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Hello, and welcome to the FEMSA Third Quarter 2026 Conference Call. My name is Carolini, and I will be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions]

I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead.

Good morning, everyone. Welcome to FEMSA's Third Quarter 2026 Results Conference Call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA's CEO; Martin Arias, our CFO; and Pamela Ortiz, who heads the Investor Relations team at Coca-Cola FEMSA.

The plan is for Jose Antonio to open the conversation with some high-level comments on the quarter's performance and trends, zooming in on OXXO Mexico's results, followed by Martin, who will provide more granular details on the results across our business units. Finally, we will open the call for your questions. Jose Antonio, please go ahead.

Thank you, Juan. Good morning, everyone. The third quarter was a strong one, during which our two main engines, OXXO Mexico and Coca-Cola FEMSA delivered strong results, showing an improvement in many of the variables we are trying to impact and thus reinforcing our confidence in our strategy and its effectiveness. At OXXO Mexico, our year-long effort to drive customer traffic while protecting our profitability produced solid results, while Coca-Cola FEMSA continued to improve results in Mexico and had a very strong set of numbers in South America.

Beyond the two big engines, exciting things are happening across our other business units. In particular, during the quarter, we saw Bara sustaining its pace of store base expansion and improving its maturation curve, while OXXO LatAm continued to deliver promising results across South America with Colombia leading the charge.

However, this morning, I would like to focus my remarks on OXXO Mexico by covering two topics. First, the continued recovery in sales and traffic, which gained further traction during the third quarter; and second, OXXO's profitability, including how we are balancing the different levers of our value proposition and the strategic framework and operating discipline that are helping us to address the challenges we face. After that, Martin will elaborate on the developments at our other business units in his remarks.

Let me begin with sales and traffic. On our last call and in many of our conversations with you since then, our recurring question was how much of our performance was structural and how much was driven by the World Cup. The third quarter gives us a good read on that issue. With very little benefit from the tournament with only one Mexico match in early July, same-store sales grew 9.2% in the quarter, driven by an increase of 5.5% in the average ticket and 3.5% in average traffic.

Given that ticket growth is nominal and includes the impact from excise tax increases on soft drinks and cigarettes, the highlight of the quarter is traffic, coming in 150 basis points above the level reported in the second quarter despite having only a small benefit from the World Cup.

While warmer weather provided some support, our data suggests it explains only part of the results. More importantly, the performance reflects a solid response from our customers to the strategy we described on our last call, putting the customer at the center of everything we do at OXXO and executing against our four strategic pillars of impulse, foodservice, daily and replenishment, and beyond trade services.

Furthermore, this positive customer response is also translating into market share gains. According to the market data available through August, OXXO continues to gain share against all relevant trade channels in the categories in which we compete. Year-to-date, our market share in the categories in which we compete is now above 2024 levels, with most of the gains concentrated in our core impulse categories, precisely where these adjustments have advanced the most. So far, this is a promising performance.

Beyond the impulse occasions, foodservice is another area where we have seen progress with traffic growing at a low double-digit rate, driven mainly by coffee. This has been the result of improved execution across our stores and tactical pricing, which helps us drive incremental costs per day. For its part, daily and replenishment is at a very early stage of testing, but its initial results are already modestly accretive to traffic. Together with Services, which is also growing in traffic terms, we see meaningful opportunities as we continue to develop all these categories. We are still fine-tuning our approach, and there is room to further refine our value proposition across the different strategic pillars.

We continue to test and learn from many initiatives, including structured price experiments across categories in selected regions, revamping our stores' coffee area and value proposition and testing the Canasta OXXO, our offer of everyday essentials at accessible price points, among others. These experiments are focused on gaining a better understanding of the right mix of assortment, price and promotions to accelerate traffic and sales. In those cases where we have adjusted the price packaging architecture, we monitor very carefully whether the resulting increase in volume is enough to offset the margin impact from the price reduction or switch from higher price points to lower price point SKUs. We know that not every test will work, but this process will allow us to scale only those that prove their overall positive value contribution.

Now let me turn to profitability. We manage our value proposition from an integral perspective. This includes price, gross margin, assortment, and in-store execution, including promotions and commercial income, all of which play an important role in enhancing value for our customers. Behind these levers are changes in our price and packaging architecture and in our overall mix as well as in the commercial income we generate working with our supplier partners, which is quite dynamic. What we were able to achieve this quarter is a better balance across all these levers to drive traffic while protecting our profitability.

While the reported gross margin contracted by 120 basis points, this contraction reflects in part a demanding comparison base as the third quarter of 2025 included a particularly high concentration of commercial income. Normalizing for this effect, OXXO Mexico's gross margin would have declined in line with the 70 basis point contraction of the second quarter of 2026.

In addition to this timing of commercial income issue, the gross margin result reflects the mix effects coming from affordability initiatives being offset by higher commercial income and by solid growth in higher-margin services. This is an important point as it shows that we are managing our affordability strategy in a rational and disciplined way, always leveraging OXXO's relevance as a commercial channel for our supplier partners rather than trading gross margin for market share.

In absolute terms, gross profit grew 7.4% Operating income grew 5.8% during the quarter and operating margin contracted by 40 basis points. This includes an impact of approximately 20 basis points from the closing of 140 older underperforming stores. Excluding these closures, operating income would have grown 8%. The closures are part of a broader pruning exercise involving approximately 250 stores, and we expect a similar impact in the fourth quarter as we complete the process.

While this measure affects near-term results, we believe it is healthy to periodically review our store base and prioritize the long-term profitability of the business. The quarter's results also reflect the team's focus on operating discipline, which has been just as relevant as the commercial strategy. In the context of increasing wages well above inflation and the upcoming labor reform relating to the reduced work week, expense efficiency continues to be a central part of how we run OXXO, and we are in a permanent effort to find new ways to optimize spending.

Summing up, I believe the third quarter is a good example of how our strategy is meant to work. We balance the different levers of our value proposition to bring incremental traffic to our stores, and we translated that volume into growth in gross profit and ultimately in operating income in absolute terms. That is, in essence, the algorithm behind our strategy, and it is how we manage the business with a focus on growing the absolute profit pool over time.

Having said that, we are not complacent. The consumer environment in Mexico remains soft, and our comparison base will gradually become more demanding as we move forward. But we are confident that we have the right strategy, the right team and a clear view of the levers at our disposal to keep executing and delivering on that strategy.

And with that, let me turn it over to Martin to go over the numbers in more detail. Thank you.

Thank you, Jose Antonio. Good morning, everyone, and thank you for joining us today. Let me begin with FEMSA's consolidated financial results for the third quarter of 2026. Total revenues increased 9.8% year-over-year, while operating income grew 9.9%, reflecting a solid performance at OXXO Mexico and Coca-Cola FEMSA and also reflecting the benefits of our cost containment and restructuring initiatives, partially offset by the bad debt provisioning in Colombia, the effect of the above-trend store closures at OXXO Mexico that Jose Antonio just described and the consolidation of losses at OXXO Brasil.

On a comparable currency-neutral basis, total revenues and operating income grew 9.4% and 13.4%, respectively. Net consolidated income amounted to MXN 10.6 billion, representing an increase of 81%. This was mainly explained by the operating income performance I just described as well as by, one, an undemanding comparison base, which included a MXN 3.1 billion loss from discontinued operations last year, reflecting the divestiture of FEMSA's logistics operations; and two, a noncash foreign exchange gain of MXN 1.1 billion compared to a MXN 1.2 billion loss in the comparable quarter, mainly reflecting a noncash gain from the valuation of our investment in Imperial Brady and the net effect of foreign exchange rate movements on FEMSA's U.S. dollar-denominated cash and debt positions.

These were partially offset by three items: one, a decrease in net interest income, mainly driven by lower cash balances and interest rates; two, a MXN 312 million loss from other financial income, mainly reflecting a loss on financial instruments at Coca-Cola FEMSA Brazil; and three, a higher income tax provision of MXN 5.1 billion compared to MXN 3.8 billion in the third quarter of 2025 due to our improved results. The effective income tax rate was 32.5% in the third quarter. As you know, our effective tax rate is subject to short-term volatility driven by a series of factors discussed in the last quarter's call.

Turning to our operating results. I will keep my comments on OXXO Mexico brief as Jose Antonio has already covered the quarter in detail. Total revenues grew 10.3%. Operating income grew 5.8% and operating margin contracted by 40 basis points. But after normalizing for the impact of the above trend store closures that Jose Antonio described, operating income increased 8% and operating margin contracted 20 basis points.

In terms of year-to-date expansion, we have added 734 stores and closed 272 stores in Mexico or a net increase of 462 new stores. While this means we will probably come up a bit short of our annual run rate of 1,000 net new stores this year, this is an exception and our annual target remains at the net 1,000 store level for the next year and beyond.

The Americas & Mobility segment delivered total revenues of MXN 29.5 billion, increasing 18.1% or 10.9% on a comparable and currency-neutral basis. Excluding the impact of consolidating OXXO Brasil, the segment's top line benefited from a solid performance at OXXO Gas driven by healthy volume growth and a strong performance across OXXO LatAm, especially in Colombia, where we continue to see encouraging four-wall dynamics with mature store traffic growing at a high single-digit pace during the quarter. For its part, OXXO Brazil continued to deliver encouraging performance with same-store sales increasing 5.1% on a currency-neutral basis.

Regarding merchandise gross margin, during the third quarter of 2025, we reclassified certain expenses from cost of sales to expenses for the first nine months of that year, which had a disproportionate positive impact on the margin for that quarter. Americas & Mobility, excluding OXXO Gas, was reported together with OXXO Mexico back then, so the impact was small for that segment. The objective of these reclassifications was to improve our disclosure by aligning the classification of costs and expenses across our retail businesses and to make the results of each of these operations as comparable as possible.

This was similar, although for different reasons to what we have done in the Europe and Health divisions. There is no impact on operating income, and we do not expect this to affect in future quarters as the entire effect of this reclassification was performed during that period. Given that change, during the third quarter of this year, the gross margin of merchandise decreased approximately 620 basis points to 33.5% of revenues. On the same accounting presentation basis, which is excluding the effect of this reclassification, gross margin for merchandise expanded by 10 basis points, reflecting solid gross margin expansions at OXXO Colombia and Peru, partially offset by a negative mix effect in OXXO Chile. Gross margin for the fuel operations decreased 50 basis points to 11.6%, reflecting the voluntary fuel price commitments at OXXO Gas, partially offset by solid fuel margins in OXXO USA.

Operating income was MXN 170 million with an operating margin of 0.6% representing a decrease of 76% and 29.9% on a comparable basis, excluding currency translation effects and the operating losses from the consolidation of OXXO Brazil. The operating margin reflects narrowing losses across OXXO LatAm, excluding Brazil, offset by the impact of the fuel price commitments in Mexico.

Our operations in Europe reported total revenues of MXN 14.1 billion, down 5.2% year-over-year, but up 4% on a currency-neutral basis, reflecting solid performance in Swiss Retail, partially offset by weaker results in German Retail and foodservice from train route closures and extreme weather-affected traffic, particularly at train stations. This was offset by weak performance at Valora's B2B business in the U.S., driven by the loss of relevant key accounts.

Regarding Valora's gross profit, as you know, since the first quarter, we have been reclassifying certain distribution expenses from SG&A to cost of goods sales, and that will remain the case for the rest of the year. As I mentioned, this change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense, and there is no impact on our operating income. However, as a mechanical effect of this change, gross margin was impacted by MXN 232 million in the third quarter.

Gross profit decreased by 10.8% with a gross margin of 39.3%. On the same accounting presentation basis, gross margin contracted by approximately 90 basis points and gross profit decreased by 7%, driven by lower food and tobacco margins. Operating income was MXN 531 million, a decrease of 24.8% and 17.5% on a comparable basis with an operating margin of 3.8%. This mainly reflects the gross margin decrease I just described and the soft performance of Valora's B2B business in the U.S.A., driven by lower sales volume combined with increased production costs and expenses.

For its part, the Health division delivered total revenues of MXN 22.9 billion, growing 7% year-over-year or 3.4% on a currency-neutral basis. Local currency same-store sales were positive in Colombia, Ecuador and in Mexico, where the business continues to stabilize, while Chile same-store sales decreased slightly, reflecting a more competitive environment. As was the case with Valora, in Health, we are reclassifying certain distribution expenses from SG&A to cost of sales, mechanically reducing gross margin by approximately MXN 621 million and reflecting the proportional shift of these expenses into the cost of sales.

Gross profit decreased by 7.4% with a gross margin of 26%, a contraction of approximately 410 basis points. On the same accounting presentation basis, gross margin in the third quarter contracted by approximately 80 basis points with gross profit increasing 1.4% in currency-neutral terms, mainly reflecting commercial initiatives to protect our competitive environment in Chile, including our expansion to match that of our competitors. Competing with new channels in health and beauty products, developing new categories and focusing on the needs of chronic patients.

As we discussed on previous calls, as part of our strategy to reduce exposure to the institutional business in Colombia, at the beginning of April, we notified EPS Sanitas, our largest counterparty in this channel by a significant margin that we would not renew the agreement upon its expiration in September. This has now been extended until the end of October for part of the business.

Given the continued uncertainty in Colombia's health care system, during the quarter, we recorded an additional noncash credit risk provision of approximately MXN 430 million. That said, we maintain a constructive view on the outlook for our retail health business in Colombia, and we will continue to actively manage this exposure, remain disciplined in our capital allocation and keep the market informed of any relevant developments.

Operating income reached MXN 319 million, a decrease of 63.2% and a decrease of 63.8% on a comparable basis with an operating margin of 1.4%. Excluding this noncash credit risk provision, operating income reached MXN 749 million, a 14% decrease driven mainly by Chile, where we saw profitability pressured by initiatives to maintain our market position in a highly competitive environment, partially offset by solid growth in Colombia Retail and Ecuador.

Mexico continued stabilizing its operation, reducing its losses significantly versus last year. Bara delivered another quarter of strong growth with same-store sales up 10.3% and 112 net new stores, sustaining the rapid expansion pace of the second quarter. We are encouraged by our newer store cohorts, which are maturing faster than our legacy stores in the Bajio, a sign that the Bara concept continues to evolve favorably and is earning an increasingly positive response from customers.

Coca-Cola FEMSA delivered revenue growth of 10.9% and an increase in operating income of 15.4%, which included a onetime benefit from an insurance claim without which the operating income would have grown 7.4%. In Mexico, volumes performed well, reflecting the resiliency of the business even after the effect of the excise tax increase, which allowed Coca-Cola FEMSA to strengthen its overall pricing, supported by agile and disciplined commercial execution. South America delivered another strong quarter with robust volume growth in Colombia and Brazil, translating into double-digit operating income growth. As always, we encourage you to listen to the earnings call hosted last Monday.

Before closing, let me briefly update you on capital allocation. During the third quarter, we deployed MXN 9.4 billion in CapEx, representing approximately 4% of total revenues and a decrease of 28.3% compared with last year, primarily driven by lower capital expenditures at Coca-Cola FEMSA, driven by a demanding comparison base last year, when they invested to expand their capacity to fit volume demand in key markets. Given the expected impact of the excise tax in Mexico, Coca-Cola FEMSA was able to delay certain CapEx this year.

With respect to shareholder returns, during the quarter, we announced a new share buyback program. This is incremental to the approximately MXN 41 billion in ordinary and extraordinary dividends expected for the cycle from March of 2026 to March of 2027, of which we have distributed MXN 30 billion to date, roughly 2/3 of the committed amount. The remaining MXN 11 billion are expected to be distributed early next year.

Regarding leverage, our net debt-to-EBITDA ratio, excluding Coca-Cola FEMSA, stood at 1.19x at the end of the quarter compared with 1.15x in the prior quarter. On October 15, we paid the third installment of our 2026 ordinary and extraordinary dividend. Adjusting our quarter end cash balances for this payment, net of the dividends received from Coca-Cola FEMSA on October 13, our pro forma net debt-to-EBITDA ratio, excluding Coca-Cola FEMSA, would have been approximately 1.3x. Our leverage objective of approximately 2x net debt to adjusted EBITDA ex-KOF remains unchanged. The buyback we announced this quarter, together with our dividend program reflects our commitment to continue allocating capital and moving forward our stated objective in a disciplined manner while preserving the flexibility to fund our organic growth and to pursue potential opportunities that meet our return thresholds.

As we look ahead to the final quarter of the year, we are encouraged by the momentum across most of our business units and particularly by the consistency of the recovery at OXXO Mexico. We remain mindful of a soft consumer environment in Mexico, recent volatility in Brazil and a comparison base that will gradually become more demanding, but we are confident in our strategy and in the levers at our disposal, and we look forward to sharing more details about our plans for 2027 on our next call.

Before we open the call for your questions, a reminder to please limit yourself to one question at a time as has become our practice. And with that, we are ready to open the call. Operator, please go ahead.

[Operator Instructions] Our first question comes from Henrique Brustolin with Bradesco BBI.

Mine is about the traffic recovery in OXXO Mexico, right? Traffic has been recovering now for two consecutive quarters. And there are several initiatives that you are implementing, but most of the improvement based on your initial remarks appears to be coming from the core impulse categories, which is interesting considering the soft consumer environment overall in Mexico. So the question is, how do you see the element of OXXO's value proposition relative to the other retail channels that are allowing you to capture this much share over the recent quarters?

Henrique, thank you for your question. So it's hard for me to talk about other retailers. I think it's obvious that some of them are maybe underperforming, but we are very much focused in what we need to do. And it's true that by far, the biggest high traffic growth has come from where what we do good, we become much better at doing, especially with adding some value assortment presentations into our core categories, even energy drinks, soft drinks, beer, cigarettes, et cetera. But to be honest, we are seeing a very good positive traffic growth across geographic regions. So all of our regions grew traffic on the third quarter, which is a very positive sign. Not all of them at the same rate, but all of them grew. And that tells you that I think we had either very favorable weather throughout the country or we are becoming better at our job.

And then in the other three strategic pillars, we are seeing also traffic growth. It's just being driven much more by impulse, but we are seeing traffic growth in services, financial and nonfinancial. We're seeing traffic growth in foodservice, mainly driven by coffee. And we are seeing some traffic growth, although not yet same-store sales growth, but we do see traffic growth in what we call essentials or daily replenishment. So very encouraging what we're seeing.

We would much rather be in an industry with a much stronger consumer sentiment. So everyone growing and we're growing more than the rest is our better place to be. But we are very much encouraged by our market share gains and how we are seeing a much more enthusiastic consumer coming into OXXO for their daily needs, for their weekend parties, et cetera. So very encouraging figures for us. We hope the Mexico consumer sentiment begins to improve.

The next question comes from Ben Theurer with Barclays.

Just maybe picking up on that first question Henrique just had and thinking a little bit forward as we've seen all these changes. So as we think with the improvements that you're doing, assortment, et cetera, but then also the asset pruning. Clearly, we're still at a, call it, relatively easy base of comparison, hence, obviously, with the acceleration in traffic growth. But if you put these things aside shorter term and you think more medium term, where do you see the opportunities and the structured traffic opportunities for you guys in OXXO Mexico, in particular, once you've cleaned up the asset base, done the pruning, you have your stores, you have the services and so on. What is a normalized traffic assumption you would target for internally and what we should basically think about it going forward?

Thank you, Ben. I wish I had a crystal ball to tell you where we're going to be in terms of traffic. Obviously, we are not yet satisfied with our results, even though we are encouraged by seeing progress on all of our initiatives and our levers. We are not satisfied. We think we can do much more. I'm hopeful that what's going to help us and carry us forward in the next few months is that some of our initiatives in foodservice are going to get better, bolder. Our execution is getting better at understanding what really drives coffee traffic and other food items. We are hopeful, although on still very early stages of our Canasta OXXO proposal, and we are still seeing some interesting traffic drives from our financial services and nonfinancial cash out, et cetera.

We're still very cautious on giving you guidance on next year. It's going to be a tough year. I think we've had favorable weather this year. We may expect a rainier and colder fourth quarter. October, although it's looking like it's going to be positive on traffic, did experience much more rain than September nationally. So we are cautious. The consumer remains very cautious and looking for affordability. That should help us on our Bara proposal, and it should help us in some of our initiatives in OXXO. But I think we should remain cautious and also planning for the worst in terms of maintaining our operating costs as lean as possible. That's my read so far for the rest of the year.

Yes. I think I would just add, Ben, this is Juan. The way I think about it is the impulse part of it, in some ways, it's like the path of least resistance. It's where we're already very good, and it was really more about improving certain things and kind of getting back to the top of our game. But that's more immediate, and that's why we're beginning to see it already. If you think about some of the other pillars, especially if I think about foodservice and I think about the daily replenishment opportunity, I mean, those could be driving incremental traffic for a while. And by that, I mean, years.

If we succeed in either of those, those could be very material in the medium term, right? So we're still testing different menus. We're still beginning to tinker with the daily opportunity. But I guess chronologically, it was always going to be impulse first and then the others materializing, I would say, from next year forward. So at least as you think about modeling, that's how I would think about it.

The next question comes from Lucas Mussi with Morgan Stanley.

Still on OXXO same-store sales and the new initiatives regarding the value proposition. I wanted to go back a little bit on the foodservice and the replenishment part of it on your commentaries, Jose Antonio. Just wanted to better understand what is the goal? What is it that you're targeting over the medium to long term in terms of how you're thinking about an OXXO store, let's call it, five years from now? Are you aiming at something closer to what a traditional convenience store looks like in the U.S. with more foodservice?

Are you targeting a better margin coming from the foodservice initiative, replenishment, although you could argue it is a lower profitability category. Are you seeing that driving a significant amount of volumes over the medium to long term? Just thinking about how would you envision the OXXO store five years from now in terms of the breakdown in your portfolio between the foodservice, still on initial stages replenishment and also the impulse category, which is your core today? Just trying to get a little bit more perspective on that.

Thank you, Lucas. It's a good question. Look, we obviously are inspired by many of the things we see developing in foodservice in the U.S. I think the convenience store industry is doing a tremendous job in certain regions and certain players. But obviously, the Mexico consumer is very different. We still believe in our foodservice approach, we have a long way to go just by comparing ourselves with other offerings within Mexico and what the Mexican consumer is seeking in their everyday quick morning, breakfast ritual in their snacking options, et cetera. We see that our relevance in the impulse categories and in the everyday lives of the Mexican consumer deserves a better percentage of that in the foodservice.

I hope that we can triple our percentage of foodservice dependency in OXXO, like we already have demonstrated in markets that are much more similar in consumer trends like Peru, Chile, and Colombia, where our numbers are almost triple in terms of the percentage that we sell with similar same-store sales revenue per store. So I foresee I am encouraging and getting the team rallying behind an ambition of tripling our percentage of foodservice. And that would be huge. And it's margin accretive, and it will become much more relevant for the lives. We will become much more relevant than we already are for the lives of the Mexican consumer, and that excites us.

In terms of daily replenishment, I think we have two big levers to pull. One is obvious to give a very low prices and low per gram prices and also low disbursement options and SKUs for our consumers. But to be frank, we already give them a huge advantage that many of the players that compete in that space do not give, which is we save them time. We're everywhere and people are sick and tired of going to the big box retailer to buy their big basket items. And we have an advantage to serve them there. And we are seeing an opportunity there to save them money, save them time, give them peace of mind. And we're very encouraged by the very early testing that we're seeing in some of the stores that we are tinkering in Chihuahua and Tijuana.

And I also think that is going to be obviously much more traffic accretive than margin accretive, but it's going to -- we're becoming more and more relevant in the lives of the Mexican consumer, and that is how we see it. It's hard for me to give you a number, but I do see an evolution of the store that becomes much more savory in terms of foodservice options and gives peace of mind for your daily replenishment needs in weekly assortment, et cetera. And we have a lot to copy or learn from other retailers in the U.S., but also from what we are seeing in Mexico with some of the discount players that we can leverage our footprint. I hope it's helpful.

The next question comes from Thiago Bortoluci with Goldman Sachs.

Congrats on the results and thanks for the space to ask questions. I would like to continue in OXXO Mexico, but now targeting more the SG&A line where I think you delivered remarkable results in this quarter. Obviously, we understand the pressures on the gross margin and the adjustments on the underlying basis, but it seems that adjusting for the calendar of commercial income, SG&A has more than compensated the lower gross margin, right? And this has been a trend throughout the year.

I know -- and I think it was like two conference calls ago, we commented about the restructuring on headcount and the corporate structure, merging Health and Proximity. I would just like to understand how much of this is already being captured in the numbers in the third quarter? And how should we think about SG&A going forward, particularly in the scenario that you that labor could be more of a concern next year?

Generally, I do think that we've captured a significant portion by this point of some of the initiatives around the corporate overhead and operating overhead that we had. Maybe there's one maximum two quarters of tailwinds there to continue to see flowing through. Remember, we also did an important restructuring at the Proximity and Health division with significant savings there that were collapsed together with our FEMSA corporate teams. Next year, the government has announced a 13% increase in minimum wage accompanied by a reduction in the work week. So you will certainly see the effects of that in our selling expenses.

Again, because we pay higher than the minimum wage, the reality is not all of that gets translated exactly percentage point per percentage point. But you will continue to see labor expenses as a percentage of revenues increase probably more in the short term as we continue to focus on our affordability initiatives. However, again, we are constantly reviewing operating model, how we can bring technology to bear at the store to make our colleagues in the store more efficient. And all the initiatives around dynamic shifts, use of technology, continue to be implemented.

Just the other day, I was sending Carlos Arroyo, some pictures they sent me of a robot that measures the inventory in the shelves. And you can just leave the inventory in the shelves going through, giving you quick data. When that will become economically and technologically viable in Mexico, I can't really tell you. Can we have small robots doing part of the cleaning inside the store. Now you can -- since we're leaving the stores open 24 hours, maybe we can dedicate an hour or two of that time to running this with robots while the person who's in the store is doing other things in the store. But the pressure will continue. This is a stated policy of the government, and we will need to react as all retailers and all consumer companies, we will need to react accordingly, finding the balance between those costs and ticket.

The next question comes from Alejandro Fuchs with Itau.

Congrats on the results. I have very quick regarding expansion growth of the business. And I think your initial remarks about...

Alejandro, we're listening to you a little bit broken up. Can you either get closer to the microphone or...

Every third word, we don't hear every third word.

Can you try again?

Yes. Sorry. Is this better?

Yes, it looks better.

Okay. Now my question is on growth. It seems that I think you alluded, Jose Antonio, to OXXO in Mexico growing a little bit slower this year, right, because of the closings. But outside of Mexico, I would say also a little bit slower than in the past, while Bara continues to grow and open stores at a very fast pace. So I wanted to see if maybe if anything has changed in terms of priorities? Will Bara be maybe a little bit higher on the list maybe relative to OXXO Brazil? And I wanted to see if anything has changed on how you see maybe the growth of OXXO outside of Mexico.

No. Good question, Alejandro. Thank you. Look, we are -- I think there's different things explaining each of these seemingly looking slowdowns. On the Mexico side, I think we had a calendar delay as we made sure we increase the productivity or what we call the batting average of our stores. We started our expansion maybe a little bit late than what we usually do in other years. That compounded with the pruning of stores, but we remain committed to opening 1,000 stores minus the closings of these years. And looking forward, as we are seeing the evolution of the maturation of our new stores and as we see them bringing significant profit and paying their cost of capital significantly, we remain committed to opening about 1,000 net new stores for the foreseeable future in OXXO Mexico.

For OXXO International, we are incredibly excited for Colombia. I think Colombia is already where we need it to be, and we need to accelerate expansion as much as we can possibly do without damaging the quality of the stores, which you know that's a number that you have to be monitor carefully because if you overstimulate the production factory of stores with incentives, you can get bad quality outcomes. So you really have to measure very well how you expand and make sure you are developing processes and capabilities and that takes time. But Colombia is ready for acceleration.

Brazil is still not there, and we've been very upfront. We see the opportunity in Brazil, tremendous. I think it's huge opportunity that we can achieve. We're very excited for the Sao Paulo region, and we're confident that it will grow, but we still need to take into account as all the other retailers in Brazil that we're going to have a 40-hour work week with two days off. And so as we learn to navigate those operational constraints, we are being much more prudent in how we expand. But we're still planning to expand about a store a week or more, maybe 70 stores next year for Brazil, net new stores.

That gets me to the Bara question. And with Bara, we are very happy with the maturity of the stores and the expansion in the north of Mexico. We're seeing an evolution that's very positive. And with still a lot of depth in value propositions to increase, we're still needing to simplify some of the portfolio. We still need to cover certain categories that Bara does not, that some of our competitors cover. But we are very excited by the enthusiastic attitude that we see in our consumer going into a Bara. The repeat customer is there. And they're beginning to see more and more all of their fulfillment needs for their house satisfied. But we still need to add some value proposition. So that's why we're not so worried about same-store sales expansion for Bara.

We see that as a marathon. We need to keep getting the stores better and better to supply the needs of our customers. And as those value propositions get added into the store, we hope we are going to see several iterations and years of same-store sales expansion in Bara. So we're much more focused in accelerating expansion, and we plan to even open more stores next year than what we are opening this year. We promised a store a day, and we're going to probably overdeliver on that. So we're happy with that.

The next question comes from Isabella Lemos with UBS.

We'd like to get a view on capital allocation. So if you could mention how do you see opportunities to divest noncore asset sales now? What about M&A, for instance, what's your appetite? And last but not least, how should we think about dividends? How do you see overall shareholders' returns evolving from now on? Kind of get your thoughts on all these aspects of capital allocation here.

Thank you, Isabella. I'll let Martin answer this one.

Thank you for your question. Again, we tend to try to focus any announcements about what the next stage of capital allocation to do it in our conference call, first conference call of the year when we have visibility about our budgets, the final year results, cash flow generation during the year. But it is pretty clear by the end of this year, first quarter of next year, we won't have reached our 2x net debt-to-EBITDA target. I suspect we will be somewhere in the 1.5x, 1.6x net debt to EBITDA. So we will have some flexibility, and then we'll have to decide whether that flexibility is returned in terms of, again, some sort of extraordinary dividend or additional buybacks.

And we will be announcing that in February, March. But clearly, there will be some space that we have available to us to announce an extraordinary dividend and again, be opportunistic with regards to buybacks and saving a little bit of gun powder in case we see a good opportunity to buy our own shares like we did now less than a few months ago. I don't know if that answers your question.

And I was just going to add, I mean, in terms of the kind of M&A versus shareholder remuneration, I mean, as everybody knows, we've talked in the past about how in the vast majority of our markets, our growth is really organic. There's not really assets to acquire in Mexico or in Brazil or in Colombia or -- we've talked about the U.S. as a place where there are some assets, some of which we've looked at, but obviously, we're being very, very disciplined in terms of valuation and expected returns. And so that we continue to kind of reserve that flexibility. But if you notice, I mean, Martin didn't mention M&A, and that should tell you a thing or two about where our minds are.

