Mexican retailers post first-quarter profits on Easter boost
today Apr 26, 2018
Easter shopping boosted sales at Mexican powerhouse retailers Wal-Mart de Mexico and El Puerto de Liverpool in the first quarter, pushing profits higher.
Net profit for Wal-Mart de Mexico, also known as Walmex, exceeded analyst expectations with 17 percent growth compared with a year ago. Liverpool’s net profit rose 27 percent, aided by the acquisition of Suburbia clothing stores last year.
Mexico’s retailers association ANTAD expects same-store sales to grow 5.8 percent this year as inflation cools and higher public spending ahead of the July 1 presidential election trickles down to consumers, analysts said.
Walmex has far outpaced the industry average for same-store sales from January to March, based on ANTAD figures, and looks poised to stay ahead of competitors due to its low prices, store remodels and vast scale with 2,369 Mexico locations, analysts said.
“You come with an attractive experience, an attractive price-value proposition, and that’s how you gain market share,” Barclays analyst Benjamin Theurer said.
March was especially strong, both for Walmex and Liverpool, because the Easter holiday was on April 1. In other years, Easter has fallen later in April, pushing benefits into the second quarter.
However, Walmex Chief Financial Officer Olga Gonzalez said in a webcast after releasing results that second-quarter earnings may not be as bright in comparison, without Easter to ramp up shopping.
“The second quarter will be more challenging, given the negative calendar effects,” she said.
Walmex shares have traded at record highs over the past several weeks, closing up more than 1 percent on Wednesday.
But continued share price hikes are unlikely in the short term because Walmex’s value is already baked into its shares, said Alejandra Marcos, director of analysis at brokerage Intercam.
Walmex, a unit of U.S.-based Walmart Inc, will need sustained growth for shares to substantially tick up, she said.
Walmex’s is betting on its technology and e-commerce unit, set to soak up 10 percent of the company’s investment this year, and will put another 28 percent into logistics, crucial to facilitate online sales.
Liverpool, which operates more than 500 sites including malls and department stores, is also investing in e-commerce, outfitting clerks with tablets to help shoppers browse online and updating its mobile app.
At its 124 Suburbia low-cost clothing stores, which it purchased from Walmex in April 2017, same-store sales grew 17 percent in the first quarter, Liverpool said.
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