Fomento Economico Mexicano SAB de CV

NYSE:FMX

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, and welcome everyone to FEMSA's First Quarter 2022 Financial Results Conference Call. [Operator Instructions]

During this conference, call management may discuss certain forward-looking statements concerning FEMSA's future performance and should be considered as good faith estimates made by the company. These forward-looking statements reflect management's expectations and are based upon currently available data. Actual results are subject to future events and uncertainties which can materially impact the company's actual performance.

At this time, I will now turn the conference over to Francisco Camacho, FEMSA's Chief Corporate Officer. Please go ahead, sir.

[Francisco Beltrán, executive]

Thank you, operator. Good morning, everyone. I hope you and your families are okay. Welcome to FEMSA's First Quarter 2022 Results Conference Call. Today, we are joined by Eugenio Garza, our CFO, and Juan Fonseca, whom you know well. As always, we also have Jorge Collazo on the line, who leads Coke FEMSA Investor Relations team. Without further delay, let's just start with our call.

We are very encouraged by the results achieved by all our business units during the first quarter. As you may remember, we closed 2021 with a positive momentum and things have continued to improve at the start of this year. I believe there are 3 thing happening here. First, every one of our business units has been working hard to develop successful growth strategies to feed their momentum and situation, always leveraging the superior execution and skills that our operators are known for. Second, the teams also worked through the last couple of years to adapt to the COVID challenges. And this often included trimming the cost structure and becoming more efficient. And finally, we are continuing to see positive trends in consumer activity and mobility as the world continues to reopen, with these effects particularly visible in the month of March.

At OXXO, the business accelerated sequentially during the quarter and these favorable revenue trends resulted in positive operating leverage. As a result, the team was able to deliver record margins at the gross operating and EBITDA levels for the first quarter.

At [ OXXO ] International, we closed acquisition of OK market and organic growth continued at a brisk pace, including our joint venture in Brazil, where we opened the 100 OXXO stores during the quarter.

For its part, our fuel business also saw positive demand trends as more of our customers increased their vehicle mobility as a result of the reopening of the schools and higher levels of activity across the board.

Our Health operations again, had a strong quarter across their income statement, building on a comparable base that keeps getting more demanding and delivering all-time high margins for the first quarter at the operating and EBITDA line.

Our Logistics and Distribution business also saw a sequentially improving quarter, particularly in the United States, with the month of March reflecting better demand dynamics in the facility supply segment, as more people returned to the office. And in Latin America, we also had a good quarter, led by improved performance in the warehousing operations. On the topic of logistics and distribution, it is worth mentioning that we remain committed to deploying incremental capital to build our US national platform.

Most recently, we were happy to announce an agreement to acquire Sigma Supply, an important distributor of packaging solutions and [ JanSan ] products that fits and complements our footprint well, strengthening our presence across the south and opening the door into the key Texas market. Staying on this topic for a minute, you can think of Envoy Solutions as a 3-legged stool, where the legs are JanSan, Food Service Consumables, and Packaging. Together, JanSan and Food Service comprise what we call Facility Supplies. Each of these legs offers compelling opportunities for cross-selling and higher route density as most of our customers need and consume products from more than one [ leg ] in their operations. And often, they need all 3 and Packaging has the added benefit of generating high cash returns on capital. So Sigma Supply will be an important addition to our platform.

I also want to talk a little about our digital platforms since we know many of you are interested in monitoring our progress there. Our numbers for customer acquisition continue to grow at a good pace at below industry costs, and we closed the first quarter with 2 million registered users at Spin by OXXO, and 8.5 million at OXXO Premia. In both cases, active users are about 60% and pretty much all internal metrics and key performance indicators, like ARPU and tender, are in line or exceeding our baseline expectations.

Having said that, we keep working not just on growing our customer and partnership networks, but also on accelerating the expansion of our products' value proposition, focusing on increasing user engagement by adding new functionalities and services, improving customer experience and ensuring a seamless interaction between our physical and digital networks. We are encouraged by these early signs and we'll keep you posted on our progress going forward. Before I turn it out over to Eugenio, I want to recognize the remarkable job done by our teams in positioning our business units for sustained growth and performing at the high level during the first quarter. The outlook is compelling as we look to the rest of this year and beyond. And with that, let me turn it over to Eugenio.

