatives.

Speaker Change: With some of the <unk>.

Speaker Change: Neighbour modifications that we did at the end of that last year that are helping us to withstand our cushion a little bit.

Speaker Change: That I am very confident.

Speaker Change: I will emphasize our AI initiatives are being very <unk>.

Helpful.

Understanding transaction patterns.

Speaker Change: We're being much more smarter about.

Speaker Change: How to staff the stores with some of these AI initiatives, but we started with.

With a pilot a big panel over several thousand stores with very good success over the first quarter and now we're going to rollout that throughout the year and that should help us a little bit compensate on the EBITDA, but basically we went from only monitoring profit in general in sales and from that doing an algorithm of how many.

Eugenio Garza Y. Garza: But we started with a pilot, a big pilot across several thousand stores with very good success in the first quarter, and now we're going to roll that out throughout the year, and that should help us a little bit compensate for the heavy debt. But basically, we went from only monitoring traffic in general and sales and from that, doing an algorithm of how many people should be stopped per store, and now we can put in inputs like traffic per hour, type of traffic versus services, versus coffee, versus other types of consumer demand and how that changes stuff.

Speaker Change: It's a bit tough per store and now we can put it in.

Speaker Change: Inputs like.

Speaker Change: Traffic per hour type of profit versus services vertical coffee versus other types of.

Speaker Change: Consumer demand and how that changes or thoughts on what we saw in <unk>. We have several thousand stores that were under staff and several thousand stores that were overstocked. So I think that AI will help us.

<unk> help us.

<unk> top line and will also help us.

Speaker Change: In the bottom line, so I don't see huge efficiency in terms of of layoffs, but more of just being much more efficient in how to make sure. The stores are up to the level, where they can maximize sale at a minimum cost. So we're very excited for that and we'll see that.

Speaker Change: It will help us much more as we progress what was started.

Eugenio Garza Y. Garza: And what we saw is that we had several thousand stores that were understaffed and several thousand stores that were overstaffed. So I think that AI will help us, in a sense, help us increase our top line and will also help us with the bottom line. So I don't see huge efficiency in terms of layoffs, but more of just being much more efficient in how to make sure the stores are staffed to the level where they can maximize sales at the minimum cost.

Speaker Change: By looking to a national.

Speaker Change: Sure.

Speaker Change: Rollout in terms of gross margin, we have ambitious plan of expanding gross margin. Several front. Some of it is being held by spin Premier some of it is being helped by what I mentioned.

Speaker Change: On on AI with better assortment.

Speaker Change: Better pricing.

Speaker Change: But I would say there are other things that are helping us.

Speaker Change: We had a dramatic increases in services not only in financial services. Both services oxo pay grew dramatically double digit grow growth a lot driven by e-commerce.

Speaker Change: With some of these new entrants and e-commerce using OXXO pay.

Eugenio Garza Y. Garza: So we're very excited about that, and we see that it will help us much more as we progress from what was started as a pilot to a national... In terms of growth margin, we have an ambitious plan of expanding growth margin on several fronts. Some of it is being helped by SpinPremia, some of it is being helped by what I mentioned about AI with better assortment and better pricing, but I would say there are other things that are helping us.

Speaker Change: As a preferred payment platform, we see a lot of growth there a lot of people are still non confident of using their.

Speaker Change: Our debit card or credit card to pay and obviously, it's a fantastic option for them when we see still a lot of growth for that and that really drives us in gross margin.

Speaker Change: We've also had some categories that are that are heavy on gross margin and that will help us like lights on green thumb on snacks. So in general I think.

Speaker Change: Got a few other things.

Helped us in the in the gross margin category.

Speaker Change: Yes.

Speaker Change: We were also very pleasantly surprised.

Speaker Change: The best first quarter gross margin.

Eugenio Garza Y. Garza: We've had a dramatic increase in services, not only financial services, but services. OxoPay grew dramatically, double-digit growth, a lot driven by e-commerce, with some of these new entrants in e-commerce using OxoPay as a preferred payment platform. We see a lot of growth there. A lot of people are still not confident about using their debit card or their credit card to pay, and Oxo is a fantastic option for them, and we still see a lot of growth for that, and that really drives us in terms of growth margins.

Speaker Change:

Speaker Change: I was able to document going back to many many many years back.

Speaker Change: Uh huh.

Speaker Change: One of the things that struck me since I came back although I was always involved I never left the company in terms of helping other strategic projects, but now obviously I get an opportunity to get more involved with the operations.

Speaker Change: The amount of tools available to OXXO.

Speaker Change: Two revenue segment to store segment.

Speaker Change: Relative to what it did five six years ago, when I left is really impressive.