The next question comes from Bob Ford with Bank of America.

Jose, can you talk a little bit about the magnitude and timeline of logistics investments you need to win in Mexican grocery, right? And how should we think about the assortment and the price points needed to build principality in the category versus the Canasta that's being tested today? And then you're also accelerating some growth in Caffenio, and I want to get a sense of how you're thinking about Caffenio.

So in terms of investments in capabilities or CapEx or even training, that's much more heavy towards our foodservice capabilities. That comes with investment from our supplier source that is very granular and it varies greatly from type of SKU, a lot of training and capability building in our stores. And in the middle of that, all of our distribution, we need cold storage distribution, cold capabilities. So that requires much more investment.

In terms of our Canasta OXXO, most of our investment is in lot of discussions with our supplier partners to target presentations that currently are not available. Many are, but we still need to develop a lot of them with our supplier partners that match the price per gram that our customer demands, the type of packaging that is convenient to carry for our customers. So that requires a lot from our commercial guys and ladies to really develop this offering in our stores. But once we have that, it's very easy to develop the store, and it's not a lot of SKUs, frankly, and it's not a lot of price changes. So it doesn't -- inventory is easy. So there's not a lot of capability building to develop them. We've done it before with Los Basicos de la Ahorro. I think we lost the, or the, focus for many years, and we're coming back, and we're very excited for the results, but it's not going to be so heavily in terms of capability building.

And Caffenio, we have two businesses with Caffenio. The Caffenio infrastructure that powers our stores, and we're seeing tremendous growth in terms of not only coffee offering, but cappuccinos and all these mixes. And we see huge potential to increase our offering. We are way above what we were selling in coffee per store last year, but way below our potential and below our target. So we have a long way to go.

And our other business, which is growing relevance, but still tiny, we operate about 300 coffee drive-thrus. They're gaining, they're becoming almost like a cult following wherever we open. We see big long lines, and we see huge potential. We compete against guys that have to pay a lot of franchise fees, and we are very happy with that competition, and we're going to keep opening coffee drives.

Just to complement on Caffenio. We were able to buy out our partner in that business that has accompanied us for many, many, many years and was a great partner. But that has given us the opportunity now that we own 100% to find significant amount of efficiencies around overhead. Number two, align much better the two organizations of Caffenio and OXXO. So for example, now we give them incentives on the basis of a completely combined P&L. So everybody, both the Caffenio and the OXXO responds for all the total cups sold for the price of the coffee that we buy, the maintenance of the machines, that, I think, has added a whole new discipline to the business.

And then in the Caffenio drives, it is really a source of very good and interesting innovation. They're a much smaller business, much more sort of almost venture capital like in the way they test and try out new things. The other day, they had pistachio-flavored frappe. And to be honest, it was selling and it was selling very well. And so that their ability to move -- and so I think it will also be a source of very interesting innovation to take things to OXXO Mexico and to take things to South America around everything related to coffee beverages and even some food because they do have a very interesting foodservice offering.

The next question comes from Alvaro Garcia with BTG Pactual.

I think we've indirectly spoken about the gross margin investment in the context of OXXO traffic, but we haven't really spoken about it directly. So my question is on gross margin specifically, and I appreciate the commentary on the tough comp on commercial income and sort of the 70 basis point run rate of investment. But on things that you can control, I guess the questions would be, how do you feel about leaning in even further into next year? And it would be very helpful to get some color on sort of breaking down that 70 basis points. How much is coffee, how much is affordability in other categories so we can think about modeling that going forward?

I'd have to get back to you to get into the granular detail of by category where we're seeing it. I know that people don't -- I've repeated this in various forums. We don't manage the business for gross margin. We manage the business for EBIT. And it's a little bit trial and error. In other words, if what I can give you an assurance is we are relentless in measuring when we initiate affordability initiatives to clearly identify what is the total margin breakeven point. So what do we have to gain in terms of traffic and volume to compensate for any adjustments that we make either pricing or to price-package architecture. And there have been instances where the math didn't work out. So we took it back.

Number two, we're changing the nature of the relationship, commercial negotiation relationship we have with our suppliers. It used to be significantly more driven by shelf space and whatever SKU they were "trying to push" in any given quarter. And now we've added a new layer very focused on what is the value proposition to the consumer. And we're being more disciplined in not selling shelf space just for the commercial income if we don't have a very strong conviction that this is what our consumer needs and wants.

And you know what, the suppliers, I have been surprised. I thought that this was going to create greater attention with suppliers. But the suppliers are also seeing it themselves. They're not particularly interested also in having a slow-moving SKU because they know eventually we just won't be buying and we won't be growing. So many of the suppliers have adapted very quickly to our concerns, therefore, allowing us to put in lower-priced brands in categories that historically they would have never seen OXXO as a natural channel for some of these lower-priced brands. They've agreed to allowing us to remove some of the SKUs and refocusing that space and therefore, allowing us to keep that money on products that our consumer wants and needs and makes us more competitive.

Very focused on innovation with suppliers as being the go-to place where new interesting products can be launched in a very efficient manner and where it can provide that sort of wow factor of very, very interesting and attractive offers made to the consumer, which obviously in the traditional trade, it's a little bit harder to do because you have to -- it's hundreds of thousands of stores with very differentiated execution and so on. So I would tell you on the gross margin, we're going to continue to test and try. And sometimes we'll get it right, sometimes we'll get it wrong. But trust me, at the end of the day, we are very focused on growing our operating income in absolute terms significantly -- as much above inflation as we can by finding the right things between -- and Jose said it in the script, if you go back and you take out some of these quotes, it's many different levers that we have to manage at any given time, but we have a lot of them, and we use them all.

The next question comes from Carlos Laboy with HSBC. Carlos, you can open your microphone now, please.

Sorry about that. Jose, Martin, we all know how disciplined you are in terms of avoiding or wanting to avoid dilutive deals. But if we can put that aside just for a moment, when you think about growth opportunities in the highly fragmented U.S. and European C-store markets, what do you think are the biggest attributes that you would bring into this market and the biggest constraints that you're facing? Is it really cost of capital and access to capital as constraints? Or are there other factors? And I'm asking because these are very underdeveloped markets, they're so highly fragmented still and yet the skill sets that you're building keep growing and the capabilities that you have that fit into these markets look attractive.

Thank you, Carlos. Obviously, we give a lot of thought and vigorous debate in our leadership team and frankly, in our Board about what are the real crux and essence of what we bring to the table when we go into the U.S. or developed markets like Europe. And in the Europe, it's lost in the numbers of Valora. But if you look at Swiss retail, what we've been able to extract on value in terms of foodservice, bread and all these things out of Valora into our Latin American operations. And then in terms of commercial income and thinking about commercial income into our Swiss retail has been tremendous. It frankly, pays most of the value that we've been able to bring in and bring out of Valora.

And we see a very similar opportunity for our North American. And frankly, if you get out the gas part of the business where we probably bring the less -- what we are seeing in our stores in West Texas, where we converted it into OXXO and we developed the foodservice and the Mex-Mex with Dona Tota, we're seeing very interesting results. And we see a lot of upfront investment from Arca or Coca-Cola, from Red Bull, from the tobacco guys. And so we're very encouraged by what we are being able to develop.

Now that has to be carried into attractive multiples to acquire. And frankly, we haven't been able to find opportunity. We've looked at very interesting things in Europe that have gone to other players that have been more willing to pay more, and we've seen the same thing happen in the U.S. So again, that balance of how much do we believe we can bring value, I'm very optimistic that we can, but we still need to be cautious about not overpaying, and we'd rather be seen as overly cautious than as overly reckless.

And I think the other part of that has to do with the choice between acquisition and new-to-industry development, right, the organic part of it. Now clearly, we haven't really done too much on either of those, but it's also part of the internal discussion of how -- even as we look at assets, could we accelerate organic growth in a place like Texas, as Jose was saying.

And we are pushing the team to begin developing the NTI opportunity in Texas, where we're seeing favorable demographics in the U.S., but it's still going to come still be less than single-digit expansion for next year. And as you know, there are investments north of $5 million or $6 million per store. So it's a different animal than what we built in Latin America.

And one additional complement. If we were to find the right asset, again, given the target size of what we're finding, what we're looking for, the reality is if we had a very strong conviction that it provided us with very special capabilities, particularly around having a value proposition, an NTI value proposition that was particularly well poised for rollout, I think we would be willing to be more aggressive in the price that we paid. The problem is when you really get to see these assets and you scratch under the surface, you will find that many people who claim to be doing extraordinarily well in the United States when you strip out goodwill and you look at the value that is being generated by, let's just say, the organic operating business, the reality is the returns are not that attractive.

So then you're paying for the expectation that what they have not been able to achieve, you will be able to achieve it over time. If you were to ask what I think OXXO can bring to the U.S., you would be shocked if you look at the next numbers of the number of convenience stores in the United States that don't make money inside the store. I mean the number is like over 90%. The people who are making money without a doubt are the ones that have a very high focus on convenience. And everybody else is basically subsidizing the inside store with gasoline. So I do think OXXO can bring a lot of innovation around pricing, promotions. I think we're quickly learning around food, and we will emulate and copy many other players, and we will bring that profit component to the inside store sales, which, to be very honest, today, I think a lot of people haven't managed to figure out.

The next question comes from Luis Felipe with Citi.

Just want a quick one on Bara here. If we look at the beginning of the year, your initial outlook for the format was opening close to 200 stores, if my math is not wrong here. And now you are already past this threshold. So I wanted to understand what has changed in the format? How has it evolved to a point that you have been accelerating so fast the format? Is it store maturation? Or do you see any other things influencing here?

So if I remember correctly, one of you told me if I open a store, they would toast with champagne. I don't remember who it was, but I was expecting my champagne bottles delivered. Look, Obviously, we come from the convenience store, the proximity store side, and we have been learning a lot by looking at others, by visiting operations all over the world and by bringing talent that have succeeded in this. And we have to unlearn a lot of things from OXXO to develop our discount, and that takes a lot of time. But what does not take a lot of time is building stores that pay their cost of capital. And we tailored that. We targeted to a very -- we have a very small...

Anyway, we have a very good batting average in our stores. They are paying their cost of capital, and we have a very low, slight standard deviation. And so that gives us enough that when you see that even though the stores lag some of the value propositions that you see, as long as you're adding value layers every year, and we're seeing a lot of progress building in our private label infrastructure, building in our supply chain infrastructure and building in getting out all the SKUs that just bring noise to the system, making a very lean, efficient machine. And so we are happy with the growth we're seeing in terms of same-store sales.

We like the traffic. Most of that is traffic. Even in some of the quarters, it has been negative in terms of ticket. So we are very excited for what's coming for Bara. We have a long way to go. It's obviously super competitive market, but it's also a huge, huge market. There's room for a lot of people. The traditional trade still plays a very significant role. And we see many years of expansion and accelerated expansion. We play a different game in terms of our positioning of what Bara stands for in the consumer than other players. And we plan to keep playing that game and staying relevant to our consumers.

We love the complementarity to OXXO. If you come to Monterrey, you'll see a lot of Baras next to OXXO. And while they both sell beer or both sell tobacco, Bara sells much more toilet paper, house cleaning goods, shampoos and other things that OXXO does not excel. So we love this multi-format evolution, and we are very excited for the future of Bara going forward.

Let me complement there to Jose. Jose, while he was in charge of P&H put together a very good team at Bara, a team that, for the first time was completely outside the company. Bara used to be a place where very successful executives at OXXO were sent -- very successful executives from OXXO were sent. And the reality is realized that the chip is a completely different chip. It's a completely different mindset. So the team that's there now, the focus that they have brought to cost, the focus that they have brought to private label, the focus they have brought to how that operating model works is really amazing. Every other week, somebody brings me a new product that they've developed and are rolling out in private label, in cookies, in ice creams, in potato chips. And you will be surprised some of the things that over the next few months and years, we will be rolling out that you would have thought would have been unmentionable for FEMSA.

Number two, people tend to -- what tends to kill the returns of these businesses and get you into trouble is for how long you have to sustain the operating losses as the store matures. So even if you haven't reached the point where a mature store within 12, 18, 24 months is making its cost of capital. If it's already breakeven at an EBIT level so that at least you're not continuing to fund losses, that gives you a lot more flexibility to roll it out quicker and then rely on your conviction with regards to new waves of value that you're going to be developing over time because you're not sustaining enormous amounts of operating losses, which again flow through the P&L and you sort of don't see them, but they weigh on the amount of money that you've had to put into the business.

So in Bara, the speed at which the stores, for example, in Nuevo Leon ramped up without alcohol licenses because in the North of Mexico, it can take you 12 months to 18 months to get your licenses. We see that in OXXO as well. We were surprised. We were very, very surprised how well it was received. So that has given us the confidence that we can roll this out, they can get to breakeven very quickly. And then as we roll out the new waves of value, particularly around private label and things of that nature, that we're going to give it a try.

And I would just add, Luis, I think, again, the question came up earlier about kind of the different growth rates for the OXXO in different countries or Bara, and part of your question touched on the same. So we'll give you more granular numbers in the next call in February in terms of some of the things that we expect will happen during the year. But in terms of the opening of stores, I would kind of think about four data points. OXXO Mexico, if we open 1,000 stores from a base of basically 25,000 stores, that's 4% growth in net new stores.

Think about Brazil. Brazil should be in the high single digits. Maybe if all goes well, we can crack 10%, but let's think about kind of high single digits for Brazil. Then you go to Colombia, where we will definitely plan to be in the double digits. And then the fourth one is Bara where it will not only be in the double digits, but probably north of 30%. So those four give you an idea of either the current scale in the case of OXXO Mexico, which is already very, very large. But in the case of the other three, where they are in their development curve that gives us the comfort to step on the gas with more conviction. And then of those three, without question, I think Bara is #1.

This concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Fonseca for any closing remarks.

Thanks, everyone. I mean just as always, make our team available for follow-ups. And thank you for joining today, and have a great rest of the week.

Thank you, everyone.

This does conclude today's presentation. You may disconnect now, and have a nice day.

Hello, and welcome to the FEMSA Second Quarter 2026 Conference Call. My name is Malu, and I'll be your moderator for today's event. Please note that this conference is being recorded.

[Operator Instructions]

I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead.

Good morning, everyone. Welcome to FEMSA's Second Quarter 2026 Results Conference Call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA's CEO; Martin Arias, our CFO; [indiscernible] Ortiz, who is now heading the Investor Relations team at Coca-Cola FEMSA and Enrique Monero who as many of you know, has rejoined us to replace Pamela on our Investor Relations team.

The plan is for Jose Antonio to open the conversation with some high-level comments on the quarter's performance and trends followed by Martin, who will provide more granular details on the results. Finally, we will open the call for your questions. Jose Antonio, please go ahead.

Thank you, Juan. Good morning, everyone. I would like to use my time this morning to give you a strategic update, focusing on some of the main components of our portfolio and the strategic pillars that we believe are most relevant in our effort to create value and shape the future of the company.

Let me begin with OXXO Mexico, which delivered a strong second quarter. Martin will elaborate on each line of the income statement in a few minutes, but I want to highlight the same-store sales performance that came very close to the double digits. It was particularly encouraging to see traffic growing at 2%, the first positive number in 8 quarters.

To be sure, part of this performance was explained by the uplift from the World Cup, and we faced an on demanding comparison base. But this growth also reflected the strategic adjustments we started to make during the second half of last year. We estimate that at least 60% of this uplift was attributable to the World Cup evenly split between the Panini collectibles and consumption tied mainly to the 4 Mexico games played in June. However, the improved performance, as we have discussed in previous calls, reflects that we have invested significant time and energy designing, testing and deploying strategic adjustments across our store base and beyond the temporary boost from the World Cup we are seeing signs that the changes we began to roll out last year are taking hold.

The core purpose of this effort is to become more consumer-centric at OXXO. Over time, we have successfully developed our commercial levers, but sometimes, this has come at the expense of customer centricity, focusing on expanding our margins, but steering us away from our customers and making us less competitive in certain key categories. We are embracing the strategic imperative to put our customers back at the center and already, we are starting to see that it translates into better performance and market share gains.

Ultimately, we expect this renewed customer centricity to translate into stronger sustained traffic. The key is to find the right algorithm, the optimal balance of price and gross margin that will drive incremental traffic, while keeping our operating margins stable and consistently ensuring we have the right assortment in place.

The strategy rests on 4 pillars. First, impulse, our core, where we are sharpening price pack architecture and promotions to achieve competitive price points and optimizing our assortment to include lower cost alternatives in key categories where the focus on convenience had reduced our competitiveness. Second, prepared food and coffee, where we are working to introduce better products on the food side, simplifying pricing and improving execution, including the optimal utilization of our coffee equipment. So far, our efforts are mostly concentrating on improving in-store execution, which has already translated into healthy growth in the coffee category during the quarter.

Building on this momentum, we are now piloting targeted initiatives in coffee across a few regions and the early results are very encouraging relative to control stores where we have not yet made any changes. In Foodservice, we are focused on developing a set of winning products, Suite as well as salty that can strengthen our effort to enhance the overall food value proposition at OXXO, starting with breakfast as a natural complement to what we are already doing in coffee. Over time, we will be extending this approach to other food occasions, particularly lunch.

Third, daily replenishment, a significant opportunity given our low market share in many of the categories that are relevant to these key grocery shopping mission. To capture this opportunity, we will need to work closely with our existing supplier base and potentially expand that base to restructure our assortment, including rethinking our price pack architecture in partnership with them and evaluating the role of private label in certain categories. Getting this right would allow us to become a more relevant destination for our customers, everyday grocery needs, expanding OXXO's role and unlocking a meaningful and durable avenue for growth.

And fourth, what we refer to as beyond trade or services, where OXXO and Spin together are allowing us to digitize customers and extend our value proposition beyond the store.

Speaking of Spin, the second quarter was a solid one with continued progress across our key indicators of user growth, engagement and transaction activity. In fact, monthly active users of Spin by OXXO grew 22% year-over-year, and Spin now ranks among the most relevant participants of the payment system in terms of processed transactions. Interestingly, we are seeing some service categories such as bill payments growing both at Spin and OXXO, underscoring the stickiness of cash in our ecosystem but also the growing relevance of Spin as a digital station tool for a broader consumer base.

However, we recognize that payments could become commoditized over time. And so Spin is already preparing for that possibility by transitioning from a pace focused on gaining scale to one increasingly centered on monetization, which will become more relevant if cash utilization gradually declines. Our monetization strategy is encouraging customer engagement, credit and broader ecosystem opportunities. Credit in particular, is becoming a very strategic focus. We have been running a very small credit pilot that is already generating valuable learnings giving us greater confidence that the data we have on our millions of customers can produce high-quality underwriting insights.

Just as encouraging, customer reaction to the pilot has been very positive, reinforcing our conviction in the opportunity ahead. On the subject of credit, as you know, during the quarter, we announced a partnership with QED investors to help us develop our lending platform bringing on board a very experienced partner with talent, expertise and execution capabilities that materially improve our odds of success in what can be a high-risk, high-reward business. We will be disciplined and cautious in how we roll this out and the fact that we chose QED as our partner reflects precisely how seriously we take the risks inherent in credit. Our approach will be based on a low and grow model, allowing us to scale gradually, learn as we go and manage our exposure responsibly.

As the portfolio develop, we will continue to keep you informed of our progress. This strategy keeps us firmly on the path we laid out for Spin, leverage the OXXO ecosystem, build credit responsibly through the right partnership and maintain operating discipline as we unlock the platform's long-term value.

Let me now turn to Bara, which is quickly becoming one of the most exciting long-term growth opportunities in our portfolio, positioned to take advantage of the consumer evolution toward discount proximity formats across the region as the consumer increasingly seek value in non-convenience groceries.

Bara serves a distinct set of customer needs and its recent performance is exceeding our expectations, particularly in the newly opened regions. During the second quarter, we set a record for store openings, adding 112 net new stores, representing more than one new store per day, a pace that we will try to improve upon in the coming quarters. Just as encouraging as the pace of expansion is the growth of same-store sales that continue to increase by double digits, driven by resilient demand and sustained customer appeal in a competitive environment. Private label remains central to this story and continues to be a key growth driver, reinforcing its value-oriented proposition and standing out as what we believe will be one of the most important long-term differentiators for the format.

This growth is coming alongside strong financial discipline and improving unit economics and our new store cohorts in particular, are showing faster maturation curve.

Turning to OXXO in Latin America. Our conviction in the region continues to grow, particularly in Colombia and Brazil. Our effort in Colombia has required patients over many years to develop and fine-tune the right value proposition and the second quarter offered encouraging evidence that our work is paying off with revenues up approximately 30%, driven largely by same-store sales growth. More importantly, after a year in which we chose to prioritize refinement of the model over new openings, our value proposition in Colombia is now delivering solid [indiscernible] economics. That this gives us greater confidence that OXXO is increasingly resonating with the Colombian consumer and puts us in a stronger position to accelerate unit growth going forward.

Of note, Colombia is where our prepared food offering is most developed, representing a double-digit contribution to revenues. We are confident that this operation will become a meaningful value driver for years to come. Brazil represents another relevant opportunity and one where we are equally deliberate in how we build. We closed the quarter with close to 640 stores, and each new cohort continues to perform better than the one before, which gives us confidence that we are learning and improving as we go.

At this stage, our focus remains on getting the fundamentals right, continuing to develop and refine our value proposition, adjusting operational processes to increase efficiency and completing the organizational structure required to support accelerated expansion when the time comes. As in Colombia, we would rather earn the right to scale than rush the process because we are convinced that the discipline we apply today is what will allow Brazil to become a durable, meaningful long-term contributor to FEMSA. In both Brazil and Colombia, we expect to reach 700 stores by the end of the year. For each part at Coca-Cola FEMSA, Mexico still shown signs of a soft consumer environment and the impact of higher excise taxes offset by World Cup tailwinds and by a strong performance in South America with Brazil and Colombia leading the way, achieving record volumes and fueling a double-digit increase in operating income for that region.

Summing up, we have a good operational momentum across most of our businesses, and we are working hard to continue improving our performance. However, as we look at the second half of the year, we know that some of the tailwinds we enjoyed in recent months will no longer be there. The World Cup was great, but it is over and our comparison base will get a bit tougher as we get into the final months of the year. The consumer environment remains sluggish, particularly in our core Mexico market, and therefore, sustaining our momentum will hinge our ability to continue executing our strategy.

And with that, let me turn it over to Martin to go over the numbers in more detail.

Thank you, Jose Antonio. Good morning, everyone, and thank you for joining us today. Let me begin with FEMSA's consolidated financial results for the second quarter of 2026. Total revenues increased 9.3% over the year -- year-over-year, while operating income grew 7.2% reflecting OXXO Mexico's strong performance, contributions from our international operations and the benefits of our restructuring initiatives, partially offset by currency headwinds and the softer performance of Health in Europe and the consolidation of losses at OXXO [indiscernible]. Excluding the Brazil effect on a comparable currency-neutral basis, total revenues and operating income grew 10.1% and 11.7%, respectively, reflecting positive operating leverage. Net consolidated income amounted to MXN 9.2 billion, representing an increase of 64.9%. This increase was mainly explained by the operating income growth I just described and by lower net financing expenses, reflecting a significantly lower noncash foreign exchange loss of MXN 655 million compared to MXN 4.1 billion loss in the comparable quarter, driven by the appreciation of the Mexican peso against our U.S. dollar-denominated cash position, reflecting a more moderate appreciation of the peso approximately 2.2% in second quarter 2026 versus 8.4% in second quarter 2025 as well as a lower U.S. dollar cash balance versus the comparable period. [ Results ] also impacted by a positive participation in associate results of MXN 38 million compared to a loss of MXN 756 million in the second quarter of '25, which reflected the results of our joint venture in Brazil as well as the proportional results of our stake in Brady Plus.

These 2 improvements that I just described were partially offset by decrease in interest income, driven by lower interest rates, a lower gain from other financial income of MXN 163 million compared to MXN 633 million in the second quarter of 2025, mainly because last year included a mark-to-market gain on the Heineken shares tied to the exchangeable bond we issued when we exited that position, shares that are no longer in our balance sheet.

And finally, these improvements were partially offset by a higher income tax provision of MXN 4.9 billion compared to MXN 4.3 billion in the second quarter of '25. The effective income tax rate was 34.8% in the second quarter of '26. As we have discussed in past calls, the difference between our effective tax rate and the statutory rate of 30% reflects nondeductible items at OXXO Mexico, specifically labor costs and other expenses as well as non credible tax loss effects, mainly reflecting losses at Spin. These losses decreased this quarter, and we expect them to decrease further as an continues its significant efforts to reduce costs, advancing towards profitability.

Turning to our operating results. OXXO Mexico delivered total revenue growth of 11.8%, driven by same-store sales growth of 9.5% with traffic growing 2% and average ticket increasing 7.4%. We also added 253 net new stores during the quarter. This strong performance was partially supported by the World Cup, particularly for Mexico matches played in June, which drove a consumption uplift in some of OXXO's most relevant categories and by World Cup-specific commercial initiatives such as the Panini Collectible stickers.

Isolating these effects, we estimate traffic still grew by approximately 1% and ticket increased 6.2%. While still early, these are encouraging signs that the strategic adjustments as Antonio described earlier, are beginning to translate into better customer engagement and healthier underlying growth.

Next quarter, you will see a more normalized number without most of the tailwind of the World Cup, and we are cautiously optimistic that while it may be lower than this quarter, we expect that it will continue to reflect progress from our initiatives. Gross margin was 44.8%, contracting 70 basis points year-over-year, mainly reflecting the impact of selected price rationalization initiatives and a higher mix of lower price point SKUs in key categories as we begin to adjust behind the customer centricity stance described by Jose Antonio. This was partially offset by solid growth in services and higher commercial and distribution income from key suppliers. Selling expenses grew 10.6%, below revenue growth, while administrative expenses decreased by 3.3% reflecting our multiple initiatives to obtain expenses and drive efficiency.

As a result, operating income grew 12.3%, with operating and expanding 10 basis points to 10%. In sum, this quarter is a good example of the gross margin, traffic and profitability and long rhythm that Jose Antonio described earlier, selectively adjusting the value proposition to drive traffic and volume enhancing our relevance with our customers while enhancing profitability through operating discipline and efficiency gains. The Americas & Mobility segment delivered total revenues of MXN 28 billion, increasing 7.4% or 11.6% on a comparable and currency-neutral basis. Excluding the impact of consolidating OXXO Brazil revenues, the segment's top line benefited from a strong performance across OXXO LATAM, excluding Brazil, especially in Colombia. On a currency-neutral basis, same-store sales for the retail operations ex Brazil grew 17.6%.

Gross margin for merchandise increased 40 basis points to 27.3% of revenues while in the fuel operations, it decreased 130 basis points to 10.9%, reflecting the inclusion of diesel and the maximum fuel price commitments at [indiscernible] together with higher costs for gasoline and diesel in Mexico general. Operating income was MXN 80 million with an operating margin of 0.3%, representing a decrease of 29% on a comparable basis, excluding currency translation effects and the operating losses from the consolidation of OXXO Brazil. The operating margin also reflects the impact from the diesel price commitments in Mexico, partially offset by narrowing losses across OXXO LATAM, excluding Brazil.

Our operations in Europe reported total revenues of MXN 14.5 billion, up 3.2% on a currency-neutral basis, driven by a solid Swiss retail operation, partially offset by weak German retail and food service results across most formats, reflecting soft traffic impacted by bad weather and turning route closures. Our B2B business remains sluggish in this quarter, and we are reinforcing our commercial teams focused to reignite growth in this business.

Regarding [indiscernible] gross profit, let me remind you that last quarter, we began reclassifying certain distribution expenses from SG&A to cost of sales, and that will be the case for the rest of the year. This change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense. There is no impact on operating income because of this reclassification.

However, as a mechanical effect of this change, gross margin was impacted by MXN 230 million in the second quarter. Gross profit decreased by 6.6% with a gross margin of 40.2% on the same accounting presentation basis. The gross margin expanded by 40 basis points, driven by higher promotional income and a positive sales mix effect. Operating income was MXN 638 million, which on a comparable basis that excludes currency headwinds, was flat year-on-year as expense containment measures were offset by onetime expenses driven by a reorganization of [indiscernible] management structure.

Operating margin was 4.4%, representing a contraction of 20 basis points versus the previous year. For its part, the Health Division delivered total revenues of MXN 22.3 billion, growing 2.2% year-over-year or 4.8% on a currency-neutral basis. Same-store sales were positive across Colombia, Ecuador and Chile and local currency, while Mexico continue to face headwinds. As was the case with [indiscernible] in Health, we also reclassified distribution expenses from SG&A to cost of goods sales, mechanically reducing gross margin by approximately MXN 543 million and reflecting the proportional shift to these expenses into cost of sales.

Gross profit decreased by 8.7% with a gross margin of 26.6%, a contraction of 310 basis points. On the same accounting presentation basis, gross margin in the second quarter contracted by 60 basis points. As we discussed last quarter, as part of our strategy to reduce exposure to the institutional business in Colombia. At the beginning of April, we notified EPS [indiscernible], our largest counterparty in this channel by a significant margin, and we will not renew our agreement upon its expiration in September.

Given the continued uncertainty in Columbia's health care system and our need to manage potential EPS and solvency risk, we recorded a noncash credit risk provision of approximately MXN 408 million during the quarter. We will continue to actively manage this exposure, remain disciplined in our capital allocation and keep the market informed of any relevant developments as we continue to prioritize our retail drugstore business, which was -- which has better profitability, cash generation and more attractive long-term returns. Operating income reached MXN 346 million, a decline of 57.7% and 54.1% on a comparable basis with an operating margin of 1.5%.

Excluding the noncash credit risk provision, operating income reached MXN 754 million, a 7.9% decrease versus last year, driven mainly by operations in Chile, where we saw profitability pressure by commercial initiatives to maintain our market position in a highly competitive environment, partially offset by strong growth in Colombia, retail and Ecuador. Mexico will continue stabilizing its operation, reducing its losses significantly versus last year.

For its part, Coca-Cola FEMSA delivered a sequential recovery. It highlights the strength of its diversified market presence. Across its territories, Coke continued to grow volume in most markets, gain market share and advance its digital agenda. While Mexico continued to navigate a challenging consumer environment and the effects of the excise tax increase, Coca-Cola FEMSA's affordability strategy segmentation and disciplined commercial execution enabled it to further strengthen its competitive position.

At the same time, South America delivered a solid quarter. Colombia and Brazil achieving record second quarter volumes that ultimately resulted in double-digit operating income growth in those business units. As always, we encourage you to listen to their earnings call hosted yesterday.