[Eugenio Garza Garza, executive]

Thank you, [ Paco ] and good morning, good Monday to everyone on the line. Starting with FEMSA's consolidated quarterly numbers, total revenues during the first quarter increased 18.6% while income from operations increased 24.9% compared to the first quarter of 2021. On an organic basis, total revenues increased 15.2% and income from operations increased 22.2%. FEMSA's net income decreased 6.6% and reached MXN 5.8 billion, reflecting higher income from operations; an increase in our participation in associates' results, which mainly reflects the improved results of our investment in Heineken relative to the first quarter of '21; and a decrease in net interest expense. This was offset by a non-cash foreign exchange loss related to FEMSA's US dollar denominated cash position as impacted by appreciation of the Mexican peso during the quarter.

Moving on to discuss our operations, beginning with Proximity, we opened 69 net new OXXO stores during the first quarter to reach 794 net openings for the last 12 months. Openings for the quarter were below trend, coming after a very active fourth quarter of last year, during which we opened more than 400 stores, leaving our new-store pipeline a little depleted at the start of this year. However, the pipeline is being replenished and we are confident [ to be ] back on trend in the coming months and certainly expect to hit our target of 800 net new stores in Mexico for this year.

OXXO same-store sales were up 12.7% for the first quarter, driven by an increase of 10.7% in average customer ticket and 1.8% growth in traffic, which reflects the sustained recovery of mobility and gathering consumption during February and March, coupled with a relatively undemanding comparison base in the first quarter of 2021, which was affected still by COVID-related restrictions.

Gross margin increased 110 basis points to reach 41.1%, reflecting a strong recovery in commercial income from promotional programs with key suppliers. Income from operations increased 54.6% while operating margin increased 190 basis points compared to the same period of 2021 to reach 7.5%. These are record numbers and well above our pre-COVID levels, driven by a leaner expense structure and resulting operating leverage.

At OXXO [ Gas ], revenues increased 27.7% and same-station sales grew 18.5% relative to the first quarter of 2021 as vehicle mobility continued to recover. During this quarter, gross margin was 12.3% while operating margin reached 3.5%, reflecting tight expense control and improved operating leverage. Moving on to FEMSA's Health operations, during the first quarter, we expanded our drugstore count by 66 net editions to reach a total of 3,718 units across our territories at the end of March, and 313 total net new stores for the last 12 months. Revenues increased 21% while same-store sales increased an average of 3.5%. On a currency neutral basis, revenues did grow 12.5% and same-store sales increased by 9.5% as we continue to see good momentum across our operations, even as the comparison base becomes more demanding. Gross margin increased 60 basis points during the quarter, reflecting improved efficiency and more effective collaboration and execution with key supplier partners across all our operations, and particularly in Mexico where the team has had success applying some of the commercial strategies that have served us well in other markets. Operating margin expanded 110 basis points, reflecting improved operating leverage and tight expense control across our territories. Moving on to our Logistics and Distribution, business revenues increased 48.3% relative to the first quarter of 2021, reflecting the steady pace of acquisitions made in the past 12 months by Envoy Solutions. On an organic basis, total revenues increased 12.2%, reflecting a gradually recovering facility supply segment at Envoy, driven largely by people going back to the office coupled with good demand dynamics in our operations in Latin America, particularly in the warehousing business. Operating margin expanded 120 basis points, reflecting improved operating leverage across our operations, which was partially offset by an increasing labor and transportation expense.

Finally moving onto Coca-Cola FEMSA, volumes grew 10.1% with most markets contributing to the growth. Revenues increased 14.6% and gross profit grew 13.5% despite supply chain disruptions and cost pressures on certain raw materials. Operating income increased 16% reflecting solid top line favorable raw material hedging strategies, coupled with operating expense efficiencies. All in all Coke FEMSA showed strong results in the business, even in such a volatile environment. You can listen to the webcast of the quarterly call that took place last Friday.

Wrapping up, and as Paco mentioned before, we are off to a promising start across all of our operations. Certainly, we must remain vigilant as we learn to coexist with COVID and we cannot trivialize macro headwinds like inflation and supply chain shocks. But in terms of what we can control and the level of fitness of our business units, we feel good about the road ahead.

