And how we eventually move in that direction. Do we do it ourselves? Do we do it, you know, with a partner? We will cross those bridges when we get there. But right now, I think it’s very satisfactory that on the question of whether, we could acquire a lot of subs and be one of the fintechs, or one of the you know players that would be outstanding, I think the answer has been a resounding yes. And there’s just a lot of things that we can do. We mentioned at the outset the number of data points, right? 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.
Martin Arias: I would just add, I think Juan Carlos and I are working together in pushing big number. But we are very proud of our tender with Spin Premia with 35% and growing every month and people are getting more adapted. And that’s obviously a general average, but there are parts of Mexico that Spin Premia has, the tender is over 50%, almost reaching 60%. So that’s an impressive amount of people in certain cities in Mexico where are already used to the Spin 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. I think it’s in the 5%. And we put focus on that and Juan Carlos and I are working together in devising 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, would 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.
Renata Cabral: That was really helpful. Thank you.
Operator: Thank you. Our next question is from Ben Theurer of Barclays. Please go ahead.
Ben Theurer: Yes. Good morning and thanks for taking my question. A lot’s been answered, but one question I still have pending is just around the 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 you seen active on the buyback side. You’ve done a little bit more on the dividend side, but if we were leverages 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 MXN2 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 add to that?
Martin Arias: Yes. At the issue of the tone of M&A, I wouldn’t call it an issue of tone, but the reality is we have declared strategically that our focus will be on the three corporate verticals. And each one of those verticals, it’s pretty clear what would be available in terms of mergers and acquisitions. I mean we concerned, it’s always going to be within the Coke system and anything that’s really outside of the Coke system, more likely than not. We’ll almost surely, instead of not, will be together with a Coca-Cola company in the typical way we’ve done transactions of that nature. 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 retail side, the one issue that I know concerns people that people are monitoring is the issue of the U.S. I think José spoke about what his objectives are and gave you some sense of sizing of what we’re thinking about. So and there are opportunities in retail with regards 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 store space. 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 only provides the overall greater return in the shorter term. In terms of capital allocation and returning capital to shareholders, as we announced in FEMSA 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. 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 always use tips in the stock probably 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 the Mexican authorities.
And you know, we have been very, very clear that we want to reach two times by 2026 and I have my work cut out for me in this new role.
Ben Theurer: Thank you very much.
Operator: Thank you. [Operator Instructions] Our next question is from Alejandro Fuchs with Itaú. Please go ahead.
Alejandro Fuchs: Hello, José Antonio, Martin, Juan, Jorge team. 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 a very strong top-line growth during the quarter and congratulations on that, but a slight drop on 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 payroll and expenses in Mexico. How do you see this going forward? What is the company thinking maybe efficiencies and 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. 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.
José Antonio Fernández: So thank you, Alejandro. I would say on the EBITDA, obviously, as you know, there’s been labor pressure for the last few years. And I think we were very good in controlling a little bit of that labor pressure, and with some of the labor modifications that we did at the end of that last year that are helping us with standard push on a little bit that I am very confident that I will emphasize our AI initiatives are being very helpful. In understanding transaction patterns, and we’re being much more, smarter about how to staff the stores with some of these AI initiatives. But we started with a pilot, a big pilot over several thousand stores with very good success over the first quarter. And now we’re going to roll out that throughout the year and that should help us a little bit compensate on the EBITDA.
But basically we went from only monitoring traffic in general and sales and from that doing an algorithm of how many people should be staffed per store. And now we can put in, in inputs like traffic per hour, type of traffic versus – services versus coffee versus other types of consumer demand and how that changes the staff. And what we saw is we have 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 top line, and will also help us in 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 a minimum cost.
So, we’re very excited for that and we see that will help us much more as we progress that. But what started as a pilot into a national rollout. In terms of growth margin, we have an ambitious plan of expanding growth margin in several fronts. Some of it is being helped by Spin Premia, some of it is being helped by what I mentioned on AI with better assortment and better pricing. But I would say there are other things that are helping us. We’ve had a dramatic increase in services, not only financial services, but services also pay grew dramatically. Double-digit growth, a lot driven by e-commerce with some of these new entrants in e-commerce using OXXO Pay as a preferred payment platform. We see a lot of growth there. A lot of people are still not confident of using their debit card, or their credit card to pay and OXXO is a fantastic option for them.
We see still a lot of growth for that and that really drives us in growth margins. We’ve also had some categories that are heavy on gross margins that will help us, like some drinks and some snacks. So in general, I think we’ve got a few other things that have helped us in the gross margin category.
Martin Arias: Yes, and we were also very pleasantly surprised. It is the best first quarter gross margin that I was able to document going back to many, many, many years back. One of the things that has struck me, since I came back, 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 operations. The amount of tools available to OXXO to revenue segment, to store segment relative to what I did five, six years ago when I left is really impressive. We have retail media, digital retail media initiatives and that includes, so you’re now 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 exist really five or six years ago. And that, the scale always helps. Every thousand stores we add, you’re selling the ability to transact with that ecosystem. So on the, and on the labor front, I would just have to say, again, using data analytics, my understanding is supervisors used to supervise 12 stores and there are places in Mexico with the help of technology, where there are over 20 now. That’s not always the case and you always have problems stores, and 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 helping that supervisor with technology. As to the labor expense, you know, I also worked in the Coca-Cola company, sorry, in the Coca-Cola FEMSA for many years.
