Finally, we will open the call for your questions. José 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're reporting a new segment, Americas and 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 U.S. 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. The first highlight is a 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. We also saw positive revenue dynamics in almost all other categories except snacks, sweets, and alternative beverages.
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.
As encouraging as these results are, we recognize there is still work to do. Average traffic remains slightly negative during the quarter, 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, sustain 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. 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, 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 MXN local currency, a very encouraging sign of OXXO's on-the-ground momentum in Colombia, Chile, and Peru. For its part, Brazil posted same-store sales growth of 6.9% in MXN local currency, reflecting continued progress in strengthening the value proposition while the U.S. business delivered same-store sales growth of 1.7% in MXN 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 food service 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 toward 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 healthcare providers, intermediaries known as EPSs. 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 EPSs to reimburse their service suppliers, including us. Accordingly, we have been gradually reducing our exposure, although our total outstanding receivables to the EPSs 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 healthcare system would result in the insolvency of certain EPSs, 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 omni-channel 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 Martín, 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 and Health Division, 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-G&A 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. With that, let me turn it over to Martín to go over the numbers in more detail.
Thank you, José Antonio. Good morning, everyone, and thank you for joining us today. As José Antonio mentioned, starting this 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, offset by currency headwinds due to a stronger peso and the softer performance of Health and KOF.
On a comparable and currency neutral basis, total revenues and operating income grew 8.5% and 12.1% respectively. Net consolidated income amounted to MXN 17.6 billion, 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 non-cash gain, net consolidated income would have been MXN 5.7 billion, or a decline of 36.4% year-over-year. This decline was mainly explained by higher net financing expenses, reflecting, 1, a foreign exchange loss compared to a gain in 2025, representing a swing of MXN 883 million driven by the appreciation of the Mexican peso against the US dollar-denominated cash positions.
2, an expense of MXN 189 million related to financial instruments, compared to a gain of MXN 1.1 billion last year for the favorable valuation of the convertible bond associated with Heineken shares. 3, lower interest income as a result of a lower cash position and lower interest rates. Additionally, income from discontinued operations contributed MXN 2.5 billion in the 1st quarter of last year, but not this year. The effective tax rate for the quarter was 17.1%, including the impact of the one-time accounting gain relating to our investment in BradyPLUS. 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 non-cash 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 non-deductible items, including labor-related expenses in OXXO Mexico, as well as losses at Spin that, while diminishing, currently do not generate a tax shield. 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 MXN 25 billion, 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 higher retail volumes in OXXO Gas relative to wholesale, which carries 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 MXN 281 million, 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 MXN 12.9 billion, stable in MXN terms or up 1.5% on a currency neutral basis, as the start of the year was characterized by a solid Swiss retail and food service business, offset by a weak German retail and food service business, resulting from soft traffic across our consumer formats that improved during the month of March.
We continued to see a weak B2B segment, driven by strong competition. 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 MXN 356 million, a solid increase of 7.4% year-over-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 MXN 22.2 billion, 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. As a mechanical effect of this change, gross margin was impacted by approximately MXN 666 million, 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 MXN 657 million, 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 May. For its part, Coca-Cola FEMSA delivered revenue growth of 1.1% and a decline in operating income of 2.3%.
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 help sustain stable consolidated margins. As always, we encourage you to listen to the earnings call hosted yesterday. Before closing, let me briefly update you on capital allocation. In the first quarter, we deployed MXN 6.2 billion 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 KOF.
We expect CapEx deployment to accelerate through the remainder of the year, trending towards our more typical CapEx to sales ratio of approximately 5%-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 MXN 15.2 billion 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 MXN 25.8 billion. Taken together, the combination of ordinary and extraordinary returns represents total expected capital distributions of approximately MXN 4.41 billion on a March 2026 to March 2027 basis.
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 MXN 41 billion 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. We temper our optimism with some caution, particularly 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. With that, we can open the call for your questions.
Okay. At this time, we are going to open it up for questions and answers. If you have a question, please click on Raise Hand for audio questions or write it down in the Q&A section for written questions. Please remember that your company's name should be visible for your question to be taken. We do ask that when you pose your question, that you pick up your headset to provide optimum sound quality. Our first question comes from Alvaro Garcia with BTG.