And with that, we'll open up the call for your questions. Operator?

[Operator]

[Operator Instructions] Your first question comes from the line of Ben Theurer from Barclays.

[Benjamin Theurer, analyst]

Just wanted to ask about what you've laid out with all the acquisitions in the US Sigma Supply just recently, and then obviously how it combines together. We've seen very strong results coming from a growth perspective and as well, underlying growth here from an operating income perspective on the Logistics segment. So can you guide us a little bit of how you think about this segment in coming years? What size do you want to take this to, and how do you think about future development? Is it a balanced strategy with building out what you have, a portfolio through M&A, throwing in your own expertise and maybe some incremental organic investments? just to understand from a capital allocation, this is all M&A? Will there be some organic? And where do you think this is going to -- what do you think is going to [ stand ] to maybe 2 years or so?

[Eugenio Garza Garza, executive]

Sure Ben, happy to answer that. I mean, as you know, when we got into the segment, we were attracted by the dynamics of an industry that, I mean, contains the same as in the rest of our business, small drop sizes, a big product bundle that allows us to set market and obtain good results, but also in an industry that was highly fragmented throughout the United States. Besides Envoy, there are another couple of platforms that are following the similar strategy and we still believe that there is a long road ahead of consolidation as a lot of these regional distributors, both on the JanSan side, the Food Service disposable side and the Packaging side, are widely distributed across the United States with small distributors.

So we feel that there is a long way fill ahead in terms of consolidation there. And that consolidation is usually immediately accretive as you can bundle -- on the supply side, bundle some of our supplier partners and create value relatively quickly there. So we still do believe that the secular trends in the business can probably result in mid-single-digit growth for a number of years to come. And then, if you add the potential for inorganic growth, this could continue to grow at mid-double-digit growth. So we still believe that there are significant capital allocation opportunities out there that can be value accretive relatively quickly. So we will continue again to be disciplined, both from a valuation perspective, as well as from a capital allocation perspective, to balance the portfolio. But we do still believe that we could grow this business significantly and really become this fourth platform for FEMSA.

[Francisco Beltrán, executive]

And just to ask to that, Ben, the most recent acquisitions, Sigma, as you mentioned, it is in the path of consolidating our national platform in all the categories. And importantly, as we mentioned, it allows us to enter the south in a stronger way, particularly in Texas.

[Benjamin Theurer, analyst]

Okay, perfect. Congrats on the [indiscernible] results.

[Francisco Beltrán, executive]

Thanks, Ben.

[Operator]

Your next question comes from the line of Rob Ford from Bank of America.

[Robert Ford, analyst]

Congratulations on the results. Eugenio, can you talk a little bit about how Spin and maybe Premia are impacting the way you are capturing data and maybe how that's evolving within the business. And you have pretty big bill payment activity at the stores and certainly correspondent banking and other services as well. And I was wondering if you're now able to identify those transactions with specific clients.

[Eugenio Garza Garza, executive]

Yes, absolutely. Bob, thanks for the question. And I mean, we have had so much success, especially on the Premia side, in terms of how easy it is for customers to get in and affiliate themselves. And what we're seeing is not necessarily, I think, a strong pickup in traffic, but what we are seeing is that the customers that are using Premia, again, the tender as of the first quarter was 6%. At this point, we're closer to 10% given how fast it's growing. But we are now, as you said, able to detect not only what tickets are in the store and what kind of buying patterns customer have in the store, but who it is, at what time he's doing it, how frequently he comes back. And those Premia customers are consistently increasing their ticket way above the average ticket price at OXXO. So we're talking about the average Premia customer being closer to an MXN 80 ticket, rather than a much lower average ticket for OXXO. And we're obviously slowly but surely doing AB testing to start to have promotions targeted at the individual customer level. So clearly that is giving us, I mean, a whole lot of new data that we're starting to use more efficiently as we try to extract value from that proposition. And giving how fast it's growing, we will likely see those results coming through, again, hopefully on the traffic side, but at least on the short term, on the gross margin side.

