Headline: "Alsea Achieves Growth in Q3 2024 Despite Currency Challenges"

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Headline: "Alsea Achieves Growth in Q3 2024 Despite Currency Challenges"

In the third quarter of 2024, leading restaurant chain operator Alsea (BMV: ALSEA*) reported a 9.3% year-over-year sales increase, reaching MXN 20.3 billion. The company's EBITDA also rose 9.3% to MXN 2.85 billion, maintaining a 14% margin. Despite positive sales and EBITDA growth, Alsea faced a significant decline in net income, struggling with foreign exchange translation challenges and external economic pressures.

Key Highlights:

  • Alsea's sales increased 9.3% year-over-year to MXN 20.3 billion, with same-store sales up 7.7%.
  • Digital orders accounted for 32.5% of total sales, reaching MXN 6.6 billion.
  • The company focused on high-traffic areas, opening 66 new stores and saw a 38% rise in loyalty sales.
  • Net income fell by 60.56% to MXN 186 million, largely impacted by foreign exchange translation effects.
  • Alsea holds a strong cash position of MXN 4.6 billion and plans to manage a EUR 90 million payment through cash and debt.

Company Outlook:

  • Alsea is cautious about new store openings in South America but maintains a strong pipeline in Mexico.
  • The company is optimistic about achieving its EBITDA guidance despite economic pressures.
  • A resilient consumer environment is observed in Mexico, with expected medium to high single-digit growth.

Negative Highlights:

  • Net income was significantly affected by adverse foreign exchange impacts.
  • Starbucks operations in Europe saw a decline in traffic.
  • Alsea did not meet top-line expectations due to currency effects.

Positive Highlights:

  • Digital transformation initiatives drove a 38% growth in loyalty sales.
  • Alsea's strong cash position demonstrates confidence in meeting debt obligations.
  • The company is optimistic about regaining half of the traffic losses in Argentina by 2025.

Shortcomings:

  • Alsea experienced a significant decline in net income, despite increases in sales and EBITDA.

Q&A Highlights:

  • Alsea plans to have over 700 stores in France in the long term.
  • A EUR 50 million repayment of EUR 90 million to minority shareholders is planned for December 2023, with the remainder due in February 2025.
  • The company projects a 2.3x net leverage ratio at year-end, prior to IFRS 16 adjustments.

Alsea's third-quarter performance reflects a company navigating foreign exchange translation challenges and external economic pressures, while continuing to grow in sales and EBITDA. The company's digital initiatives and loyalty program growth indicate a strategic shift to strengthen customer engagement.

Despite setbacks in net income and a cautious approach in South America, Alsea's expansion in Mexico and consumer resilience provide a balanced outlook for the company’s future. The next earnings conference is scheduled for 2025, where Alsea will provide further updates on its progress and financial health.

InvestingPro Insights:

  • Alsea's recent financial performance reported in the article can be contextualized further with additional insights from InvestingPro. Despite challenges in the third quarter, including foreign exchange translation effects and external economic pressures, Alsea maintains some strong fundamentals.
  • According to InvestingPro data, Alsea (ALSSF) boasts impressive gross profit margins; recent numbers show a 62.15% gross profit margin for the twelve months ending Q2 of 2024, aligning with the company’s ability to maintain a 14% EBITDA margin, as reported, demonstrating effective cost management despite economic challenges.
  • An InvestingPro Tip highlights Alsea as a significant player in the Hotels, Restaurants, and Leisure industry, consistent with its leading restaurant chain operator position mentioned in the article. This industry leadership could provide Alsea with economies of scale and bargaining power, potentially aiding its navigation through challenging economic conditions.
  • However, investors should note that the stock has taken a significant hit over the past six months; InvestingPro data indicates a -39.29% six-month price total return from the most recent available data, possibly reflecting the market's reaction to challenges outlined in the earnings report, particularly the significant decrease in net income.
  • For those interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Alsea, providing a deeper understanding of the company's financial health and market position.