| | |  Business News | October 2009 
Wal-Mart Bodegas Lift Profit in Mexico
 Emily Schmall - Bloomberg
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October 06, 2009
Mexico City - Wal-Mart de Mexico SAB, Latin America's largest retailer, is profiting from the worst recession since the 1930s by offering smaller, cheaper products to Mexicans at its Bodega Express shops.
Walmex, as the Mexico City-based retailer is known, will report this week a 12 percent increase in third-quarter net income to 3.66 billion pesos ($268 million), according to the average analyst estimate.
A rise would mark the fourth straight quarterly advance in earnings.
The Bodega Expresses -400-meter (1,312 feet) shops wedged into poorer neighborhoods- are allowing Walmex to tap into demand for single-use boxes of cereal, milk and tortillas from Mexicans who buy meal-to-meal, according to HSBC Holdings Plc and Actinver SA. The World Bank forecasts the number of people living in poverty will swell by more than 4 million this year in Mexico, where the minimum wage is 55.85 pesos ($4.09) a day.
Walmex is "capitalizing on the people who want to trade down, people living day to day," said Francisco Suárez, an equity strategist at Actinver, Mexico's largest independent money manager.
Minimum-wage earners "depend a lot on this just to live," he said.
Walmex surged 20.5 percent in the third quarter and has climbed 42 percent in the past 12 months to 46.25 pesos, beating the 25 percent rise in the benchmark Bolsa stock index.
Walmex, which is majority-owned by Bentonville, Arkansas-based Wal-Mart Stores Inc., trades for 24 times estimated earnings compared with 16 times profit for companies in the Bolsa index.
Seventy-three percent of the record 270 stores Walmex is opening this year will be Bodega Express units, Chief Executive Eduardo Solórzano said at a Sept. 9 conference in New York.
"In Mexico, purchasing power has been diminished," Solórzano said at the conference. "We're trying to adapt as much and as fast as we can."
Walmex spokesman Antonio Ocaranza declined to comment on the third-quarter profit forecasts.
Mexico's unemployment rate jumped to 6.3 percent in August, the highest in at least nine years, after Latin America's second-biggest economy shrank 10.3 percent in the April-to-June period.
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