On the Spin product, as you said before, right now it's a relatively simple product. It's basically a wallet with bill payments and what it is doing is, I think it's capturing the marginal consumer that otherwise would've not done the transaction at the store. So it's capturing that marginal consumer and without changing our pricing architecture for the services segment, it is making our market in that category, I think, wider. The more that we start to put functionality into this Spin product, stuff such as remittances from the US, eventually a partnership on credit, we believe that the use case for the product will start to become, I think, more and more compelling. And the fact that you are also earning premier points by using the Spin product is allowing us to do the cross-selling of the services category along with the other categories at OXXO. So overall, we believe it's super accretive to the entire OXXO ecosystem.

[Francisco Beltrán, executive]

And just to add to that, to complement that, Bob, I think there is worth mentioning that not surprising, the store is proving to be a tremendous source of competitive advantages. Obviously, a lot of the transactions continue to be not only on the digital world, but also on the physical world. And a lot of people get into the program by visiting the store. So the combination of having the stores, having the digital platform is just a great way to work on synergy continuity of those both things.

[Robert Ford, analyst]

Super interesting. And as you look at your earlier cohorts, particular cohorts, particularly with Spin, Eugenio, I think you mentioned that there's some evolution in terms of frequency or average ticket, right? But they're becoming more important clients. Can you talk about that evolution that you're seeing in your early cohorts and why you expect that to be replicated in more subsequent cohorts as you acquire new users?

[Eugenio Garza Garza, executive]

I think on that point, Bob, right now, the average Spin user is transacting about 10 times per month, which is up significantly from where our early cohorts were. And I think it's basically just the network effect. As new more people become Spinners, the peer-to-peer function of sending money across peers is starting to become a lot more valuable. So more and more, we are seeing that part of the value proposition play out in terms of just the sheer network effect.

[Juan Fonseca, executive]

And I think I would add Bob -- this is Juan -- we're seeing people realize that they can do other things with Spin and here, I would highlight there's a certain kind of power user that's differentiating themselves. A lot of them are women that have a -- they sell some products, maybe it's beauty products, maybe it's some other type of product, obviously entrepreneurial. And they're realizing that this facilitates their life in a big way. And so they're using the product much more than your average Joe just sending money to his aunt. So I think people are realizing how useful something like this can be for their professional lives. And that's something that we didn't necessarily anticipate.

[Operator]

And your next question comes from the line of Alan Alanis from Santander.

[Alan Alanis, analyst]

Congratulations again for the results. I have a question regarding traffic. I mean, your same-store sales of OXXO, I mean, basically you're capturing clearly inflation there in the average ticket, but how does the traffic compare versus 2019? And as we see inflation becoming more pervasive in Mexico and everywhere, how should -- how are you thinking about the business going forward with this higher levels of inflation?

[Eugenio Garza Garza, executive]

Sure. Alan, on the traffic question, we are still well below 2019 levels on a traffic basis. On a same-store sales basis, we're up. Why? Because the ticket, as you know, went up as people started shifting their view of the OXXO store into other categories, in terms of, I mean, home replenishment but now some of the more traditional categories, such as [ gathering ], etc., are coming back. Having said that, it's -- the traffic number, actually, you need to drill down and [ average it ]. There's still a mixed bag. I would say that the locations closer to traffic-heavy stations, such as bus stations, the more urban cities, etc., those traffic levels are coming back up, but we still have certain locations within schools that are still not back to a 100% present classes, or office buildings that are now adapting to a hybrid model. Those are locations where traffic patterns still continue to lag. So it is a little bit of a mixed bag with regards to that.

Having said that, the store has been resilient in terms of making sure that we are keeping the cost at the level of the new reality in terms of traffic patterns and the ticket is obviously helping. So we're being very strategic about how we start the stores, the product bundle that we put in it, etc.

And then Paco, I don't know if you want to take the inflation one.

[Francisco Beltrán, executive]

Yes, for the inflation, Alan, the reality is that Proximity is a very good channel for consumers to spend their money wisely. And with the out-of-pocket is small. We carry the right items in terms of cash outlay. And another thing that is very strong [indiscernible] is how flexible and how fast we manage the portfolio products that we offer. So we will -- we work and we will continue to work together with our commercial partners to make sure that we provide consumers with options moving forward, that protect their out-of-pocket. And we are confident that there shouldn't be difficulties that we cannot handle as the inflation persists, until it is lower.

