Digital Transformation And Mexico Urban Expansion Will Drive Future Value

Key Takeaways

• Accelerating e-commerce growth, increased private label penetration, and successful regional strategies are strengthening customer loyalty and enhancing long-term profitability potential.
  
• Diversified business lines and growing real estate income provide new revenue sources, supporting recurring earnings and operational resilience amid shifting consumer trends.
  
• Weak store traffic, fierce competition, and challenging macro trends risk undermining revenue, margins, and profitability, while diversification efforts strain capital without boosting returns.

Catalysts

Operates various formats of stores in Mexico.

• Soriana's 19% increase in digital sales and 44% growth in online orders point to accelerating adoption of e-commerce and omni-channel strategies, positioning the company to capture incremental revenue as digital infrastructure expands in Mexico and consumer shopping habits shift online.
  
• Private label penetration increased to nearly 13% of sales (with total sales up 9.3%), and City Club posted double-digit private label growth-suggesting expanding customer loyalty and enhanced margin potential as consumers increasingly seek value, supporting long-term profitability and net margin growth.
  
• Population and urbanization trends in Mexico continue to underpin steady demand for food and general merchandise, while successful execution of targeted regional store formats (notably in northern states) and new store openings point to a larger customer base and positive same-store sales outlook.
  
• The real estate business posted a 12% income increase (90% occupancy), driven by new rentals and attracting institutional tenants, indicating enhanced asset utilization and a meaningful, recurring supplemental income stream that directly supports earnings and return on invested capital.
  
• Strategic partnerships and new business lines-such as the expanding Sodimac home improvement stores and the rollout of ultra-fast EV charging stations-open avenues for future revenue growth and operational diversification aligned with changing consumption and sustainability trends, with positive implications for top-line growth and long-term earnings potential.

Organización Soriana S. A. B. de C. V Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Organización Soriana S. A. B. de C. V's revenue will grow by 5.2% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 2.2% today to 2.0% in 3 years time.
• Analysts expect earnings to reach MX$4.2 billion (and earnings per share of MX$2.23) by about July 2028, up from MX$3.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting MX$5.1 billion in earnings, and the most bearish expecting MX$3.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.6x on those 2028 earnings, up from 12.0x today. This future PE is lower than the current PE for the MX Consumer Retailing industry at 19.0x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.34%, as per the Simply Wall St company report.

Organización Soriana S. A. B. de C. V Future Earnings Per Share Growth

Risks

• Soriana's same-store sales growth is lagging the rest of the market and is currently driven by higher average ticket rather than increased customer traffic, indicating risk that top-line growth may stagnate if consumer footfall does not recover, negatively impacting future revenue and earnings.
  
• Management highlights persistent and intensifying competition-both from international players like Walmart and Chedraui and aggressive regional and niche players (e.g., HEB, Smart)-which could result in ongoing price wars and margin compression, depressing Soriana's net margins.
  
• The macroeconomic environment in Mexico is showing concerning trends: declining consumer confidence, downward trends in remittances and formal job creation, and expected tighter consumer spending; these secular headwinds could materially pressure revenue and earnings growth.
  
• Soriana's strategy of protecting gross margin through better supplier terms and shrink management may be insufficient to regain market share if not coupled with more aggressive investment in pricing and store experience, risking further underperformance in traffic and sales versus competitors and impacting profitability.
  
• The accelerated expansion into adjacent businesses (like Sodimac home improvement) has yet to reach satisfactory returns on invested capital, and the brand in Mexico lacks critical mass, which risks drawing capital away from the core business without material earnings contribution, pressuring overall company returns and net income.

Valuation

• The analysts have a consensus price target of MX$23.429 for Organización Soriana S. A. B. de C. V 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$33.0, and the most bearish reporting a price target of just MX$19.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be MX$204.7 billion, earnings will come to MX$4.2 billion, and it would be trading on a PE ratio of 15.6x, assuming you use a discount rate of 15.3%.
  
• Given the current share price of MX$25.48, the analyst price target of MX$23.43 is 8.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.