Walmex posted a 6 percent jump in 2014 operating income though same-store sales disappointed as Mexican consumers tightened their belts in a weakening economy.
Wal-Mart Inc’s Mexico and Central American division said operating earnings on a EBITDA basis totaled 42.8 billion pesos ($2.6 billion) on revenues up 4.1 percent to 437 billion pesos, or $26.55 billion.
Comparable-store sales, however, increased just 2 percent as sagging sales at ailing apparel department-store Suburbia and discounter Sams Club fell a combined 5.6 percent, according to communications director Antonio Ocaranza.
“It was a complicated year” for the two units, Ocaranza said. To boost the fortunes of Suburbia, which targets lower and middle class Mexicans, the company is planning to improve store-credit schemes and slash inventory costs, he said.
Operating and net income for the year increased 9.7 percent and 34 percent, respectively, the Mexico City-based firm said.
For the fourth quarter, EBITDA rose 17.2 percent to 14.8 billion pesos, or $899.1 million, on net sales up 4.3 percent to 128.5 billion pesos, or $7.8 billion.
“We are not happy with our comparable sales in Mexico but we are operating in a challenging economic environment with moderate consumer spending,” new chief executive officer Enrique Ostale said during an earnings conference call February 17.
Ostale said operating costs were flat year-on-year and that gains from “expense leveraging” in Central America were offset by the Mexican unit’s weakness.
In Central Ameica, where the chain has been growing aggressively, sales grew 7.3 percent compared with a 3.4 percent consolidated revenue hike in Mexico.
Walmex opened 131 stores during the period to take its count to 2,986.
Ostale said Mexico’s largest retailer is engaged in a major restructuing effort of Sams Club and hopes to see results this year. He added the company will provide further guidance in a March 18 analyst presentation.
Accordingly, he said Walmex hopes to double its revenues by 2025.
Despite the results, which were below analysts’ forecasts and unnerved investors – spurring a 5 percent decline in Walmex’ share price – Ostale said he is confident in the Mexican and Central American retail market’s long–term potential.
“…I’m confident we have the capacity to double the size of the company in the next 10 years and we are going to get back to growing earnings faster than sales,” Ostale said.
“We have two core strategies: invest energy in driving sales and earnings but we also have to build a more effective organization were we give people more ownership and accountability to react faster and more accurately to customers’ needs.”