[Alan Alanis, analyst]

Got it. That's clear. Just regarding the traffic still being way lower than 2019 -- and thank you, Paco, Eugenio -- roughly how much in aggregate are we seeing traffic still below? What's the catch-up that we need to be [ into ] to go back to 2019 levels?

[Eugenio Garza Garza, executive]

It's in low double digits down from 2019, roughly across all [indiscernible].

[Operator]

Your next question comes from the line of Sergio Matsumoto from Citi.

[Sergio Matsumoto, analyst]

I wanted to ask about the Premia and Spin success that you're seeing lately and with the context that for a long time, the Mexican consumers have preferred cash transactions. But obviously, things have changed and just wanted to kind of hear from you, what do you think has changed in the Mexican consumers? Because for a long time, they kind of went out of their way to circumvent their financial transactions being tracked and always preferred cash. So, in your mind, what do you think changed in the last couple of years, obviously led you to launch these new products?

[Eugenio Garza Garza, executive]

Yes. Sergio, thank you for the question. Look, I don't think that there is a major change or a fundamental change, at least for the time being, in terms of the cash utilization. I think that, simply, consumers are seeing the opportunity to use their money and to transact differently with the opportunities we're giving them. So, I mean, just going back to the question that Bob made regarding the cohorts, I mean, it's clear that, as Juan was highlighting, we have a new cohort when it comes to owners of small businesses that can actually transact differently using a Spin. And some of those transactions are not in cash. Some of those transactions are of a different nature.

So I guess that what I'm trying to tell you is that we continue to have a number of consumers that favor cash transactions. They are there, we continue to serve them properly, but we are adding a number of other transactions, some of them from the same consumers, some of them from different consumers, that are non-cash. And I think as we move forward and that we add different transaction abilities to our platform, we'll see more of that.

And for Premia, I mean, the fact is that consumers transact the way they are -- the way they have been doing it in the store. They buy something and then they just accumulate points. And so that -- what they do with the points, then that becomes a non-cash transaction at some point, but the origin of the points is, as it was before, in its majority cash. Is that going to change moving forward? It's very likely but I think that when that happens, we are perfectly positioned to also capture that trend. So all in all, I would say that this is an evolution, it is very fluid and we are well positioned to capture any of the 2, as we move forward.

[Juan Fonseca, executive]

Putting it into concept, Sergio, I mean, there's 1.3 million active users of Spin right now and the active population, economic population in Mexico is nearly 60 million. So again, it's still early stages with regards to this and I would say that it's not that they're changing, but the use case right now for Spin is primarily peer-to-peer, sending money across Mexico. And that is just one functionality to the extent that number one, we get a bigger network effect there; and number 2, we add more functionalities, we feel that there is still a very long runway of people that, again, maybe they will still use cash for their day-to-day activities, but especially for these kinds of use cases, they will find the Spin product to be good for them.

[Operator]

Your next question comes from the line of Alvaro Garcia from BTG.

[Alvaro Garcia, analyst]

My question's on gross margin proximity. Eugenio, you mentioned the pricing architecture at Spin's the same and we've seen obviously a big bump in users there. So I was wondering if that had something to do with your gross margin gains, given how profitable that business is, or if perhaps that has to do maybe with beer, better beer dynamics, more commercial income there. Any more color on gross margin would be great.

[Eugenio Garza Garza, executive]

Sure. I think Alvaro, it's a combination of a bunch of different initiatives that have been, I mean, taking ground over the past few years that maybe were passed by because of the pandemic and whatnot, but we're seeing a big increase in commercial activity from a bunch of supplier partners. We're starting also to see the [indiscernible] in beer, and that category specifically providing, I think, more headwinds in terms of a gross margin perspective. We are -- also the gathering use case for OXXO is back. And that usually includes higher tickets of higher gross margin products, and the home replenishment category also taking in that. And I think a lot of the efficiencies that were baked in on the distribution side and in other categories within the core offering of the core OXXO store, I think are starting to pay off as the traffic slowly, but more importantly, the overall consumption starts to kick in. So it's a combination of a bunch of little factors, Alvaro.

