CHDRAUI B: Rising Revenue Momentum Will Outweigh Near-Term Retail Headwinds

Key Takeaways

• Expansion of physical stores and digital channels in both Mexico and the U.S. strengthens revenue growth, market share, and customer retention.
  
• Enhanced operational efficiency, supply chain upgrades, and cost management boost profit margins and ensure resilience against changing consumer environments.
  
• Structural wage pressures, soft consumer demand, and heavy U.S. exposure threaten profitability amid intensifying competition and inefficiencies from rapid store expansion.

Catalysts

Operates self–service and real estate stores in Mexico and the United States.

• Ongoing store network expansion in Mexico and the U.S.-including aggressive rollouts of proximity formats like Supercito and remodeling of Fiesta Mart locations-positions the company to capitalize on growing urban populations and evolving shopping habits, supporting sustained revenue growth as stores mature over time.
  
• Significant improvements in inventory management, shrink reduction, and promotional efficiency in Mexico are translating to durable EBITDA margin gains, with management confident in maintaining or expanding these gains even in softer consumer environments, driving higher long-term earnings.
  
• Upgrades to supply chain infrastructure, particularly the completion of the Rancho Cucamonga Distribution Center (RCDC) in California, are expected to continue delivering cost efficiencies, fresher product, and private label penetration, which should enhance both top-line growth and net margin recovery for U.S. banners.
  
• Digital channel growth, evidenced by a rising share of e-commerce and successful partnerships with third-party platforms like Rappi and Mercado Libre, is strengthening omnichannel capabilities and customer stickiness, with potential to accelerate both revenue and margin expansion as online penetration deepens.
  
• Focus on value-driven formats and lowest-price positioning aligns closely with increased consumer preference for affordable retail options amid economic uncertainty, which should allow Chedraui to hold or win market share, reinforcing the resiliency of revenues and long-term profitability.

Grupo Comercial Chedraui. de Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Grupo Comercial Chedraui. de's revenue will grow by 7.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.2% today to 3.1% in 3 years time.
• Analysts expect earnings to reach MX$11.6 billion (and earnings per share of MX$12.04) by about September 2028, up from MX$6.4 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as MX$10.1 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.8x on those 2028 earnings, down from 22.5x today. This future PE is greater than the current PE for the MX Consumer Retailing industry at 18.5x.
• Analysts expect the number of shares outstanding to decline by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.98%, as per the Simply Wall St company report.

Grupo Comercial Chedraui. de Future Earnings Per Share Growth

Risks

• Persistent labor cost inflation in both Mexico and the U.S. (projected 10–12% annual increases), combined with tight labor markets and structural policy support for wages, could compress net margins and limit sustained EBITDA growth.
  
• Exposure to softening consumer demand in Mexico, particularly in the Southeast region, may dampen same-store sales growth and revenue expansion as macroeconomic conditions remain pressured.
  
• Increasing dependence on the success of newly opened stores and rapidly expanding Supercito formats introduces inefficiencies and delays in expense recovery, pressuring earnings and potentially lowering short-term profitability.
  
• Overexposure to U.S. operations, especially in regions vulnerable to immigration policy changes and stiff local competition, exposes the company to revenue volatility from external regulatory shocks and unfavorable currency movements.
  
• Sustained margin pressure from ongoing price competition (pricing strategies at Smart & Final and El Super) and the inability or reluctance to expand into hard discount formats may challenge long-term revenue and market share growth against specialized competitors.

Valuation

• The analysts have a consensus price target of MX$165.286 for Grupo Comercial Chedraui. de based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MX$190.0, and the most bearish reporting a price target of just MX$130.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be MX$367.1 billion, earnings will come to MX$11.6 billion, and it would be trading on a PE ratio of 20.8x, assuming you use a discount rate of 15.0%.
• Given the current share price of MX$150.12, the analyst price target of MX$165.29 is 9.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.