Financial
Section

Management's analysis and comments on the results of operations and financial situation

as of December 31, 2017
Consolidated Results

Net Sales

Accumulated consolidated Net Sales as of December 31, 2017 posted a growth of 0.1%, amounting to $ 17,553.9 million vs $ 17,543.7 million in 2016 amid a challenging economic outlook for consumption in Mexico and also high levels of uncertainty in our target market in the US.

The operations in Mexico were the main driver of the consolidated results, reaching an annual increase of 3.0% in Net Sales. The foregoing was mainly boosted by the origination of loans with a payroll payment discount, both for the acquisition of merchandise and cash arrangements. The objective has been to consolidate a mix of high quality and strengthen the credit origination criteria, thus allowing an advance in the improvement of the customer profile by means of criteria aimed at the specific characteristics of each place, instead of doing in a centralized form, at the same time to pursue the reduction of credit risk. Similarly, the impulse provided to advertising campaigns and discount programs, implemented continuously for durable goods throughout the year, representing a catalyst for the increase in sales.

In the same way, during 2017, continuity was reinforced in the strengthening of the structure and operation of the door-to-door channel.

During 2017 FAMSA USA´s sales posted a 19.2% decrease in pesos, while in U.S. dollars decreased 19.7%, reflecting: i) the increase in the uncertainty of the Hispanic population in E.E.U.U. for strict immigration measures in that country; ii) the climatic effects caused by the concentration of most of our stores in E.E.U.U .; and, iii) to a lesser extent, for the purposes of the appreciation of the peso against the dollar.

Consolidated Same Stores Sales (SSS) recorded an annual increase of 1.7% in 2017. Same Store Sales (SSS) of Famsa México grew 3.7% during fiscal year 2017, providing support for the expansion of this indicator. Same Store Sales (SSS) of Famsa USA, excluding the effect by exchange rate, decreased by 17.0% YoY in 2017.

It is important to mention that the Company adopted in advance IFRS 9 "Financial Instruments" and IFRS 15 "Revenue from contracts with customers", with retrospective effects as of January 1, 2017. It is suggested to consult notes 3 and 5 that are part integral to the audited consolidated financial statements of the Company as of December 31, 2017 that explain the accounting changes derived from these adoptions.

Net Sales