On the FEMSA corporate front, as you might recall, last year, we launched a corporate reorganization and savings plan, and we continue to advance in this effort, making good progress and in line with our expectations. This progress reflects the benefits of a leaner structure and non-headcount saving initiatives that remain underway. At the same time, as I mentioned a few minutes ago, Spin has continued to gradually narrow its losses as the own reorganization takes hold.

While it is still early, we are encouraged by the progress we are seeing and remain focused on executing the plan with discipline. Before closing, let me briefly update you on capital allocation. During the second quarter, we deployed approximately MXN 8.9 billion in CapEx, representing approximately 3.8% of total revenues and a 3.6% decline compared with last year. This was primarily driven by lower CapEx at Coca-Cola FEMSA, partially offset by continued investment in OXXO Mexico and growth platforms -- and other growth platforms.

With respect to shareholder returns. During the quarter, we concluded a $300 million buyback through an accelerated share repurchase program that was launched at the end of last year. Once we consider the ordinary and extraordinary dividends being dispersed this year, the total expected capital distributions for the cycle from March 2026 to March 2027 will reach approximately MXN 41 billion.

Regarding leverage, our net debt-to-EBITDA ratio decreased to 1.15x from 1.24x in the prior quarter. This reflected a 3.2% increase in last 12-month EBITDA, excluding Coca-Cola FEMSA as well as a reduction in FEMSA ex [indiscernible] net debt. The latter was driven primarily by a 2% sequential decrease in gross debt, reflecting the depreciation of the Mexican peso against our U.S. dollar denominated debt.

That said, our leverage target remains unchanged. As we look ahead, we remain focused on executing against our strategy. We are pleased with the momentum we saw in the second quarter across most of our business units. But as Jose Antonio mentioned, we are very aware that the external tailwinds we enjoyed will taper off soon, and we will continue to face a challenging consumer environment, particularly in Mexico. Having said that, there are many tactical and strategic levers at our disposal and early results from our recent tests and adjustments are promising.

Before we open the call for your questions. A reminder to please limit yourself to one question at a time like we did on our previous call. We received positive feedback and would like to make that practice permit. And with that, we are ready to open the call. Operator, please go ahead.

[Operator Instructions]

Our first question comes from Thiago Bortoluci from Goldman Sachs.

Congrats on the results. I'll like explore a little bit more on the team opportunity you got. Obviously,the are a lot of moving parts and a lot of growth avenues for FEMSA. But more recently, I think you have delivered and announced good development in expanding the ecosystem, right? So I don't know what you can give us in terms of additional information on how you're thinking about the partnership with QED, how we're thinking about using balance sheet to expand the value proposition and what is the road map for evolving the ecosystem would be greatly appreciated very much.

Thank you, Thiago. I will begin and let either Martin or Juan to help me. But it's very early in the venture with QED. We are very excited for the partnership. We had a long [indiscernible] chip to get to know each other, and we were quite impressed by the level of detail and all the start issues that these guys have developed over many, many years of developing soft prime credit in all parts of the world in ecosystem very similar to ours.

So we really like that growth on the table. We had begun already using some data and sharing some of the data to them, and they were very impressed by the quality of the correlations that they were seeing between good credit and good credit responses. And so we are -- I think the partnership is up to a good start. The level of talent that they're able to bring [indiscernible] mortgages and many of his partners and female partners in QED are legends in their field. And so they are able to attract very impressive talent, and that was very important for us. I would say, as team continues to become more and more relevant in the ecosystem, we're in -- we're at the point where we are enjoying the best of both worlds. Transactions in services are still growing in the physical world in OXXO even with a decline in top-ups or cell phone payments. We're still growing in cash in, cash out in the physical store.

But in Spin, this is growing dramatically. So I think there is a moment that we are in the sweet spot where Spin and OXXO can complement each other dramatically, and I think that will continue for the next several years. There's people more aggressive that things will change in the next couple or 2 or 3 years. And there's other people that think this will remain for many, many years. So I think as Spin becomes more relevant as Spin loyalty becomes also -- continues to increase ever number of users, and we changed the game -- the dynamics in which we give rewards. I think all of this is giving us a very good platform to begin monetization. We're already doing it with retail media, but now we are very excited with what could become a very interesting thing with credit.

As you know, there's a lot of people trying to give a credit in Mexico. There's very good players already in the space. I think we have several things that makes us unique for a level of the population that still underserved. But it's still -- we are very conscious of the risks inherent in credit, especially in this segment. So we will proceed very slowly with our low and grow model, as I mentioned before. I think for now, that's all I could give unless Martin or Juan want to complement me a little bit.

Yes, I would just comment on two things. Jose, I think you do a comprehensive job of prescribing all the external looking things that are happening internally as a result of the reorganization that was undertaken. Today, both the physical and digital payments in FEMSA report to one organization. That is giving that team the ability to make judgments about changes in pricing and creating use cases that are very user-friendly and which try to resolve some of the paradigms of having both the physical and a digital payment system. That's also happened at Spin [indiscernible], where we've created an area of customer value management, where we're taking a broader sort of more holistic integrated view of our consumer. We're -- obviously Spin [indiscernible] is the main contact point and one of the main ways that we collect data and provide promotions to the consumer.

On the credit issue, the credit over time has to become nonrecourse to FEMSA. It's going to start up very small, very contained and over time, to the extent that we can be successful, we'll start thinking about off-balance sheet financings against the portfolio of credits that we're extending. And eventually, we'll have to find sources of funding, which may include obtaining a leasing -- a banking license. We're still in early days. As we promised, we'll continue to communicate this and be very transparent. But the numbers really today don't really move the needle in any significant way from the perspective of the credit portfolio.

Our next question comes from Mr. Rodrigo Alcantara from UBS.

Congrats again, Pam. Welcome back [indiscernible] to have you back. I guess I'll leave the question on gross margins to my colleagues here. I'm pretty sure they're going to ask about this. So let me ask you this -- to you, Jose. It's been a while, right, you have taken the role of CEO of FEMSA consolidated. And also you brought -- or well, FEMSA brought a very high-quality guy, right, to lead the OXXO Mexico operation, right? Carlos, [indiscernible]. So my question would be on -- or if you can comment on how you are shifting the responsibilities from retail to FEMSA consolidated. What would be the main contributions in your view that Carlos has achieved so far, anything that you may highlight that we -- that you can comment would be very, very, very helpful.

That's a very interesting question. So I think, obviously, the shift from heading proximity and Health to shift to running FEMSA is a very dramatic shift, and I'm still on, I hope in my early stages of that shift. And I would say the biggest change in my order is I'm now going to spend a lot of time in big strategic discussions with my -- all of my CEOs, but particularly a lot of time with Ian, a lot of time with the Chairman and the Board a lot of time with the retail guys on drafting strategy, on shaping culture and on building and mapping talent.

That's where I spend most of my time. I would say, Carlos brought -- first of all, Carlos has much more experience in retail than I did while a new retail since -- from leaving it and reading it in my household, it was -- I don't come from the retail background. I got to meet Carlos. Carlos and I actually go a little bit way back when I was running Coca-Cola FEMSA Central America. Carlos run Walmart in that region. And we used to argue a lot -- and I learned about his negotiating capacity, his real ability to fight every cent to run a very lean, efficient machine. And I always like what I see. And I think what Carlos has brought beyond these things that I've already mentioned. I would say he surround with himself with people that are smarter than him, which is a characteristic that I love about leaders, big leaders and executives. It really has surrounded himself with a stellar team. He knows the importance of a super -- I mean, top 1% of supply chain capacity. I think that comes from a good school. I will not mention which, but it's obvious in understanding that supply chain you have to -- especially in the world, we are entering with such a competitive dynamics and where we see ourselves as under docs, where we see ourselves that we are only beginning the race towards transforming retail in Mexico. We need a supply chain that's best in the world. And while we have a very good supply chain, we didn't have a top 1%. And I think Carlos is investing a lot behind that. And it's the backbone of a food strategy.

It's a backbone of a grocery strategy. It's the backbone of obviously, keep winning at impulse and beer and soft drinks. There's much more to say about Carlos, but I will leave it at that for now. I think those are the main contributions that he has brought. And obviously, he's delivering we're gaining share, and I like what we're -- the progress we're making.

Our next question comes from Mr. Ben Theurer from Barclays.

Jose Antonio, Martin and Juan, thank you as well as congrats on those very strong 2Q results. I wanted to dig in and stay a little bit within some of the strategic pillars that you've laid out at the beginning and one caught my attention a Lids was all about that price pack -- price pack architecture as well as assortment optimization. So I wanted to understand a little bit more of what you've kind of like learned from the past. And I remember we've talked a lot about in the past about competitive pressure against the informal market. I just wanted to understand what proactively you've been doing over the last couple of quarters and where there is still room to further drive maybe traffic by just having more competitive pricing on certain categories? And if so, which categories those are. So what have you done? Where are we going?

Thank you, Ben. And I think, look, we -- we've always been very, very good in the big, big categories in making sure we have an assortment to tailor to everybody. But over time, we got a little bit complacent and saying, hey, we're so big in this -- for example, we're so big in that beer category that we can allow ourselves either a little bit of extra margin in a very important SKU or we are willing to not live with this value price because it will hit our BPS or gross margin in a certain way. And I think it's very smart to do from time to time. But if you overdo it, especially when you have a consumer that's more value centric, et cetera, you can begin to lose very important profitable traffic. And I think that's one of the things that we've been saying in all the calls. We've been adjusting price back to allow for a certain value packs, especially in [indiscernible], in soft drinks and everything.

And then I think the other one we were very good at selling prime real estate within the store in categories that are not so relevant in the store right now, but that they were paying premium positioning to be center stage. And while we recognize that that's a very -- we continue to do a little bit of that, especially in certain categories. It is very important, first of all, to serve our customers what -- where they meet the customers where they want to be met. And that requires maybe simplifying the portfolio, maybe we don't need 14 types of mail the other [indiscernible] or different brands because they all pay.

Maybe we need to extract a little bit more value from certain suppliers, but then have a price pack architecture that serves all of our customers. And there's a type of customer that is willing to pay [indiscernible] tax of mail the other one to go to their home, but there's someone that needs a value the other one because they need to change.

So all these things are becoming more and more important in our price pack architecture. So it's very hard for me to tell you a target of gross profit that we're going to hit. We are maximizing profit or income from operations, but now putting into the mix that we want to grow traffic profitably. We want to continue to expand our relevance in categories where we are now not as big, like groceries and daily replenishment and that will take us on a path that over time will increase our profitability. It will increase our stickiness. We will continue to gain share, and we will monitor share against this the supermarkets against the traditional trade against the discounters. But obviously, gross profit could ebb and flow from the percentage where we are, we're really not managing for maximizing gross profit but maximizing operating income over a multi-decade period. I don't know if that answers.

It does.

Yes, I would just add -- Ben, this is Juan. I think it's an important segue talking about the price pack architecture and having the discussion on margins because what -- the mist want to be clear is, this was not about lowering prices. I think with very, very few exceptions. I think coffee is one where we've said we've been testing things at a lower price point. But most of it has to do with bringing in those low price point in the tobacco, in beer and snacks. So again, not lowering prices, but rather changing the mix. to something that is a better match for what the consumer is asking for. So that was just one clarification I wanted to make.

Our next question comes from Mr. Ricardo Alves from Morgan Stanley.

I have -- I think that this question is a follow -- to some extent, a follow-up to the previous one. It is -- it was a quite impressive same-store sales indeed. So it's great to see the turnaround there. Now with the 8% or near 8% ticket boost, significantly above inflation naturally. I guess that we thought the gross margin could have been higher. And appreciate all the commentary that was just made around the gross margin and the strategy of the company prioritizing operating income that makes perfect sense. But when we look at that number, when we look at the gross margin, our first reaction was maybe the affordability measures that we've been talking about, Juan, was just mentioning the change in mix, for example, all of that could explain. But when we look at your average ticket.

That doesn't seem to be the answer. So beyond what we already discussed, is there something near term, I don't know, maybe on the commercial income, not on the side of the revenue on the commercial income, but discount from from suppliers, I think that Jose Antonio even referred to some of maybe these supplier contracts that you have, maybe commercial income is hurting a little bit more in this moment where you are adjusting the strategy. I just wanted to understand that dynamic a little bit better on the same-store sales not translating necessarily right now or the average ticket into higher gross margin as well?

So with all -- thank you, Ricardo. It's a very good question, obviously. With all that -- I think the quarter obviously has some things that are affecting it more than normal. First of all, you have to include that there is yes in 2 of our big categories like soft drinks and CR. So that could have an effect a little bit on the way the ticket is being affected. On the other hand, if you look, I would say the assortment -- the assortment helped us a lot during the quarter, given the Panini, the [indiscernible] cargo helped a little bit and probably also had an effect on the margin, but increase the ticket which by the way, Panini was a record thing for OXXO as I'm sure, for many retailers across the globe throughout the World Cup. And so all of these things had an effect. We -- while we are happy with the 2% traffic growth because it really changes 8 quarters of missing traffic. And we are happy that even during July, even the second -- later part of July, we're still seeing good traffic numbers in after the World Cup. So we are confident that some of the levers that we pulled are being -- are working. We're not satisfied for sure. We have a long way to go to have the traffic growth numbers that we ambition. And I think the ticket should also, I mean, come at the expense of -- or should be balanced by more -- doing more value-driven things like what we're doing in expanding coffee at an attractive price and more value categories in beer and cigarettes. But in general, I would say the quarter did have a few mixes that did not help the number as much as you would expect. So we're still fighting with improving traffic. But obviously, we had a very good quarter then the World Cup and other tailwinds.

Just to complement you, Jose, Ricardo. The inflation that you see is the headline consumer inflation number for Mexico, is not necessary the inflation number that gets passed on in the categories that we sell to the store. So you need to be a bit careful. There are categories where the cost that's being passed on by the supplier is somewhat higher than the consumer inflation that you see in the newspaper. We follow this on a quarterly basis in our quarterly meetings where we check the cost that was passed on to us by the consumer, by the supplier and the cost that we passed on to the consumer. And with the exception of the categories wholesale mention, specifically cigarettes and soft drinks, where we were passing on a tax, which is not to anybody's benefit other than the tax question for the government. And all of them, we were either passing on only what was passed on to us or in some cases, passing slightly lower than what was passed on to us.

And that could be also effective mix on a category-by-category basis. So once you take that out, you take out the World Cup the bigger tickets from people going for runs for the parties that we're having at their home, so on and you stripped that out and the benefits of that and some other mix effects of top-ups coming down and financial services going up. And so you take that all in, we are very comfortable that we are improving significantly the affordability proposition for our consumers.

One final comment on that is that the excise tax effect will remain for the next couple of quarters as well, right, until we cycle in next January.

Our next question comes from Mr. Bob Ford from Bank of America.

Congratulations on the quarter. How do you feel about price deltas and overlapping small box values in areas where investment has been made. I think Martin was moving in that direction, but I just want to get other sense of where you are right now and how you're thinking about elasticity. And as you expand that investment, how do you think about the TAM in grocery in the pantry segments and then you haven't really touched on Brazil, but I was very curious about same-store sales in Brazil and then the path and time line to profitability there.

I understood the Brazil part. Can you repeat the first one?

Sorry. Sure, it was -- no, no. I was probably speaking too quickly, but it was really about the price deltas that you have with overlapping competitors, whether it's the informal segment competing CSDs -- or sorry, convenience stores and other channels. But how are you thinking about your price gaps right now in areas where you've made investment. Do you feel that you're at an equilibrium? Or do you think there's a need to make some additional price investment? How should we think about the price elasticity in those areas? And then as you expand -- and I think what I'm hearing is you're going to expand that activity in opening price points and price investments selectively in other categories, right? You mentioned grocery and pantry segments. And I was just curious how you're thinking about the addressable market in those areas as well.

That's -- okay. very, very clear. I would say, first of all, when we look at a price point in our in our business. We have to look at the overall cost of going to an OXXO store and being served versus going to a supermarket chain or driving or getting on a bus to go to longer distance. But we also compete against the mom-and-pop and the discount store. And so we put all those categories into play and we sell the coldest beer probably out there even more than the retailers owned by the beer guys. So we put all that into the equation. And what we want is to be able to have a price pack architecture that tailors the the top e-com segment of Mexico, but also the bottom 10% and 20% income segment of Mexico. And that's very evident across our core categories, our imports, where we make the big growth of our categories, beer, soft drinks, snacks, tobacco.

In those categories, we are so well known. We are so well like that we are willing to have some price differentiation. But I think we are already where we want to be in the core driving traffic drivers like the 16-ounce Coca-Cola bottle or the 6-pack of beer of a leading beer brand. I'm not suggesting any -- I'm not supposing we're going to have any price contraction there other than mix. We can -- we may introduce value brands at a very attractive price, and I don't -- but we are not seeing a big cannibalization effect in those. In the -- where we do need to be much more aggressive is as we expand into the pantry development. We are not the winners there. We are not well known. And we need to -- first of all, we're not going to -- maybe we don't need a 12 pack of X, but we need to have a very competitive price, 6 pack of X, and we will have the best price much better than the traditional trade and maybe in part with some of the discounters in certain categories as we become well known that for daily replenishment OXXO is a much better alternative than the corner store or even some of these customers.

And we will go all in, in winning our space in pantry. And I know I'm not only talking to investors when I say, we're going only. In terms of OXXO Brazil, it's too early. We are getting better and better. We're improving. We had a couple of quarters that were not as -- we have been growing double digits over the last couple of years, double-digit revenues. We had a slowish quarter when we grew mid-single-digit same-store sales. We are still iterating the model. But I think OXXO Brazil, what we like is that every cohort, every new generation of stores keep getting better and better. And so we think it's going to take us a few years, but eventually, we're going to find a sweet spot when we can accelerate expansion as we feel Colombia is ready now. Colombia now can really accelerate. And hopefully, we will show begin to show an increasing faster pace of growth in Colombia.

Our next question comes from Mr. Alejandro Fuchs from Itau BBA.

Congratulations on the results. My question is on OXXO Mexico, I wanted to maybe take you back, Jose Antonio, to the end of last year when you guys were preparing the budget for this year and seeing all of these changes that you wanted to make, right? I think that was very clear, the 4 pillars. Can you elaborate maybe Jose Antonio which of the pillars or which of the changes are working better maybe than you expected? And maybe which ones do you think there's opportunity to maybe even improve more when we look at these very strong semi-store sales and traffic performance.

So again, I think I'm still confident that the pillars will all work out and seeing positive signs in all of them. But obviously, I will tell you on impulse becoming excellent or best-in-class in something that you were already great, but now you're becoming best -- has become the one that most quickly turn the middle. We're gaining share like never before in beer. We're gaining share in tobacco. We're gaining share in soft drink. We're being in what we are already well known for. We are doing very well, even in the first quarter and obviously continue with the second quarter, probably helped by the World Cup. But I mean, the World Cup was there for many of the [indiscernible] and other supermarkets, and we clearly won a lot of market share in our core categories. I think -- we have a few trials in [indiscernible] and daily replenishment.

Both the -- both trials include execution teams, assortment things and pricing things and opinions, especially on coffee, just getting coffee right, which is probably the easier part because we are already well known in coffee. -- is showing the biggest dramatic increase. We still have a long way to go in developing what we call hero products that OXO can get very well known for and use its scale to get very good quality, good pricing and really few millions of Hungary Mexicans. I think that's going to take a lot of time, and it requires a lot of infrastructure that we need to build in the supply chain and the supplier infrastructure side.

And I think daily replenishment, it's the one that you can start more quickly even than premiums with pricing even if you don't have the market ready for it, we are doing some trials in some parts of Mexico with promising results, but I think it's further down the line in terms of really moving the needle. It's going to take us longer and what we call beyond trade, I'm really excited by what we are seeing in terms of encouragement of the new things coming in the pipeline for Spin [indiscernible] and for Spin by OXXO. But just by itself, it's getting a lot of momentum, and we are reducing our expenses there dramatically and still providing you an exciting product. So I think we are off to a good start.

You know I'd just like to add, Alejandro, I mean, obviously, we've just been talking about the drivers for top line growth. But I also think, I mean, looking at the overall results, everything that happened below the gross margin, right, because to come -- to have a small contraction at the gross, but actually a small expansion at the operating level and at the EBITDA level. There are a lot of work that's being done on the expenses side, on the cost side, on the efficiency side that we've spoken about before in terms of these programs that are in place regarding corporate overhead and regarding all kinds of efficiencies on the labor front. So just to highlight that, it hasn't just been the top line efforts, which obviously -- that come first but also the work that's being done kind of behind the scenes that's helping us to put out what I think is a very, very well-balanced quarter for OXXO Mexico.

Our next question comes from Mr. Hector Maya from Scotiabank.

Sorry, I am Hector Maya. I don't know what happened there, but yes. On OXXO, I understand your strategy is different with core categories and value packs and pantry. But I just wanted to know if you could give us a bit more clarity on how much further could you be willing to invest gross margin to keep gaining share by category and with this, how do you expect your mix to maybe change, if any, in the long term, considering your focus on operating income optimization.

Again, it's a very good question, but it's a very one that at least for me, it's very hard to answer. I -- we like our PPQ for this quarter. We are willing to give gross margin if we see traffic profit go up, and we see our operating income continue to go up, but this is a very long-term race. We're getting into a very competitive world. We like that we continue. We enter the cycle of continue to grow market share in our core categories, beginning to grow market share in pantry in what we call daily replenishment consumer occasions, which obviously has a lot of house and basics of pantry. We see gross -- our gross profit as a little piece of a very big profit pie that starts with FMCG and goes all the way to the consumer pockets. We -- our gross profit is a very small part of that because we see the enormous amount of profit that come from the FMCGs. All FMCG companies that you know and that you guys cover all the big ones named Mexico as one of their top 5 markets, especially the ones that are big relevant in our categories, beer, soft drink snacks. So we see a long way to go in terms of gross profit still. But part of the gross profit we want to invest in giving more value to some consumers that we see that we could really benefit from OXXO serving them half on at a very attractive price or other traffic drivers that could be profitable, that we're willing to give margin. So impossible for me to give you a number. What I can tell you is that I still see the FMCGs in Mexico, one of the most profitable stories in the world. And I think we can get a little bit of a bigger share as we begin to grow -- as we continue to grow 3 stores a year in OXXO plus maybe 1.5 stores a day in Bara. So we have a lot of potential [indiscernible] number, but I am optimistic on that front on the net income side.

Our next question comes from Mr. Antonio Antonio Hernandez from Actinver.

Congrats on your results, very solid ones. Just a quick one regarding prepared foods and coffee. Would you please share how much of a share do they account for at OXXO Mexico in terms of revenues? And if you have a specific target? And how do you see it profit-wise.

So we're not ready to give a precise number on coffee, but we're growing double digits in revenue in coffee. It's a growth category for us, even though we reduced prices. More and more Mexicans are recognizing OXXO. OXXO has very good quality coffee and a very good price point. So we like what we see. We have a long way to go in terms of the percentage of food service in OXXO, Mexico, it's in the mid-single digits while in other parts of our operations like Colombia or Europe, it's in the mid- to high mid-teens. So we have a long way to go and we have our ambition is to get at least towards what Colombia has. I hope that answers enough, Antonio.

Yes. That's very helpful. But -- and from a profitability perspective, is there a big difference between how you see food billings or [indiscernible] food here in Mexico versus Colombia and Europe, how do the margins differ.

They are in all those places and in Mexico, they are highly accretive. Once you were able to control shrinkage food becomes a very good profit driver for all of our operations. And from what I see other operations I study across the world in convenience, if you do food right, it becomes highly accretive. Even for a very profitable chain like OXXO Mexico, food can become a good source of traffic, of revenue and retain and retain profits.

Our next question comes from Mr. Emiliano Hernández from GBM.

Congrats on the results, and thanks for the questions. Just a quick one on proximity. Europe, results have been broadly resilient, but maybe looking ahead, where do you see the biggest opportunities to accelerate growth over the medium term? Is it starting maybe in store expansion, maybe continue to refine the value proposition or something else? More broadly, how do you -- how should investors think about this medium-term strategy? And how do you think about this business as a growth driver in 5 years?

We are very excited from what we have been able to do in Europe so far in terms of increasing promotional income and net profits dramatically, especially in our retail operation in Switzerland. In Germany, in the retail side, we continue to gain significance and dominance. We've been growing especially through fuel low operator agreements. We just signed another agreement in -- with our fuel operator in Austria to operate 200 stores. And we like that asset-light model for expansion in Europe we're seeing opportunities to expand with other fuel operators that are recognize themselves as not very good at the store and need a partner like us that are not big in fuel, but can become very good operators.

Overall, we are obviously monitoring carefully all opportunities across Europe. But our main focus right now is our attention to continue to expand our Mexico and South America operations, where again, I see -- we see ourselves as small and underdogs compared to much larger retail players in the region. So that's our main expansion. But opportunistically throughout Europe and even North America, but we're not close to anything right now.

Our next question comes from Mr. Froylan Mendez Solther by JPMorgan.

And I want to ask on if you could help us frame the degree of normalization that we should expect in second half in OXXO Mexico, both in terms of same-store sales and gross margin, given all the discussion that we have had. But can you help us understand second half, what should be something expected in terms of same-store normalization, gross margin normalization just to understand the seasonality versus the actual run rate, especially under the weak consumer environment.

Froylan, I will let Juan and Martin help me with guidance towards the second half. I am cautiously optimistic, but we still see a softer consumer and obviously, the World Cup is over. So I think the most I can say is what I already said in my comments. We are working hard to make sure the handover is not so hard, and we continue to gain share. But I will let Martin and Juan complement.

Froylan, this is Juan. Look, I think we can go forecasting the next 6 months is, in many ways, like forecasting the next 5 years, right? I mean lots of things could happen. But historically, as you know, we've defaulted to -- I hate to call it algorithm because it's too basic to be an algorithm. But generally, our same-store sales will tend to grow at inflation plus 1, right? I mean if you look -- look at it kind of long enough time series. Right now, we can make the case that the consumer in Mexico is perhaps a little bit softer than normal. So that would be an argument against inflation plus one. But on the other side, and Jose mentioned this a few minutes ago, we're actually looking at pretty good numbers in the last few weeks, right? So even post World Cup, the second half of July is looking a little bit better than we thought.

So I guess we have a few arguments for, a few arguments against. But at the end of the day, the mid-single digit is where we tend to land on a normalized series. So if inflation is going to be close to 4 then same-store sales should be close to 5. I know that's kind of a soft answer, but there's enough uncertainty that I don't think we can be more granular than that.

And gross margin, Juan? Any thoughts? I also believe that part of the, let's say, the incremental gross margin that you had came from retail media, you were able to give some back to the consumer, et cetera, but second half in that specific metric or the leverage.

Yes. I think it's important to remember that the commercial income is still there, right? It's -- I mean the big CPGs, the relevance of OXXO for them keeps -- every day, it keeps getting bigger because we have more stores. And so in many ways, it's within our control, right? And so Jose and Martin spoke in their remarks about this balance that we're going to go for trying to really reduce the gross margin as little as possible, ensuring that the EBIT margin continues to grow gradually. And it's going to be a little bit of hit and miss. But I think if you look at the second quarter, if you can take out the one-offs, the kind of the World Cup stuff, I think that's what it should look like, right? And that gross margin contraction could be smaller than what we saw this quarter.

I support there will be, of course, where it could be a little bit higher. But at the end of the day, the levers are there and there for us to manage, which is it's really good to have so many of the variables within our control.

Our next question comes from Mr. Álvaro García from BTG Pactual.

Gentlemen, thanks for the space for questions. Jose, I was wondering, I have a strategic question on labor in NokoMexico in the context of sort of solving for operating income growth, which you mentioned earlier, given all the emphasis on recovering traffic and foodvenience and coffee, it would seem that you need better staff or higher average staffing over the medium term. So I was wondering if you could maybe comment on how you're thinking about that third shift and how you're thinking about people in the context of more -- of having more people at OXXO.

It's a very relevant question, Alvaro, because it's obvious that as we continue to look at our value proposition, it's clear that our value proposition is very uneven at certain times of the day. Obviously, the third shift as it lost a little bit of relevance, it became like a self-fulfilling cycle that since it was becoming less relevant after COVID. So we closed a lot of third shift options or we closed the door. And to be honest, the OXXO system and the consumer expects at OXXO also that's open 24 hours in most places, not always, but most places, the stores should be open 24 hours with 2 people serving the store, one for the cleaning and taking inventory and receiving suppliers and one for servicing the customers at least. And we let that sleep in many regions. We were squeezing as much -- or trying to reduce our operating head in many places, and I think we overdid it and we are going back to many, many regions and looking store by store, and many of them really deserve a very well-staffed third shift.

That will increase at the beginning of our SG&A, but it will also increase our traffic. What we're seeing, interestingly, in the places, we did a big third shift reopening in the northeast of Mexico and what we saw is that the first shift starts gaining traffic and sales because obviously, people at the store is very savvy at using the third shift for getting the store very ready for the first shift and so we are going to continue to do that. The store deserves at least 2 people for most of the third shift. That will increase SG&A. But overall, over time, the value proposition should stand.

Obviously, as cost of labor continues to increase and the labor reduction, these things could change here and there but our commitment should do should be to invest ahead of time in processes that allow us to retain that level of service and that level of commitment without significant or at least trying to mitigate the labor increase costs as much as possible and the rest of it obviously try to negotiate with our suppliers to compensate with gross margin.

So I think it's a whole balance of things that we will continue to do so. The leveraging pressure will continue to rise with labor with the regulations. But we feel confident that we have the right price mix and the right level of service to tackle that as we continue to gain share, we feel confident that we will be able to cover most of it. I don't know if I answered you, Alvaro.

Yes, that was great. And I hate to do this, but I do want to follow up with just a clarification which is mentioned in your prepared remarks, the 60% uplift at OXXO Mexico that was tied to the World Cup. I was just wondering if you can clarify that's on a traffic basis or on a full-fledged same-store sales basis, that would be helpful.

I mentioned it on a traffic basis, to be honest, it's hard to measure it very carefully. If we had not done anything, it's Carlos and all the management would have gone and not move any levers, and we continue on the back like we probably would have lost another point of traffic and without the World Cup [indiscernible] just because of seasonality of -- a little bit of bad weather in certain parts of Mexico, in some in secured. If you put all of that the continuous slide or decreasing traffic in top-ups by not doing any [indiscernible], I think we probably would have lost 1%. We made that and another 2 points mostly because the World Cup helped mostly because of Panini, which comes from the World Cup also helped a lot, but also because we increased market share in many categories. And as you can see, we gained share across most retailers across Nielsen across every way you measure it, we gained a lot of share. So I think we liked what we were able to deliver although I hope to start to see more traffic gains after the World Cup, which I hope that we can sustain.

