Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX) Q4 2022 Earnings Call Transcript

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Because it’s really surprising what you did at the SG&A level probably mainly in Mexico and how could that be replicated in other places. In the context of this big review, I would assume that you probably are thinking about the other regions as not only in terms of growth contribution that they could have to the overall business, but also returns.

Daniel Rodríguez: Thank you, Ricardo. I mean let me comment and then you can complement to it. But I would say that, I mean, in terms of your question around returns, I mean, obviously, we are at a very high level. So I think in that regard, you are right. And I think also, Ken, you mentioned during the last week call that, I mean in terms of additional value creation to open 1 stores in OXXO in Mexico, obviously, is one of the most profitable investment that we can make. So that is why we will continue doing so. Having said that, I mean, when you think in the medium and long term, that is why we think that the growth outside of Mexico. And I would talk specifically regarding South America, I think that will give us, I mean, a nice way to, in the future, compensate the scale that Mexico has achieved.

So on a store level, as I also mentioned during the last call, we feel pretty comfortable that we have been achieving, I would say, at this stage, mainly in Colombia and in Chile, which give us, I mean, a nice way to escalate the business and speed up, I mean, the organic growth. Obviously, in the case of Brazil, I mean, the value proposition is proven to be very successful. And Brazil will make a big difference, I mean, in terms of the scale of the business in South America. Peru is also doing well. But I mean, obviously, it’s a much smaller operation compared with the other 3. So I mean we are very positive in terms of the growth and in terms of the returns that we will achieve. But we recognize that we need to reach a certain level of scale, I mean, in terms of the number store and after that, you will take a while until we get there.

But I mean, very positive when you compare like-for-like, I mean, stores in Colombia with 1 store in Mexico. I mean I think we are very optimistic about that. So Eugenio?

Eugenio Garza: Sure. Thank you, Daniel. Just to complement, you have to remember that during the pandemic, the business did a fantastic job in terms of curtailing some of the losses we had in same-store sales through better store efficiencies I mean, better supply chain dynamics, et cetera. And those learnings basically continued as traffic and ticket came up. And on top of that, the expansion and the net new store expansion that we’ve been experiencing has been operating and what we call batting averages, which is what percentage of the new stores that we’re opening are meeting the target sales per store as they mature and we are all-time high in terms of batting averages. So we’re being a lot more strategic and a lot more targeted in pinpointing the right points so that the net new stores that we’re adding are being a lot more productive than the ones we were adding before plus, I mean, all the efficiencies that we gained during the pandemic, all the learnings about, I mean, opening hours, about shifts about changing supervision patterns, about inventory stocking segmentation, et cetera, have produced these all-time high ROICs at the store level and at the whole country level in Mexico.

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