Walmex Underperforms for Four Consecutive Months
Posted on August 9, 2012 by jway
On Tuesday, Walmart’s Mexico operations announced July results that made investors cringe.
The problem: same store sales growth (SSS) – growth in sales at stores already open for a year – declined in Mexico. Analysts had estimated that SSS would grow by 2.7%, but SSS grew by only 1.2% in Mexico and declined by 0.7% in Central America. Investors consider SSS to be one of the most important indicators of a retailer’s performance.
UBS analyst Gustavo Piras Oliviera says that Walmex’s performance is “disappointing.” The Wall Street Journal reported that “such a result means Walmex will have underperformed the industry for four consecutive months, Credit Suisse said, showing that the retailer’s efforts to relaunch its everyday-low-price strategy aren’t yielding major benefits.”
Walmex also experienced a 2.1% decline in transactions in July. Paola Sotelo, an analyst at Monex in Mexico City, told Reuters that “we are seeing store traffic fall for a third straight month… There are less (sic) consumers in their stores and it could be a consequence of more aggressive competition.”
All this bad news has put a significant dent in Walmex’s stock price. According to Bloomberg, Walmex’s price “fell the most in more than a month after sales increased less than expected in July, signaling that Latin America’s largest retailer could be losing market share. The stock fell 2.9 percent, erasing this year’s gain, to 37.91 pesos at the close of trading in Mexico City, the steepest decline since June 21.”
The Bloomberg story goes on to note that Walmex’s share price “has fallen 0.8 percent so far this year, compared with the benchmark’s 10 percent advance in the same period.”
If we connect the dots, it looks like Walmex’s SSS have not been great since April, which is the month that the New York Times published allegations of a massive bribery scandal of public officials (to the tune of $24 million) and the subsequent cover-up by high-level Walmart executives. It doesn’t pay to play dirty, Walmart.
This post was written by Rebecca Cassler.