Earnings call transcript: Alsea sees strong growth in Q1 2025

Restaurant operator Alsea SAB De CV reported strong Q2 2025 results, with sales rising 4.2% and net income surging 552.7% to $868 million, largely due to non-cash foreign exchange effects, which prompted a 4.85% stock increase. Performance was driven by robust growth in Mexico (9.1%) and Europe (25.4%), despite South American headwinds. Under new CEO Christian Gurria, Alsea aims for disciplined organic expansion, including the Chipotle Mexico launch, and portfolio optimization, while prioritizing customer traffic over price hikes and projecting mid-single-digit EBITDA growth.

Analysis

Alsea SAB De CV (ALSEA) reported a robust Q2 2025, with total sales increasing 4.2% year-over-year to COP 20.4 billion and same-store sales growing 4.9%. While net income surged an impressive 552.7%, this was primarily driven by non-cash foreign exchange effects on its U.S. dollar-denominated debt, a non-operational gain that warrants careful consideration. The core operational strength is evident in the 10.5% YoY rise in EBITDA, although the EBITDA margin contracted by 40 basis points. The company's performance is a tale of geographic divergence: strong sales growth in Mexico (+9.1%) and Europe (+25.4%) is offsetting significant weakness in South America, where same-store sales (excluding Argentina) fell 6% due to lower traffic in Chile and economic instability. At the brand level, Full-Service Restaurants (+5.9% SSS) and a resurgent Domino's Pizza (+6.0% SSS) were standout performers, while Burger King remains a significant drag, with a 6.8% SSS contraction in Mexico. Under its new CEO, Alsea is implementing a clear strategy focused on driving traffic over implementing price hikes, optimizing its portfolio through a 2:1 ratio of remodels to new openings, and pursuing disciplined organic growth, exemplified by the planned introduction of Chipotle to the Mexican market. The company is navigating notable headwinds, including rising coffee prices and a Net Debt-to-EBITDA ratio of 2.7x, but maintains guidance for mid-single-digit EBITDA growth, supported by a strong digital platform that now accounts for 38.6% of total sales.

Key Decisions for Investors

• Investors should monitor the execution of the new CEO's strategy, particularly the ability to sustain traffic and same-store sales growth without significant price increases amidst rising commodity costs.
• The portfolio's performance is highly bifurcated; consider the ongoing strength in the European and Mexican segments as a counterbalance to the persistent underperformance of the Burger King brand and macroeconomic challenges in South America.
• Evaluate the company's ability to manage its 2.7x Net Debt/EBITDA leverage and margin pressure, as the decision to absorb input cost inflation could impact profitability if sales volumes or operational efficiencies do not meet expectations.
• Factor in the long-term growth potential from strategic initiatives such as the high-ROI remodeling program, the introduction of Chipotle in Mexico, and the continued expansion of its robust digital and loyalty channels.