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What does guidance in Mexican Consumer Discretionary look like? And what should it look like?

This week, we are coming back to our guidance trends analyses, focusing on the Mexican Consumer Discretionary market. As we have said in our previous guidance analyses, common metrics included in guidance strategies vary from sector to sector, and hence, so do best practices on this matter. The idea is that companies should share the metrics that are most relevant for investors and analysts’ forecasts and model projections.

It is important to note that, as usual, we only consider guidance to be formal guidance if it is properly disclosed, numeric (even if it is a range), and not only broad management comments on a very high-level view of the direction the business is taking. As for the sector classification of companies, we are following the definitions from the BMV (Bolsa Mexicana de Valores).

Consumer Discretionary – Current formal guidance strategy

Source: Company materials

*Notes:
  • FAMSA withdrew its guidance in February 2020, but used to give guidance on consolidated net sales, consolidated EBITDA, and EBITDA margin. These were published as ranges in their fourth quarter earnings results and presentations.
  • Grupo Hotelero Santa Fe stopped giving guidance during the 4Q21 as well, given the macroeconomic and pandemic situation. They used to announce their point estimate expectations for revenue growth and EBITDA growth on an annual basis at their HOTEL Day.
  • Grupo Posadas discloses its hotel development program’s required CapEx and the percentage growth in rooms capacity it will represent with point estimates in its earnings reports. They do so on a variable basis, so we do not consider this formal guidance.
  • Sports World also suspended its guidance but used to disclose it annually in its fourth quarter earnings report and call, as well as in press releases. They offered range estimates for their revenue growth, EBITDA growth, and EBITDA margin.
 
What can we read from this table?
  • Currently, three out of the 15 companies in the Mexican Consumer Discretionary sector provide formal guidance. This represents 20% of the sector.  
  • However, four additional players suspended their guidance due to market uncertainties. This means that before the pandemic, half the sector communicated forward-looking metrics.
  • Within those companies that do provide guidance, the number of metrics published varied greatly, from two to seven metrics. Revenues (and/or revenue growth) is the most popular metric.
  • Two out of the three peers share their guidance in their annual investor day calls and presentations, while the third peer does so in its earnings calls, reports, and presentations.  
  • All three companies publish their guidance on an annual basis.
  • All three players used a mix of point estimate and range estimates.  
 
So, what do the largest consumer discretionary companies (by market cap) in the world do?
  • Amazon communicates its guidance quarterly through press releases, offering range estimates on net sales and operating income.
  • Nike shares its guidance on revenue growth, gross margin, EBIT margin, EPS, ROIC, and CapEx. They do so annually on the fourth quarter, using range and point estimates in their earnings call and annual earnings supplement.
  • TJX Companies suspended its guidance during the pandemic. Before that, the company shared its expectations for EPS, EPS growth, adjusted EPS, and adjusted EPS growth using range estimates. These were published through quarterly press releases.
 
What should we learn from this?
The only international player listed that does not provide guidance at least used to do so before the pandemic. The number of metrics and type of estimates shared varied as much as it did among Mexican peers, from two to six metrics, and using range and point estimates. Of the two players that do offer guidance, one does so on a quarterly basis, while the other does so annually. One publishes its guidance through quarterly press releases, compared with the second, that has a specific document dedicated to communicating their full-year expectations during the fourth quarter of the year.
 
Interestingly, both on a local and international level, the peer mix showed that many suspended their guidance, and have not taken it back up since, regardless of the companies’ sizes. It could be expected that those companies whose scale and operating capacity allow them to lead their sector should already be sharing their perspectives and expectations with the market.
 
In line with this, and although we’ve seen other sectors with weaker guidance strategies, the Mexican Consumer Discretionary companies’ approach could still improve. Ideally, we would like to see disclosures from all companies to help investors and analysts anchor their valuation models. We still believe that providing guidance is relevant for all companies who are looking to keep an open and transparent communication with the market, so if it’s your first time planning a guidance strategy or you’d like help relaunching what you had in place before, let us know! We will be happy to help.

Contacts at Miranda Partners

Damian Fraser
Miranda Partners
damian.fraser@miranda-partners.com

Ana María Ybarra Corcuera
Miranda-IR
ana.ybarra@miranda-ir.com

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