Grupo Elektra’s Q1 2025 EBITDA Growth Reflects Strategic Resilience Amid Market Challenges

Grupo Elektra, S.A.B. de C.V. (BMV: ELEKTRA) delivered a solid first quarter 2025 financial performance, reporting a 9% year-over-year increase in EBITDA to Ps.6,939 million, driven by robust growth in its financial services division and disciplined cost management. The results underscore the company’s ability to navigate macroeconomic headwinds while expanding its footprint in key markets. However, challenges such as rising expenses and regulatory uncertainties cast a shadow over its prospects.

Financial Highlights: A Dual Engine of Growth

The financial services segment emerged as the primary growth driver, with revenue surging 23% to Ps.33,844 million, fueled by a 14% expansion in the consolidated gross loan portfolio to Ps.198,915 million. Banco Azteca México, the company’s flagship banking arm, contributed significantly, with its gross loan portfolio growing 13% to Ps.190,630 million. This expansion was supported by strong deposit growth (12% to Ps.243,931 million), which provided low-cost funding and kept the deposits-to-loan ratio at a healthy 1.2 times.

The commercial retail segment saw a 5% rise in sales to Ps.17,924 million, driven by strategic focus on high-margin products like motorcycles (boosting business productivity) and home appliances (improving quality of life for consumers). Gross margins improved by three percentage points to 55%, reflecting better cost control and pricing discipline.

Despite these gains, the EBITDA margin dipped slightly to 13% (from 14% in Q1 2024), due to higher operating expenses, including a 28% jump in selling, administrative, and promotional costs to Ps.21,280 million. Net income grew 8% to Ps.1,865 million, with earnings per share rising 14% to Ps.8.90.

Segment-Specific Strengths and Challenges

Financial Services:
- Loan Portfolio Growth: The expansion of Banco Azteca México’s loan book highlights the demand for accessible credit in Mexico, particularly among small businesses and consumers.
- Liquidity and Capitalization: The bank’s 701% liquidity coverage ratio and 14.63% capitalization ratio (exceeding regulatory requirements) signal financial stability.
- Credit Quality: While the consolidated NPL ratio rose marginally to 4.4%, Banco Azteca México’s NPL ratio remained low at 3.9%, reflecting effective credit risk management.

Commercial Retail:
- Infrastructure Optimization: The company reduced its points of sale by 20 (to 6,150) while expanding in high-growth regions like Central America (432 locations). This strategic pruning focused resources on profitable markets.
- Inventory Management: Inventories surged 37% to Ps.23,946 million, suggesting preparations for sustained demand, though this may pose risks if sales slow.

Risks and Regulatory Pressures

The results were overshadowed by a 71% plunge in Elektra’s share price on April 29, 2025, following the resumption of trading after a four-month halt due to legal disputes over share ownership. The company’s CEO, Ricardo Salinas Pliego, saw his net worth drop to $5 billion, erasing his position among Bloomberg’s top 500 billionaires.

Forward Outlook: Balancing Growth and Prudence

While Elektra reaffirmed its commitment to expanding its financial services division—leveraging Banco Azteca’s deposit growth and low-cost funding—it faces headwinds from rising operational costs and regulatory scrutiny. The company’s plans to streamline operations and prioritize high-margin products (e.g., motorcycles and appliances) could mitigate margin pressures.

Conclusion

Grupo Elektra’s Q1 2025 results demonstrate resilience in its core businesses, with financial services leading the charge and commercial retail providing steady growth. The 9% EBITDA expansion and strong liquidity metrics signal operational discipline. However, the stock market’s negative reaction to regulatory and governance issues highlights external risks. Investors should weigh Elektra’s financial strengths against its vulnerabilities, including the 25% rise in net debt to Ps.32,920 million and the lingering legal challenges.

For now, Elektra’s dual-engine growth model and geographic diversification (with operations in Mexico, the U.S., and Central America) position it to capitalize on regional demand. Yet, sustained success will hinge on resolving governance disputes and maintaining cost discipline in an uncertain economic landscape.