[Foreign language] Alvaro.
Hey, good morning. Thanks for the space for questions. Thanks very much for the new segment information. I think it's great. You know, I have two questions, one for Martín on. Or I'll stick with one question. On others.
Thank you.
on others, just it, you know, came down materially relative to last year. This is obviously the difference in EBITDA, between your consolidated EBITDA and all of your different segments. I was wondering if you could just help piece together why that came down in the context of the recent restructurings, you announced last quarter. Thank you.
Sure. I mean, one big driver for that doubt was the decline in losses in spend. Again, generally our efforts at cost containment. One has to be careful with others line because sometimes that all the firms support things in our businesses that were coming in and out. Generally, I think from last quarter to this quarter, the best progress that was made was on the reduction of the spend. The benefits from cost reductions will probably begin to cycle in over the next three quarters, and you should continue to expect improvements also as we manage the spend losses and find more efficient ways to manage those losses from a tax shift perspective.
Wonderful. Thank you.
Our next question comes from Benjamin Theurer with Barclays.
Hello, Ben.
Good morning. Thank you very much. I'll stick to one as well. You showed relatively strong performance in terms of traffic this quarter, despite some of the security issues. Could you help us understand a little bit more just January, February, March, and how issues in the Pacific area, Guadalajara, Jalisco have impacted traffic throughout the quarter and what the normalization looks like? Thank you.
Ben, I would say, I'm still not satisfied with traffic. I expect OXXO is a growth platform, is a growing company, and it should also grow on a same-store sales basis on a traffic level. The strategies we have put in place 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 ANTAD figures and what we see from NielsenIQ 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, 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, in the Bajío region, compared to a much difficult traffic scenario, obviously, in Jalisco, and Nayarit and that region, Michoacán. 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. I that's how I would frame it in general.
Excuse me. I think maybe adding to the, to the lackluster performance in kind of the south of the country, as you know, really the states that are more exposed to remittances, you know, the remittances are coming down and the, you know, they're generating fewer pesos. I think that also-
Yes
contributes to the, to the difference between the north and the rest of the country.
We saw a relatively soft Holy Week or, you know, vacation season, probably a little bit discouraged by international tourism from the news in Jalisco, plus a stronger peso relative to the dollar, also affected the region around Cancún. That didn't help as well. A long way to go on traffic. We're working on lots of stuff.
Well, keep it going. Thank you very much. Good luck.
Thank you, Ben.
Our next question comes from Melissa Byun with Bank of America.
Hello, Melissa.
Hello. Thanks for taking my question. I too will try to keep this to one question or theme. On the OXXO gross margin, are you seeing a contribution from commercial income in anticipation of the World Cup yet? How do you expect margins to evolve along the year?
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. No, I think we're gonna 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. We're doing a lot of things behind that that should help. It's not necessarily promotional income, but today, which is Día del Niño here in Mexico, we're launching El Panini, that, this, you know, collectible thing. 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. Finally, some expansion in financial services. We're still seeing as some services like top-ups decrease, they're much more than being covered by growth in cash withdrawals from new banks, FinTechs, and other players like Spin, frankly. All of that has been help on the gross margin.
If I can compliment José just on one small item, 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 just distribute on their behalf. As we have gained scale and efficiency in our distribution, more suppliers see us as a better alternative relative to them directly distributing to the store.
Just one final comment on this, Melissa. I mean, 140 basis points is a big number. 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 basis points 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 expands more than I thought. Just to be a little bit conservative because this was a big number.
Yes.
Great. Understood. Thank you.
[Foreign language], Rodrigo.
Our next question.
Sorry.
I was jumping the gun.
with UBS. That's okay. Go ahead, Rodrigo.
Hello, Rodrigo, again. Sorry.
Go ahead, Rodrigo.
Hello, hello. me escuchan? [Foreign language]
Si. Hola.
Oh, super. Hello, José. I have three questions. No, just joking. I'm just. We'll ask one. José, now that, I mean, I have you here on the line, you know, the affordability strategy 2025 worked quite well, right? Helped you recovering the lost traffic to mom-and-pops. It clearly worked well, that strategy. Still, I mean, the way I see this was kind of like a reactive strategy, let's say, you know, to what was happening there, with the macro. The question is looking for 2026 and, you know, 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 stuff, right, at the beginning of your remarks, right? Just wondering if you can, like, help me understand the flagship strategies that you are working on to precisely re-accelerate the traffic trends beyond the World Cup. That would be my question. Thank you, José.
