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Investing.com -- Walmex (BMV:WALMEX) reported fourth-quarter earnings that fell short of consensus estimates.
The retailer saw its consolidated revenue increase by 8.3% to P$274.7 billion, which was in line with expectations, but its earnings before interest, taxes, depreciation, and amortization (EBITDA) only grew by 2.5% year-over-year (YoY) to P$27.4 billion, missing consensus by 5.5%. Net income rose by 1.4% YoY to P$15.2 billion, which was 7.3% below consensus.
The company's slower same-store sales (SSS) growth was a key factor in the earnings miss. In Mexico, SSS growth decelerated to 4.3%, down from 4.5% in the third quarter and below the 5.4% consensus. Central America also experienced a slowdown, with SSS growth at 3.1% in constant currency terms, compared to 3.7% in the previous quarter.
Despite the slowdown, Walmex's SSS growth in Mexico outpaced the 2.3% reported by the National Association of Supermarkets and Department Stores (ANTAD), with Sam's Club continuing to lead in SSS growth.
Operating expenses presented another challenge, increasing by 14.7% due to investments in new stores, e-commerce, technology, and labor costs in Mexico. These factors, along with flat traffic in Mexico and higher inventory levels, contributed to what JPMorgan described as a "more challenging than anticipated" environment.
As a result, the bank cut its rating on Walmex, citing the Q4 results and management's indication that top-line growth is expected to be 6-7% this year, which is 2 percentage points below JPMorgan's previous estimates.
In response to these developments, JPMorgan stated, "Earlier this week we published a report stating that the negatives for Walmex were well priced in, seeing a good entry point for a low beta play in a low beta market. Yet, 4Q24 results showed adj. EPS up 3% y/y at Ps0.88, -1% vs. JPME and -6% vs. consensus... We cut our ˜25E/˜26E EPS by 8%/7%, seeing limited growth of 4%/9% y/y, respectively, and putting our figures ~5% below consensus while embedding in forecasts the top end of company's top line growth guidance. Accordingly, we lower our Dec. 5 PT to Ps62/sh (from Ps65), offering limited 8% upside from current price levels."
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