Mexicans Sipping Champagne Have La Comer Piling Up Buy Ratings

  • La Comer has gained while Mexico's benchmark IPC fell in 2016
  • `It reminds me of what Whole Foods was in the U.S.:' Itau BBA

Mexico’s newest stock is amassing buy recommendations on wagers that the country’s growing ranks of champagne sippers and gourmands will drive profit at specialty stores catering to their tastes.

La Comer SAB shares have fallen less than 1 percent after debuting Jan. 4, bucking the benchmark index’s 4.7 percent decline over the period. The newly formed company, which operates 54 food markets primarily in Mexico City, has four buy ratings and just one sell rating, with analysts on average expecting a 30 percent price gain over the next 12 months.

At the supermarket chain’s upscale City Market stores -- think Dean & Deluca or Whole Foods -- shoppers can browse through 1,500 liquors, 60 types of champagne, beluga caviar, certified gluten-free bread, fresh truffles, or spa products from the Himalayas. While the high-end goods are out of reach for a majority of people living in Mexico, where per capita gross domestic product is a fifth of the U.S., the market for luxury foodstuffs is “underpenetrated,” according to Itau BBA.

“To some extent, it reminds me of what Whole Foods was in the U.S. over the past 10 years,” Joaquin Ley, an analyst at Itau who recommends buying the shares, said from Mexico City. “I believe that’s something similar to what La Comer could be in Mexico over the next 10 years -- the growth potential, the focus on the under-penetrated high-end supermarket segment.”

La Comer, which is based in Mexico City, declined to comment on the share performance through an outside press official.

The supermarket operator is likely to see sales at stores open at least a year increase at double the recent pace seen at Wal-Mart de Mexico SAB, Latin America’s biggest retailer, Barclays Plc analysts led by Benjamin Theurer said in a note Jan. 7. The shares may rise another 31 percent in 2016, driven by fat profit margins on high-end spirits, organic products and prepared foods, they wrote.

“La Comer offers a unique opportunity to gain exposure to the growing high-end consumer in Mexico,” the Barclays analysts said.

La Comer was formed as a result of Controladora Comercial Mexicana SAB’s sale of a majority of its supermarkets to Organizacion Soriana SAB, which was approved by regulators in October. The new company maintained the six upscale City Market stores previously run by Comercial Mexicana in the transaction and disclosed plans in a filing to convert more stores into its LaComer and Fresko market formats.

“In a nutshell, we believe that La Comer could be one of the fastest growing retail assets in the Latin American space,” said Itau’s Ley.

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