FEMSA heads into its third-quarter report with the best operating story it has told in two years and a market that seems reluctant to believe it will last. Last quarter, OXXO Mexico posted positive customer traffic for the first time in eight quarters and same-store sales of roughly 9.5%, capping a steady climb from under 2% a year earlier. Management then did something unusual for a company on a roll: it told investors to expect less. Roughly 60% of the second-quarter lift came from the World Cup, executives said, and they steered second-half normalized comps back toward the mid-single digits. The October 28 release, due before the open, is the first clean look at what OXXO's momentum looks like without the soccer bump.
The Street is still asking for a lot. Consensus calls for earnings of $1.18 per share on revenue of about $13.08 billion, implying year-over-year growth of roughly 34% in EPS and nearly 12% in sales. Revenue is expected to slip slightly from the second quarter's $13.29 billion, which fits management's warning about fading tailwinds, yet the EPS estimate sits well above last quarter's $0.93. FEMSA has not issued formal guidance, so that bar rests largely on analysts' confidence that store growth, lower leverage and below-the-line improvements can offset a softer comp. Net debt to EBITDA fell to 1.15x last quarter, and consolidated net income jumped about 65%, but sustaining that kind of profit growth with slower top-line momentum requires margins to cooperate.
Margins are the real swing factor. OXXO Mexico's gross margin contracted 70 basis points to 44.8% last quarter, a sharp reversal from 140 basis points of expansion in the first quarter, because management is deliberately cutting prices and leaning into lower-priced items to win back shoppers. That is a reasonable trade if traffic keeps growing after the World Cup. Same-store sales near 5% with traffic holding around the roughly 1% underlying rate management estimated would validate the strategy. Comps slipping toward the low single digits while margins stay compressed would suggest FEMSA bought visitors rather than built loyalty. Continued share gains in beer, tobacco and soft drinks would be useful supporting evidence, especially given the sluggish Mexican consumer and excise taxes that are also weighing on Coca-Cola FEMSA's Mexico volumes.
Outside the core, several threads need follow-through. Health remains a drag after two large provisions tied to Colombian insurer credit risk, and the EPS Sanitas agreement expired in September, so this quarter should show whether the damage has been fully reserved or whether further charges loom. Fuel gross margin fell 130 basis points last quarter and bears watching. On the growth side, SPIN monthly active users rose 22%, and the new QED Investors partnership to build a lending platform is the most interesting catalyst in the portfolio. Early credit pilot results were encouraging, and any update on scaling that low-and-grow rollout matters. VARA's record 112 net openings and Colombia's roughly 30% revenue growth also set up expectations for faster expansion toward targets of 700 stores each in Brazil and Colombia by year-end.
The market has cooled despite the operating upturn. Shares are down 3.4% since the last report, trailing the S&P 500 by about seven points, and sentiment has dropped from 36% bullish to 15%. At $126.93, the stock sits above its 200-day moving average of $117.29 and in the middle of its post-earnings range, well short of the $141.47 high. That positioning suggests skepticism is already priced into the outlook, though it does not lower the consensus EPS hurdle.
Ultimately, this report hinges on one question: is OXXO's traffic recovery structural or seasonal? If comps land near management's mid-single-digit target with positive traffic and stabilizing gross margin, the price-investment strategy looks like a durable foundation. If traffic rolls over once the World Cup crowds disappear, last quarter's inflection will look more like a one-off event than a turning point.