Fomento Economico Mexicano S.A. ( FMX ) - also known as
FEMSA - reported lower-than-expected bottom-line results for the
first quarter of 2013. This largest franchise bottler for
The Coca-Cola Company ( KO ) posted net majority
income of 59 cents (Ps. 0.73) per share, lagging the Zacks
Consensus Estimate of 95 cents.
However, quarterly earnings of this Zacks Rank #3 (Hold) company
jumped nearly 15.7% from the comparable year-ago quarter's earnings
of 51 cents per share, primarily driven by robust performance at
its FEMSA Comercio segment.
Quarter in Detail
Total revenue grew 4.6% year over year to Ps. 56.203 billion
($4.440 billion), mainly aided by improvements in revenue at
FEMSA Comercio . On an organic basis, total revenue
climbed 3.2% from the prior-year comparable quarter. Moreover, it
surpassed the Zacks Consensus Estimate of $3.994 billion.
FEMSA's gross profit rose 6.0% year over year to Ps. 23.255
billion ($1.837 billion), and gross margin expanded 60 basis points
(bps) to 41.4%. The increase was primarily driven by gross profit
improvements at Coca-Cola FEMSA and FEMSA
FEMSA's operating income dropped 1.8% to Ps. 5.119 billion
($0.404 billion) from Ps. 5.215 billion ($0.401 billion) in the
year-ago period as increased operating income at FEMSA
Comercio was offset by higher operating expenses at
Coca-Cola FEMSA . On an organic basis, operating income
declined 3.4% year over year. Consequently, consolidated operating
margin contracted 60 bps to 9.1%.
Total revenue at Coca-cola FEMSA was almost flat year
over year at Ps. 33.561 billion ($2.651 billion) in the quarter, as
the high single-digit revenue growth in Mexico & Central
America division was offset by the negative impact from currency
devaluation in Venezuela, Argentina and Brazil. However, on a
currency neutral basis, total revenue escalated 10.8%.
The segment's operating income for the quarter declined 5.6% to
Ps. 4.074 billion ($0.322 billion) from the year-ago quarter,
primarily due to increased labor and freight expenses in Venezuela,
Argentina and Brazil. Consequently, Coca-Cola FEMSA's operating
margin contracted 80 bps to 12.1%.
FEMSA Comercio registered revenue growth of 14.0% year
over year to Ps. 21.703 million ($1.714 billion), mainly
attributable to the opening of 135 net new stores in the quarter
along with a 4.8% upside in same-store sales. The growth in
same-store sales was primarily driven by an increase of 6.1% in
average customer ticket, partially offset by a 1.2% decline in
customer traffic. The company opened 1,037 net new stores in the
last 12 months, bringing the total store count to 10,736.
Operating income for the quarter under review jumped 21.5% year
over year to Ps. 971.0 million ($76.702 million). The segment's
operating margin expanded 30 bps to 4.5%, primarily aided by an
improved gross margin, partially offset by increased expenses on
new store openings, organizational and IT structure and development
of specialized distribution channels.
Dollar Tree, which competes with Coca-Cola Enterprises
Inc . ( CCE
), had cash and cash equivalents of Ps. 28.855 billion ($2.336
billion) at the end of the first quarter. Long-term debt at the end
of the quarter was Ps. 26.610 billion ($2.154 billion). During the
quarter, FEMSA incurred capital expenditure of Ps. 3.213 billion
($0.260 billion), mainly toward incremental investments at
Coca-Cola FEMSA to increase capacity in Columbia.
Other Stocks to Consider
Apart from FEMSA, the other stock in the Beverages-Brewers
industry worth considering includes Pepsico, Inc.
( PEP ), which
currently carries a Zacks Rank #2 (Buy).COCA-COLA ENTRP (CCE): Free Stock Analysis
ReportFOMENTO ECO-ADR (FMX): Free Stock Analysis
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