It's a great question. As you say, I think, working on a very good price from OBPPC 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 beer out there, we should still gain share and continue to do so. Cold and affordable beer for everyone is our goal.
Going forward, it's not gonna be enough to bring us where we want to go in terms of relevance for the Mexican consumer. We are very ambitious in our foodvenience 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. We serve phenomenally good coffee for a convenience store chain. It's 100% Mexican coffee in Mexico, 100% Colombia in Colombia, and in Brazil is 100% Brazilian. It's a great product. We should promote it more.
It's incredibly good coffee considering the price, 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 a great breakfast options with what we call hero products that can help you for snacking, for lunch. 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 over the next few quarters. I think we still see a huge opportunity in OXXO, this is, you know, 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 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 gonna take us more time. You know that traditional trade is still 50% of the basket in of the channel in Mexico, so we have a long share gains to achieve. I think there's room for growth for us and other players like Bara to gain share there. Thank you.
Thank you. Thank you, José Antonio.
Our next question comes from Tiago Bortoluci with Goldman Sachs.
Hola, Tiago.
I think you might be on mute.
Sir, you can open your microphone. I believe he's having some technical issues. We're gonna go ahead with our next question from Alejandro Fuchs with Itaú BBA.
Hello, Alejandro.
Hola, José Antonio, Martín, Juan, Jorge. Thank you for the space, the questions, and congratulations on the very strong start of the year. Just one question, maybe a little more strategically for José Antonio. We have seen in the past, you know, FEMSA a little bit simplifying its portfolio of businesses, right, with the FEMSA Forward strategy and being very efficient now with capital allocation. How do you feel, José, with maybe the portfolio of businesses that you have today? You know, thinking about the future, I felt a little bit maybe more cautiousness on the pharma side of the business again. Do you think that? Do you feel comfortable today or we could see maybe going forward, you know, more of the simplification strategy that we have seen in the past?
Thank you.
I'll let Martin help me complement a little bit. I would say, in general, We're always studying parts of the portfolio that could either perform better with someone else or should be or should not be part. Simplification is still alive. It's always on our mind. We see most of our growth focused in organic growth. 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 is really underperforming, and we are analyzing all possibilities with that asset. Colombia has huge amounts of potential to grow.
We continue to gain very significant amounts of share on our Colombia retail, and taking out the institutional side, as I mentioned on my initial remarks, has some issues. The Colombia private retail segment, the industry is growing and we are the fastest growers in that industry. That keeps a lot of momentum. We should capture as much of that waving as possible. Chile is gaining share. We had a lackluster set of results, but in general, it still has lots of potential. Ecuador as well. 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. Obviously, everything is always on our plates, and I delve 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? Everything's on the table. I don't know, Martin, you.
Very, 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. 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, you know, we have to be particularly cautious of what we say about what we're looking at or not looking at any given moment.
I would add a third qualitative comment, which is, you know, once you own an asset, you then have to make a judgment about, you know, what is it worth to you relative to what other players might be out there. That debate happens regularly here at the company. I would just close with that.
Thank you.
Gracias, José Antonio, Martín.
Thank you.
Next question from Tiago Bortoluci with Goldman Sachs.
Hey, guys. Good morning, everyone. Can you hear me now?
Yes.
Yes.
Hello, Tiago.
Hola, José, Martín, Juan. Thank you very much for taking the question, and congrats on the solid sequential improvement and turnaround of the business. I would like to explore the productivity and traffic theme 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%. 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 ROIs of these new cohorts? Thank you very much.
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, you know, 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. They tend to have a higher ROIs. 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 not looking not also on the nominator, but also the denominator, making sure we make a smarter, focusing on improving our ROI, reducing our cost of each new store. 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 two important things. We made a pause in the in really making sure we are continuing to maximize ROIs. 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 three or four years, and I think, we haven't really done a big pruning after the recovery of COVID. 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, you know, canceling the contract or eliminating?" We think this year, while we're still gonna open about 1,100 stores, that 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.
