Urbanization And Digitization Will Strengthen Modern Retail Networks

Key Takeaways

• Centralized procurement, integrated perishables, and private label expansion can drive significantly higher margins and operational efficiencies than currently anticipated.
  
• Loyalty platform transformation and private label migration create new high-margin revenue streams and market share gains, positioning Chedraui for sustained industry outperformance.
  
• Ongoing cost pressures, macroeconomic vulnerability, and limited digital investment risk profitability and market share, while aggressive expansion may strain returns and future growth stability.

Catalysts

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

• Analysts broadly agree the new RCDC will drive operational efficiencies and margin gains, but this likely understates the potential: with the fully centralized procurement and fresh/perishables now integrated across all US banners, Chedraui may unlock much steeper reductions in shrink, higher in-stock positions, and rapidly scale private label penetration, driving both gross and net margin expansion beyond current estimates.
  
• Analyst consensus views the MiChedraui loyalty program as an earnings lever via targeted promotions and retention, but the company's stated intent to turn this data-rich platform into a digital monetization engine-offering high-margin vendor marketing and reducing ad spend-suggests an underappreciated material uplift to both net margins and future non-retail revenue streams.
  
• The ongoing migration of US private label brands into Mexico, particularly the rapid 30%+ penetration in high-growth, small-box formats, positions Chedraui to disproportionately benefit from Mexican consumers' accelerated shift toward value, boosting market share and delivering compounding margin gains even in slow consumption environments.
  
• Chedraui's extremely low leverage, robust cash flow generation, and sustained outperformance against industry benchmarks equip the company to accelerate store openings and omnichannel investments just as urbanization and middle-class expansion drive demand for modern retail, indicating substantial upside to long-term revenue and EBITDA growth.
  
• As formalization and digitization displace informal grocers in Mexico, Chedraui's scale, proprietary tech investments, and dual-market expertise uniquely position it to capture disproportionate share of wallet-potentially driving structurally higher top-line growth and reinforcing operating leverage over the coming decade.

Grupo Comercial Chedraui. de Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Grupo Comercial Chedraui. de compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Grupo Comercial Chedraui. de's revenue will grow by 9.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.2% today to 3.4% in 3 years time.
• The bullish analysts expect earnings to reach MX$12.9 billion (and earnings per share of MX$13.36) by about July 2028, up from MX$6.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 21.5x on those 2028 earnings, up from 21.2x today. This future PE is greater than the current PE for the MX Consumer Retailing industry at 17.8x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.91%, as per the Simply Wall St company report.

Grupo Comercial Chedraui. de Future Earnings Per Share Growth

Risks

• The company's same-store sales growth in Mexico has slowed due to weakening economic activity and softening consumption trends, particularly in its key southern region, which could pressure revenue growth if these patterns continue.
  
• Persistent increases in labor costs across both Mexico and the U.S., coupled with ongoing expansion of the store base, are driving operating expenses higher and risking a sustained squeeze on net margins and overall profitability.
  
• Grupo Comercial Chedraui's limited commentary on significant investments into digital and omnichannel capabilities relative to larger peers leaves it exposed to accelerated e-commerce adoption, potentially resulting in long-term market share erosion and slower revenue growth.
  
• The company's strategic focus on low-to-middle income consumers makes it especially vulnerable to macroeconomic downturns and persistent inflation, which could compress sales volumes and further erode net earnings.
  
• Entry into new markets and formats-such as rapid expansion of proximity stores and significant investment in the U.S. through new logistics infrastructure-raises the risk of overexpansion and capital misallocation, potentially diminishing return on invested capital and impacting future earnings.

Valuation

• The assumed bullish price target for Grupo Comercial Chedraui. de is MX$190.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Grupo Comercial Chedraui. de's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be MX$385.2 billion, earnings will come to MX$12.9 billion, and it would be trading on a PE ratio of 21.5x, assuming you use a discount rate of 14.9%.
• Given the current share price of MX$140.11, the bullish analyst price target of MX$190.0 is 26.3% 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.