Narrow-Moat Femsa’s Planned CEO Succession Should Not Impact Its Strategy or Our View

Femsa disclosed that CEO Eduardo Padilla is set to retire on Jan. 1 and be replaced by Daniel Rodriguez Cofre. Padilla, who has served as CEO since 2018, has been with Femsa since 1997 and was instrumental in the growth of Oxxo, so his experience will be missed. However, Rodriguez has been with Femsa since 2015 and is the current CEO of Femsa Comercio, so the transition should be smooth. We do not expect any major changes to Femsa’s strategy, which includes managing Coca-Cola Femsa’s portfolio to drive sales and expanding Oxxo’s footprint while improving profitability of both units. Moreover, the CEO change does not affect our Standard capital allocation rating. While we have a generally favorable view of Femsa’s recent acquisitions and investments to diversify its portfolio and expand Oxxo, we would prefer more consistent dividend growth and share buybacks.