Walmart’s Mexican unit sees profits rise 5% but costs rise

A Walmart sign is pictured inside a Walmart store in Mexico City, Mexico March 28, 2019. REUTERS/Edgard Garrido/File Photo

MEXICO CITY, Feb 16 (Reuters) – Walmart’s Mexican unit (WALMEX.MX) said on Wednesday its fourth-quarter net profit rose more than 5% from a year earlier, the margin gross being aided by new, even higher business lines. expenses have eaten away at income.

Walmart de Mexico (WALMEX.MX), Mexico’s largest retailer, said its net profit rose to 13.3 billion pesos ($646.3 million) from the previous October-December period. . Revenues increased by 9.5% to reach 214.6 billion pesos.

However, the company also reported a more than 13% increase in costs and its EBITDA margin fell to 11% from 11.4% a year earlier.

“We are seeing an increase in the cost of doing business in areas such as salaries, as well as strategic investments,” Walmex said in a report.

Citigroup analysts said Walmex shares were likely to underperform on Thursday, noting that its earnings before interest, tax, depreciation and amortization (EBITDA) came to 23.6 billion pesos, which the company said. bank, was 5% lower than the consensus.

“2021 was difficult to predict in all aspects, even more so on the e-commerce front,” chief executive Guilherme Loureiro said in an online presentation accompanying the earnings report.

The retailer highlighted the positive performance of online shopping after an uncertain year in the aftermath of the COVID-19 pandemic.

E-commerce net sales rose 24% in the fourth quarter and accounted for 1.2% of total sales growth. They now represent nearly 5% of sales in Mexico compared to 1.5% in 2019, before the pandemic caused online purchases to jump.

Investments in 2021 included the conversion of 75 Superama grocery stores to the Walmart Express format, part of the more than 20 billion pesos spent by the company in 2021, up 22% from the previous year.

Still, the company spent 8% less than planned as it decided to postpone some logistics projects until this year, she said.

The rebranding of Walmart Express has dampened same-store sales growth, but is 85% complete, Citigroup analysts said.

The company said in a report that same-store sales were strong in Mexico and Central America, and new business such as the Walmart Connect advertising platform and rental revenue helped gross margin, which rose. by 10 basis points to just over 23%.

Another brokerage, Mexico’s Intercam, said Walmex’s results were underperforming due to a 450 million peso outlay related to adjusting royalties paid by the Central America region to Walmart.

Walmex executives reiterated that the company was considering what it called “strategic alternatives” to its operations in Central America, as announced last month. Read more

However, they said the process was just beginning and it was still possible to not execute any changes.

The company also continued its expansion into physical stores, opening 51 locations during the quarter in its main market, Mexico. The retailer opened 131 full-year locations.

Executives said the company would focus on productivity and expense management to offset ongoing costs, including planned investments.

($1 = 20.5075 Mexican pesos at the end of December)

Reporting by Daina Beth Solomon, Noe Torres and Valentine Hilaire; edited by Richard Pullin, Diane Craft and Gerry Doyle

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