Update: Fomento Económico Mexicano S.A.B. de C.V.

Overview Key strengths Key risks The largest chain of small-format store in the Americas, measured by number of stores. Larger-than-expected investments or shareholder returns, funded with cash or debt, could pressure the ratings on Fomento Economico Mexicano S.A.B. de C.V. (FEMSA) if its adjusted leverage is consistently above 2x. Large equity stake in Coca-Cola Femsa S.A.B. de C.V. (KOF; global scale: A-/Stable/--; national scale: mxAAA/Stable/--) enhance the business profile and cash flows through recurrent dividend inflows. Weaker-than-expected economic conditions, including persistent inflation in FEMSA?s key markets could hamper consumption and its results. Solid operating cash flow (OCF) and strong liquidity position allow the company to fund its new store openings and business expansion. Highly fragmented and competitive retail and e-commerce

...Earlier this year, FEMSA announced a long-term reorganization plan, "FEMSA's Forward", aiming to focus on its core businesses. Plans include its retail division (the Proximity segment consisting of OXXO and Valora convenience stores; the health segment consisting on pharmacies, and the fuel segment consisting of gas stations), and beverage division through its stake in KOF. At the same time, we expect FEMSA to further invest and expand its Spin and Oxxo Premia digital platforms to connect its businesses through a digital customer-centric ecosystem to maximize value creation. To date, FEMSA's none-core asset divestment is progressing quickly, as seen in the sale of its 14.76% stake in Heineken N.V. (###+/Stable/A-2) for which it received about $7 billion. Moreover, FEMSA recently announced an agreement to sell its minority stake in Jetro Restaurant Depot (JRD; not rated) for which it will receive about $1.4 billion (33% of which in 2023 and the remainder in the next two years). Finally,...

Full Report