Yes. I mean, a data point and also encouraging is we seek to track market share relative to different channels. And we continue to see that doing well for us, particularly relative to the bigger formats. Curiously, traditional trade is also doing well and recovering relative to previous measurements that we've had. So that does give us confidence that the World Cup helped everybody, and it seemed to have helped us equal to or slightly better than other channels. And so that gives us some confidence that this is not just World Cup related.

Our last question comes from Mr. Carlos Laboy from HSBC.

Thank you for this time. Jose, I don't think there's a bottler in the last 34 years. It's positively impacted the the next frontier capabilities and the economic model of the Coke system more than Coke FEMSA. And as you settled into your job here, I'd like to understand a little better what's your vision and ambition for the bottlers as you think out over the long term?

Carlos, I'm modestly biased, but I agree with you on the huge impact of Coca-Cola FEMSA in the Coke system. Another Latin American bottlers. Obviously, I'm very -- I've been following close since 1993 very closely. And I've never seen a more interesting future for Coca-Cola FEMSA in both the organic and the inorganic front. If you see organically, as you well know, Carlos, have a huge opportunity for Venezuela. And that keeps me incredibly excited for the level of commitment for Coca-Cola FEMSA to invest behind Venezuela is incredible. What we're doing in Colombia is -- I've never seen numbers like that in the decades, maybe Guatemala for a while, but we are entering a cycle of very market share gains, but also profitability plus scale plus investing the level of alignment with the Coca-Cola system has never been there before.

And the digital tools that we have in Coca-Cola FEMSA, I'm -- I wish I could take some of that to OXXO. And I'm learning just by seeing how the supervisor in Coca-Cola FEMSA has become almost a microeconomic expert with the digital tools that it has at its disposal. So Coca-Cola FEMSA is set for a very brilliant future in organic growth, and it's now becoming very clear that the Coca-Cola FEMSA. The Coca-Cola system from what I sense, feels comfortable with big bottlers, much more than ever before. The management in the Coca-Cola system is a Coca-Cola system that rewards and wants to see big [indiscernible]. This is my superstition, but I think there's been public comments from Coke executives around that.

And so I think there is an upcoming future where I would love to see Coca-Cola FEMSA be a big part of the consolidation that I think could take place in Latin America, and we will do anything that requires us to be part of that success, Carlos. I know you would love to see -- to hear me say something much more sensible [indiscernible]. That's all I can say for now, Carlos. But we're very excited for Coca-Cola FEMSA. I'm very excited for its future.

And let me just clarify because I was corrected by Juan Fonseca. OXXO Brazil grew same-store sales in the double digits the last quarter. was growing in the high teens and now it's growing in the low teens, but it's also Brazil is still growing. Sorry for that mistake earlier.

No worries, Jose. And really, I mean, we have spoken in the past about how the whole period of -- on winding the JV and prior to that, conversations with a partner. I mean, clearly, the last year or so was not a typical year, but it is remarkable, and we did slow down the opening of new stores because of that, but it is remarkable that they've managed to keep the same-store sales in the double digits recently.

Thank you, everyone.

This concludes the questions-and-answer section. At this time, I would like to turn the floor back to Mr. Fonseca for any closing remarks.

Thanks, everyone, for joining us today. Obviously, we're -- the team is always available for follow-ups and any questions that might have gone unanswered today. Other than that, have a great rest of your week.

Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.

Hello, and welcome to the FEMSA First Quarter 2026 Conference Call. My name is Sophia, and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions]

I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead.

Good morning, everyone, and welcome to FEMSA's First Quarter 2026 Results Conference Call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA's CEO; Martin Arias, our CFO; and Jorge Collazo, who heads Coca-Cola FEMSA's Investor Relations team. The plan is for Jose Antonio to open the conversation with some high-level comments on the quarter's performance and trends, followed by Martin, who will provide more granular details on the results. Finally, we will open the call for your questions. Jose Antonio, please go ahead.

Thank you, Juan. Good morning, everyone. Before we get into the numbers, we should talk a bit about the changes we have made to improve our disclosure. As you saw in our release, we are now reporting OXXO Mexico on its own, given how important its performance and trajectory continue to be for our investors and analysts. At the same time, we are reporting a new segment, Americas & Mobility, which comprises our OXXO operations outside of Mexico as well as our fuel business in those markets where we participate in fuel, namely Mexico and the United States. This new segment contains some of our fastest-growing operations. So hopefully, it will allow you to track our progress as we work to gradually capture the growth opportunity in places like Brazil and Colombia. These are the main changes to our reporting segments with Europe, Health and Coca-Cola FEMSA remaining as they were.

Moving on to the quarter results. Most of our operations delivered a strong performance, and the first highlight is the continued recovery at OXXO Mexico. Building on the positive trends we first saw during the final quarter of last year, OXXO delivered 8.3% revenue growth driven by same-store sales that beat the industry despite the disruptions in late February that led to many store closures, a few of which remain today. In particular, we saw revenue growth in the tobacco and soft drink categories, reflecting the pass-through effect from the application of new excise taxes. But we also saw positive revenue dynamics in almost all other categories, except snacks, sweets and alternative beverage.

We believe that these revenue trends reflected our continued focus on affordability through promotional activity and price package initiatives, which in turn helped drive improvements in traffic. Beyond the top line, however, the team also delivered gross margin expansion through continued cooperation with our suppliers, increases in distribution income and warehouse cost savings. On the selling expense front, OXXO Mexico achieved selling expense containment with growth in line with expansion plus inflation. This reflects the impact of our efforts to increase efficiency. As a result of all these factors, operating income growth was well into the double digits.

Just as relevant as the growth in numbers themselves, in a consumer environment that remains challenging, we believe we have continued to gain market share in recent months against the traditional trade, while bigger box retailers were stable as a whole. However, as encouraging as these results are, we recognize there is still work to do. Average traffic remained slightly negative during the quarter, but improved significantly versus the declines we faced last year, reflecting clear progress and the early benefits of our commercial initiatives.

While we are encouraged by this trajectory, we are not being complacent and remain firmly focused on continuing to improve traffic. As we mentioned on our last call, we aspire to restore OXXO Mexico sustained growth and relevance through a clear focus on recovering traffic and further improving same-store sales by sharpening our value proposition and enhancing the customer experience while delivering strong operational execution.

Next, I would like to talk a little about Americas & Mobility. During the first quarter, the business delivered strong growth across most of its income statement. We should note that this segment includes 2 months of the recently consolidated operations of OXXO Brazil, and therefore, the comparable column is particularly useful to understand the rest of the segment's year-on-year growth. Here, we are especially proud of the same-store sales growth in LatAm ex Brazil of more than 20% in local currency, a very encouraging sign of OXXO's on-the-ground momentum in Colombia, Chile and Peru. For each part, Brazil posted same-store sales growth of 6.9% in local currency, reflecting continued progress in strengthening the value proposition, while the U.S. business delivered same-store sales growth of 1.7% in local currency.

In terms of store expansion, growth was moderate on a last 12-month basis. In Colombia, this reflected our decision to prioritize operational improvements and strengthen key capabilities to support a stronger pace of expansion starting this year. While in Brazil, expansion was impacted during most of 2025 by our focus on unwinding our joint venture. Looking ahead, this is a segment that should gradually improve its profitability as it gains scale, strengthens operating leverage and continues to mature across markets. With our updated reporting structure, you will now be able to monitor that progress more closely on a regular basis.

Since we're discussing some of our fast growers, we should also mention Bara and the fact that during the first quarter, it increased its same-store sales by double digits, driven equally by traffic and ticket, while opening 38 net new stores and reaching almost 30% of private label in its revenue mix. All in all, a solid quarter for Bara.

In Europe, Valora again delivered strong growth in operating income even as they continue to face soft traffic trends, particularly outside the core Swiss retail and foodservice business. For its part, the Coca-Cola FEMSA team remains focused on executing its playbook of strengthening affordability, expanding refillable to defend household penetration and continuing to deploy state-of-the-art digital tools and revenue growth management initiatives, particularly important in Mexico, where softer consumer demand has been further pressured by this year excise tax increase.

On the other side of the ledger, our Health operations again delivered a lackluster set of results. Top line was driven by Colombia retail, Chile and Ecuador in local currency with revenue growth and market share gains. However, results were pressured by soft margins in Chile, reflecting an unfavorable product mix shift towards lower-margin pharma products such as GLP-1 treatments and by continued losses in Mexico.

Let me also discuss recent developments on our institutional business in Colombia. As you know, our health business in Colombia includes a significant institutional segment in which we distribute medicine and provide highly specialized medical services on behalf of private health care providers, intermediaries known as EPS. The institutional component represents a bit more than half of our business in Colombia, although it has been growing much more slowly than our retail business and is significantly less profitable. In recent years, this part of the business has become increasingly challenging due to funding gaps, which have impeded the ability of such EPS to reimburse their service suppliers, including us. Accordingly, we have been gradually reducing our exposure, although our total outstanding receivables to the EPS have continued to grow.

As part of our strategy to reduce exposure at the beginning of April, we notified EPS Sanitas, our largest counterparty in this channel by a significant margin that we will not renew our agreement upon its expiration in September. The current environment in the Colombian health care system would result in the insolvency of certain EPS, thus creating a credit risk for us with regards to such receivables. We will continue to actively manage this exposure, remain disciplined in our capital allocation and keep the market informed of any relevant developments as we continue to prioritize our retail drugstore business, which has stronger profitability, cash generation and more attractive long-term returns.

Finally, Spin had a good quarter. Today, Spin by OXXO sits at the center of the digital consumer evolution in Mexico with 11 million active users and more than 100 million monthly transactions. Spin is already one of the fastest-growing participants in [ stay ] and peer-to-peer transfers across fintechs. As we mentioned on our last call, Spin is focusing on becoming a structurally omnichannel platform, aiming to amplify OXXO's ability to solve and serve daily consumption needs and occasions for the Mexican consumer and change how they experience convenience in their daily lives.

Before turning the call over to Martin, I would like to reflect on some of the changes we have made in our organization during these first few months. The work has been intense and challenging, but having the right team in place is fundamental to our long-term success. At this point, we have finished almost all of the organizational changes we need to make. We completed the combination of the overhead structures of FEMSA Corporate and the Proximity & Health divisions, including the top reductions in headcount required by this new structure. For its part, OXXO Mexico has a renewed senior leadership team that brings additional capabilities and the revamped team at Spin now has a more aligned reporting line with OXXO Mexico to ensure maximum alignment.

We still have some work to do to review our corporate non-FTE expenses, but I believe we have assembled a strong world-class team that will help me lead this extraordinary company through the next stage of growth. I want to take this opportunity to thank everyone on our team at every level for continuing to deliver a top-notch performance even as we made meaningful adjustments to the lineup.

And with that, let me turn it over to Martin to go over the numbers in more detail.

Thank you, Jose Antonio. Good morning, everyone, and thank you for joining us today. As Jose Antonio mentioned, starting in the quarter, we are reporting under new segment structure, OXXO Mexico, Americas & Mobility, Europe, Health and Coca-Cola FEMSA. We have included the comparable base numbers for the first quarter of 2025. Among other benefits, we believe this structure will make it easier for you to track and monitor operations that are in different stages of development and evolution.

Let me begin with FEMSA's consolidated financial results for the first quarter of 2026. Total revenues increased 6.1% year-over-year, while operating income grew 5.5%, reflecting the continued recovery in OXXO Mexico, contributions from our international operations and the early benefits of our cost restructuring initiatives, but offset by currency headwinds due to a stronger peso and the softer performance of Health and Coca-Cola. On a comparable and currency-neutral basis, total revenues and operating income grew 8.5% and 12.1%, respectively.

Net consolidated income amounted to 17.6 billion Chilean peso, representing an increase of 97.3% compared to the first quarter of 2025. This increase was driven by a one-time non-cash accounting gain related to the BradyPLUS and Imperial Dade combination. Eliminating this noncash gain, net consolidated income would have been 5.7 billion pesos or a decline of 36.4% year-over-year.

This decline was mainly explained by higher net financing expenses, reflecting: one, a foreign exchange loss compared to a gain in 2025, representing a swing of 883 million pesos, driven by the appreciation of the Mexican peso against the U.S. dollar-denominated cash positions; two, an expense of 189 million pesos related to financial instruments compared to a gain of 1.1 billion last year for the favorable valuation of the convertible bond associated with Heineken shares; and three, lower interest income as a result of a lower cash position and lower interest rates.

Additionally, income from discontinued operations contributed 2.5 billion in the first quarter of last year, but not this year. The effective tax rate for the quarter was 17.1%, including the impact of the onetime accounting gain relating to our investment in BrradyPLUS. The gain was recognized as part of a share exchange transaction that for accounting purposes, required fair value recognition similar to a sale, resulting in a book gain with no current tax effect. Excluding this noncash item, the effective tax rate would have been 37.9%. The difference between the statutory corporate tax rate of 30% and our effective tax rate of 37.9% is mainly explained by certain nondeductible items, including labor-related expenses in OXXO Mexico as well as losses at Spin that while diminishing currently do not generate a tax yield. We expect these losses to decline beginning next quarter.

Turning to our operating results. OXXO Mexico delivered total revenue growth of 8.3%, driven by same-store sales growth of 6% and continued net new store additions of 158 units during the quarter. Gross margin was 46.2%, expanding 140 basis points year-over-year, reflecting solid income from key suppliers and the resilient performance of financial services. Selling expenses grew in line with store expansion plus inflation despite a double-digit growth in labor costs, reflecting our multiple initiatives to contain costs and drive efficiencies.

Administrative expenses increased by 13.9% to represent 2.9% of revenues, driven by a change in the phasing of provisions for year-end bonuses and profit sharing that in the past were more heavily provisioned later in the year and greater expected bonuses and profit sharing due to projected better financial performance this year. As a result, operating income grew 20.9% with operating margin expanding 80 basis points to 7.6%.

The Americas & Mobility segment delivered total revenues of 25 billion pesos, increasing 12.9% or 10.5% on a comparable and currency-neutral basis. The segment's top line benefited from strong performance across OXXO LatAm, which saw average weighted currency-neutral same-store sales growth of 13.1% in Chile, Peru and Colombia and the consolidation of OXXO Brazil.

Gross margin of merchandise was stable at 31.8% of revenues, while in the fuel division, it increased 120 basis points to 13%, driven by a more favorable sales mix with the higher retail volumes in OXXO Gas relative to wholesale, which carried higher margins, together with the benefit of higher fuel prices and improved CPG margins in the U.S., partially offset by lower volumes in the U.S.

Operating income was 281 million pesos with an operating margin of 1.1%, which represented an increase of more than 100% on a comparable basis, excluding currency translations and the consolidation of OXXO Brazil. The operating margin reflects the recent consolidation of OXXO Brazil, which generates an operating loss at this stage, partially offset by strong fuel performance and narrowing losses across the remainder of OXXO LatAm.

Our operations in Europe reported total revenues of 12.9 billion pesos, stable in peso terms or up 1.5% on a currency-neutral basis as the start of the year was characterized by a solid Swiss retail and foodservice business, offset by a weak German retail and foodservice business, resulting from soft traffic across our consumer formats that improved during the month of March.

We continue to see a weak B2B segment, driven by strong competition, and we have taken measures, including bringing in a new sales team to help us reignite growth in this business. Gross profit decreased by 1.3% with a gross margin of 41.5%, resulting from the reclassification of distribution expenses from SG&A to cost of sales. On a comparable basis, the gross margin would have expanded by 90 basis points. There is no impact on operating income from this reclassification.

Operating income was 356 million pesos, a solid increase of 7.4% year-on-year, driven by strong cost containment, offsetting the weak top line growth. Operating margin was 2.8%, reflecting continued cost discipline against the volatile macro environment. For its part, the Health division delivered total revenues of 22.2 billion pesos, growing 0.9% year-over-year or 6.5% on a currency-neutral basis. On a same-store sales basis, performance was positive across Colombia, Ecuador and Chile in local currency, while Mexico continued to face headwinds.

During the quarter and consistent with the adjustments made last quarter, we reclassified certain distribution expenses from SG&A to cost of sales. This change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense. As with Valora, there is no impact on operating income because of this reclassification. However, as a mechanical effect of this change, gross margin was impacted by approximately 666 million pesos, reflecting the proportional shift of these expenses into cost of sales.

Gross profit decreased by 10% with a gross margin of 26.2%. On a comparable basis, the first quarter gross margin would have declined by 20 basis points. Operating income reached 657 million pesos, a decline of 14.9% and 4.9% on a comparable basis with an operating margin of 3%. This result was supported by strong growth in Colombia and Ecuador, which was more than offset by a decline in Chile and continued losses in Mexico.

For its part, Coca-Cola FEMSA delivered revenue growth of 1.1% and a decline in operating income of 2.3%. And on a comparable basis, revenue grew 6.3% and operating income also grew 2.1%, reflecting the benefits of its diversified geographic footprint as international operations offset a more challenging result in Mexico. Portfolio initiatives, strong marketplace execution and digital capabilities continue to support market share gains, while disciplined cost and expense management helped sustain stable consolidated margins. As always, we encourage you to listen to the earnings call posted yesterday.

Before closing, let me briefly update you on capital allocation. In the first quarter, we deployed 6.2 billion pesos in CapEx, representing approximately 3% of total revenues and a 29.5% lower than last year, primarily reflecting a slower start of the year in OXXO Mexico store openings and a conservative approach to capacity-related investments at [ cost ]. We expect CapEx deployment to accelerate through the remainder of the year, trending towards our more typical CapEx to sales ratio of approximately 5% to 6%. Our approach remains disciplined, linking investment decisions across markets to clear visibility on same-store sales and demand trends, margin evolution and cash generation.

With respect to shareholder returns, in our recent Annual General Meeting of Shareholders, we voted to deploy 15.2 billion pesos in ordinary dividends between March 2026 and March 2027, an increase per share of 4.5% versus last year. In addition, shareholders also approved an extraordinary dividend for the year equivalent to 25.8 billion pesos. Taken together, the combination of ordinary and extraordinary returns represents total expected capital distributions of approximately 41 billion pesos on a March 2026 to March 2027 basis. Additionally, we continue to execute on our latest 300 million share repurchase program, which we expect to be completed during the second quarter. This program is part of our 2025 returns and therefore, incremental to the 41 billion pesos I just mentioned.

As I look ahead, we are optimistic as we accelerate towards a busy summer that includes the FIFA World Cup while executing against our strategy across our business units. However, we temper our optimism with some caution, particularly across -- towards the second half of the year as we continue to operate in a challenging and uncertain macro environment worldwide. We got some feedback about our last call being a bit long. We are mindful of your time, and we want to be fair in giving as many participants an opportunity to ask questions. We ask you to help us by asking one question at a time. Feel free to rejoin the queue if you have further questions. Thank you. And with that, we can open the call for your questions.

[Operator Instructions]

Our first question comes from Alvaro Garcia with BTG.

Thanks very much for the new segment information. I think it's great. I have 2 questions, one for Martin and -- or I'll stick with one question. On Others, just it came down materially relative to last year. This is obviously the difference in EBITDA between your consolidated EBITDA in all of your different segments. So I was wondering if you could just help piece together why that came down in the context of the recent restructurings that you announced last quarter.

Sure. I mean one big driver without doubt was the decline in losses in Spin. And again, generally, our efforts at cost containment. One has to be careful with Others line because sometimes that all the forward things and businesses that are coming in and out. But generally, I think from last quarter to this quarter, the best progress that was made was on the reduction of the Spin. The benefits from cost reductions will probably begin to cycle in over the next 3 quarters. And you should continue to expect improvements also as we manage the Spin losses and find more efficient ways to manage those losses from a tax shield perspective.

Our next question comes from Ben Theurer with Barclays.

I'll stick to one as well. So you showed relatively strong performance in terms of traffic this quarter despite some of the security issues. So could you help us understand a little bit more just Jan, Feb, March and how issues in the Pacific area, Guadalajara, Jalisco have impacted traffic throughout the quarter and what the normalization looks like?

So Ben, I would say I'm still not satisfied with traffic. I expect OXXO is a growth platform. It's a growing company, and it should also grow on a same-store sales basis on a traffic level. And the strategies we have put in place, we are aiming towards profitable traffic growth on a medium-term level. Having said that, we are encouraged by seeing compared to other players in the industry in figures and what we see from Nielsen on the traditional trade, we're encouraged by our traffic numbers are relatively better. Especially considering the effects we had on February on the disruptions in the Jalisco region and really in a larger swath of the country. I would say we're seeing very good growth traffic or I mean, better than our average traffic growth, especially in the North of Mexico, probably helped a little bit by weather, also maybe a little bit more economic momentum in that region and the Bajio region compared to a much difficult traffic scenario, obviously, in Jalisco and Nayarit, and that region -- and obviously, the Southeast, which I think has a negative effect after all these infrastructure projects from the last administration are not present anymore or not as relevant. That's how I would frame it in general.

I think maybe adding to the lackluster performance in kind of the south of the country. As you know, really, the states that are more exposed to remittances, the remittances are coming down and they're generating fewer pesos. And so I think that also contributes to the difference between the North and the rest of the world.

And we saw a relatively soft weaker vacation season, probably a little bit is encouraged by international tourism from the news in Jalisco, plus a stronger peso relative to the dollar also affected the region around Cancun. So that didn't help as well. But a long way to go on profit.

And we're working on lots of stuff.

Our next question comes from Melissa B. with Bank of America.

I will try to keep this to one question or theme. On the OXXA gross margin, are you seeing a contribution from commercial income in anticipation of the World Cup yet? And how do you expect margins to evolve along the year?

So we are not yet seeing -- I don't think that is part of the incremental promotional income from this quarter, maybe a little bit in March, but no, I think we're going to see much more of that during the second quarter. There's a lot of excitement being built by many of the sponsor World Cup brands, and we're doing a lot of things behind that, that should help. It's not necessarily promotional income. But today, which is the El Nino here in Mexico, we're launching [ El Panini ] that is collectible thing, and we're partnering with the Panini company, and we expect some tailwinds of traffic and revenues behind that. We will see -- I mean, part of it is commercial income. We're also seeing a lot of expansion on our retail media efforts gaining momentum. We are now -- we have about almost 6,500 digital banners that are functioning and our network of sales of that channel is growing. And finally, some expansion in financial services. We're still seeing some services like top-ups decrease. They're way -- they're much more than being covered by growth in cash withdrawals from new banks, fintechs and other players like Spin, frankly. So all of that has been helped on the gross margin.

Maybe I can complement, Jose, just on one slide. This quarter saw an improvement in distribution income. In other words, suppliers who choose to use -- deliver directly to our distribution centers and then we distribute on their behalf. And as we have gained scale and efficiency in our distribution, more suppliers see us as a better alternative relative to them directly distributed to the store.

Yes. And just one final comment on this, Melissa. I mean, 140 basis points is a big number. And again, I think everything that was just discussed ahead of the World Cup. Some long-term agreements that were recently renewed with some of our big suppliers. Some of that may not be present in the second half, right? I don't think we should put 140 bps for the second half of the year. Hopefully, I'm wrong. I've been wrong 100 times on this more often than not in the right direction, meaning margin expansion more than I thought. But just to be a little bit conservative because it was a big number.

Our next question -- UBS. That's okay. Go ahead, Rodrigo.

So I have 3 questions. I was just joking. Jose, I mean I have you in the line. The affordability strategy 2025 worked quite well, right? How you recovering the lost traffic to mom-pops. It clearly worked well, that strategy. Still, I mean, the way I see this is kind of like a reactive strategy, let's say, to what was happening there with the macro. Now the question is looking for 2026 and beyond the World Cup, what kind of like active strategies would you highlight for OXXO for it to accelerate traffic? I mean you mentioned that you're working in a couple of stuff at the beginning of your remarks, right? But just wondering if you can like help me understand the flagship strategies that you are working on to precisely accelerate the traffic trends beyond the World Cup. That would be my question.

It's a great question. As you say, I think working on a very good price from OBT BCR architecture in OXXO in the impulse categories in terms of affordability has returned us in a growing share trend in tobacco, in beer, in soft drinks and in most of our key categories. I think we still have a long way to go in terms of our ambition of what we can do with impulse. I think given our capillarity, given that we sell the coldest tier out there, we should still gain share and continue to do so. Cold and affordable tier for everyone is our goal. But going forward, it's not going to be enough to bring us where we want to go in terms of relevance for the Mexican consumer. We are very ambitious in our convenience agenda. One of the things we achieved over the quarter with very -- still very minor price and offering adjustments.

We increased our coffee cups sold per store on the quarter from 28 cups in the first quarter of 2025 to 30 cups on 2026. We still have a long way to go. Coffee is -- we serve phenomenally good coffee for a convenience store chain. It's 100% Mexican coffee in Mexico, 100% Colombia in Colombia and in Brazil, 100% Brazilian. It's a great product. We should promote it more. It's incredibly good coffee considering the price, and we still can go very aggressively on price given that we have our own supply chain and have a capacity for withstanding margins there. Coffee should come with breakfast options with what we call Hero products that can help you for snacking, for lunch, but especially in breakfast, we see a huge opportunity. And hopefully, we're successful and the plan is to be, you should see us grow in food and coffee over the next few quarters.

And then I think we still see a huge opportunity in OXXO. This is OXXO only in Mexico in what we call daily replenishment. The traditional trade plays a very good game there with all the CPGs, and we are -- I think we have a very good idea of what the consumer needs in terms of what is sold at mom-and-pops in everyday stores. This is not a competition against other formats like discounters. This is helping you on your daily replenishment on what you need for what you forgot while you were going to work, those type of things. We are piloting a few things in Chihuahua and Veracruz in terms of bringing back affordability and highlighting the importance of how it's much more convenient to get your beer and on the way, get your diapers or your toilet paper in OXXO.

We are seeing some encouraging progress, but still a long way to go. I think that's going to take us more time. But you know the traditional trade is still 50% of the basket of the channel in Mexico. So we have a long, long share gains to achieve. And I think there's room for growth for us and other players like Bara to gain share there.

Our next question comes from Thiago Bortoluci with Goldman Sachs. I believe he's having some technical issues. We're going to go ahead with our next question from Alejandro Fuchs with Itau BBA.

Congratulations on the very strong start of the year. Just one question, maybe a little more strategically for Jose Antonio. We have seen in the past FEMSA a little bit simplifying its portfolio of businesses, right, with the FEMSA forward strategy and being very efficient now with the location. So how do you feel, Jose, with maybe the portfolio of businesses that you have today, thinking about the future? I felt a little bit maybe more cautiousness on the pharma side of the business again. So do you think that -- do you feel comfortable today or we could see maybe going forward more of the simplification strategy that we have seen in the past?

I'll let Martin help me complement a little bit. But I would say, in general, we are always studying parts of the portfolio that either perform better with someone else or should be -- should not be part. So simplification is still -- it's always on our mind. We see most of our growth focus in organic growth. And frankly, some of our operations in pharma have huge potential for organic growth, and that keeps us encouraged in those platforms. Unfortunately, it's not across all of our pharma businesses. Mexico it's really underperforming, and we are analyzing all possibilities with that asset.

Colombia has huge amounts of potential to grow. We continue and continue to gain very significant amounts of share on our Colombia retail. I'm taking out the institutional side, as I mentioned on my initial remarks, have some issues. But the Colombia private retail segment, the industry is growing, and we are the fastest growers in that industry. So that keeps a lot of momentum. And so we should capture that as much of that weighting as possible. And Chile is gaining share. We had a lackluster set of results. But in general, it still has lots of potential in Ecuador as well.

So I would say on the big picture thinking is, yes, we are always understanding where we are the best at, and we are the best, obviously, at proximity and convenience. That's where we shine. We are the best in Mexico, but we are also beginning to see that we can deliver growth and profitable growth in Latin America. And even in Europe, we're encouraged by what we're able to turn around in our European businesses. But obviously, everything is always on our plate, and I bet a lot of my time thinking 5 years, 10 years from now, thinking in decades, how should the portfolio look and where should we go. So everything is on the table. I don't know, Martin, if you. . .

Very little to add. I would just remind everybody the history of FEMSA from the brewery to FEMSA Forward, the mandate that we have as management from our Board and from our shareholders is to value maximize. So any opportunities that we have to find assets in the portfolio where we can maximize value will always be considered thoughtfully. Number two, obviously, these are awkward conversations to have over forums like this because this impacts people, employees, suppliers. And so we have to be particularly cautious of what we say about what we're looking at or not looking at any given moment. And I would add a third qualitative comment, which is once you own an asset, you then have to make a judgment about what is it worth to you relative to what other players might be out there that offer. And that debate happens regularly here at the company. So I would just close with that.

Next question from Thiago Bortoluci with Goldman Sachs.

Congrats on the solid sequential improvement and turnaround of the business. I would like to explore the productivity and traffic seen in Mexico, but from another angle that is how your new stores are performing, right? You are opening a run rate of 890 stores per year in Mexico. When we try to see -- and this is the best simplification we can get your numbers, you are growing area by 3%, but the sales contribution of this growth is close to 2%. So that might imply the productivity of these new stores is not trending in line or trending a bit lower than your same-store sales. I would just like to understand if this is right, what is the plan? And how comfort it gives to you to keep up with the growth pace? And how should we think about the incremental ROI of these new cohorts?

It's a very good thoughtful question. It looks like you've done your math. I think, first of all, we're still very impressed by the new cohorts of stores. As you know, a growing share of the mix is coming from what we all call OXXO niche or OXXO stores that are in special either factories, apartment buildings or offices. Those stores tend to sell in average less than other stores. They usually have some SKU restrictions like alcohol, tobacco, et cetera. But then they tend to have a higher ROIC. So as that share of our OXXO stores goes from 10% to almost 25% this year, that is impacting a little bit of that number.

The other thing is that we are also looking not also on the [ nominator ], but also the denominator and making sure we make a smarter focusing on improving our ROIC, reducing our cost of each new store. And so the return on invested capital of the new stores, even if they sometimes perform less or take more time to mature are in a very good shape. Compared to last year, we did -- I think we should mention 2 important things. We made a pause in really making sure we are continuing to maximize ROIC, and that led to a slower start of the year compared to last year. That should normalize throughout the year in terms of total opening of stores. However, every 3 or 4 years, and I think we haven't really done a big pruning after the recovery of COVID. And so in this year, we are being very smart about saying, hey, it's a few years have gone by we've gone through COVID, how many stores of our underperforming stores we should consider canceling the contract or eliminating. And we think this year, while we're still going to open about 1,100 stores, the net new -- the net opening of stores could be impacted by a few hundred stores. We're still finalizing that number. The OXXO team is being very careful in seeing which stores should probably not exist. And so maybe the net new stores of this year will be impacted throughout the year. But I will have a better number as the year progresses.