Maybe the net new stores of this year will be impacted throughout the year. I will have a better number as the year progresses.
Yeah, Tiago, this is Juan. I think I'd like to follow up on what José Antonio just said, because it started actually last quarter, where I mean, we usually talk about the net number, but we are, and it happened last quarter, closing more non-performing stores. 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. The ones that we just opened in the last few months are probably selling less.
Than those that we're closing. That's happening more than it ever did before. It. Again, this is where the question came up in the last, in the last conversation. That will probably continue as we continue to prune the store base.
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 pace, but also stores in Mexico for the next various years. A lot of years, hopefully.
This is very clear, José, Juan, thank you very much.
Obrigado.
Our next question comes from Héctor Maya with Scotiabank.
Hola, Héctor.
Hola, José Antonio, Martín, 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 passthrough of the new taxes on cigarettes and beverages versus organic pricing or mix from the implementation of the affordability strategy?
Look, I'm gonna have to do some math here just quickly. We had 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. If you just calculate the difference between the growth of 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 'cause I haven't actually calculated.
Yeah. Yeah.
Common sense leads me to that conclusion really.
I would say, if you'd 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. I would say, it was a big portion of it. I don't think it was above 80%, but it was a big portion.
Depending 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 gonna increase it by. There is some variability between different parts of Mexico, depending on the competitive dynamics amongst the players.
Perfect. Very clear. Thank you. Thank you very much.
Next question from Lucas Mussi with Morgan Stanley.
Hello, Lucas.
Hi, everyone. Thanks for taking my question. Congrats on results. I have one for Martin maybe, about your current leverage excluding KOF, 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, your announced dividends and buyback activities. Just thinking about how you're thinking about cash flow for all 2026, how you think that should shape up as it pertains to your target 2 times net debt to EBITDA excluding KOF, by the end of the FEMSA Forward plan, in the next 12 months or 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 for the second quarter, if you see some upside, potential upside, some gaps that could be filled, in your target, or any general comment, given you are already four months into the year. Thank you very much, everyone.
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 2 times. How much will ultimately depend on how well we do the remaining 3 quarters, I think. 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. We can trigger that at any moment that we have in our judgment, we want to see an opportunity for buying shares.
Number 3, you know, 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 the M&A perspective. There may be things that come up this year that will help us to close that gap. Without that M&A, I suspect we will be below. Not hugely, but we will likely be below, the 2 times. 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.
That's helpful. Thank you, Martín. Thank you, team.
Next question from Joseph Giordano with J.P. Morgan.
Hello, Joseph.
Hello. Good morning, everyone. Thanks for taking my question. I'd like to explore a little bit like, the expansion of Barra in the north region, of Mexico. Just wanted to understand like how you're seeing the performance, increase in private label, and how are you evolving the model. I think it's like, a building mode. Thank you.
We are very encouraged by what we are seeing on an expansion of Bara in the north. Although Bajio continues to prove, you know, with very favorable momentum. We are encouraged that we are seeing same-store sales growth on both a mix of traffic and ticket. We love to see more traffic driving the growth in sales. We are accelerating store expansion. We opened about 45 stores in the first quarter. We are planning. On April, we're opening 30 stores. It's 38 stores in the first quarter, we are opening 30 stores just in April.
We plan on accelerating expansion, and we're still on target on that champagne promise I made of a store a day for Bara in 2026. Hopefully, my team will deliver that, but we're gonna 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. We're still fixing issues with supply chain and still the welcoming has been very positive. I'll stop there. I don't wanna attract more attention towards our expansion here.
All right. Thank you very much.
Our next question comes from Henrique Brustolin with Bradesco BBI.
Good morning. Thanks for taking my question. I would like to address the merchandise margins in the Americas. You, you mentioned, right, the 31.8% flat gross margin, but when I look at the comparable figures from the, from the release, it looks like there was a 5-point margin expansion year on year. Just to be clear, if there was anything in the comparison base, you know, that we should be aware of when thinking about this margin expansion. On this topic, when you look at the 31, the close to 32%.
percent gross margin, how is that compared to the target that you see for those operations outside of Mexico, in terms of, you know, the profitability you can achieve thinking about the expenses dilution that you should have as you grow, or if gross margin expansions is still potentially an important driver for growth to accelerate and the bottom line growth as well? Thank you very much.