[Alvaro Garcia, analyst]

Great. I just want follow up on the pricing architecture. Is there any, maybe, thinking internally on maybe changing that pricing architecture as you move sort of into a more digital sphere on things like bill payments, maybe subsidizing a bit of that -- those transaction -- that transaction cost to boost traffic, or are we not there yet?

[Eugenio Garza Garza, executive]

Yes, the digital team is actively engaging in Ab testing strategies precisely to figure out what the elasticity of those products would be. So we are actively engaging in those kinds of experiments to come up with the best solution, obviously to continue to create value for the consumer, but also try to cannibalize as little as possible of our business there.

[Operator]

Your next question comes from the line of [indiscernible] from [ BPM group. ]

[Unknown Analyst]

It's just a quick one, actually. And I apologize if you've already discussed this earlier. From the 2 million users -- Spin users that you discussed in your report, can you share with us if they are 100% organic or there are some conversions from -- or that they were previous Saldazo customers. That would be the first.

[Juan Fonseca, executive]

[ Luis, ] this is Juan. I mean, this is organic in the sense that everybody comes in and whether they had a previous product and they lost their card, or it expired and they want to open a new one, or they've never had a card like this, right? So there isn't an automatic transmission of any Saldazo users. That's -- the consumers are going to look at Spin and hopefully see that it's a compelling product, and then they're going to obtain and fill an application and get their card. So the numbers you're seeing are mostly organic, I think in the sense you're asking the question. There might be some that in the past were Saldazo users. But this is basically people that have requested or have thought positively about opening an account. There is no -- most of the Saldazo users are still using their Saldazo c-ard as we speak.

[Unknown Analyst]

[indiscernible]

[Juan Fonseca, executive]

Yes, the main difference [indiscernible] the component is that now we actually -- that customer belongs to us. We have their data, we have their consumption pattern, whereas before with the Saldazo customers, we had, I mean, a lot less information on the customer.

Yes, I mean, from their perspective, obviously they have the automatic enrollment in Premia and they begin to accrue rewards and hopefully, we will keep improving the value proposition, but yes, it's up to each individual consumer, whether to open an account or not.

[Operator]

The next question comes from the line of Rodrigo Alcantara from UBS.

[Rodrigo Alcantara, analyst]

On -- back on the Logistics and Distribution, I think you were quite active in the quarter. [ You said ] that Sigma also acquired a couple of smaller companies. Just curious if this was the main reason behind the sequential contraction on the EBITDA margin that we saw.

And also thinking more on a very long-term basis, how should we think about the L&D -- the logistics distribution division as like a new core for FEMSA, or perhaps as you generate the synergies, create a larger platform, could be a potential strategic sale to capture cash in all of these investments that you are doing. I know that it's quite like a long-term question, but just wanted to know your thoughts about this.

[Eugenio Garza Garza, executive]

Sure. On your first question, just with regards to EBITDA margin, if you actually look at the EBIT margin, that is actually, I think, reflecting a little bit of kind of what we're doing in the synergies that we're able to accrue. The issue on the EBITDA line is that in our Mexican Logistics business, we did a sale-leaseback transaction of certain trucks that were being used in our direct contract carrier business. And that clearly affected the depreciation line. And that's why you see a contraction in EBITDA margin, but that is more, I think, a financial transaction, and it doesn't reflect the underlying economics of the business.

I don't know, Paco or Juan, do you want to take the long-term view of the Logistics division?

[Francisco Beltrán, executive]

Yes. Look, thank you for the question Rodrigo. First of all, just to put it in context, when we decided to enter the US market, as Eugenio said before, we saw a tremendous opportunity of consolidating an industry that was highly fragmented and still is, to some extent; to leverage the knowledge we have of the distribution of items to different points and different industries. And as we see the -- what we have learned over the last 18, 24 months since we decided to do this, all those premises have proven to be true. And we have brought -- we have, I would say, combined the expertise of the companies that we have acquired, and at the same time, the expertise that we have at FEMSA to integrate those businesses into what is becoming a very powerful national platform. So also, as we said before, there are -- there continue to be opportunities to consolidate the industry and now also work on the packaging platform, which is what Sigma is providing. And that is going to take some time. I mean, we see the opportunities, we see the way into strengthening our national platform. So the long-term proposition that we envision when we started this continues to be there. We are confident about the strategies we have to capture that value. And as we said before, also, the opportunities for cross-selling that we have for these 3 categories -- JanSan, Food Service and Packaging -- are enormous because the customers usually buy those 3 platforms. So at this stage, we see very strong opportunity on the organic side as we consolidate and integrate the platform. And we also see a lot of inorganic opportunities.