Yes, Thiago, this is Juan. I think I'd like to follow up on what Jose just said because we started actually last quarter where -- I mean, we usually talk about the net number, but we are -- and it happened last quarter, closing more nonperforming stores. And the reality is that those stores are in the base of the same-store sales, and they're probably -- even if they're not that great, they're probably selling more than some of the new ones or the newer ones. right? And so the ones that we just opened in the last few months are probably selling less than those that we're closing. And that's happening more than it ever did before. And again, this is where the question came up in the last conversation, and that will probably continue as we continue to prune the store base.

But overall, we still see the opportunity for opening between 900 and 1,100 net new stores of OXXO. This is not counting Bara, which is also accelerating its space, but OXXO stores in Mexico for the next various years, a lot of years, hopefully.

Our next question comes from Hector Maya with Scotiabank.

Jose Antonio, Martin, Juan, congrats on the results. Could you please share with us how much of the ticket growth in Mexico in OXXO was driven mostly by the pass-through of the new taxes in cigarettes and beverages versus organic pricing or mix from the implementation of the affordability strategy?

I'm going to do some math here just quickly, but we have been trending at inflation or a little bit above inflation generally in the tickets. And it wasn't like there was any structural thing that went on in the business. So if you just calculate the difference between the growth in the ticket and inflation, probably, I would suggest that a significant portion of that was related to that. That would be my way to give you a quick and dirty answer because I haven't actually calculated. Common sense leads me to the conclusion really.

I would say if you add some color, we were quite impressed by the -- in the tobacco section, the very inelastic behavior of the consumer with the tax, not so much on the soft drinks. But I would say it was a big portion of it. I don't think it was above 80%, but it was a big portion.

And depending on what territory you spoke about, different soft drink brands decided to pass on more or less of the tax because remember, they collect the tax and then they decide in the price they sell you what's the price at which they're going to increase it by. And so there is some variability between different parts of Mexico depending on the competitive dynamics among the players.

Next question from Lucas Mussi with Morgan Stanley.

Congrats on results. I have one for Martin maybe about your current leverage, excluding cost, of course. Just wanted to hear a bit more how you're thinking about how that should progress through 2026. As we think about your capital allocation, you announced dividends and buyback activities. Just thinking about how you're thinking about cash flow throughout 2026, how you think that should shape up as it pertains to your target 2x net debt to EBITDA, excluding cost by the end of the forward plan in the next 12 months or so. So just how you're thinking -- how comfortable are you with your announced shareholder remuneration, given what you saw in the first quarter and your early expectations in the second quarter, if you see some upside, potential upside, some gaps that could be filled in your target or any general comment given we're already 4 months into the year?

Yes. I mean, all other things being equal, I would expect that given the return of capital position that we've taken, we will end up at the end of the year slightly below the 2x. How much will ultimately depend on how well we do the remaining 3 quarters. And so that will leave the question early next year of deciding whether we make a judgment of either doing another extraordinary dividend, for example. We also have capacity under our share buybacks. So we can figure that at any moment that we have in our judgment. We want to see an opportunity for buying shares. And number three, which is the part that's hard to discuss in a public forum, we also have in our radar opportunities that we're constantly looking at from an M&A perspective. And there may be things that come up this year that will help us to close that gap. So without that M&A, I suspect we will be below, not hugely, but we will likely be below the 2x and then expect to hear from us at the end of the year, beginning of next year to give you thoughts on what our decision next year will be.

Next question from Joseph Giordano with JP Morgan.

I'd like to ask little bit like the expansion of Bara in the North region of Mexico. So just wanted to understand like how you see the performance increasing private label and how are you evolving the model? I think it's like a [ beauty ] mode.

We are very encouraged by what we are seeing on the expansion of Bara in the North, although Bajio continues to prove with very favorable momentum. We are encouraged that we are seeing same-store sales growth on both mix of traffic and ticket, and we love to see more ticket -- more traffic driving the growth in sales. We are accelerating store expansion. We opened about what, 45 stores in the first quarter. But we are planning to -- on April, we're opening 30 stores. It's 38 stores in the first quarter, but we are opening 30 stores just in April. And so we plan on accelerating expansion, and we're still on target on that. I can't promise I made a store [ a day ] for Bara in 2026. Hopefully, my team will deliver that. We're going to be close to that number. We are seeing -- considering that some of the stores in Northern Mexico do not sell alcohol yet, the numbers remain quite impressive. And we're still fixing issues with supply chain and still the welcoming has been very positive. But I'll stay there. I don't want to attract more attention towards our expansion here.

Our next question comes from Henrique Brustolin with Bradesco BBI.

I would like to address the merchandise margins in the Americas. You mentioned, right, the 31.8% flat gross margin. But when I look at the comparable figures from the release, it looks like there was a 5-point margin expansion year-on-year. So just to be clear, if there was anything in the comparison base that we should be aware when thinking about this margin expansion? And on this topic, when you look at the 31 -- close to 32% gross margin, how is that compared to the target that you see for those operations outside of Mexico. In terms of the profitability you can achieve thinking about the expense dilution that you should have as you grow or if gross margin expansion is still potentially an important driver for growth to accelerate and the bottom line growth as well?

So the comparable items excludes Brazil, and Brazil still has a long way to go to match the gross margin that we are seeing in Chile, Peru and Colombia. So I think that should explain most of it. I'm not sure, but I'm pretty sure it does. However, we are encouraged by what we are seeing in Brazil in terms of margin expansion ambition towards the rest of the year. And frankly, again, what we -- the momentum we're seeing in Colombia with double-digit traffic growth with double-digit same-store sales growth was very encouraged that Colombia will be -- eventually will dilute all of its overhead and will be a very profitable operation. It was already EBITDA profitable last year and hopefully would be very close to EBIT breakeven this year.

Brazil has a longer way to go. It's still behind in gross margins. But every new cohort of stores we're opening is surprising us on the upside. They're maturing better, faster. Food is a larger component of our business in South America. In the store consumption of beer is allowed in Brazil, and that is helping drive traffic. So our plan is to -- and then by the way, we are also seeing some interesting expansion of some services, very different types of services, obviously, in Brazil and Colombia, but there's people doing lottery tickets, cards in Brazil. In Colombia, we're seeing a little bit of that and also some cash withdrawals. So I think gross margins, while they're not going to -- I don't think we'll ever match Mexico, could go way above the 35%. So that should keep us on the safe side on paying our cost of capital and continuing to invest in those 2 platforms, especially Colombia and Brazil.

Yes. I think so much of your gross margin depends on your positioning with your suppliers, right? And your scale is a big part of that. So if we continue to grow as we hope we will grow, then our conversations with our suppliers will evolve and that gap will close vis-a-vis Mexico.

There's 2 ways to prove scale in this business. You can be a very big guy and then extract more value or you can grow very fast. And we are still not growing very fast in Colombia and Brazil, and we're still not a very big guy in those 2 countries. When we begin to show faster growth, faster profitable growth, which is the plan for the next couple of years. You'll start seeing our suppliers realizing we are more serious in South America. We're more serious in Brazil. We're educating the consumer of our CPG partners of how profitable is our channel for them. It's a great place for them to launch new products, to launch new campaigns. And so we plan to stay in Brazil and Colombia for decades, hopefully.

Our next question comes from Antonio Hernandez with Actinver.

Antonio Hernandez Velez Leija

Congrats on your returns. Just a quick question regarding that very strong performance in OXXO Mexico. I mean you already mentioned that the 140 basis points expansion is maybe not sustainable, but you do expect some expansion ahead. Just wanted to get a sense on a disclosure of how much of that expansion was driven either from financial services, income from key suppliers, retail media and so on.

I think -- I mean, generally, commercial income is the biggest contributor to the deltas. And I think that was the case again this time around. I mean we spoke a little bit about new agreements that were signed recently with some of the big ones, everything kind of leading up towards the FIFA World Cup. We put some big suppliers, some beer guys or some big beer SKUs into the distribution centers, and that is driving distribution income. So I think it's a mix of everything. I think with one cautious remark before has to do that if we are planning to remain ambitious on our affordability. Some of our margin expansion should be given back to our consumers in SKUs that our consumer team are more elastic to them and really value-add. And so as we continue to grow some gross margin in certain categories because there's a lot of room for expansion. There's also a lot of room to give back to some of our consumers to bring them more frequently to buy at our stores in terms of things like pantry or coffee, for example.

Next question from Renata Cabral with Citi.

Renata Fonseca Cabral Sturani

Congrats on the results. My question is about Spin, maybe for Jose Antonio. As last quarter, you described Spin as a phenomenal fintech but and there is the opportunity to bring more customers into the store. And we saw in the release Spin tender now crossing the 50% in Q1, a remarkable milestone. And I would love to hear how you're actually putting the data at the transaction level to work across more than half of OXXO sales or the opportunities you see there, where that's personalizing promotion, optimizing assortment or for strengthening commercial negotiation with suppliers, if you have an example would be amazing. And just a follow-up on that. Where do you see the natural savings for tender? Is 7% to 8% achievable over time?

It's a very, very good question. We are very impressed by the encouraging results that we're seeing on Spin. I want to remain cautious. But I do say in March alone, we added the highest number of active users in the past 2 years. And more than our 11 million active users are impressed. Our weekly active users keep growing. I think they are almost reaching 5 million. Our monthly transactions are growing month-over-month double digits on a very impressive basis. They overcome by far our financial services in the store. We're using much more stay and peer-to-peer payments in the Spin app. So basically, Spin is gaining momentum and reducing costs. So it's becoming more profitable or if you account for the OXXO commission that we get, it's already making money. So I think Spin is proving to be a success.

Now as Spin continues to grow dramatically and becomes one of the biggest peer-to-peer payment systems in Mexico, a lot of those payments will commoditize and will capture some margins from OXXO. But if we are the fastest growing and we capture a big momentum. We're basically meeting our consumers where they are. We're making them what they -- was very convenient to do at OXXO, making it more convenient to do in the app. And I think once we have that relationship with them in Spin, we can add either more services for them within Spin, and that may require some financial regulation changes or we can also invite them to the store more with promotions, with gamification.

And so I think as you see that, we think Spin will continue to become a more relevant partner of OXXO to bring more people into the store to remind them, hey, your beer is now available, all these things. We are studying how can we begin other services with Spin or financial services with Spin. We're still playing around with how to do credit. But I want to be very cautious. This is a very different consumer than what the other credit card players are doing. So we will be cautious on that. But we see an opportunity for that given all the information we're learning from them.

And frankly, with this indication and what we're seeing in Spin Premia, I think we have at least the responsibility of trying to get our tender well into the 2/3 of -- and we've seen it in our pharmacy business in Chile, we're way above 90%. It's going to be tougher in convenience, but I think we should get above -- hopefully get towards 66%. It's an ambitious goal, but it's not an unattainable goal. That's what I would say for Spin, but very encouraging results for what we're seeing. It also obviously helps our retail media channel, and that should be a source of profitability for Spin as well.

This concludes the question-and-answer section. At this time, I would like to turn the floor back to Mr. Fonseca for any closing remarks.

Thanks, everyone. We appreciate the discipline with the one question policy. Obviously, any follow-ups, you know where to find me and Pamela and Alex, and we're always available. So thank you. And as we are getting closer to the weekend, have a good rest of your week.

Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.

Hello, and welcome to FEMSA Fourth Quarter 2025 Conference Call. My name is Air, and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead, Juan.

Good morning, everyone, and welcome to FEMSA's Fourth Quarter and Full Year 2025 Results Conference Call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA's CEO; Martin Arias, our CFO; and Jorge Collazo, who heads Coca-Cola FEMSA's Investor Relations team. The plan is for Jose Antonio to open the conversation with some high-level comments on performance, followed by a strategic overview and an update on our priorities. Next, Martin will provide more details on the results. And finally, we will open the call for your questions. Jose Antonio, please go ahead.

Thank you, Juan. Good morning, everyone. Today, I would like to split my remarks in 2. First, we will focus on operational results and trends, highlighting some important points and takeaways. Then we will address more strategic topics, including an update on our priorities as well as some relevant structural changes we are putting in place as we prepare for the next stage of growth.

Let me begin with the performance of our business during the fourth quarter, particularly at OXXO Mexico. Back in October, during our previous quarterly call, we mentioned we had observed what seemed to be an inflection point in the same-store sales and traffic trends that made us optimistic about the fourth quarter and beyond. As you saw in the numbers, this improved trend indeed continued through the end of the year and allowed us to close 2025 on a positive note, with same-store sales for Proximity Americas approaching the mid-single-digit growth range at 4.4% and traffic that while still negative, 0.6% was markedly better than what we saw earlier in the year.

While we are not satisfied with the year's performance, as we look back at 2025, we have gained many lessons, and we can also take some encouragement from the fact that initiatives put in place in the second half of 2025 have begun to show results. We began 2025 with a challenge. Traffic at OXXO Mexico was falling by mid-single digits, and it was not following the cyclical recovery we had expected. Initially, we attribute it to the economy and the typical post-election hangover. Accordingly, it took us a little while to diagnose the causes. But once it became clear to us that we had a competitiveness issue versus the traditional trade around some of our core categories, the team designed and put in place a broad set of tactical affordability-focused initiatives. This including growing our mix of returnable beverage packages, increasing multi-serve presentations, seeking from suppliers more competitive promotions and packaging architectures as well as agreeing with suppliers on adding low price point SKUs in core categories like snacks and tobacco.

The strategy worked as designed. We quickly began to recover market share. And as we saw in today's results, our numbers are now trending closer to our long-term expectations. Obviously, we do not operate in a vacuum. Earlier in the year, we mentioned abnormally poor and wet weather in most of the country as a relevant factor in our traffic underperformance and weather was more normal during the fourth quarter. That helped. We also talked about a soft consumer environment and generally lackluster macro sentiment around investment and economic activity in Mexico. Those have not really improved in recent months, but they seem to have stabilized. However, by focusing on the variables and drivers that we could control, our efforts delivered the desired results. That is an encouraging reminder of the strength and resilience of the OXXO platform.

Having said all that, 2025 also highlighted the fact that the core consumer occasions that we serve best, trust, impulse and gathering still have significant opportunities to expand the number of consumer occasions where OXXO can be more relevant and create value. 2025 also highlighted the need to prioritize and focus on a few bold initiatives that will create significant new waves of value. Furthermore, as we already mentioned in our last call, in 2025, we began to address the need for a leaner fit-for-purpose organizational structure, which has now been fully implemented at OXXO Mexico and is currently being implemented at Proximity Americas as well as FEMSA corporate. More details on that later.

As we look at 2026, we aim to regain OXXO Mexico's growth and relevance with a clear focus on recovering traffic and same-store sales through a sharper value proposition and improved customer experience and strong operational execution. In the short to medium term, the team is working hard to take our core categories to their full potential, which means enhancing our already strong competitive position on impulse while also prioritizing and focusing on improving our position in food premium with a focus on our coffee and breakfast offerings. On this front, we have a number of tests in place and are already seeing some compelling results from initiatives such as increasing the affordability of our regular coffee offering, while we learned from our successful food propositions in Colombia and Brazil and adjust them for the Mexican consumer, aspiring to be a go-to solution for a convenient and value compelling breakfast alternative.

Further down the road, we believe we can also pursue and capture new missions like the daily replenishment occasion by improving our offering of pantry essentials at great value while continuing to strengthen our beyond trade opportunity with incremental payments and financial solutions. In the future and in various forums, I will begin to share more details and updates on some of these long-term initiatives. Considering that we currently only represent around 10% of all the categories in which we participate, we continue to see an enormous opportunity to keep growing our business in Mexico by capturing a broader share of consumer spending, increasing our store base by more than 1/3 over the next decade and leveraging that incremental scale to deliver growth while sustaining high returns.

In fact, if we look at the whole of FEMSA during 2025, we deployed over $1 billion of CapEx in organic growth in Mexico across our business units for the third year in a row despite the fact that at the consolidated level, you see a reduction versus 2024, reflecting our ability and willingness to adjust the pace of investment in challenging environments. I want to briefly highlight some of the operations delivering standout performances during the quarter, beginning with OXXO Colombia, where our value proposition has finally come of age, and we generated positive EBITDA for the first time for the full year and nearly breakeven EBIT in the fourth quarter. For its part, Bara showed strong momentum in the discount space, also growing its same-store sales by double digits, while we continue to fine-tune its value proposition and increase the mix of private label offerings, now approaching 30% of the mix for all of Bara. And in Europe, Valora generated record operating income in 2025 on the back of strong retail results in Switzerland and solid expense containment.

For Coca-Cola FEMSA, as Ian mentioned in more detail during their call, we remain focused on 3 clear priorities: first, driving volume by growing the core, strengthening execution and reinforcing our portfolio; second, take Juntos Plus to the next level, leveraging AI and advanced analytics to create more value for our customers and improve decision-making; and third, continue fostering a customer-centric culture of empowerment. However, just like we point your attention to the successes, we must acknowledge when things do not go as intended. In particular, during the fourth quarter, our Health division again registered a provision for uncollectible accounts for MXN 487 million from the institutional side of the Colombian business. in line with similar provisions registered in 2023 as that segment of the market continues to struggle. This comes as the business in Mexico only begins to stabilize after significant downsizing, combining for an underwhelming result for the quarter. Our new management team at the Health division has completed its initial assessment and has launched a series of initiatives focused on more disciplined use of capital and commercial practices with a focus on cash flow generation and returns. This will be a tough year in terms of results for this division, particularly as it relates to our institutional business in Colombia and the need to stabilize the Mexico operations. Martin will get more into the details in a minute.

Now let me get to the second part of my remarks. Beyond the quarterly results and operating trends, I want to provide you with a broad update on our strategic priorities as well as some of the changes we are making to our organizational structure to better align with those strategic priorities and with a focus on increasing efficiency and effectiveness. As we have said in the past, we strive to create value by generating returns in excess of our cost of capital. This means focusing our investment capacity with precision and purpose on those initiatives that can create the most value as well as putting the strongest possible team together and deploying our best people to where they are most needed. At the same time, together with Martin and the finance team across our business units, we are putting in place a renewed focus on cash flow rigor pushing the teams to think about cash with an owner's mentality and exerting full control over the levers that drive cash, including an obsessive focus on managing working capital and highly disciplined investment in CapEx.

Let me briefly touch on expansion, which remains a key pillar of our long-term growth strategy. During 2025, we instilled a more rigorous approach to store base growth across the portfolio, particularly in Colombia and Brazil. We have closed early cohort and underperforming stores as we keep refining our value proposition, resulting in a more measured number of net additions. This was a deliberate adjustment, not a structural shift in our ambition, and we are well positioned to accelerate growth going forward. Our top priorities remain consistent with what we have discussed in the past. As I just mentioned, the Mexican market will continue to be at the top of our list. OXXO Mexico remains our first priority as we continue to capitalize on the white space opportunity while we strengthen and expand our value proposition by consistently adding incremental layers of value to ensure we increase our relevance for an evolving Mexican consumer. Mexico is also Coca-Cola FEMSA's largest market, and we continue to develop and deploy the right market and portfolio strategies to grow our core and successfully navigate a challenging regulatory environment.

At Bara, we now have 2 growth engines, having just opened our second distribution center in Monterrey. Together with our Bajio and Jalisco growth sale, we will continue to fine-tune our value proposition and raise our mix of private label beyond the current levels. 2026 should be -- also be the year that we increase our pace of store expansion with plans to grow our store base by approximately 1/3 during this year. Moving to Brazil, our second largest market, we now have full strategic control of OXXO, and we will continue to fine-tune our value proposition while we also accelerate growth within the state of Sao Paulo. In particular, we will continue to develop our successful prepared food offerings, while we also increase our operational focus and execution. For 2026, our target for store expansion is approximately 100 net new stores, representing slightly more than 15% growth as we continue to build scale in this high potential market. Brazil is also a very high priority for COF, where they see a compelling opportunity to keep growing the business, enhanced by cutting-edge digital capabilities with Juntos Plus.

In Colombia, we have achieved strong unit economics at the OXXO store level anchored in a successful value proposition for prepared food. As a result, we are ready to further scale the operation in a disciplined manner with plans to increase our store base by 20% in 2026. Beyond Latin America, we are excited about our operations in the U.S. and Europe. In the U.S., we remain focused on fine-tuning our value proposition with a focus on prepared food, testing different alternatives and continuing with the conversion of the store base to the OXXO banner with positive results. For its part, Valora has exceeded expectations, particularly through the strength of our Swiss retail platform and the management team's proven ability to operate with increasing levels of efficiency.

To better support these priorities and to prepare us for sustained long-term profitable growth, we have redesigned our organizational structure, integrating the leadership teams that existed at FEMSA corporate and at the Proximity and Health division, consolidating them at the FEMSA corporate level. As a result, in addition to Coca-Cola FEMSA, we will have the 4 large retail divisions reporting to me: OXXO Mexico through Carlos Arroyo, Proximity Americas and Mobility through Constantinos Pass, Health and multiformats through Jaco Caller and Europe through Michael Mueller. All corporate functions such as finance, strategic planning, human resources, corporate affairs and sustainability will also be consolidated at the FEMSA level. This consolidation will allow us to run a leaner, more streamlined organization while realizing meaningful synergies and efficiencies.

Another critical component of this restructure effort involves Spin and OXXO Mexico. As we have continued to develop the value proposition of Spin during the past 5 years, we have come to understand that the physical growth path of OXXO and the digital growth path of Spin not only are not divergent, but they actually converge and intersect. Digital does not replace the store. It amplifies it. And the store is not a constraint on digital. It is its greatest competitive advantage. As a result, we have redefined our ecosystem 2.0 as a model focused on OXXO Mexico, creating greater alignment between Spin and OXXO. The principle is straightforward, one client, one strategy and one aligned P&L. This implies narrowing our focus and emphasizing the role of Spin within the OXXO store network, for example, by postponing the application for a full banking license and instead giving us the time to clarify the lending opportunity through the right partnership.

This increased alignment of the Spin and OXXO platforms will allow us to merge digital and physical talent, capabilities and ways of working to reinforce our omnichannel value proposition where payments services, loyalty and data are embedded into the store experience while creating important savings and efficiencies. Spin already reduced its negative EBIT for the full year 2025 by almost 30%, and we are estimating a further improvement of close to 20% in 2026. In the context of this important strategic adjustment, today, we want to recognize Juan Carlos Guillermety's leadership in building digital capabilities that are critical for FEMSA. Under his guidance, our ecosystem strengthened its value proposition, consolidated strategic partnerships and defined our financial ambition, setting the foundation for this new stage of integration. Juan Carlos will transition into an advisory role and Rodrigo Garcia Jaques will assume the leadership of Spin with a clear mandate, consolidate execution, ensure a permanent alignment with OXXO Mexico and maintain operating discipline.

We expect the combined effect of all these restructuring efforts and the sustained improvement in performance from Spin to result in a positive impact on our bottom line of approximately MXN 1 billion on an annualized basis, which will show up in our results mainly at the corporate level. The efficiencies will ramp up during 2026 and reach their full impact in 2027 and beyond. Martin will also elaborate on some of the ground level implication of these changes. And with that, let me turn it over to Martin to go over the numbers in more detail.

Thank you, Jose Antonio. Good morning, everyone. Let me begin by walking you through FEMSA's consolidated financial results for the fourth quarter of 2025. During the fourth quarter, total revenues increased by 5.7% year-over-year, reflecting a combination of improved trends in Proximity Americas and continued growth outside of Mexico, particularly in Coca-Cola FEMSA and Valora. Operating income increased by 8.5% as cost containment initiatives offset gross margin pressure. These results reflect, for the most part, a recovery in the fourth quarter relative to the first 3 quarters. Net consolidated income for the quarter amounted to MXN 12.7 billion. representing a 33.6% increase compared to the fourth quarter of last year, driven mainly by an increase in income from operations of 8.5%, nonoperating expenses that fell by 62.7% and a decline of 26.6% in income taxes due to nonrecurring items, which were partially offset by ARS 830 million of foreign exchange loss from our U.S. dollar-denominated cash position compared to a gain of ARS 2.7 billion in the comparable period and lower interest income as a result of a reduced cash position during the period.

Turning to our operating results, starting with Proximity Americas. During the fourth quarter, total revenues increased by 5.3% or 6.3% on a comparable basis, mostly driven by same-store sales growth in Mexico as well as top line growth in OXXO Colombia and Peru. Gross margin stood at 48.1%, reflecting a 40 basis point expansion as a result of an improvement in OXXO LATAM, driven by increased scale and more disciplined commercial negotiations with suppliers. Operating income increased by 7.7%, while operating margin was 12%, reflecting the initial benefits of our overhead reduction and productivity initiatives, along with disciplined expense management, which allowed us to translate most of the gross margin expansion all the way to the operating level. During the quarter, Proximity Americas added 209 net new stores, closing the year with a total of 1,125 stores. At the same time, we have been prioritizing a rigorous evaluation of our entire store base. And as part of this process, we closed a number of underperforming stores in LatAm, particularly in Colombia. These actions allow us to enter 2026 refocusing growth on profitability and strong unit economics at the store level.

Moving on to OXXO USA. We ended the year with 50 converted stores under the OXXO banner. We continue to make progress in our foodservice strategy, expanding our hot food and coffee offerings as well as assortment expansion. All these initiatives are part of a learning process as we continue to refine the value proposition in the region. Finally, at Bara, we added 63 net new stores during the quarter and 157 during the full year, remaining on track with our long-term growth ambitions while continuing to optimize the discount offering.

In Europe, Valora delivered revenue growth of 2.5% in pesos in the fourth quarter. Gross margin was 37.9% and operating income increased by 10.8%, reflecting continued cost discipline and a favorable mix in Swiss retail while navigating a challenging macro environment in Germany and a softer performance in foodservice B2B. The decline in gross margin of 550 basis points is a result of the reclassification of full year 2025 distribution expenses from SG&A to cost of sales, all in the fourth quarter. On a comparable year-over-year quarterly basis, the fourth quarter 2025 gross margin would have expanded by 70 basis points. There is no impact on operating income as a result of this reclassification.

Moving to the Health division. Fourth quarter revenues increased by 4.6% or 6.7% on a comparable basis, driven by strong growth in Colombia and Ecuador, complemented by flat performance in Chile, while Mexico remained under pressure, primarily due to lower store base compared to last year, following the closure of underperforming locations as part of our restructuring efforts. Additionally, during the quarter, we reclassified the full year 2025 distribution expenses from SG&A to cost of sales, all in the fourth quarter. This change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense. There is no impact on operating income because of this reclassification. However, as a mechanical effect of this change, gross margin was impacted by approximately MXN 1.8 billion, reflecting the proportional shift of those expenses into cost of sales. This is the full amount for the year 2025, which we are recording in the fourth quarter. If we only recorded the amount corresponding to the fourth quarter, the impact to gross margin would have been a reduction of 110 basis points relative to the comparable period. Additionally, during the fourth quarter, we reclassified certain administrative expenses into selling expenses for the full year. For comparability purposes, we suggest focusing on the sum of selling and administrative expenses.

Operating income from the quarter was MXN 573 million with an operating margin of 2.5%, largely reflecting a deteriorating environment in the Colombian institutional business, where we took a charge of MXN 487 million for uncollectible accounts. Excluding this effect, operating income would have been MXN 1 billion with an operating margin of 4.6%. At OXXO Gas, same-station sales increased by 8.7% during the quarter, supported by higher wholesale volumes, which is allowing us to leverage our scale and optimize logistics. Operating margin stood at 4.8%, maintaining profitability levels compared to last year, reflecting disciplined cost management and operational efficiency.

Turning briefly to Coca-Cola FEMSA. During the fourth quarter, the company delivered revenue growth of 2.9%, supported by growth across geographies, particularly outside Mexico. Operating income increased by 13.3%, reflecting continued focus on efficiency and disciplined execution. As always, we encourage you to refer to Coca-Cola FEMSA's earnings call for a more detailed discussion of the results.

As Jose Antonio mentioned in his remarks, we continued advancing our restructuring process. The initial phase began late last year with the fit-for-purpose initiative, which was focused on OXXO Mexico and Health, and we expect to generate more than MXN 800 million on an annualized basis and has recently been put into place. We are now extending that discipline across Proximity and Health, FEMSA Corporate and Spin, including the consolidation of overlapping structures between the Proximity and Health division and FEMSA Corporate and between OXXO Mexico and Spin to generate additional savings. These initiatives will generate approximately an additional MXN 1 billion on an annual run rate basis beginning in 2027, most of which will be reflected at the FEMSA corporate level. Due to the timing of the transition and the implementation of the new structure, we will not begin to see the full run rate benefit until the end of 2026. These efficiencies are primarily driven by headcount optimization, the simplification of the organizational structure as well as improving results at Spin, supported by underlying business momentum and an organizational restructure in that business. Importantly, in the fourth quarter of 2025, we recorded provisions related to this restructuring process, which will temporarily offset a portion of the savings before the full benefits are reflected in our results.

Before closing, let me briefly address capital allocation. During the fourth quarter, we deployed MXN 14.2 billion in CapEx, bringing full year CapEx to MXN 45.3 billion, focused primarily on store expansion, manufacturing, supply chain infrastructure and strategic capabilities across the company. That said, full year CapEx came in below 2024 levels, mainly driven by 3 factors. First, in Mexico, a softer macro environment allowed us to prudently postpone certain capacity and infrastructure investments without compromising service levels or long-term growth plans. Second, as we just mentioned, we implemented a measured slowdown in expansion in selected markets, particularly in OXXO LATAM, where we prioritize profitability and unit economics or pace of growth. Third, this outcome also reflects a renewed discipline in capital allocation, ensuring that every peso deployed meets our return thresholds and strategic priorities. On this point, we are increasingly linking expansion decisions to clear visibility on traffic recovery, margin sustainability and cash generation. Importantly, none of these adjustments alter our long-term growth runway. Instead, they demonstrate our ability to be flexible on investment timing in response to market conditions while preserving financial strength and return discipline.

In terms of shareholder remuneration, for the full year from March 2025 to March 2026, total capital returned to shareholders through ordinary and extraordinary dividends and share buybacks amounted to $3.1 billion at the exchange rates at the time of payment. Importantly, this past January, we completed the deployment of our extraordinary dividend for 2025, totaling $1.7 billion at the exchange rates at the time of payment. Regarding our previously announced $900 million share repurchase objective, we executed approximately $600 million with the remaining $300 million pending execution. This delay was primarily driven by blackout periods during most of the second half of last year, which limited our ability to execute buybacks. Consistent with the road map we presented a year ago, our plans from March 2026 to March 2027 include extraordinary returns of approximately $1.3 billion. Tomorrow, we will present our recommendation to the Board of Directors regarding both ordinary and extraordinary returns of capital, and we will communicate the Board's resolutions accordingly. We expect that by the end of this year, we will be slightly below our targeted 2x net debt to EBITDA, excluding Coca-Cola FEMSA, which will require us to consider additional returns. However, given how close we will be to the target and the potential inorganic projects that we are currently evaluating, we want to retain the flexibility to execute on such projects or to announce extraordinary capital returns, including buybacks later this year. It goes without saying that the performance of our business this year will also inform any additional extraordinary decisions. As we look at the year that begins, we are confident in the resilience of our portfolio, the actions we have taken to unlock further value across each of our divisions and our ability to continue executing with discipline. Our focus is clear: improving returns on capital, strengthening the fundamentals of our core businesses and allocating capital thoughtfully to continue to create value for our shareholders. And with that, we can open the call for your questions.