The comparable items excludes Brazil still has a long way to go to match the gross margin that we're seeing in Chile, Peru, and Colombia. I think that's, that should explain most of it. I'm not sure, but I'm pretty sure it does.
Yeah.
However, we are encouraged by what we're seeing in Brazil in terms of margin expansion ambition towards the rest of the year. Frankly, again, the momentum we're seeing in Colombia with double-digit traffic growth, with double-digit same-store sales growth, it 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 will be very close to EBIT breakeven this year. Brazil has a longer way to go. It's still behind in gross margins. 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. By the way, we're also seeing some interesting expansion of some services, very different types of services obviously in Brazil and Colombia, but there's people doing a lottery thing, big tickets, gift cards in Brazil. In Colombia, we're seeing a little bit of that and also some cash withdrawals. I think gross margins, while they're not gonna, I don't think will ever match Mexico, could go way above the 35%.
That should keep us on the safe side on paying our cost of capital, and continuing to invest in those two platforms, especially Colombia and Brazil.
Yeah, I think so much of your gross margin depends on your positioning with your suppliers, right? Your scale is a big part of that. If we continue to grow as we hope we will grow, then our conversations with our suppliers will evolve and that gap will close.
Yeah
... vis-à-vis Mexico.
There's two 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. We're still not growing very fast in Colombia and Brazil, and we're still not a very big guy in those two 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 for serious in South America. We're for 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 SPEI in Brazil and Colombia for decades, hopefully.
That's very helpful. Thank you very much.
Obrigado.
Our next question comes from Antonio Hernandez with Actinver.
Hi. Good morning.
[Foreign language] Antonio.
Hola. Hola, que tal? Buenos dias. 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, at the disclosure of how much of that expansion was driven either from financial services, income from key suppliers, retail media, and so on. Thanks.
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, you know, 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 beer, big beer SKUs into the distribution centers, and that is driving distribution income. I think it's a mix of everything.
I think with Juan cautious remarks before, has to do that if we are planning to be, to remain ambitious on our affordability, some of our margin expansion should be given back to our consumers in a SKUs that our consumer team are more elastic to them and really value. 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 things like pantry or coffee, for example.
Thanks. That's helpful.
Thank you.
Next question from Renata Cabral with Citi.
[Foreign language]
[Foreign language] Thanks so much for the space, and congrats on the results. My question is about Spin, maybe for José Antonio, as last quarter you described Spin as a phenomenal FinTech, but acknowledge the opportunity to bring more customers in, into the store. We signed the release Spin Premia at tender, now crossing the 50% in Q1, marked a milestone, and I would love to hear how you're actually putting the data, the transaction level to work across more than half of the OXXO sales or the opportunities you see there. Where's that personalizing promotion, optimizing assortment, or for strengthening commercial negotiation with suppliers? If you have an example, would be amazing. Just a follow-up to that, where do you see the natural ceiling for tender? Is 78% achievable over time? Thank you so much.
Renata, 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. I do say in March alone, we added the highest number of active users in the past 2 years. More than our 11 million active users are impressive, our weekly active users keep growing. I think they're 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 pay and peer-to-peer payments in the Spin app.
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. 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. If we are the fastest growings and we capture a big momentum, we're basically meeting our consumers where they are, we're making them what it was very convenient to do at OXXO, making it more convenient to do in the app.
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. We can also invite them to the store more with promotions, with gamification. 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, you know, your, 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 wanna be very cautious.
This is a very different consumer that what the other credit card players are doing. We will be cautious on that. We see an opportunity for that given all the information we're learning from them. Frankly, with this gamification 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. We've seen it in our pharmacy business in Chile. We're way above 90%. It's gonna be tougher in convenience, I think we should get above, hopefully get to towards 66%. It's an ambitious goal. It's not an unattainable goal. That's what I would say for Spin, very encouraging results for what we're seeing.
It also obviously helps for retail media channel. That should be a source of profitability for Spin as well.
Thank you so much, José Antonio. Really appreciate the color and the detail. [Foreign language] Muito obrigado and congrats on the results.
[Foreign language], Renata. [Foreign language].
Thank you. 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. 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.