So longer term we are confident that we are in a business that we continue to provide value to FEMSA and to our shareholders. And we continue to work the strategic [ path ] that we have figured out for that business. Juan?

[Juan Fonseca, executive]

I think that's exactly right Paco. And I think as Eugenio said earlier as well, the potential for meaningfully increasing the size of the operation is very real. Right now, we already -- if we just look at the US business, once the Sigma transaction closes, will be north of MXN 2 billion in revenues in that business. So very quickly doubled from the original [indiscernible] North American transaction. And I don't know that we're going to continue to grow at the same pace, but certainly it's a pretty steep growth curve still.

[Rodrigo Alcantara, analyst]

That's very clear. Thank you very much, Juan, for that -- for the component on that answer.

[Operator]

And your next question comes from the line of Thiago Bortoluci from Goldman Sachs.

[Thiago Bortoluci, analyst]

I'd like to shift back the conversation a little bit to store expansion, especially when it comes to the growth out from Mexico, right? It seems that Brazil and Grupo Nós are scaling up pretty fastly. So in the very long term, let's say 5, 10 years down the road, how big do you think Brazil could be compared to the core OXXO [indiscernible] Mexico?

[Juan Fonseca, executive]

Thiago, this is Juan. Yes, I think if you look at store growth and other than what we described in terms of the hiccups maybe coming after a very active fourth quarter where we opened, I think something like 450 stores in Mexico in one quarter, and that has kind of flowed into the start of the year as the pipeline gets rebuilt. And the confidence level is high that we're going to hit something that's very close to 800 stores in Mexico this year. But the way you frame the question, I mean, what's happening is obviously the growth -- the slope of the curve in Mexico has flattened a little bit. And I think we -- 800 would be the number that I would put in my model for the next 2 years in Mexico. But what's happening outside of Mexico, I think is -- it's remarkable. Especially, I mean, certainly you talked about Grupo Nós and I think that's relevant. The fact that we already opened our 100th OXXO store basically a year, or a little over a year after the first OXXO was open in Campinas, if you just look at overall OXXO international, you're looking at Chile and Colombia, which together should contribute anywhere between 150, 180 stores per year right now. And then you have Brazil, which yes, it's a joint venture so I guess you can say we only get credit for half of those, but they have a plan for more than 200 this year. So already you're looking at a scenario where outside of Mexico, you're going to add something like 400 stores, plus the 800 in Mexico. And those curves are going to continue to convert, right? Not because Mexico's -- I don't think we're going to be opening fewer stores in Mexico, but I do think we're going to be opening a lot more stores in South America.

So, in a 5-year timeframe, as you describe, I think it's definitely possible that international would be adding an equivalent number of stores as Mexico. Right? So, that's -- I think that's pretty powerful, especially because we continue to see that, as soon as you get to a certain scale and, of course, assuming you have your value proposition right, you begin to make money. And we're already beginning to see that in Chile and Columbia, where the revenue per store is already above what it is in Mexico. And you're -- obviously, there's -- you need more scale there. And in Chile now we're going to have than 200 stores. And you're very, very close to beginning to have some actual profitability, not just at the store level, but at the company level.

So we're very optimistic that international will increasingly contribute to the profitability of the company, and scale is a big part of it. And so, yes, I think in 5 years' time, you could be having South America contributing an equal number as Mexico. And then of course, we'll keep looking for other places where the model could work.

[Francisco Beltrán, executive]

Yes, just to add, yes, a little bit of additional perspective on that. I think that, yes, I agree with Juan that definitely when you look in the next 10 to 5 years, which is the -- is your question, there is no reason to doubt that we have the opportunity to see the same number of stores in Latin America as we see in Mexico today. That's on one hand. On the second, and more specifically about Brazil, I think that the fact is that when we look at the numbers we have today in terms of number of stores, it goes beyond that. And it goes to the point of what is the value proposition and how strong it is in Brazil today. And the fact that the OXXO model actually travels very well across different countries.