[Operator Instructions] Our first question comes from Thiago Bortoluci from Goldman Sachs.

Antonio, congrats for the results. Martin. I have two questions here, right? The first one is on the balance between growth and profitability, particularly in OXXO Mexico, right? I remember last earnings call, Jose Antonio, you mentioned a number of initiatives to improve traffic and protect demand. Obviously, a lot of this has been already playing out. But still in this quarter, you had better gross margins and lower traffic at OXXO Mexico, right? So my question is, going forward, how ready do you think the assortment and the value proposition in Mexico is already set? And if there is any low-hanging fruit or any clear initiatives yet to be done, if you could help us just understanding particularly in which category that might come from? And then my second question, maybe for you both on the initiatives and restructurings, right? Obviously, we understand directionally what you're trying to do here. But just on the magnitude, right, this is relevant. Martin mentioned like MXN 800 million plus another MXN 1 billion from the fit for purpose and Spin. This is like almost 3% of your net income, right? So I think the question here is, what are those low-hanging fruits and how possible this kind of efficiencies can exist in a company so efficient as FEMSA. Why hasn't this been done before? And what makes you confident that going forward, this could be fully executed on track? Those are the questions.

Thiago, thank you. Very complete and full questions. I'm happy to address them. Both, I will address the first one, and then I will let I will address a brief thing on the second one, but I will let Martin complement me. On growth and profitability, if you look at the full year of 2025, to me, it was a year that left me disappointed. It was much better the second half of the year. So I am very happy with the turnaround that we were able to implement, but I am much more obsessed with bringing profitable traffic and growing market share in our core consumer occasions than on short-term profitability. And obviously, I am much happy of how the year ended on the fourth quarter because it looks like we're turning -- taking a turn. And I am very happy with how the year started. I don't want to give any spoilers, but we see the trend continues upwards in terms of traffic, and that keeps me optimistic. But our obsession is not profitability just for profitability per se. Our obsession is we are about 10% of the consumer occasions we address. The total addressable market is huge and OXXO -- should remain the favorite part of the Mexican consumer for not only our core categories like impulse, like tobacco, like beer, like soft drinks, but more and more other consumer occasions like breakfast and coffee, like daily replenishment, which we are already playing there, but we are not playing to win as much as we want. And that's what's going to be our obsession. To be able to give you a number, it's tough. What I do see is that there's still a lot of margin expansion to be gained from our core supplier partners. A lot of -- some of that has to be given back to the consumer to bring them on a profitable way more and more into the store. And so for us, a year with same-store sales traffic decline is a year that we -- that's a miss. We need to gain traffic on a same-store sales basis, and we're going to be obsessed with that. However, obviously, it has to be profitable growth. I hope that answers you the first question. For the second question, we began even my tenure in proximity with an obsession of trying to get leaner and meaner, and we were able to do that in health and in OXXO Mexico. We've now instituted some efficiency opportunities in Spin, and we have just finished the same thing with FEMSA. On an FTE basis, I think we are done. We are not seeing a need for more restructuring. We have the team that we need in place to accomplish our goals. But there are still opportunities to do non-FTE restructuring. There -- we are looking at every little expense that we make and everything that we think is redundant, not necessary or not bringing us traffic to the store. should go. And so we're reviewing every consultant, every law firm, everything, every expense that we think may not be necessary going forward. And there should be even more opportunities that Martin mentioned, but it's too early for me to promise you a number. And with that, I'll open it to Martin.

Yes. I mean as to your broader question of this, why now? And look, I've been around the block a long time with different types of companies. This tends to happen like this in terms of waves. You go through phases where you're making bets and you're expanding and you're building capabilities. And as you begin to see the results of that, you naturally prune. And with Jose arriving to the seat of the CEO, he wanted to give us a renewed focus on this issue that he had already started at Proximity. Also with his arrival and given that the structure we ultimately decided to implement, which was to collapse the P&H division with FEMSA Servicios, that also created a new opportunity that didn't exist before when we had decided to maintain that division. As to the figures and the numbers, it's just very important to note, there's 2 numbers. There's one that will tend to be reflected more in Proximity Americas, which has to do with the fit for purpose, which was announced and we discussed for the first time last year. And then that should be impacting in Proximity Americas generally throughout this year as it gets implemented and rolled out. And some of that also gets reflected in Salud because I also mentioned it was in Salud. So some of that will be seen in the overhead expenses of Salud. The part that is at FEMSA Corporate is a combination of 2 things. It's a combination of reduction in costs. Definitely, there has been a net reduction in FTEs throughout the organization, particularly relating to the merger of PNH and FEMSA Corporate. Some of this has to do with Spin. So it will be reflected also at FEMSA Corporate because FEMSA Corporate is the one that consolidates the results of Spin. And in the case of Spin, it's not only a significant tightening of costs, which is directly related to the narrowing and focusing of the strategy and the ambition of Spin. And as we mentioned on the call and in the press release, we're postponing the license. Premia will no longer be offered to third parties outside of the OXXO ecosystem. and...

For the FEMSA ecosystem.

The FEMSA ecosystem. And we've also narrowed some of our efforts on payment platforms in small mom-and-pop stores. Some of these things have been delayed or postponed for the foreseeable future until we have greater visibility about the payment platform in the store, the credit initiatives. So also part of what's included in that figure is our expectation that the losses at Spin should be coming down because of all these cost reductions, but also because we expect the momentum of the business with this renewed focus and alignment to improve. Obviously, that is a sort of a view about what will be the improvement in the top line performance of Spin. So it's a little bit harder to rely on because it depends on a lot of external things going right as well.

Our next question comes from Ricardo Alves from Morgan Stanley.

My first question on OXXO. I think that another impressive performance on the gross margin. It's great to see that. In our conversations, we've seen some people more concerned about financial services in the long term. So I wanted to think about your gross margin performance and financial services in taking advantage of all these long-term strategic initiatives. I wanted to think about that in the long term. Are there main initiatives that you're already working for 2026 as we speak to kind of defend your position and to remain relevant. The 2 main components of the gross margin that we always discuss, commercial income and financial services, I think that commercial income is easier for us to understand given your physical presence, given the World Cup this year and et cetera. But -- so perhaps my question is more directed to your strategy around cash in and cash out. We've been talking about remittances for the past couple of quarters. So an update here would be great. And then I'll ask my second question later.

Thank you, Ricardo. So as you say, commercial income is still early and growing, and it's a huge source of growth. And I think we're just scratching the surface in terms of what we can do with retail media and other commercial income projects. In terms of financial services, look, it's still -- it's growing on traffic. if you blend that all together and if you put even top-ups or cell phone, this thing is driving growth. It's growing traffic at same-store sales level. It's accelerating. We just put Banorte as part of the Correspondsalia network, and it's driving tremendous growth. We see the need and the consumer demand needs for payments, being able to use the OXXO network as an ATM is still -- and I think it's going to be for the foreseeable future. If you ask me long, long term, that's in a way -- and I would say we haven't even scratched the surface on what we can do with remittances. But we've been -- we keep installing the cash machines in more and more stores. And I think there's still a huge opportunity for us to capture market share in remittances. Long, long term, it is obvious that as people go more and more into digital, some of these services will fade or will reduce as we are seeing with cell phone top-ups reducing and going more into digital payments. And I think that's where Spin plays a huge -- a critical central role within OXXO, and that's why the decision to turn it back into the OXXO ecosystem. If you look at, Spin is a phenomenal fintech, but but we've underdelivered in making it a useful tool to bring people into the store. And I think Spin's value really does not come from choosing between OXXO or being a fintech. It comes from really bringing both together. Spin -- OXXO is really the best competitive advantage that Spin has and you can use -- there's a lot of things that we have not been promoting well that you can do with a Spin QR. You can take a picture of a Spin QR and you can tip your waiter, your gardener, your whatever or you can send -- give money to a colleague and you can make it go into the OXXO store and with a QR scan really very quickly deliver it or pick the cash up. So I think we're just scratching the surface of what you can do when you combine a digital application and a physical a physical network of over 25,000 stores. We have a lot of things on the pipeline, things in like PUDO, working with some of the e-commerce players. But I think we are just scratching the surface of the services that will come and replace the wave of services that will go entirely digital. So I'm optimistic that the pace of change will allow us to adapt, and we will come up on top on the long term. But obviously, there will be pluses and minuses throughout the coming years. Does that answer you, Ricardo?

It does. Should I ask my follow-up now or go back to the...

Please go ahead.

Yes. Yes. The other one is probably for Martin. I think that a helpful summary, Martin, that you gave on shareholder distribution, strong year in 2025. Congrats on the execution there. As we're thinking about 2026, however, we've ran a couple of sensitivities and we get easily to a potential excess cash beyond $3 billion. I'm not saying that this is the number that FEMSA is going to be distributing to shareholders, but it seems to us that the excess cash balance by the end of this year could be significantly higher unless some of the basic assumptions that we saw in 2024 and 2025 could have changed. For instance, I don't know if maybe the potential ticket for M&A is higher than before or maybe if the 2x target of leverage, maybe if we stay below 1.5, 1.7, that would be okay in the longer term. So I just wanted to provoke you a little bit more here. It seems to us that the excess cash position could be significantly higher. So I just wanted to hear your thoughts on that.

Sure. I mean, without trying to understand your number on this call in real time, which would probably not be prudent or helpful, I would remind you that given the extraordinary $1.3 billion that we've already committed to distribute, the $300 million in buybacks and let's just assume the Board approves, which I don't think is a difficult assumption to make, that the dividend -- ordinary dividend will be consistent with what we paid last year. we're talking about easily $2.4 billion, $2.5 billion being paid out this year, March to March. That's nothing else happening. So if for some reason, we do spectacularly -- so my estimate of excess cash is less than yours. And number two, if for any reason, it is what I expect and/or even better than I expect. And we -- we will reserve the right during the year to do more buybacks, announce another extraordinary dividend. So we're not foreclosing the possibility. It just seemed given how close I expect to get to the 2x net debt to EBITDA that now we're just really, to be honest, playing with some decimal points as opposed to -- and I don't need to be that precise because I have the flexibility and the company has the flexibility during the year to buy back more shares or call a special meeting -- shareholders' meeting and declare another extraordinary dividend. But I'd be happy offline to walk through the numbers and try to understand where your $3 billion comes from.

Our next question comes from Rodrigo Alcantara from UBS.

Congratulations on the results. So 2 questions. The first one on the fit for purpose, amazing what you are doing there. Just for the sake of the conversation, I know that you have been in the road talking to investors. And as a frequent answer that you have -- a frequent question that you have received is in relation on how KOF fits into this new structure that you are envisaging. So my question is precisely to hear from you now in the call like what you are answering when you received this question about KOF within this fit for purpose. And my other question would be very quickly, if you have any early comments on the unfortunate events that we have seen in terms of security arising to what happened 2 days ago in Jalisco, right? We have seen some news flow there about x number of stores being affected. So any commentary on that would be helpful.

Thank you, Rodrigo. These are, as you say, a very relevant question. The first one being very frequent one. The second one, I hope it's not -- it's never asked again. But -- on the Coca-Cola FEMSA side, as you know, we are always, always evaluating possibilities for all of our businesses. And we do not see ourselves as a conglomerate. We are very focused on what we bring value. We love these our businesses, our main businesses where we are, and we see huge future ahead of them. And we've proven to you guys that we are pragmatic. We are a 135-year-old company that started with beer. And we don't -- other than the huge amounts of beer we sell from many brewers in OXXO, we are not into beer anymore, and we will remain ourselves very pragmatic going forward. If these 2 companies, Coca-Cola FEMSA and Proximity or retail were 2 separate companies, would you consider merging them? The answer is absolutely no. Now the possibilities of separating has a lot of implications, a lot of things that we're going through, a lot of analysis that has gone through our minds. So I would let the comments there. For now, the structure that we have works great for us. And if something changes, we would address it at the appropriate level.

On the second thing, Rodrigo, obviously, it was a very sudden and unfortunate event in the last couple of days. I do want to take a minute first to recognize the heroic and incredible work done by many of our employees and frankly, customers. We've received dozens of videos, comments, memories of people filming, protecting our stores, protecting our collaborators. We have a heroic employee that basically tried to put her life at risk to save one of the stores. I just want to say, first, no customer at all was even injured during these disruptions by organized crime. -- our employees suffered minor injuries. All of them are out of danger. And I was incredibly moved and touched by the amount of customers and employees that through themselves to save some of the stores that we were in danger. On the great scheme of things, we were not as harmed as much. We had to close for 1 day up to 6,000 of our stores. Yes, but precautionary, but a day after we had opened over 90% of them. And today, only about 300 stores remain closed. If you look at the amount of damage that the country received, it's -- I mean, we had about 200 stores with some level of affection. It could be a loading or all the way to a store burn. But I would say most of those stores in a week or so will be up and running. But the fact is that we are everywhere. We are in every town in Mexico. We are -- and so it's not -- we haven't seen anything that's against us. It's just that given that we are all over the place, we tend to be the first ones targeted, but there were other supermarkets, other convenience stores, other pharmacy chains affected. It's just that we tend to get the most coverage. I also do want to recognize the incredible closeness and collaboration with the security personnel, Army officers, Guardia Nacional, the authorities have been incredibly close to us and helpful in monitoring the situation and giving us feedback, and we've been able to give feedback. So I am very impressed by the security authorities, both Army, Marines and Guardia Nacional and the response has been tremendous. So I was also very thankful for that incredible back to normal that came quickly. So I really hope these things don't happen again. And we have protocols in place that have made my team very proud of how we were able to respond and have no incident on customers and some minor injuries on employees that are out of danger. Thankfully for addressing that question and thankfully, thanks for letting me give these comments.

Our next question comes from Alvaro Garcia from BTG Pactual.

I have 2 questions. The first one on the restructuring. Martin, you've run through it. I just kind of wanted to walk through the numbers. In the past, you've mentioned a cash burn at the corporate level of almost $200 million, a cash burn at the Spin level of around MXN 150 million. So -- and then today, you've mentioned the MXN 1 billion and the MXN 800 million. So I was wondering if you could just clarify if it's MXN 1 billion, if it's MXN 1 billion plus MXN 800 million. I know some of that might be at Proximity Americas. But I guess at the corporate level specifically, how should we think of what used to be that cash burn? What might that look like on a pro forma basis into 2027? That would be very helpful. And then will Spin formally be merged into OXXO? I know that has relevant sort of fiscal implications. So that's my first question. And then I have a very, very quick follow-up, which I can ask after very quickly.

Sure. Let me -- Spin will not be merged into OXXO. -- there will be activities that were undertaken at OXXO and Spin that will be centralized in one of the 2 businesses. But Spin will remain as a separate distinct operating unit with its own budgets, its own routines for management and its own support functions in order to ideally protect the unique capabilities that have been built around that business. Number two, as to the cash burn of Spin, in effect, there are -- the way we account for the cash burn of Spin is in a very conservative fashion. So that $200 million figure coming down to $150 million is a figure which is Spin stand-alone. And what does that mean? Given our -- the transfer pricing rules and allocation of revenues and so on, there is a formula pursuant to which Spin has to share the revenues that are generated from certain service offerings that Spin provides that use the store. And it has to pay for certain services that are executed in the store by the store employee. So that number, just to put it in its context, is a very conservative way of measuring the cash burn of Spin on a stand-alone basis. On an ecosystem basis, it's significantly lower than that. And I'll give you a prime example. Spin by OXXO is a -- generates a cash burn at Spin. But when you look at the ecosystem of all the payments that are executed in the store through Spin by OXXO, which arguably might never be executed had not Spin by OXXO existed. When you look at it, that business, for example, is breakeven is easily breakeven. We do expect that cash burn to decline. So from the 200 million to 250 million, you should continue to see it come down. Some of this will be difficult to account because when you see it in others, there will be eliminations, accounting eliminations, which will counteract some of the effects. And we will do everything we can to give visibility and transparency on this as we progress throughout the year, and you ask us the follow-up question, how we're undergoing on this. And yes, the 2 figures are complementary of each other. In other words, there are some. There's MXN 800 million at PNH -- I'm sorry, Proximity Americas, which relates primarily to OXXO Mexico, but also includes -- and I should have been maybe a little bit clear, it does include an amount for Salud, which is basically cost reductions across the businesses, but very focused on overhead, but it also included savings within the operations. And the MXN 1 billion refers primarily to savings at FEMSA Servicios, FEMSA corporate from the collapse of the 2 structures, P&H division and FEMSA Servicio. It also includes the momentum we expect from Spin at its top line. It includes also significant savings at Spin from the narrowing and focusing of our ambition.

And it includes -- I'd imagine it also includes additional headcount from -- that you're moving towards the corporate level. That's also included in that MXN 1 billion figure.

Yes. Yes. Well, again, it's the net savings from moving some of those people over here plus the people here and then the net savings we will execute.

Awesome. And then just one very quick one on OXXO. Now that's super helpful. I really appreciate the color, and I will be asking that going forward. On revenue growth at Proximity Americas, it grew 5.3%. Same-store sales was 4.4%, sort of the lowest gap we've seen between same-store sales growth and total revenue growth in quite some time, that productivity factor. If you could comment on that, that would be very helpful.

Alvaro, this is Juan. Yes, I think there's a number of things at play there, but a couple of them are some of the the growth is actually also happening now outside of Mexico. So we saw a really good quarter from LatAm, and we had some currency headwinds there. So if you look at the comparable number, as you can see in the table, it's a little bit higher. But there's another factor which has to do with the openings and closings. And we mentioned we are closing a fair number of stores in different markets because they are, for lack of a better word, mediocre. But they're selling, and we're replacing them with hopefully better stores, but that are brand new, right, or much newer. And so I think in some ways, we're exchanging potentially better stores, replacing stores that clearly kind of exhausted their potential and never really reached what we expected. And so I think that's also playing into that number. I think we're going to do a deeper dive and happy to take this offline because you're right. Normally, you would have expected something perhaps in the order of 8 as opposed to the 6 that we're showing.

Our next question comes from Bob Ford from Bank of America.

Jose, how should we think about the strategy in Brazil? And how does it change following the separation from Raízen? And that your current same-store trajectory in Brazil, how long will it take you to cover all the central administrative and overhead expenses? And where do you see the most promising category SKU and service opportunities in Brazil for OXXO?

Great question, Bob. Thank you. To be honest, we're very excited for what we have been able to achieve in Brazil. We -- it was great to have a partner for the first few years. It gave us confidence, security. It gave us some training into how to build and gain permits and stuff. But now we're very excited that we're ready to go on it alone. And the potential we see is still enormous. We keep -- I think it's the third year in a row that we grow same-store sales on double digits. I'm pretty sure that number is right. And this -- and 2026 also began very, very strong. I mean we've had good weather. We've had Carnival, but we see huge potential. To give you a precise number of how many stores do we need to get to pay for its overhead, I don't have the number, but it's still maybe -- it's going to be probably around 1,000 stores, which I have full confidence that we will be over 1,000 stores in Brazil. I think our huge challenges in Brazil are twofold. One, we need to continue growing the same-store sales business to a level that allows us to really absorb all the costs within the store. The cost structure in Brazil still has opportunities vis-a-vis Colombia. turnover-wise, cost to hire, cost to fire, et cetera, all these operational things, but they've been improving dramatically month-over-month. So at the moment -- and this number will -- as soon as we are able to stabilize and if we are able to have 7 new net employees per store, a gross margin of around 38% and around MXN 1 million per month, which all of them are 5% to 10% off. That's when we will know this will be a 10,000 store business or a 5,000 store business. It's that dramatic that turnaround. In terms of categories that we are excited, we are impressed by the food offerings. We have very strong margins on food and coffee. and we play a strong game there. We sell phenomenal paocacos, Cosinhas and panadas. All these things are -- our customers love them and are eating them frequently. Our coffee offerings is amazing. It's obviously pure Brazilian premium coffee, and we sell at a good price. And the other great thing is the consumer occasion, the impulse occasion of beer gathering plays a humongous role in Brazil. Obviously, you don't have the service component that we have in Mexico, but there are other services that we're beginning to try in terms of gaming and other gift cards and other things that are part of the landscape in Mexico and could play a significant role in Brazil that we are trying to implement. So overall, it's too early, but I am very passionate about our Brazilian business, and I will not rest until we have 10,000 stores in Brazil, hopefully not far into the future. Does that answer you, Bob, or were you specific?

No, it does. Very helpful, Jose. And just with respect to the Mexican drugstore business, what are the next moves?

That's a tough one. Thank you.

You're going from the best to...

From a darling to a tough one. We haven't nailed pharmacy in Mexico. It's been a tough business. We are not experts at it. We are -- we have a phenomenal business in Chile. Our pharmacy business in Colombia getting -- discarding the institutional side is great. In Ecuador, we're growing. We're growing share. We're growing profits. So our South American business is great. Mexico, I think we don't play with the league against the real good players. There is a future for pharmacy in Mexico, maybe more closely related to OXXO in over-the-counters and on digital. So if I see a future for us in pharmacy, it has more to do with helping doing an omnichannel type of pharmacy. And I think there are certain corners of Mexico where we can be profitable in the Pacifico region and in the Southeast. But overall, it's -- we're not winning in that. And unless we do something different or we exit that business, I don't see a foreseeable change in our Health Mexico business. being very honest.

And I think just -- I mean this is somewhat obvious, but if you look at the competitive position that we have in all the -- in the other 3 countries, we're either the main player or the #2 player moving towards #1. And in Mexico, we never really were able to get to that critical mass and really take away from the couple of large incumbents. So that -- this being a scale business, that was a tough one to break. And so that's, I guess, where OXXO comes in, in terms of can we do something disruptive that OXXO. But that's still very much in the drawing board.

I would just add, I mean, we have now a great CEO of our pharmacy in Mexico. He's doing wonderful things with the tools he has. I think the business is stabilizing, and it will not burn cash this year, hopefully. but it's not winning. That's for sure.

Our next question comes from Antonio Hernandez from Actinver.

Congrats on your results than that asked that difficult question before me. But another question that I have is regarding Bara and OXXO. What about maybe cross-selling across the different private labels, different SKUs? I know it's a different value proposition. But still, I mean, you're growing Bara, you're facing competition at OXXO. So any findings that you have there or anything that you could provide would be helpful.

Can you clarify, you're saying we are facing competition...

Between No, no, no. OXXO in terms of affordability, what was mentioned earlier in the call. So maybe some findings or any learnings that you found in Bara and that you can apply to OXXO as well across...

Reflection.

Okay.

Very, very interesting question. Thank you, Antonio. So I think the worst thing you can do is try to change your positioning just based on your competitor. We have a phenomenal competitors in the discount space. That's obvious. They're growing, they're doing well, and they play a good game in their hard discount space. And I think Bara has, in my opinion, a stronger value proposition for the long term against other discounters. It needs to grow its private label offering. But I like our odds in competing against the discount space. The discount space is going to grow dramatically in Mexico over the next couple of decades. And Bara has a real chance of becoming one of the leading players there. I like what we have, and we are very our value proposition for Bara is very much adapted for the Bajio and Jalisco region and our stores we're opening in Monterrey are to me the perfect mix of what the Nortenum needs. You see beer, you see assortment of beer, you see -- but you also see private label of food and daily replenishment and snacks and supermarket or grocery. So I love our concept, and that's where we're going to compete against those players. OXXO has a great role to play in getting into affordability in beer, in soft drinks, in tobacco, in snacks. And then for the daily replenishment, where we have a role to play that's different from the discounters is is that daily replenishment. I need something urgently. I don't need that big pack size. I don't need -- I need the brand I know, the brand I love, the brand I recognize in a smaller format for my daily things because I forgot shampoo and I need something for the gym or whatever. That consumer occasion, OXXO will be where it competes, more similar assortment to what you see on the traditional trade, where it's still 50% of the consumer basket, by the way. So I think OXXO has a lot of room to grow on the daily replenishment more similar to the traditional trade and and whoever wants a very private label, very low pricing, they could go to a Bara or one of our competitors for that. Having said that, we do see private label becoming more relevant in OXXO and complementing the offering that we have. We already have a lot of private label in OXXO in our cooking oil, in our coffee, in some snacks. And we see that even in diapers and some housing products. And so I think OXXO can also develop some powerful brands around private label, especially where in some categories where commercial income is not as significant, and we can play a bigger role. But I think each one will have its place. And I see a lot of growth for OXXO, and I see a lot of growth for discount, hopefully more Bara than other ones.

And I suppose some suppliers from Bara could be less.

Definitely, some of the suppliers in Bara. And even some of the private label suppliers of our pharmacy business in South America are interested in coming over and doing some things that we can sell in OXXO and in Bara. Does that answer you?

Okay. That's very clear. And just a quick follow-up. Do you have any white space potential number for Bara in Mexico?

Tens of thousands. They're slapping me here for saying that, but I think there's a room for many thousands.

Many thousands...

Bara.

Yes, that business is here to stay. It will be huge. I don't want to sound Donald Trump huge, but it's going to be big.

Our next question comes from Hector Maya from Scotiabank.

Congrats on the results. Jose Antonio, Martin, I just wanted to understand from the excess cash right now and the planned deployments, the cash deployments, about $1.5 billion might be set aside still for M&A, correct? And on this, how has the appetite for M&A changed in the U.S.? I mean, has it changed a bit due to political uncertainty or the current immigration policies may be affecting traffic in states close to the Mexican border? And on the ongoing work to adapt the value proposition in the U.S., how long do you think you would still need to reach a point in which you feel comfortable enough to now go on a more aggressive growth path by organic expansion or more M&A in the U.S.

I will address it briefly, and I'll let Martin and Juan complement me. Thank you, Hector. So we are not saving that money exclusively for inorganic M&A. I think Martin expressed it very well. We are -- want to be -- we are evaluating a lot of opportunities on throughout FEMSA, not all of them are inorganic M&A. There are other things. And all those things are put into the equation, and we want to be cautious before we pronounce whether we give this cash in either buybacks or other opportunities to even considering another extraordinary dividend. So it's not exclusively that we are hunting for inorganic M&A. Having said that, we have a lot of things coming our way, some of them in the U.S. for convenience stores. But to be honest, we have been surprised by the expectations of the sellers, and we want to be very cautious. We are not concerned about traffic in the Texas region for immigration or stuff. We have a very long-term view for the U.S. The U.S. still has a long way to go to consolidate. And we are learning a lot from our little operation in Texas. We're getting more and more relevant in the El Paso region. We want to be the winners and win share and gain the confidence of the El Paso one , the Midland citizen, the Odessa. So that's where we're concentrated. When we see we can gain share against the quick trips and the other local players, we will become more aggressive in growing our footprint. We are already -- we bought a couple of stores here and there in El Paso, and we're very happy with that. So we're looking more at tuck-ins, small chains. The bigger chains, I'm very surprised about their expectations for multiples that are outrageous. Some of it has to do that everyone wants to think that they're the next cases. And to be honest, not all of them deserve those valuations, but credit to cases that they've done a tremendous job. But no, we have a long-term view, and we're still looking at opportunities in U.S., but we're being very cautious with our returns.

Yes. I mean very little to add. We have -- our interest has not diminished. It's been -- we have been unable to find an entry point with the right risk reward in a reasonable period of time that made us willing to pull the trigger. So as we have said, the entry into the United States is a function of finding the right opportunity. It's not an unconditional need that we have. It has to be based on being able to find value-creating opportunities.

Our next question comes from Renata Cabral from Citi.

I have 2 follow-ups here, one on Brazil and Bara. My question is, are Brazil and Bara already seen as scalable platforms. I know it was already discussed here as a great opportunities. But just to understand from your view today, that's durable, there's durable economics or they are seeing a proof of concept in terms of proposition that they can offer to the clients compared to OXXO, obviously, already consolidated and very clear for everyone. And in terms of capital allocation, timing allocation, especially, we are seeing the company much focused on the strategy. Now you have just discussed about the health business that the company are working towards that. So we see the company much more focused, and we discussed here 3 and more really important opportunities such as opportunities to grow in the U.S., Brazil, B. We have a top 2 that maybe in the next 5 years, you see more opportunity than the others. If you can shed some light qualitatively, I would really appreciate.

I got your question on Bara and OXXO Brasil very clearly, and I'm happy to add some comments, but I didn't understand very well the second question. Can you repeat it?

Sure. Yes. In terms of the big opportunities that we already discussed here in the call, for instance, Bara, OXXO expansion in the U.S. can we have one of them should be bigger in the next 5 years? Or the company today is allocating more time in which of those initiatives?

Okay. Okay. I think I get it. Okay. obviously, Bara and Brazil are -- our obsession is OXXO Mexico and Coca-Cola FEMSA Mexico. Those are the motors and have huge growth opportunities that are our priorities. Then what keeps me very excited and frankly, come with a smile to work every day is OXXO Brasil and Bara. Bara is much more advanced in readiness to hyperscale. We've been tailoring the value proposition for the last probably 5 years. And today, we have a value proposition that we love. We are happy. We opened a distribution center in Monterrey, and we are ready for hyperscaling. And in Mexico is where it's easier to transfer capabilities of hyper growth. So you should expect a faster growth in unit numbers in Bara than in OXXO Brasil. OXXO Brasil first is a Sao Paulo bet. It's still very much Sao Paulo bet. It still has a lot of room to cover in Sao Paulo. And we've focused much more in quality versus quantity. So we are ready to open about 100 stores in 2026. That is a low number to what we would love to, but we much rather mature the right processes in place, the category management in place, the commercial income capabilities in place, the categories that really are going to move the needle and the process control that would allow us for OXXO Brasil to become a very valuable bet. If you do the DCF of OXXO Brazil, growing at 100 stores a year versus growing 1,000 stores a year moves exponentially the value of OXXO Brasil going forward. So 100 stores a year is not enough for us to call OXXO Brasil the second wave of FEMSA. But we're working hard on solving the operational things that we need to solve so that OXXO Brasil can grow at, I don't know, if 1,000, but a store a day. That's still a few years down the line. So I think it's behind us. In terms of other bets, I think we are plate full with OXXO Mexico OXXO Brasil. But I would say we are incredibly surprised, and I don't want to scare you guys, but we are incredibly surprised about what we are beginning to see as opportunities for growth in Europe, mostly organic. But it's Europe -- the management team in Europe has done a tremendous job in getting more value. And we are still in very early stages of OXXO USA. And we think -- I think we shouldn't call it OXXO USA. We should call it OXXO, Texas, New Mexico and that region, and we see huge opportunities for growth there as soon as we are able to refine our value proposition. That's where we are right now. I think those things are further down the road and not in the near future.

