KOF - Reduced Consumer Activity Continues To Pummel FEMSA

• FEMSA posted better than expected third quarter results, but the beat was driven largely by Coca-Cola FEMSA, and underlying results at the OXXO convenience store business remain weak.
• OXXO's business model is predicated on frequent/repeated low-ticket visits, and same-store sales have been hit hard by reduced consumer mobility in Mexico.
• Management believes the worst is over for OXXO and the business as a whole, but normalization is likely still at least a few quarters off as Mexico's economy struggles.
• FEMSA has lost some of its luster as a defensive growth play on Latin America, but there's still a quality growth story here and an appealing long-term return potential from today's price.

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