The FEMSA paradox: revenues rise 11%, but OXXO profits fall

The Monterrey-based giant FEMSA presented a quarterly report that baffled the market. While its consolidated revenue grew a solid 11.1%, the operating profit of its most iconic brand, OXXO, plummeted an alarming 11.8%. What's behind this paradox?

Fomento Económico Mexicano (FEMSA), one of Latin America's largest conglomerates, has released its first-quarter 2025 financial results, revealing a complex, two-sided reality. On the one hand, the company demonstrates robust financial health with 11.1% growth in total revenue and a 4.9% increase in consolidated operating income. However, beneath this surface of success, its most visible and ubiquitous division, Proximidad Américas (dominated by OXXO stores), has suffered a drastic 11.8% drop in operating income.

This contradiction raises a fundamental question: how can the company's flagship be in trouble while the rest of the fleet is sailing with the wind in its favor?

The best way to understand this paradox is to look at the numbers. The following table breaks down the performance of FEMSA's main divisions, clearly showing the conglomerate's strengths and weaknesses.

OXXO's decline in profitability is due to a perfect storm of factors. Reports point to a 1.8% decline in same-store sales (a key indicator that measures the performance of established stores, excluding new openings). This could be a symptom that the Mexican market is reaching a saturation point for OXXO stores, where new openings are beginning to "cannibalize" the sales of existing ones.

Added to this is an increase in operating expenses, including higher labor costs. In short, OXXO is finding it more expensive to operate each store, and at the same time, existing stores are selling slightly less.

The strength of FEMSA's business model lies in its diversification. While OXXO is struggling, other divisions are performing stellarly:

• Healthcare Division: With an impressive 27.4% growth in operating profit, this segment (which includes pharmacies in several countries) has become a driver of profitability.
• Coca-Cola FEMSA: The bottler continues to be a solid and reliable source of growth, with operating profit up 7.4%.

FEMSA CEO José Antonio Fernández Carbajal expressed "cautious optimism" about the future recovery, citing "ongoing initiatives to improve revenue and manage operating costs."

FEMSA's report is a lesson in business life cycles. It shows that even a brand as successful and dominant as OXXO is not immune to market challenges. The question now is whether OXXO's decline is a temporary blip or the beginning of a new era in which Mexico's most famous convenience chain will have to reinvent itself to continue being the growth engine of one of the country's corporate giants.