Yes. I would add to what Jose just said. I mean, if you just look at the numbers that we provided you in this call about how many stores we're going to be opening this year. Obviously, this is just 1 year, and it doesn't speak too much about the future. But we said for Bara, we are aspiring to grow it by 1/3 in 2026. For OXXO Brazil, we spoke about 15%. OXXO Mexico, it's less than 5%, right? Obviously, this is -- it has to do with how big the base already is, but it also has to do with how -- what is our conviction about the value proposition and how many incremental tweaks we need to make. I do think that in Brazil, it feels like we've been in Brazil for just a little bit of time compared to how long we've been working on Bara. -- never mind how long we've been working on OXXO, right? So there's nothing magical about this. It's -- you just get to the point where you step on the gas at different points in time. But also to Jose's earlier comments where you begin to think about eventually thousands of stores in a way that is actually somewhat literal as opposed to just hypotheticals.

Our next question comes from Ulises Argote from Santander.

And all the details that you have shared. This has been extremely helpful. So Jose, I actually had one for you and kind of taking advantage there as you kind of ramp up into the CEO chair. But on your opening remarks, you said you were not satisfied with the results that we saw in the year, right? I know there's always room to grow and always room to improve. But if we are here 1 year from now and specifically maybe 2 or 3 key things, but what has to change from where the company is today for you to start next year's remarks saying you see a successful 2026 in the books?

Great question, Miss. I would love to see hitting our top line growth of mid-single digits in OXXO with profitable traffic growth in same-store sales, at least -- I mean, for me, at least same-store sales growth of traffic, which is a tough, tough challenge because we have yes in soft drinks or taxes in soft drinks, added taxes in tobacco, the beer category with some struggles. But with the World Cup, with all that we are doing with food, with all that we're doing in affordability and coffee, I should -- for me, success should mean same-store sales growth in the OXXO Mexico level. That should be added with market share growth. And then obviously, I would love to see Colombia in an EBIT -- at least EBIT breakeven and then Brazil hitting its targets of getting closer to a nice gross margin, opening 100 net new stores successfully. To me, that's what I would qualify as success. Europe should give us another strong year more because of efficiencies that they're still pulling out of the business, hopefully, with a couple of interesting deals that we're looking with partnering with some service stations. And then Coca-Cola FEMSA taking advantage of the World Cup and being able to transfer most of the price of the Y without any share loss gains, even with some gains in share and then gaining ROIC. All of them should be able to be gaining return on invested capital. Finally, if we are able to open a store a day in Bara, 1 store a day in Bara profitably, I will celebrate with champagne. That's success for me next year -- or I mean, this year, sorry.

Amazing. That's great to hear and super clear. And if you reach that Bara per day target, I'll send you the champagne myself, Jose.

Thank you. I will send you a selfie or invite you for a toast.

Our next question comes from Henrique Brustolin from Bradesco BBI.

Jose Antonio, I wanted to circle back to your comments on OXXO Mexico about the opportunities you have for the new consumption occasions, right? Or the large opportunity you see in breakfast, coffee, daily replenishment, which you're already present. But as you mentioned, you can effectively start to play to win on them. I just wanted to hear a little more what needs to change operationally in terms of assortment, pricing or even store execution for this to start to gain more traction? And how do you see the transition in terms of timing and implementing all these initiatives taking place to reflect in the performance of OXXO stores in Mexico? That will be my question.

Just to be clear -- thank you, Enrique. But just to be clear, on regards to food or in general?

The question was in general, if there is anything specific that you can move the needle more or you are more focused at, it would be great to hear as well. But it was a category on food and the daily replenish that you mentioned, you can play to me.

Yes. So...

We've tried everything on -- I mean, we've really tried a lot of things on food over our history. And it always has been a struggle because of the huge level of complexity that it brought into the OXXO store. And we were able to simplify complexity first when we did this partnership with Caffenio and we brought the coffee, these Japanese thermos that were a huge advantage and simplify the store operations many years. Now we're moving beyond that towards automated coffee machines. I just -- we all just came from a trip to Japan and now our coffee machines look like 10-year-old coffee machines. So it's impressive how the coffee store infrastructure has evolved in developed markets. There's huge potential for us to bring coffee into our stores. Just to give you an example or just to give you some guidance on coffee. We sell about 28 cups per store per day in Mexico. Japan's convenience stores sell over 100. Colombia or Colombian stores, which, by the way, Colombia, Mexico has similar per capita on coffee are about 90 coffee per day per store. So we have a long way to go in becoming -- and we have very good coffee. It's 100% Mexican coffee from Miralgo, Oaxaca and from Veracruz. And I think we need to really win the narrative on why the best coffee to start your morning is the coffee at OXXO. It's high quality. It's really affordable at a very convenient price, and we're considering even lowering the price. Now people do not go to OXXO just for the coffee. They want a good feeling, hot breakfast option, and we are trying many different things, but we haven't delivered something that we can turn it national. We are looking at this hero product and we're trying a few things. But I think bring -- that also brings a lot of complexity to the store. How do you bring freshly baked product with some protein on it to start your morning in a fulfilling way. We are doing it incredibly well in Colombia, where over 25% of our revenue is full. In Brazil, it's almost 20%. In Mexico, we have a long way to go to get to those numbers. But I am continuously impressed by what the OXXO team is bringing to the table in terms of evolution. And then we're also trying a lot of little things like that pizza program in Monterrey, which has been a huge success. I don't know if it's going to scale so much, but it's incredibly successful. The beach things we're trying. So I think there's a lot of things to develop on that. That will be just part of the story. The other one is we need to be more competitive on daily and replenishment. And we need to continue to gain share in our impulse categories. So a lot of things moving on. But I think if we are able to win on the breakfast occasion and start moving the needle on daily replenishment, we should have a strong 2026.

This does conclude the Q&A section. At this time, I'd like to turn the floor back to Mr. Fonseca for any closing remarks.

Thanks, everyone, for attending today. Obviously, you know where to find us. The IR team is always around to double-click on questions that maybe were not raised during the call. Thanks, and have a great rest of the week.

Thank you, everyone.

Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.

Good day, and welcome to today's FEMSA's Third Quarter 2025 Results Conference Call. My name is Serge, and I will be your coordinator for today's event. [Operator Instructions]

And now I'd like to hand the call over to Juan Fonseca. Please go ahead, sir.

Good morning, everyone, and welcome to FEMSA's Third Quarter 2025 Results Conference Call. Today, we are joined by our CEO and Chairman, Jose Antonio Fernandez Carbajal, Jose Antonio Fernández Garza-Lagüera our current CEO of our Proximity and Health division and future CEO of FEMSA; Martin Arias, our CFO; and Jorge Collazo, who heads Coca-Cola FEMSA's Investor Relations team.

The plan for today is a little different than usual. We will begin with our CEO and Chairman, who is traveling today and is therefore joining us remotely. Jose Antonio will share with us some thoughts on the past couple of years, where he sees our company today, and how he sees FEMSA position for the future as he gets ready to step down from the CEO role at the end of this week.

He will not be able to stay for the remainder of today's call.

Next, we will hear from Antonio Hernandez Velez Leija, still in his capacity as CEO of our Proximity and Health division. As you know, he will assume the role of CEO of FEMSA in a few days. But most of his comments today will focus on the performance and trends in our key retail operations during the third quarter, as well as some thoughts on the short- and long-term initiatives we are taking to address an evolving consumer.

Next, Martin Arias, we'll discuss FEMSA's consolidated and operational results for the quarter in further detail. And finally, we will open the call for your questions.

For the Q&A, please keep in mind that as of today, Jose Antonio is still the CEO of Proximity and Health, and there is a lot to discuss regarding those operations. If you would rather ask him about his views on the broader FEMSA platform, I'm sure he'll be happy to provide some high-level directional comments today, but these are early days as he onboards to his new role.

Obviously, we'll be happy to dedicate ample time to this topic during our February call and beyond.

And with that, let me turn it over to our Chairman, Jose Antonio, please go ahead.

Thank you, Juan. Good morning, everyone. As you all know, in June of 2023, I returned to the role of CEO at a challenging moment because of our good friend, Daniel Rodriguez have fallen gravely ill, and we were in the thick of executing on our ambitious FEMSA Forward strategy.

I committed at the time to where the 2 hats of CEO and Executive Chairman for a certain time with a clear plan to fill the CEO position and return to the separation of these key roles within that time frame. With the help of our Board, we've been able to deliver on that plan. And while I'm happy to hand over the keys to the incoming CEO next week, I appreciated the opportunity in these past 2 years to get close to the operations again, particularly through such a key process as FEMSA Forward.

Today, I would like to share some thoughts on our recent past and on our future.

FEMSA Forward was all about maximizing long-term value creation by focusing on our core verticals, retail and beverages, enabled by digital, and setting out very clear capital allocation target. In the past 32 months, we've been hard at work executing that plan, divesting nearly $11 billion of assets while in our core at the same time. In addition, the capital allocation framework we put in place in February of last year is guiding our actions and allowing us to move steadily toward our leverage objective by distributing between March of 2024 and March of 2027, and expected a total of approximately $7.8 billion of capital through [ ordinary ] and extraordinary dividends, and also through some share buyback.

As I briefly recap these last 2 years, there are 2 message -- 2 messages I want to highlight. First, that everything we set out to do when we announced FEMSA Forward, we have delivered on. We told you what we were going to do, and then we did it. Second, that these actions have been driven by our share pursuit of long-term value creation for all of our stakeholders. Our purpose and interests are well aligned.

Finally, I would like to quickly touch on how I see FEMSA position today. I feel very confident that our business units have never been stronger. I know this year has been sluggish in Mexico. And I know that the team has addressed this, and we will discuss this later during this call. But I also know that the last year was a banner year. So I am talking about the forest, not the trees.

On the retail side, we have OXXO Mexico still with at least a decade of continued store growth at the current pace, world-class returns on capital, and a full range of levers to adjust as we ensure our value proposition continues to satisfy a growing number of needs for an always evolving consumer.

In Mexico, we have successfully completed the leadership transition to Carlos Arroyo, an experienced retail operator with a decade -- with a decade's long track record, who is bringing a new set of capabilities that will serve us well for the challenges ahead.

In the proximity convenience environment outside of Mexico and in the discount space in Mexico, we have a compelling set of higher growth opportunities that are ready to be scaled up, such as OXXO Brazil, OXXO Colombia and Bara among others. Any one of these opportunities has the potential to create billions of dollars of value over the next decade and beyond.

In our other retail investment, specifically Health in Europe, we are laser focused on organic growth and on improving the returns on our invested capital. At Coca-Cola FEMSA, we are in the middle of an ambitious multiyear investment phase, continuing to increase our production and distribution capacity, as well as our long-term growth capabilities.

Underscoring the strength and resiliency of this business even as we navigate a challenging short-term environment. On that note the recently announced tax increase in Mexico will present challenges, but we believe this will be the -- like the one we have faced in the past. And we will make the necessary adjustments in order to balance our return on investment capital while allowing us to take advantage of some growth opportunities.

At Spin, we continue to grow our user base and engagement as we make steady progress in developing.

Hello Jose Antonio? Excuse us while we try to reconnect to connect with Antonio.

[Audio Gap]

Ladies and gentlemen, we experienced a momentary interruption in today's conference. Please continue to stand by.

[Audio Gap]

And we've got -- we've back Jose Antonio. Please go ahead.

Thank you. I'm very sorry. I don't know what happened and I kept talking, and I didn't notice when I left. Can you tell me where I...

The paragraph of Spin Jose Antonio.

Okay. So I will repeat that paragraph. Thank you. At Spin, we continue to grow our user base and engagement as we make steady progress in developing a digital ecosystem that will better enable our millions of users to navigate and improve their financial lives in a world that is increasingly digital.

Although this is one of the longest term bets in our core verticals, we have a firm belief that the digital capabilities we are building are indispensable to OXXO Mexico, and will prove to be a source of value creation, creation for decades to come. Jose will certainly bring a fresh perspective to this business.

I have been at FEMSA for nearly 40 years. During that time, I have lived through several reinventions of FEMSA. And today, I am as excited about our long-term growth opportunities as I have ever been, and I hope you are too. I will continue to work to capitalize on those opportunities in my role as Executive Chairman, but I will have fewer chances to speak with you. So I want to take this moment to thank every one of you for your interest in our company and for your full support through all these years.

And with that, let me turn it over to our new CEO.

Thank you, [indiscernible]. Good morning, everyone. Today, I want to structure my comments around three topics. First, the quarter's results with a particular focus on OXXO's Mexico same-store sales and traffic, where despite a still challenging environment, we are seeing some encouraging signs. Next, I want to talk about the actions and initiatives the team has put in place at both the short-term tactical level, but also some ideas about more strategic considerations and projects aimed at strengthening the value proposition and relevance of the OXXO store in the medium and long term. Finally, I will share with you some initial thoughts as I get ready to step into the FEMSA CEO role in a few days.

So firstly, let's talk about the third quarter. As you saw in our release, same-store sales for Proximity Americas increased 1.7%, with average ticket rising 4.9%, and average traffic contracting 3.1%. This represents a clear improvement versus the first half, marking an inflection in our trend that seems to be improving further in October.

This quarter was the first to show positive same-store sales growth since the middle of last year, and importantly, we believe a significant part of the improvement came not from a meaningful change in macro conditions, the weather or the consumer environment, but rather from adjustments we made to address category and channel-specific challenges.

As a result, we improved our competitive position in several key categories like beer, soft drinks and snacks. And in terms of the channel, we believe we also improved our overall competitive position versus the traditional trade, reversing the trend we saw earlier in the year. Which brings me to my second topic regarding the short- and medium-term initiatives we have launched to improve performance.

There is a long list of actions and initiatives designed to drive our short-term results which are aligned with our long-term strategic objectives. One of our most important such initiatives, which I want to highlight is pursuing affordability in our core categories of beer, soft drink, snacks and tobacco. To this end and working in tandem with our key supplier partners, we were able to improve our assortment and our price package architecture by adding presentations at both ends of the out-of-pocket spectrum.

Larger multi-serves and returnable presentations in beverages, smaller packages for snacks and beverages, and lower-cost brands for cigarettes.

In addition, we have implemented aggressive promotional campaigns in these categories and a variety of other categories. These initiatives are being supported by strong communication efforts, access to Premia related data, and a focus on store execution, and we are already seeing positive results, improving our competitive position during the quarter for most of these categories relative to the traditional trade.

At the same time, we are executing ambitious initiatives to drive productivity and efficiency across the proximity and health organization aligned with our long-term strategy, including our recently launched fit-for-purpose corporate overhead efficiency program, which will make our organization leaner and achieved significant cost savings over the next several quarters, generating a reduction in SG&A.

Beyond the short term, we are in the early stages of developing the strategy that will guide the evolution of our OXXO platform in the years to come. As powerful as our value proposition has been to satisfy certain consumer needs and occasions around thirst, gathering and impulse, we believe we can expand our relevance and increase the scope of our value proposition while ensuring affordability in a more integral manner.

We also see that coffee and food categories are categories where we can win by making significant improvements. We have performed a deep diagnostic on our current value proposition and are currently in the experimentation phase to launch new offerings. We are excited by the opportunity and we will keep you posted as we advance on this ambitious multiyear effort.

Finally, let me talk about FEMSA and my role as future CEO for a minute. As you might imagine, I have been rapidly getting up to speed in all the matters outside the scope of Proximity and Health. However, although it is still early, and I do not start the job until next week, I want to share an initial message of strategic continuity.

Over the past few years, we achieved meaningful progress driven by the vision, courage and strategic clarity of those that came before me. They led a powerful transformation, streamlined our portfolio and positioned FEMSA to compete with greater focus and strength. I have the privilege of learning from them and their example continues to shape how I live and think about the future.

As a member of the senior leadership team, I was informed and fully supportive of FEMSA Forward and the resulting focus on our core business verticals, and I am completely designed our capital allocation framework and strategy. I am convinced we have in Coca-Cola FEMSA and OXXO Mexico, two of the most remarkable and valuable assets in their respective global industry. Not just because of what they represent today, but just as importantly what they can become in the future. Our retail platform is poised for dynamic long-term growth through OXXO Brazil, OXXO Colombia, Bara and although still at an earlier stage of development, OXXO USA.

Our other retail platforms, in particular, Health and Europe, our solid self-funding operations where our focus should be on maximizing the returns on our existing assets through efficiency and primarily organic growth. And I am a firm believer in the potential and optionality of the Spin ecosystem.

I also want to take this opportunity to share with you that I am bullish on Mexico. We continue to deploy more than $1 billion in our CapEx in our home country every year. As attractive as some of our international long-term bets are, Mexico will continue to play an outsized role in the value creation at FEMSA for the foreseeable future.

As for my management style, I favor thinking in decades while lasting in days, balancing a long-term view on value creation with a sense of urgency in setting the right conditions for execution. We will have plenty of opportunities to talk about these topics in the future. But I can share some examples with you of what I mean by that.

Thinking in decades requires that we methodically consider our strategy, ensuring that we do not mortgage our future for short-term fixes and gains at the expense of our long-term growth and competitive position. We should always be driven by the objective of long-term value creation, instilling a relentless focus on sustaining or having an achievable and realistic path to ROIC over WACC.

Acting in days requires us to rigorously tighten our grasp on actionable expense and cash flow levers, making it a daily habit across the organization. It includes getting the right people in the right seats right now, as well as testing frequently, learning quickly, moving on fast when we fail, and acting decisively when we find a new solution that serves our customer needs. I would also add that I'd like to communicate in a no nonsense straightforward way, and one thing I can offer you now is a commitment to be in touch with you, our investors and analysts more than in the past. Not just on these quarterly calls, but by meeting you on the road.

We are already developing the plans for next year with Martin and Juan, and I look forward to seeing you all in the not-too-distant future.

And with that, let me turn it over to Martin to go over the quarterly results in detail.

Thank you, Jose Antonio. Good morning, everyone. Let me begin by discussing our consolidated results for the third quarter of 2025.

During the quarter, we delivered total revenue growth of 9.1% despite a still challenging but improving environment in Mexico, impacting both Proximity and Coca-Cola FEMSA, which was offset by solid top line trends outside Mexico. Some currency tailwinds, particularly in Europe and the consolidation of the OXXO USA operation.

Operating income increased by 4.3% year-over-year, reflecting inflationary effects on our costs and expenses, partially offset by expense efficiency efforts across multiple operations, especially at OXXO Mexico, Coca-Cola FEMSA Mexico, Health and Europe.

Net consolidated income decreased by 36.8% to MXN 5.8 billion, driven mainly by a noncash foreign exchange loss of MXN 1.3 billion, compared to a gain of MXN 4.3 billion last year, a swing of more than MXN 5.5 billion. Related defense U.S. dollar-denominated cash position, which was negatively impacted by the sequential appreciation of the Mexican peso during the period. Two, higher interest expense of MXN 5.5 billion, compared to MXN 4.8 billion the previous year, reflecting higher debt at Coca-Cola FEMSA and higher lease obligations across our retail network. And three, lower interest income of MXN 1.9 billion compared to MXN 2.6 billion the previous year, reflecting lower interest rates and lower cash balances.

Our effective tax rate for the quarter was 29.3%, showing a sequential improvement. We understand that the spike in the first half of the year in our effective tax rate 42.2% in the first quarter, and 40% in second quarter raised certain concerns. In that regard, I want to make several comments. The quarterly movement of our tax rate can be volatile and difficult to project on a quarterly basis, since it can be impacted in any given quarter by any of the following things.

Extraordinary settlement of fiscal contingencies from the past in 1 quarter, reflecting issues from several years in the past. As the year progresses, we also make adjustments to provisions for tax payments given the performance of the business.

Foreign currency gains and losses on our foreign currency cash balances and debt can cause important swings. We are requiring our tax rules to include or write-off deferred tax assets relating to NOLs based on adjustments to internal projections. Movements of accumulated cash, excess cash from our subsidiaries to Mexico, reflecting several years of profits can cause an increase in taxes.

There are certainly structural reasons why our tax rate is higher than the 30% corporate income tax rate in Mexico, including nondeductibility of certain expenses, losses relating to Spin, and higher [ tax ] rates in countries outside of Mexico. We have guided investors towards a tax rate in the mid-30s range, and we continue to believe that this is the right number under current legislation.

Turning to our operating results and beginning with the Proximity Americas division. Same-store sales increased modestly by 1.7%, once again reflecting a combination of a solid average ticket growing 4.9%, offset by a traffic decline of 3.1%. This is an improvement over the previous several quarters. And as Jose Antonio just said, it includes some encouraging information regarding the effectiveness of our tactical initiatives, and an incipient recovery in our competitive position in key categories.

Total revenues for Proximity Americas grew 9.2%, or 4.8% on an organic and currency-neutral basis, mainly driven by the expansion of our network 1,370 stores year-on-year, a strong performance in our LatAm markets, which continue to grow at very attractive rates. The consolidation of OXXO USA, as well as favorable exchange rate effect in several of our operating currencies.

Gross margin expanded by 80 basis points to 45%, reflecting a continued expansion in Mexico and LatAm, despite undertaking the affordability efforts mentioned previously in Mexico, and the consolidation of the U.S. operations which have a significant component of lower margin fuel. Operating income increased by 7.1%, while [indiscernible] 20 basis points to 8.8%, mainly due to the consolidation of the U.S. operations, which are slightly above breakeven. And despite the fact that Mexico's margin was flat, and OXXO LatAm continued to reduce its operating income losses relative to its revenues.

The combined selling and administrative expenses grew at 12%, reflecting continued pressure on wages in Mexico, continued expansion-related expenses in LatAm and consolidation of the U.S. operating expenses. There were some reclassification of administrative expenses to selling expenses in LatAm, which makes comparison more difficult on a disaggregated line item basis.

We expect, over the next few quarters, you should be able to see the effects on SG&A as we streamline corporate overhead through our fit-for-purpose initiatives.

On the store expansion front, Proximity Americas added 198 new stores in the quarter, in line with our plan for the year. At OXXO USA, the conversion of DK stores into the OXXO banner continue to pace, reaching 50 converted stores in Midland-Odessa and Lubbock. We are making progress in food service with revamped hot food menus and offerings in the 50 OXXO stores, adding new partnerships aimed at driving consumer frequency and strengthening the overall food service value proposition, including clip-ins from our [indiscernible] and [indiscernible].

We are also initiating the conversion process in El Paso, as well as testing stand-alone nonfuel OXXO stores in certain locations.

At Bara, during the quarter, we continued our accelerated store expansion opening with 40 new stores, and we remain on track to achieve or surpass a 30% growth rate in 2025. We continue optimizing our discount value proposition by scaling our private label strategy. Bara same-store sales grew 10.8%.

In Europe, Valora delivered solid results as total revenues increased by 10.1% in pesos, or 3.3% on a currency-neutral basis, driven by higher Swiss retail sales, coupled with positive trends in Swiss B2C food service, partially offset by softer sales in B2B food service, particularly in the U.S. Gross profit grew 10.1% in pesos, or 3.4% currency neutral, in line with revenues and representing a stable margin compared with last year.

Total operating expenses grew below revenues. However, selling expenses grew at almost the same rate as sales, reflecting wage pressures and inflation, but were offset by nearly flat administrative expenses. This reflects broad efforts to reduce corporate overhead expenses.

Valora reported a 29.1% increase in operating income, 20.7% on a currency-neutral basis, representing a 70 basis point improvement in operating margin, and reflecting strong growth in Swiss retail, positive contribution from Swift B2C food service, and effective corporate overhead cost management offset by our B2B food service business.

Now let me walk you through the performance of our Health division. Total revenues increased 2.9% in pesos with same-store sales growing 0.8%, mostly explained by strong top line performance in Chile and Colombia, offset by Mexico. On a currency neutral basis, total revenues grew 4.5%, evidencing currency headwinds relative to the U.S. dollar in Ecuador and the Chilean peso.

Growth in revenues occurred despite the continued challenging environment in Mexico, which saw same-store sales declines and the closure of 423 underperforming stores versus the same quarter in 2024.

Operating income declined 4%, and 1.3% on a currency-neutral basis, resulting in an operating margin dilution of 30 basis points to 4%. This reflects operating deleverage in Mexico and higher labor expenses in South America, particularly driven by the rapid expansion in Colombia. [indiscernible], same-station sales increased by 8.3%, and total revenues grew by 5%, reflecting growth in retail volume, offset by a decline in the wholesale business.

Gross margin stood at 11.8% and operating margin at 4.6%. It is worth highlighting that during the quarter, selling expenses decreased 1.7% underscoring our continued effort to look for efficiencies and savings to support profitability in such areas as labor costs.

Now moving to Coca-Cola FEMSA. During the third quarter, they delivered gradual sequential improvement amid a challenging environment. Total volume declined slightly, driven mainly by Mexico, or a softer macro environment continued to weigh on consumption. On the other hand, South America delivered a resilient performance with volume growth across most territories, demonstrating the adaptability of the business across regions.

In terms of profitability, cost protected its margins, mainly through the implementation of mitigation actions, controlling expenses and generating efficiencies, recognizing a more difficult 2025 than expected. You can dive deeper into the results by listening to the webcast of their earnings call held last Friday.

Finally, regarding capital returns to shareholders in the context of our capital allocation framework.

During the quarter, we distributed a total of [ MXN 11.8 million ] in a combination of ordinary and extraordinary dividends. In terms of share buybacks, we were not active during the third quarter, so we are a bit behind schedule. As you know, whenever we become active, we will make the required filings and you will be able to follow.

As we look ahead to the coming year, we are cautiously optimistic. As we mentioned before, we are beginning to see signs of improvement in the October data in Mexico. In terms of the levers and variables under our control, we are confident we are making the right adjustments and achieving the desired results across our platform. From the consumption side, we will have the additional tailwind from the FIFA World Cup to be held in our continent, with matches being played at the right time of day. And hopefully, we will also get a slightly better environment in which to operate in Mexico.

We will provide a more detailed update in our next call. And with that, we are ready to open the call for questions.

[Operator Instructions] The first question is from Ben Theurer from Barclays.

Jose Antonio, congrats on the new job. And I actually have a question for you on the old jobs. So as it comes to retail, just wanted to understand a little bit and dig a little deeper into your commentary on the same-store sales performance. Well, clearly, traffic was down only 3% versus the give or take, 6% we saw in the first half. There was a very easy comp versus last year because of some of the hurricanes. But you did mention there is sequential improvement into October.

So I wanted to kind of like understand if you could give us a a couple of more data points as to maybe how the performance was from July through September? And how that carried into October? And what we should expect here as we move throughout the fourth quarter and then maybe into next year, just with the closing remarks being slightly optimistic into next year? So I just want to understand a little bit the traffic dynamics at OXXO.

Sure. This is great. I was expecting this one to be either the first or the second question.

Fantastic. Be prepared for that.

So -- I mean, obviously, I would say, I am glad that I see a reversing of the trends in OXXO Mexico on this quarter. And I do see better performance in traffic compared to last -- the first half of the year. But obviously, I'm not satisfied because we had, as you say, some easy comps. To the defense of my team and also there were some adverse effect in weather, especially obviously in September and especially in the Central of Mexico, but I -- and I mean what gives me some optimism is that the last couple of months, we've seen market share gains in beer, in soft drinks, and even in snacks, and even in tobacco, especially with the introduction of some lower-priced tobacco.

I am -- October is still not over, but I am very encouraged by the results. So if that trend continues, I think we should be facing a much better end of the year. What else I can tell you? I can tell you some of the things that we've been putting in place that we think we're going to take effect much more -- or they were going to take longer to take effect.

Like promoting coffee and some food items around coffee and breakfast are really beginning to shape up. Coffee is growing at double digits, and that gives me optimistic. And then the ability to be introducing multi returnable packages, affordability stuff in beer in soft drinks are really, really beginning to take place.

And I would say in services, we're implementing new increasing services every, every quarter. And so even though, for example, we're growing a lot with the Asian e-commerce retailers, those things have now scaled back given some tariff restrictions. We're beginning to see other increases in traffic in services that are -- give us high expectations for growth. We're still waiting for the permit to get back into Banorte and other banks. But cash withdrawal with the main banks, some of the big fintechs and with Spin are growing double digits as well.

So I would say still not satisfied because I wish we were going better in traffic, but very encouraging signs towards the fourth quarter. Does that help you?

It does. And then obviously, into next year, we get the really easy comps, correct?

Well, hopefully, yes. I do think there's a lot of things we need to still do on our part, and I am very encouraged by the obsession towards market share gains that we're following through in OXXO, and I think that's a discipline we will go forward. But we should get better comps. And I do think the World Cup should help as well.

Congrats again on your new role as well.

Thank you.

We'll now take our next question from Alejandro Fuchs from Itau.

Congratulations on their new role to Jose Antonio. I have 2 quick ones, if I may. The first one on OXXO Mexico, another strong performance on gross margins this quarter. I wanted to see if you could maybe elaborate a little bit more into how much of this is the service mix continue to add to the business? How much of this is maybe a little bit of pricing? And where do you see just gross margins in Mexico continue to develop at OXXO in the future?

And then the second, on Bara and also in Brazil and another also strong quarter of growth, so congratulations on that. I wanted to maybe Jose Antonio grab your thoughts on where do you see these 2 businesses in the next 10 years? How much of our priority are them to you and to the team? And then maybe if you could elaborate a little bit into what would be the best case scenario, sort of medium to longer term of Brazil and Bara.

Yes. Thank you, Alejandro, for I would say, obviously, I've always said that OXXO Mexico has a lot of momentum and still a lot of gross margin to gain. If you look -- I think always the gross margin it's an incomplete number. And obviously, we don't have the full answer, but you would have to say, look, at the full profit pool all the way from the -- of our supplier partners all the way to the consumer. And I always like to see gross margin gains, and I think there's a lot to gain still. But some of that should be given back to our consumer in affordability.

Obviously, some categories are more elastic than others. And so we have the smart data to play with that and give back to our consumers some of the gross margin gains. As to this quarter and the gross margin gain, it has a little bit to do with the commercial income that we continue to grow incredibly well. It has a little bit to do with mix. The affordability things allows us to even gain some gross margin as we implement some very profitable promotions in some of the affordable SKUs that we we are trying to promote. So the mix also helps sometimes with the broad margin.