And in Brazil, and just the same as the other markets, the teams have been able to, I would say, tweak and modify and improve on the value proposition we have in the Mexico, to adapt it properly to the different markets and the different consumer needs we have in the -- in each market. And also importantly, to adapt it to the way consumers live in those cities. So when you look at an OXXO store in Brazil, for example, and you see that we have a lot of stores that are in vertical development where a lot of people live close by, we have adapted the proposition to reflect that. And it is doing very well. So, and you can see that when you go to a store in San Pablo, for example -- San Paulo, for example.

So that is giving us the confidence to look very positively as the chances and opportunities we have to expand our OXXO platform outside Mexico. So the next 5 to 10 years should be very exciting for a business in Proximity in Latin America. And I would say particularly in Brazil.

[Thiago Bortoluci, analyst]

Thanks very much [indiscernible] exciting forward. Thank you very much and congrats for the results.

[Francisco Beltrán, executive]

Thanks, Thiago.

[Operator]

And your next question comes from the line of Carlos Laboy from HSBC.

[Carlos Alberto Laboy, analyst]

I'd like to hear from Eugenio and Paco on this. Gentlemen, we all know that the operators of OXXO and Coke FEMSA are great and they keep doing a great job and the business models are great, but what does the Board think about the source of FEMSA's share price discount to NAV? And is there any insight you can give us on how the Board may approach a repair to this discount?

[Eugenio Garza Garza, executive]

Yes. Sure. Listen, I mean, clearly that's top of mind right now for us. If you think about kind of the raison d'être of FEMSA, for the longest time, I think being a multi-business company involved in several different businesses has bode well for us for the longest time, because it has given us -- in a market where capital was obviously much more difficult to come by than it is today, it has given us access to capital -- a lower cost of capital. And also it keeps giving us the umbrella to really be able to incubate initiatives that require patience to play out, such as OXXO and whatnot. I think for the longest time, we've proven that those initiatives and that patience and that cost of capital has proven to be valuable for all shareholders. Now we do realize, and the Board is obviously pressing us on it, that as our portfolio has gotten a lot more complicated on the one hand; and on the other hand, also the nature of our shareholder base and who they are, and what they're interested is evolving, that there is a disconnect between what the value of the individual businesses are and what we're getting in the market.

So I think more importantly this year, with Daniel's new role, the Board has entrusted him with running a comprehensive strategic review of all of the different business units and obviously all of FEMSA as a holding company and as a portfolio. So we're beginning that work and we'll probably be working on that throughout the year. And that work will focus on some of these pain points, which include us trading at what we believe, as well as you do, to be a structural discount to the sum of the parts. So we will be sharing with you the results of that analysis. I do think that there are a lot of levers where we could probably in the short-term, extract some more value, but there are also, I think, longer term considerations that we need to take in mind. But there are issues such as simple as just giving more disclosure or -- and being a lot more transparent about each one of our individual business units that we're trying to do slowly, as you have seen in the past couple of years. But I think overall that they are very confident as a Board that we will be able to crystallize the value of all these initiatives through different mechanisms, as we go forward.

[Carlos Alberto Laboy, analyst]

Do you think they would even consider breaking up the group or is that off the table?

[Eugenio Garza Garza, executive]

Nothing is off the table at this point, Carlos, we're -- again, we'll be reviewing all different options, considering both short-term value creation implications, as well as long-term structural advantages that holding the group together conveys.

[Operator]

Ladies and gentlemen, that is all the time we have for questions today. I'll now turn the conference back to Francisco Camacho for [ closing ] additional remarks.

[Francisco Beltrán, executive]

Thank you very much for participating in the call today. And thank you for your continue support to FEMSA, its businesses and its teams. See you next time.

[Operator]

Ladies and gentlemen, if you wish to replay the webcast for this call, you may do so at FEMSA's Investor Relations website. This concludes our conference for today. Thank you for your participation and have a nice day. All parties may now disconnect.