Eugenio Garza Y. Garza: We've also had some categories that are heavy on growth margins that will help us, like some drinks and some snacks. So, in general, I think we've had a few other things that have helped us in the growth margin category. Yeah, and we were also very pleasantly surprised. It is the best first quarter growth margin that I was able to document going back many, many, many years ago.

Speaker Change: We have retail media digital retail media initiatives and that includes so youre now going to be able to sell.

Speaker Change: Generally promotional revenue from GOP inside the store from the screens inside the store from the use of the App.

Speaker Change: So two of those three didn't exist really five or six years ago.

Speaker Change: And that the.

Speaker Change: The scale always helps every thousands of doors, we add.

Speaker Change: You are selling the ability to transact with that ecosystem.

Speaker Change: Okay.

Speaker Change: So on the and on the Labor front I would just have to say again using data analytics.

Eugenio Garza Y. Garza: You know, one of the things that has struck me since I came back is that, although I was always involved, I never left the company in terms of helping out in strategic projects. But now, obviously, I get an opportunity to get more involved with the operation. The amount of tools available to OXO, revenue segment to store segment relative to what it did five, six years ago when I left is really impressive. You know, we have retail media, digital retail media initiatives, and that includes, so you're not going to be able to sell, generate promotional revenue from POP inside the store, from the screens inside the store, from the use of the app. So, two of those three didn't really exist five or six years ago, and that. The scale always helps.

Speaker Change: My understanding is.

Speaker Change: Supervisors used to supervise 12 stores and there are places in Mexico with the help of technology, where there are over 20 now.

Speaker Change: That's not always the case and you would have problems stores that you have to dedicate more time, but being able to increase your supervisors through the use first definition of roles and responsibilities between the store leader and the supervisor and then.

Speaker Change: Helping that supervisor with technology.

Speaker Change: Labor expense.

Speaker Change: I also worked in the Coca Cola company.

Speaker Change: Starting with the Coca Cola FEMSA for many years.

Speaker Change: And there is a.

A blessing in the increase of the minimum wage in Mexico, which is very helpful to us which is it goes towards the bottom of the pyramid that most uses our products in most users our stores and so.

Speaker Change: As People's income increases.

Speaker Change: The reality is they are also going to be purchasing more products from OXXO and then Andy buying more Coca Cola products, and we have to find the right balance, but part of our topline part of our ticket is people have more money in their pocket should be very honest. We're all happy about I think it's fantastic that people have more money in their pocket.

Eugenio Garza Y. Garza: Every thousand stores we add, you know, you're selling the ability to transact with that ecosystem. So, on the labor front, I would just have to say, again, using data analytics, my understanding is that supervisors used to supervise 12 stores. And there are places in Mexico, with the help of technology, where there are over 20 now. But that's not always the case, and you always have problem stores, and you have to dedicate more time.

Speaker Change: The standard of living is improving and thats.

Speaker Change: Win win for us at least.

Speaker Change: A positive development.

Speaker Change: Okay.

Speaker Change: Thank you for sampling and marketing very comprehensive questions. Thank you.

Speaker Change: Thank you and we have no further questions I would like to turn the call back over to Mr. Secor for any closing remarks.

Secor: Thanks, everyone.

Great call, obviously, we're available for follow ups as always.

Secor: And otherwise have a great weekend.

Secor: Yeah.

Speaker Change: Thank you very much that concludes today's conference you may now disconnect.

Eugenio Garza Y. Garza: But being able to increase your supervisors through the use of first the definition of roles and responsibilities between the store leader and the supervisor and then helping that supervisor with technology. As to the labor expense, I, you know, I also worked for the Coca-Cola company, I'm sorry, for many years, and there is a blessing in the increase in the minimum wage in Mexico, which is very helpful to us, which goes towards the bottom of the pyramid that uses our products and most uses our stores.

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Eugenio Garza Y. Garza: And so, as people's income increases, the reality is they're also going to be purchasing more products from Oxygen, and they're going to be buying more Coca-Cola products. And we have to find the right balance. But part of our top line, part of our ticket is that people have more money in their pockets.

Speaker Change: Okay.

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Eugenio Garza Y. Garza: To be very honest, we're all happy about it. I think it's fantastic that people have more money in their pockets and their standard of living is improving. And that's a win-win for us, at least a positive development. Thank you, Jose Antonio Martin. Very comprehensive questions.

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Operator: Thank you. Thank you. As we have no further questions, I'd like to turn the call back over to Mr. Fonseca for any closing remarks. Thanks, everyone. I think it was a great call.

Speaker Change: Thanks.

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Juan F. Fonseca: Obviously, we're available for follow-ups as always, and otherwise, have a great weekend. Thank you very much. That concludes today's conference. You may now, ? ? ? ? ? ? ? ? ? ? A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A A

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