April 29, 2019 / 1:35 PM / 7 months ago

UPDATE 2-Femsa's Oxxo stores on Mexican border outperform after wage hikes, tax cuts

(Adds details from analyst call; share movement)

MEXICO CITY, April 29 (Reuters) - Mexican conglomerate Femsa on Monday reported first-quarter growth, particularly in its Oxxo convenience stores near the U.S. border after President Andres Manuel Lopez Obrador this year raised wages and lowered taxes in the region.

Net profit jumped nearly 1,000-fold, helped by an easy comparison with the same quarter a year before, when Femsa's Coca-Cola bottling unit suffered from the Mexican peso's appreciation against the U.S. dollar.

For the January-March period, Femsa posted 2.2 billion pesos ($115 million) in net profit, up from just 2.3 million pesos a year earlier. The company's quarterly revenue rose 5.6 percent to 115.9 billion pesos, up from 109.7 billion pesos a year earlier.

Oxxo stores led growth with revenues up more than 9 percent, boosted by better sales, traffic and more than 200 store openings.

Most of the best-performing stores were in northern Mexico, particularly near border crossings, Investor Relations Vice President Juan Fonseca said in a call with analysts.

The period marks the first full quarter for Mexican businesses under Lopez Obrador, who took office in December. At the start of the year, he raised the minimum wage and cut taxes along the border to boost economic growth and deter migration to the United States.

"If you have higher wages and lower taxes, they are powerful levers for consumption," Fonseca said.

Femsa also noted consumption was stronger than expected given that this year's April Easter holidays, which drive sales, did not fall in the quarter.

However, Oxxo's operating costs increased nearly 19 percent, due to factors including higher labor expenses and managing the intake of cash in stores.

"The Mexican consumer is still very much a cash consumer... and that benefits us today," Fonseca said. "But we will have to anticipate the gradual evolution, where people rely more and more on digital currencies and e-wallets."

Oxxo accepts cash for a variety of websites and financial services and in April added Amazon.com Inc. to its roster. Fonseca said that Oxxo's own mobile shopping application is in a test phase in the company's northern Mexico home base of Monterrey ahead of a broader roll-out.

"The sense of urgency and the level of resources that the company has put behind digital is probably higher than you might imagine," Fonseca told analysts.

At Femsa's 540 gas stations in Mexico, same-store sales fell 7.5 percent due to gasoline supply shortages at the beginning of the year, the company said.

Shares in the company rose more than 1.5 percent after markets opened on Monday, following the release of results.

$1 = 19.4120 pesos at end-March Reporting by Daina Beth Solomon Editing by Bill Trott

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