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    ALSEA *   MXP001391012

ALSEA, S.A.B. DE C.V.

(ALSEA *)
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End-of-day quote Mexican Stock Exchange  -  2022-06-23
39.96 MXN   +3.44%
05/20Robust Mexican consumer emerges as a bright spot in weak economy
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04/28TRANSCRIPT : Alsea, S.A.B. de C.V., Q1 2022 Earnings Call, Apr 28, 2022
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Robust Mexican consumer emerges as a bright spot in weak economy

05/20/2022 | 07:19am EDT
FILE PHOTO: Mexicans chafe over struggling economy and surging inflation

MEXICO CITY (Reuters) - Not all is rosy for Mexico's economy as it deals with a two-decade annual inflation high and sluggish economic growth, but consumption levels have now reached pre-pandemic levels in Latin America's second-largest economy.

Spending has increased as Mexicans living abroad sent a record $12.5 billion in remittances home during the first quarter, tourism picked up, pandemic-restrictions and infections eased, while the job market remained strong.

As a result, vendors big and small have been reaping the benefits.

Alicia Doreintes Gerardo, who manages a fruit stand in downtown Mexico City, says sale volumes have improved "little by little" over the last three months, despite inflation doubling fruit prices.

Fitch Ratings on Tuesday flagged consumption as one of the Mexican economy's biggest strengths, despite various headwinds.

"Consumption has reached pre-pandemic levels, benefiting from easing mobility restrictions, labor market improvement and relatively strong remittances," Fitch said in a note affirming its 'BBB-' rating for Mexico's sovereign debt.

Growing consumption has translated into strong quarterly results at large supermarket chains like Walmart de Mexico and smaller counterpart La Comer, which posted annual same-store revenue increases in Mexico of 9% and 7.3% respectively last month.

Service businesses are also seeing improved demand. Restaurant operator Alsea, which operates local branches of Domino's and Starbucks, saw year-on-year net revenue grow 49% in the first quarter.

Alsea Chief Financial Officer Rafael Grosskelwing noted that the second quarter was off to a strong start, with Easter week revenues soaring by a fifth versus the comparable prepandemic weekend of 2019.

Private consumption in Mexico grew 1.3% in seasonally adjusted terms in February from January, outpacing April's monthly inflation rate of 0.54%, according to the most recent figures published by Mexico's INEGI statistics agency.

Adrian de la Garza, chief economist at Citibanamex, said the consumption data had come as a "surprise" and beat expectations.

Citibanamex now forecasts Mexican consumption will grow a total of 2% across 2022, consistent with the monthly growth rate seen so far this year.

Retailers say the consumer boost is being felt nationwide.

"We are having a very, very good performance. Basically all [through] the country, we are seeing a recovery in the trend of our same-store sales," Mexican supermarket chain Soriana's chief financial officer recently told analysts.

But not everyone is impressed by Mexico's consumption figures, including Nikhil Sanghani, a Latin America economist at Capital Economics, who said "it's not faring as badly as expected but it's hardly a barnstorming recovery."

"Consumption is not falling as it is in Colombia and Chile, but equally [Mexico] never got to their strength in the first place," Sanghani added.

Regional headwinds loom too. U.S. rate hikes could squeeze the flow of remittances to Mexico and strict lockdowns in China could worsen supply chain disruptions to Mexico's massive manufacturing base.

Still, unlike China, Mexico has been open for business as the pandemic eases.

"We're at our peak, the cafe is overflowing with people who want to go out," said Erik Belmonte, the manager of the WO Barra de Cafe, a coffee shop located in an up-market part of Mexico City.

(Reporting by Isabel Woodford; Editing by Anthony Esposito and Nick Zieminski)

By Isabel Woodford


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
ALSEA, S.A.B. DE C.V. 3.44% 39.96 End-of-day quote.5.30%
LA COMER, S.A.B. DE C.V. 1.93% 37.42 End-of-day quote.1.66%
MEXICO IPC 2.51% 47790.62 Real-time Quote.-12.50%
NASDAQ COLOMBIA -1.05% 353.80812 Real-time Quote.-3.27%
ORGANIZACIÓN SORIANA, S. A. B. DE C. V. 1.48% 21.24 End-of-day quote.-18.24%
S&P GSCI COFFEE INDEX -2.51% 171.9292 Real-time Quote.-1.26%
STARBUCKS CORPORATION 3.87% 78.11 Delayed Quote.-33.22%
WAL-MART DE MÉXICO, S.A.B. DE C.V. 0.71% 66.6 End-of-day quote.-12.47%
WALMART INC. 0.08% 123.72 Delayed Quote.-14.56%
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05/20Robust Mexican consumer emerges as a bright spot in weak economy
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Financials
Sales 2022 63 979 M 3 215 M 3 215 M
Net income 2022 1 159 M 58,2 M 58,2 M
Net Debt 2022 40 147 M 2 017 M 2 017 M
P/E ratio 2022 27,4x
Yield 2022 -
Capitalization 33 196 M 1 668 M 1 668 M
EV / Sales 2022 1,15x
EV / Sales 2023 1,07x
Nbr of Employees 72 630
Free-Float 62,7%
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Mean consensus OUTPERFORM
Number of Analysts 18
Last Close Price 39,96 MXN
Average target price 53,45 MXN
Spread / Average Target 33,8%
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Managers and Directors
Fernando Gonzalez Somoza Chief Executive Officer
Rafael Contreras Grosskelwing Chief Financial Officer
Alberto Torrado Martínez Chairman
Salvador Aponte Escalante Chief Information Officer
Fabián Gerardo Gosselin Castro Independent Director
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