But I would say, mainly, it's -- that we continue to win commercial income. And as we grow what you can expect through the year I do expect that there's more gross margin to make, but some of it will be given back to the consumer in affordable promotion and price pack architecture. Afterwards -- afterwards Bara and OXXO Brazil, as I said in this forum, and I will say it in the future, those are 2 of the most exciting avenues for long-term growth for FEMSA.

I am incredibly encouraged by the amount of progress that OXXO Brazil has been able to achieve in the last couple of years. We were -- just 2 years ago. We still needed to believe almost a quantum leap in gross margin expansion, in operating cost reduction, in top line goal. And now we are within arms reaching all of those areas. So we know we're going to have a profitable business in OXXO Brazil. We know where our next areas of growth beyond Sao Paulo will be. We're already mapping them. We're already starting them carefully.

The big, big question to ask is, do you believe of that it will be a 40,000 store business in Brazil, or a 4,000 business in Brazil? I think it will be something somewhere between. Sorry for the wide margin. But it's up to us to really continue to perfectly engineer the whole process of the business to make it -- to be closer to the higher end belief. But it's one of my big, bigger ambitions for the next decade in FEMSA.

Imbera, we are incredibly happy with the progress in terms of increasing our return on invested capital of new opening stores. We still need to polish and perfect the value proposition of Bara towards more -- towards -- closer towards harder discount. We're happy with the deployment and growth of our private label brand, but we still have a long, long way to go, but we are following closely and working with the private label manufacturers from other countries that are one to come and install in Mexico. And we're beginning to grow beyond our core region of El Bajio. And we're seeing very positive results in Guadalajara in Jalisco and we just opened in the north of Mexico. So we're very excited with the progress there.

And we will now take our next question from Antonio Hernandez from Actinver.

Congrats on the results and this new position. So question regarding an update on the health business, both in Mexico and Chile, some news also...

Antonio can you be closer to the mic? I'm not being able to...

Yes. Can you hear me there?

Yes, better.

Okay. Perfect. Just wanted to get an update on your health business. Both in Mexico and Chile saw some news -- recent news on a new format in Chile. Also, there's a very different trend in Mexico. So I wanted to get an update on that business in both countries.

Yes. So in Chile, we were facing a very tough competitive environment in Chile for the last couple of years, and we are very happy that we continue to

Gain market share. We're growing in all of our channels. As you know, Chile is a multichannel business. We are in the pharmacy. We're in the franchise business. We're in the distribution to independent pharmacy. And we continue to gain -- and we just even opened our discount pharmacy chain in Chile. And we are seeing incredible growth in sales and in market share, in all of that.

Given that it's a very competitive market, sometimes that does not translate to bottom line growth. But even given the huge competitive environment that we see in Chile, we are happy that we are growing even in the income statement. So -- and we expect Chile, it's a mature market. We have very high market shares. But I do feel there's a lot of room for growth in even newer categories in the health and beauty space, in the premium and in the discount space, and we're beginning to get into other adjacencies in the elderly care, I mean the pet and veterinary care, and so we see new avenues for growth for Chile.

Very different outlook for Mexico. In Mexico, we are the #6 player. I could obviously put as an excuse. A big chunk of our stores are in the Sinaloa region, which have been affected by security. But it's not enough to explain the drop. To be honest, we need to fix Mexico. We're working very hard to fix it. We have now the right talent in place. But we had to close many stores in Mexico, and we're still on working on fixing that operation, and we hope to fix it in the next few months. Thankfully, we have a very high-growth business in Colombia. And even in Ecuador, we're seeing market share and revenue and profit gains. So in general, health as a business we're happy except for Mexico.

And we will now take our next question from Alvaro Garcia from BTG Pactual.

All the best in your new role Jose Antonio. Two questions. One, the fit-for-purpose /corporate restructuring comments you mentioned earlier, the reduction in SG&A. In my head, I have this $100 million amount that you've typically guided for on the corporate front. Is that subject to change? And if you could just give us more color on how you're thinking on structuring the corporate expenses there?

And then just one really quick one on interest expense. Martin, I don't know if you could expand on -- you saw a pretty big uptick at the FEMSA level, ex-cost. What explain that?

So I would say, I would split the corporate overhead in 2 phases. The first one, the fit-for- purpose component is something that me and the OXXO team have been working on, and we are -- there were opportunities as we prioritize certain projects in OXXO Mexico and prioritize others. There was a good opportunity to reshuffle the overhead in OXXO Mexicos headquarters, and there will be some opportunities for savings, but also to leave some room for executives to dedicate to the big projects around food, around services, around the affordability that we want to invest.

I do expect a big hit on savings. You will see the full number probably by the end of the year and as we start next year. As -- eventually, I would -- when I become CEO of FEMSA, I do plan to take a deeper look on -- and as always, with big changes in management, there are opportunities to look at the overhead in the full company, and I will comment more on that probably in February and beyond. Hopefully, that's what I can answer for now.

The comments on -- fit for purpose for OXXO Mexico specifically at the moment?

Yes, for now, yes.

Alvaro, could you repeat your second question? I just want to make sure I got it right.

Sure. On the interest expense, specifically, ex-KOF, we saw a pretty big sequential increase there. I was wondering if maybe there's some derivatives in there that's driving that? Or what drove that sequential uptick there?

Well, looking at the total interest expense, KOF, actually went up from -- looking this correctly from [ $1.59 billion to $1.3 billion ] interest expense net and it was flat on interest expense. And so the interest expense went up by MXN 600 million. I don't -- I'd have to get back to you on the detail exactly in the context of everything, it's not that big a number.

Interest income is certainly coming down as our cash balance has come down. As interest rates generally come down, particularly in Mexico, but to some degree in the United States. But specifically, that what appears to be a MXN 600 million increase in interest expense at FEMSA, I'll get back to you.

We'll now take our next question from Thiago Bortoluci from Goldman Sachs.

First of all, best of luck on your expanded challenges. And also congrats to your father on another successful transition. We'll be looking forward to connecting more going forward.

I have two questions. One is more conceptual, right? When you think about the one thing that you'd like to do differently in FEMSA going forward. What do you think this is the clear opportunity? This is more conceptual, right? But it still related to your vision for the company, and this is somehow also linked to the capital allocation strategy. How do you think the role that Coca-Cola FEMSA will have in the FEMSA overall portfolio going forward?

Thank you, Thiago. Obviously, great question. I would say -- I will answer you with the second one. I would say, obviously, I am in love and have a huge appreciation for the KOF as a business and the talent. It's an incredible business, and it's an operation that has a lot of things going on for themselves to really keep growing, growing the core. I'm incredibly impressive what the opportunities that are -- we see for the digital transformation of the bottling platform.

For growth opportunities, not only in their soft drink category, but in their non-KOF. And I see a lot of potential for organic growth in Brazil, Guatemala, Colombia and even in Mexico, with all the -- even with the taxes. So I'm very excited for Coca-Cola FEMSA. The relationship with the Coca-Cola Company is the best one we've had probably in decades, probably since the JV was formed. It's incredible that what the management team from both sides have been able to construct as a growing and fruitful relationship.

I do think Coca-Cola FEMSA should play a part in a consolidation space through eventual M&A. And I am excited for the opportunity. I have huge respect for the bottlers in South America. And obviously, here in Mexico, I have a huge appreciation for all of them. And I do think there are opportunities to keep exploring possibilities with other families and bottlers in the space.

I will comment more -- in more detail on what I see cost in the future, but that could give you some color of my excitement for Coca-Cola FEMSA. And from what I would say, I would do different? I think I let it be known in what -- in my earlier comments. I do think we need a bigger sense of urgency and a bigger sense of counting every penny. We have the ambition in FEMSA to be one of the best, or the best proximity retailer in the world.

Obviously, with the Coca-Cola FEMSA company as part of it. As to do that, you have to have the best management team. You have to have a very demanding workforce, but also lead to the culture that you want to instill for the long-term growth of the company.

So I would say my big, big focus on conceptually bigger demand for excellence in our corporate office, bigger demand for excellence throughout the channels in management, bigger speed in making big decisions on capital allocation. And I think that should give you the color on the sense of urgency that we plan to move versus previous years.

And going back to Alvaro Garcia's question, the increase in interest expense, excluding Coca-Cola FEMSA, was slightly over MXN 600 million. 2/3 of that can be attributed to an increase in the financial expense associated with the lease accounting under IFRS, and likely the consolidation of the U.S. business is a big reason for you seeing the sort of uptick relative to other periods. For other periods, most of it is related -- all of it is related to organic growth of leases.

We'll now take our next question from Bob Ford from Bank of America.

Congratulations on the promotion, Jose. Martin mentioned some reclassifications. Were there any reclassifications or onetime items that contributed to the gross margin improvement at OXXO Mexico? And Jose, where do you see opportunities to make further improvements in the value propositions at OXXO Mexico?

And then one other question, if I could. Could you discuss the charge in discontinued operations, it was a little bit bigger than what we were looking for. We're just wondering how you're thinking about Solistica and the LTL business.

Some of the reclassifications -- all the reclassifications that happen in Proximity Americas had to do with OXXO LaTam. None of them had to do with OXXO Mexico. And OXXO Mexico, even on a standalone basis did have an expansion of its gross margin.

In fact, I think Bob, expansion in Mexico was something like 130. Yes.

Thank you, Bob. I would say if you look into also Mexico, we are, by far -- or we have a very important market share in what we call impulse gathering the beer, the soft drinks, the services category. But we still have a long ways to go in a couple of categories that OXXO right for winning.

One is around food. We are the biggest sellers of coffee. And if you look at our LatAm operations, all of our coffee occasions go paired with very good tasty food. And I think we have a lot of opportunity to win in food around coffee. And obviously, that leads you to breakfast. And if you look at it, there's not really an affordable winning food opportunity. And that's a segment on that we have lower traffic than average. So we are very excited with increasing the opportunity for that.

We still are very excited about the opportunities we see on segmentation. And I think we're going to go bigger and tougher on segmentation. We know all of the stores that are close to a discount store, or discount supermarket. And we have very clear actionable steps that we can put in place in the affordability space, not only in the categories that compete in the grocery space, but in the impulse and gathering. So we're beginning to do some of that and it's beginning to react incredibly.

And there are things that will take longer to mature. But I am very excited about them. Some of them around the beyond trade and other services. And that requires working with team towards creating payment options that you can pay at Spin, but you can also send people money that they can withdraw at OXXO, and you can reward them for withdrawing at OXXO in a way. We're beginning to see some interesting things.

We are still very excited about our growth in OXXO Nichos. They continue to outperform in terms of ROIC and we are continuing to accelerate that. This year, 25%, a little bit lower than what we planned, but still much bigger than previous year. 25% of our stores would be on the niche space, and that should just continue to gain momentum.

I would leave it on that. Those are the things that we see are beginning to help us gain share beyond the inputs and gathering categories and towards food and groceries and others. Does that respond your question, Bob?

It certainly does. I just had that one follow-up with respect to the discontinued operations in Solistica.

Martin, you'll take that one?

Yes. So Solistica was -- the transaction was completed in early July. So you will see an impact from Solistica being removed from discontinued operations for that quarter. And it should not return. We've had so many transactions going -- going forward. We really have no major transactions to complete or close that should impact other than this quarter, we reconsolidated the only part of Solistica that we kept, which was less than truckload in Brazil, a very small business. But that's the only one that also got removed from discontinued operations and is now consolidated at the holding company level.

We'll now take our next question from Rodrigo Alcantara from UBS.

Jose, I would like to focus here a bit on food, right, which is a topic we also discussed back in those days. I mean, food is not a new thing, right? I mean, has been there for a while, remember Doña Tota, right? A couple of years ago, was part of the speech, right? Still ever since food as a percentage of sales in OXXO remains relatively low, right? I mean, kind of like it's on this front over the last decade has been relatively slow.

So my question here for you is what makes you feel so excited about food again? Why this time could be different? Or could we expect faster adoption on this front presumably with Sbarro, what you're doing with Andatti, right? That would be my question. I mean, can we expect something faster on this front as opposed to previous years?

And my second question would be as presumably, you will consolidate this operation, right, once the transaction is approved. Any indications on how the consolidation of OXXO Brazil may impact your consolidated or your proximity Americas margins once you consolidate these operations? That would be my -- those would be my two questions.

I'll answer you first with the second one. Hopefully, by next year, we will give you more clarity, or a distinction between South American and our Mexico proximity business. So hopefully, that will not bring a lot of noise. Obviously, it's still our operation there. It's 600 stores. So even if we still combine it on the proximity of Americas, it shouldn't move the needle significantly. But our plan is to propose to you guys a different outlook when we show the proximity numbers. We're still working on that with Juan and Martin.

On food, obviously, food is a very challenging topic, and we always get the question and what is different? What are you going to do that's really going to change? I would say one of the things that encourages me is that all of our South American operations are incredibly well -- really grew the operations since probably they didn't have the services business to rely on. They were very focused on being customer-centric in food first. And since we had a lot of Mexican executive there, they were very humble in asking really the consumer what you guys need and want?

And Brazil, we sell a lot of powre [indiscernible]. We sell a lot of bread, our SKU bread is our #1 SKU. And it's twice in numbers than our second even in sales than our second SKUs. So it tells you a little bit of how big food can be for the on-the-go consumer. It's no different to Mexico. And obviously, you would say, well, but Mexico is still eat on the street. That happens in Colombia, that happens in Peru. That happens in Chile. And so I think that's no excuse.

What we're doing different is we are really starting with the coffee offering first. We see the opportunity for coffee. We've always treated coffee almost as a margin developer, and we still -- now we see it as a huge traffic. We still make money on coffee, but I think it should be a much more of a traffic driver. And where we do promotions on coffee, we instantly see the results.

I'm very excited with preparing coffee with breakfast products. I would say that's the main thing we're experimenting. But obviously, I am a firm believer that OXXO is not a place for you to sell tacos. It is very complex to sell taco. That is a red ocean. That is taken over by the street. And to be honest, street tacos are very, very good.

And so we are beginning to play around different things that our consumer wants, that they want to carry on their hands. They want to get in and out quickly out of the store. And we are beginning to try some things that excite me. Obviously, pizza and our Sbarro partners. It's too early to say. We have two restaurants here in Mexico, but we are incredibly impressed by the results. But that's, I would say -- I don't know if a decade away, but very few years away for being something that can really move the needle.

We are doing some clippings in [indiscernible] Doña Tota and they are impacting well. But I think where you will see things moving fast is on affordability for breakfast. For on the road, the road warrior of Mexico, where we see a need where our consumers are really demanding more opportunities and where I think we can differentiate from the taco category. Hopefully, we will be proven right.

We'll now take our next question from Ricardo Alves from Morgan Stanley.

Thank you, Jose Antonio, for all the support and all the interactions with the investor community over the past few years. We really appreciate that and wishing all the best to the new CEOs going forward.

A couple of questions, guys. Actually, follow-ups. On the gross margin, when we exclude the U.S. in proximity, I think that we're getting to something like 46%. And my question initially was if we were close to a ceiling, but I think that from the commentary that was already made, you made it clear that the answer to that question is no. That you see more opportunity to continue to expand gross margin here.

My question is, how is that possible when you compare your business to other convenience store business outside of Mexico globally in Asia. What do you think is going to be this next lag up driver for your gross margin to continue to expand? That's my first follow-up question.

And the second one, I think that as Juan suggested, I will leave more strategic questions at the FEMSA level to next year, but taking advantage of the transition that is happening right now for the new CEO. I think that we can still talk about longer-term strategic issues at proximity. There's a lot of things going on there. You have full control of Brazil, now. Mexico, you're focusing on recovering traffic, all these efforts that we discussed here today. Colombia is growing, then you have the U.S.

So there's a lot of things moving on going on, on the proximity alone. What do you think should be your focus and our focus to see what is really going to move the needle under your leadership as you think about the different regions for the next 2 or 3 years?

Thank you very helpful. I would say -- on traffic, I mean, on margin, we are I always say the gross margin is a very incomplete number, and I know I said it before, but I think it's important to emphasize. You need to look at the CPG's gross margin, or margins, and the consumer let's say, relative or end price and the relative value. And in that respect, I do think Mexico is an outlier. And you see it in all the major CPG players that come to Mexico.

Mexico is one of the most profitable markets for all of the guys that you guys know well, obviously, for the soft drink guys, for the snacks guys, for the beer guys. It's incredible the margins that they make here. And Mexico is an outlier because they do have a big love for brands. And I think the traditional trade still plays an incredibly large amount of -- which creates a moat for the CPG players.

We have the added benefit of the commercial income. And as the discount players continue to gain -- grow and they will continue to grow off and others will continue to grow, the CPGs rely more on obviously, the traditional trade, but also on convenience, and they love to use us as a defensible place to promote -- and to promote their brands. And they do see a great benefit in return on promotional income from OXXO. And that's why we still see a lot of potential for growth.

Going forward, as we try to gain share in categories where we're not huge, we're obviously beyond impulse, beyond gathering and beyond food, we will go into categories in groceries where we see an opportunity to gain share against the traditional trade and even against the supermarket. And some of that margin will be given back to the consumers. I don't know yet the amount, you will have to do -- a lot to do with elasticity.

So I still -- it's very hard for me to say where the end game is. But when I see the margins of my CPG partners, which I love, and I love for them to do business with us, I do still see room for growth, both in promotional income and in gross margin fully in Mexico. So I would give it at that, and I will give -- you will see clearly how we evolve as we begin to get into other categories in groceries in OXXO where I see a big opportunity.

I would also complement what Jose is saying with a couple of things. Comparisons with other players outside of Mexico, I think, is also difficult because there are very few players that have the weight of financial services. And the income that we earn on financial services is very high margin. Because the -- there are no COGs really associated with the commissions that we charge for our financial services. It's really more as G&A related to the transportation of cash, and technology that we need to have in place.

Number two, the issue of our -- when you strip out financial services, the reality is the margin is different and more comparable to things that you may be looking at. Number two, there are very few players outside of Mexico that have such a scale and breadth as opposed to OXXO in meeting proximity needs, really, our competitors are the traditional mom-and-pop. And I think our value proposition is very, very specific and very distinct which allows us in certain categories, given the imports that we have, that Jose mentioned, to partner up with suppliers for any number of initiatives and work that we do with them.

And then finally, it's an evolving thing. The waves of value at OXXO will also impact the margin as we go forward. Food, for example, is properly executed, should be an attractive margin business at the gross margin if you manage to control an issue of waste. So I will tell you, it's very hard. We don't look at the business sort of targeting a gross margin. We look at the entire ecosystem. There are things that can produce enormous gross margin, but that would destroy the economics of the store because of the complexity it would bring to distribution, or the complexity it would bring to the execution in the stores, so we pass on them.

And then there are things that are lower margin but drive traffic are very simple to execute, and it may be very attractive. So each one of our categories is really judged on the merits of competitive dynamics, issues in the store, growth going forward, and so we spend a lot less time sort of trying to project what the total amount of gross margin is going to be as opposed to looking at each category, maximizing the value in that category, and let the chips fall where they may.

And for opportunities for proximity, I would say, first and foremost, Mexico. And I would say even also Mexico, in terms of absolute value, an incredibly optimistic about the future. Even I know there's a lot of volatility and there's some of our categories where we have been having lower declines like tobacco and alcohol and others. But some categories go and some categories come. So I'm very optimistic.

We just finished an analysis of how many stores fit and even if you put account a drop in services, a drop in tobacco, we still see thousands of stores. The number is so high that I'm scared to give it to you guys, but it's still at least a decade of growth at this rate. And obviously, beyond -- I mean, within Mexico, Sbarro is increasingly getting its act better and getting better and better with every cohort.

And so we do see a few thousand Sbarro's in the foreseeable future. And obviously, that market is huge. It's very, very competitive, and the competitors are getting better by the year, but I think there's room for a few of us. So I'm very happy with our results and the expansion.

And I would say Brazil is very top of my mind. We still need a lot of work to getting it better and better. But we are impressive by -- I mean, we've been growing same-store sales at double digits for the whole year and the business keeps accelerating. So I'm very optimistic on Brazil, Colombia. And I would say U.S.A hopefully, eventually, we will grow more confident and confident to keep growing it. But it's still on a very early stage there. But I would put my focus on that order.

I would finally say, I'm incredibly impressed by the progress we've made in Europe. We have a superb management team. I've said it before. Our biggest challenge is to grow it, and we're beginning to see opportunities for growing -- especially organically. But we are very happy with the progress in Europe, and we are happy with the economic development of Europe in certain markets where we see opportunities. So we're happy there as well.

We'll now take our next question from Renata Cabral from Citigroup.

Jose Antonio, congratulations on the new role, exciting times ahead and I wish you every success. My question is a follow-up on OXXO digital ecosystem or financial services. The markets in Mexico is quickly evolving on this front and recognizing that OXXO success on this digital front. My question is regarding -- looking ahead, what is Spin's ambition? And where do you see OXXO as distinctive in right-to-mean versus wallet, telco, fintech solutions. And what would be the top capabilities that the company are targeting to invest on those fronts? So that's my question.

That's a very good question, Renata. Thank you. I would say for me Spin is a digital extension of OXXO's value proposition. That's how I see it. We see it as a lever to really enhance the lifetime value of our users. The Premia user average, or Premia users, which are our power users who have the loyalty program, do 3x the average consumption in OXXO in a month than the rest. But if you have a Spin, or your wallet, and the Premia the loyalty program, that's 42% above the Premia user. So I do think there is a lot of value in embedding the whole Spin ecosystem throughout our core missions. We can offer rewards, we can offer personalized promotions. We can offer frictionless experiences that really incentivize you to go more often to the store.

So for me, we're in the very early stages on creating an ecosystem with Spin that strengthened the OXXO relevance in our customer lives. Obviously, that includes -- so what some people see as an apocalyptic scenario where everything will go digital like in Brazil with [ PIX ], which could happen. But for us, the potential value shift from in-store to digital, we don't see it as a value migration. We do see it as an opportunity for increasing dramatically the way people interact, and use OXXO almost as a place to cash in your rewards, your points. So we're still very focused on that.

I do think at the end, it's about convenience and Spin is much more convenient than cash, but a lot of people need cash, and will need cash for the foreseeable future. Even if we go to a peak level ecosystem cash will still be important for a big sector of the economy. I am incredibly impressed now that I'm in the onboarding phase seeing how people are using Spin in ways that we even didn't imagine.

Just to give you an example, people -- the way people are tipping, you're paying your waiter or your people at the gas station. People take a picture of the QR code, the QR code that you can just scan in OXXO and withdraw cash. And it's becoming the main source of people going to the OXXO store to withdraw cash. And it's easier than having to give someone else a Spin account or having to give them your WhatsApp account. You just take a picture of the QR and you scan it in OXXO. And so we see an enormous amount of little things like that, that can enhance the value ecosystem.

So obviously, there will be -- there will be a lot of movement towards digital transactions. But digital transactions grow so massively, sometimes exponentially, that the percentage, even if it's 10%, that still means to withdraw cash will be enough to cover, I think, a big chunk of the services decline that we can see at the store. So to me, it's an optimistic angle. We'll see.

We'll now move to our next question from Froylan Mendez from JPMorgan.

Congrats on the new position, Jose. You spoke about that the pace of growth can be maintained for at least 10 more years. Can you go deeper into how the breakdown of this growth should be in terms of store expansion, same-store sales, incremental revenue from commercial income? And your thoughts on what is the adequate level of cannibalization that you can see at any point in time? And how do you feel on the ROICs of the new stores versus the more vintage space today?

That's a very -- if I had a -- a crystal ball to be able to predict exactly that. I wouldn't be here. But I would say, obviously, I mean, if you look at the acceptance level of cannibalization that we take when every time we open a store, and we -- and you extrapolate that for the next 10 years at our expansion. We do think we have at least 10,000 stores to -- and about 60% of that should be normal stores and about 40% of that should be OXXO Nichos.

Our numbers say that's even bigger. I would say -- but it's too early to say. So you cannot estimate the stores. How much of that growth would come from same-store sales? I don't know, but we are expecting same-store sales at least to be flat, or even growing slightly with inflation adjustment. So I think there's that. If we win on breakfast, we win on grocery and we win -- we continue to gain share on gathering. Obviously, that number could get higher. But hard for me to give you a precise number at this time.

I think, Froy, this is Juan. In terms of -- normally, we separate in terms of new stores. If you model 1,100 per year. Today, that's 4% and change. And over the years, that will probably get smaller into the 3. But then same-store sales, it's a separate part of the growth algorithm. And there, as you know, our kind of our long-term guidance has been to mid-single digits. If you assume an inflation of 4%, which is the upper band of the Central Bank for inflation and add a point from mix and pricing. It gets you to the mid-single digits. So that's usually what we use for kind of long-term broader expectation management, right?

So what I'm talking about is, right now, we're almost at 10%. If you add the two together over the years, probably gets you to the very high singles. Geographically, as you know, there are also differences. It's very different for us. when we look at white space in Guadalajara or in the Bajío or even in Mexico City compared to Tijuana or Juárez, right? So a lot of the openings happening in Central Mexico. But yes, that's how I would -- if I were building a model, those are the numbers I would put in.

Although you should expect that the type of stores -- this is Martin speaking, the type of stores will also shift over time. Nichos are becoming are about 15%, 20% of the stores that we're opening. Also Nichos our stores that are open within institutional contacts the factory, hospitals, universities. They tend to have significantly lower staffing. They have slightly different assortment because obviously, you're not going to be selling beer in a workplace.

Over time, you could also see us -- we've been testing, although we're not ready to roll it out because we don't think there's yet an opportunity what are called OXXO Smart stores, which are unmanned stores. you can one day see OXXO smart stores and apartment buildings, or smaller offices that we meet needs. So the composition of the type of stores will probably shift over time creating new white spaces and new opportunities in the consumption occasions.

And one data point that we provided in the past, having to do with cannibalization is that it probably represents something like 30 basis points of growth in the overall number. So I would also use that for my own modeling.

We'll now take our next question from Hector Maya from Scotiabank.

Would love if you could give us your view, please, on how you are progressing on the banking license ambitions in Mexico and the role of Spin and Spin Premia for OXXO to have an edge with that?

Also, if we think about innovation at Spin and Spin Premia, what do you think could move the needle in the next 2 years? And how could this help being to compete versus strong alternatives in Mexico that are accelerating the Nubank, Mercado Pago and potentially Cashi from Walmart?

So I will let Martin answer you the first one, and I will defer to February to give you a more detailed outlook as I'm still on the re-onboarding faith on Spin, and I would love to give you more clarity but on February. But for now, Martin will give you some answers.

I think we will not be presenting our banking license for a year now -- for a year. We've decided to start with a bigger focus on our credit part of it. That does not mean we're going to be increasing our credit. The pace of our credit business much quicker than we had. As I told you, and I promise we'll keep you informed and up to speed. We don't expect that to be more than a $20 million or $30 million deployment next year in terms of trying out new things.

But we came to the conclusion that we want to have greater visibility and a sense of our ability to use our data to be successful in credit before we went for the full banking license. So I'd say we're about a year from making that decision of actually filing the banking license. It's already and prepared -- and we've done a lot of work on it, but we decided to just wait 1 year.

We promise better details on February, Hector. Sorry.

We'll now take our next question from Carlos Laboy from HSBC.

Congratulations Jose. And also thank you to Jose Antonio for really turning over the leadership of FEMSA at a moment in history when the business are really at their most dominant, their most focused, maybe the most talent-rich and fiscally sound position that we've seen, right? So it's a gift that we can get Jose Antonio to put his full focus on and growth and value creation here.

So Jose, can you please give us more insights on affordability? Beyond, obviously, the savings aspect. Can you speak to what else is driving consumer sampling, repeat consumption and adoption, or maybe some of the more successful discount brands that you're running into in Mexico. And are there any specific categories where this is most evident? Kind of related to that also, is this pressure improving the differentiated proposition that OXXO is getting from its big branded suppliers to drilling foot traffic?

I didn't hear the last part.

Yes. Is all this pressure, Jose, from discount brands, improving the differentiated proposition that OXXO is receiving from your larger branded suppliers to help you draw in foot traffic.

Yes. It's still semi hypothesis. Obviously, it's an educated, not guess, because we've been talking to our CPG partners. And as they see the growth of the discount channel, they reinforce their partnership with OXXO with strength. I would say, first, if you look at the national level, how many stores are next through a discount of our stores are between 600 meters of a discount store, and it's still below 10% of our stores. So that tells you it's still not really moving the needle so much. But they will continue to grow, ours and others.

So we -- where we are next to them, something interesting happens. Some -- we lose sales in some categories, and we even win traffic in some categories because people -- it's very easy to walk into one of our stores and to the other ones. And so you see people may be buying the ice with us or buying or buying the beer with us and then going to do their top-ups and their weekly grocery bill in the other one. So it's an interesting dynamic.

But that said, it's an increasingly competitive dynamic. Affordability is here to stay in OXXO because the Mexico consumer is very -- is becoming much more price conscious. And we see the opportunity to really gain a much more relevance in what we call the replenishment occasions. And obviously, that has a role to play in beer where you are beginning to see more returnable glass, or the famous Caguamón, we're beginning to increase our coverage in Mexico, but also multipacks.

And we're beginning to see that a lot in soft drinks. I think we were a little late in the game and getting into mini multipacks, or the mini cans, 6 pack or 12 pack, which we're beginning to introduce in the soft drink category. It's driving a lot of success for the bottlers, and we are beginning to introduce that in Mexico.

So that's a top-up or a weekly type of consumer occasion, and that's where we're beginning to see affordability taking place. We're seeing it in tobacco. And interestingly enough, we're not seeing a lot of migration from the premium tobacco smoker to the brand -- about 70% of the value brand. About 70% of the -- given the information we have from the tickets and the Premia is that most of the value brand buyers in OXXO in tobacco are people that were not coming into the store that frequently.

So we are beginning to lose our fear of cannibalization from premium products to mainstream or value. And so we are beginning to develop more and more assortment of affordable prices and sort of affordable SKUs. And our -- our supplier partners are collaborating with us to help us throughout the spectrum.

Part of what I tell them is, if we're going to put a value beer in OXXO, which we didn't use to have for Barrilito, for example, let's also put Negra Modelo in a promotion in San Pedro. And so we like to play on both ends of the spectrum. And I think one of the beauties of our model is that we can really drive affordability in certain regions and corners of Mexico, and we can really drive premiumization in certain regions and corners of Mexico. So we will continue to play that gain.

I would say that's all about what I can say for affordability now, but I will bring more information as we continue to gather more granular data about our progress there.

That's all the time we had for today's question. With this, I'd like to hand the call back over to our host for closing remarks.

Thanks, everyone. Obviously, we're always available for follow-ups and incremental questions. But other than that, have a great rest of the week.

Thank you, everyone, and we will be seeing each other here in every conference call. So looking forward to more interactions.

This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.