On Thursday, Walmart de Mexico - the country’s biggest retailer - reported its slowest revenue growth in three quarters, with its core supermarket chain hit by competition after the government altered a welfare spending program.
Walmex (as the unit of Walmart Inc. is known locally) said revenue rose 4.7% in the fourth quarter of 2019, its slowest since a growth of 4.6% in the year’s first quarter.
Walmex’s warehouse-style supermarkets (referred to as Walmex Bodega) comprise of nearly 80% of the retailer’s stores in Mexico, the largest foreign market by store count for Walmart Inc.
President Andres Manuel Lopez Obrador’s government distributed supermarket vouchers, which were previously designed to be spent at chains like Walmex Bodega. But ahead of the fourth quarter, the Mexican government allowed the vouchers to be converted into cash, opening up possibilities for them to be spent at corner stores, street vendors and outdoor marketplaces.
“Among our formats, Bodega suffered the greatest impact from the change in disbursement of government support programs, especially in the center and metro regions,” said Guilherme Loureiro, Walmex’s Chief Executive, on a webcast following the release of the quarterly earnings (Yahoo Finance
Walmex said the fourth quarter’s revenue rise was driven by solid same-store sales in Mexico as well as Central America. The company also said online sales in the quarter grew 47%, with e-commerce representing 2% of total Mexico sales.
“Quarterly net profit dropped 4.5% to 11.2 billion pesos ($602.31 million), after an intellectual property royalty payment to parent company Walmart in November of 1.1 billion pesos.”
Overall for the year, Walmart de Mexico said net profit rose 5.9%, citing better productivity and cost controls despite a macroeconomic environment.
“We’re facing a soft-growth environment and more challenging competition,” Olga Gonzalez, the company’s chief financial officer, said in the webcast (Yahoo Finance