Walmart’s Mexico unit blames government cash aid, as revenue rise slowest in three quarters

MEXICO CITY (Reuters) – Walmart de Mexico (WALMEX.MX), Mexico’s biggest retailer, reported on Thursday its slowest revenue growth in three quarters, with its core supermarket chain hit by competition after the government altered a welfare spending programme.

FILE PHOTO – A cashier works inside a Walmart store in Mexico City, Mexico March 28, 2019. REUTERS/Edgard Garrido

Walmex, as the unit of Walmart Inc (WMT.N) is known locally, said revenue rose 4.7% in the fourth quarter of 2019, it slowest since the 4.6% clocked in the year’s first quarter.

Walmex’s Bodega family of warehouse-style supermarkets comprise nearly 80% of the retailer’s stores in Mexico, the largest foreign market by store count for Walmart Inc.

Supermarket vouchers given out by the leftist government of President Andres Manuel Lopez Obrador were previously designed to be spent at chains such as Bodega. But ahead of the fourth quarter, the 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.

He said the company was working to lower prices in response, without specifying how deeply sales were hit at Bodega.

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.

However, 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 amid a tough 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.

Reporting by Daina Beth Solomon; Editing by Marguerita Choy and Muralikumar Anantharaman

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