 |
|
|
 Business News | April 2005 
Walmex 1st-Qtr Net Rockets By 35 Percent
 Wire services
| | An increase in consumer credit is benefiting the retail market as shoppers are spending more than ever. |
Wal-Mart de Mexico SA, Latin America's largest retailer, boosted profit by about 35 percent in the first quarter after Mexico had its biggest surge in consumer spending in four years.
Walmex, controlled by Bentonville, Arkansas-based WalMart Stores Inc., had net income of 1.85 billion pesos (US166 million), or 42 centavos a share, compared with 1.37 billion pesos, or 31 centavos, a year earlier, the company said in an e-mailed statement. March same-store sales rose 9.5 percent versus a decline of 2.7 percent a year earlier.
"The economy appears to be more vigorous than what many people had hoped for," Chief Executive Officer Eduardo Solorzano, 47, told reporters at the company's headquarters in Mexico City on March 30.
Solorzano, who took over as CEO on Feb. 25, is benefiting from a surge in retail sales as consumer lending grows at its fastest pace in a decade. Retail sales rose more than 6 percent a month between September and January, according to the latest available figures, a rate of growth for a fivemonth period unmatched since March 2001.
Bank lending to consumers jumped 49 percent at the end of 2004 to 165.3 billion pesos from 111.2 billion pesos the previous year, according to the Mexican Securities and Banking Commission.
Retailers also increased sales compared with a year ago because Easter this year fell in March rather than April. Walmex's sales rose to 36 billion pesos, or 12 percent, from 32 billion pesos a year earlier, the company said.
"In the case of Walmex, earnings are boosted by growing private consumption and the company's aggressive expansion plan," said Joaquin Ley, a retail analyst at Santander Investment in Mexico City. Walmex earnings have grown for six straight quarters.
Smaller Cities
Walmex shares gained 45 centavos, or 1.2 percent, to 38.28 pesos. The shares rose 2.4 percent in the first quarter compared with a decline of 1.9 percent in the benchmark bolsa index.
Solorzano became CEO in February, the same month Walmex said it planned to open 70 stores in 2005, a record number for a single year.
The company has identified 200 smaller cities in Mexico that could support a Walmex store, Solorzano told reporters last month. Citing studies that found as much as 50 percent of Mexican commerce takes place in the "informal" economy, Solorzano said the company has room to grow. Walmex accounts for only about 4.5 percent of its Mexican supplier's sales, he said.
"We really represent a very small part" he said.
Obstacles To Growth
As Walmex moves into smaller cities, the company could meet the kind of resistance from merchants and local politicians its parent company encounters in the U.S. Walmex had to delay its store in San Juan Teotihuacan, which opened in November, because protesters said the site on the outskirts of Mexico City was too close to historic pyramids.
Opponents have threatened similar demonstrations in cities such as Patzcuaro in the southern state of Michoacan.
Competition from companies such as Monterrey-based Organizacion Soriana SA, the country's second-largest retailer, could also slow the pace of growth. Soriana said earlier this year it plans to spend as much as US300 million to expand into central Mexico and fight Walmex for market share.
Soriana's shares rose 61 percent last year, outpacing a 20 percent gain for shares of Walmex, which has underperformed the bolsa index the past three years.
In March, Veracruz-based Grupo Comercial Chedraui SA bought 29 hypermarkets in Mexico from Paris-based Carrefour SA for US545 million, beating bids by Wal-Mart and Soriana.
Antitrust
The nation's federal antitrust regulator may also crimp Walmex's ability to grow by acquisitions, said analysts such as Jose Alberto Galvan with BBVA Securities Inc. in Mexico City.
Still, antitrust rules won't stop Walmex from moving into small towns without having to make a big investment, Alberto Galvan said.
"There are cities that only have informal markets," Alberto Galvan said. "There is still space for Walmex to grow organically." |
| |
|
Vallarta Weddings
Tell a Friend
Site Map
Print this Page
Email Us