Walmex Earnings Growth Slows With Mexican Economy

Wal-Mart de Mexico SA, Latin America's biggest retailer, posted its smallest profit gain in six quarters after the company cut prices to lure shoppers as the economy slowed.

Second-quarter net income at Walmex, as the company is called, increased to 2.97 billion pesos ($276 million), or 35 centavos a share, after adjusting for inflation. Profit a year earlier was 2.77 billion pesos, or 32 centavos, the company said in an e-mailed statement today.

The company was forced to cut prices and costs as consumers spent less. Mexico's economy grew 2.6 percent in the first quarter, the slowest since 2005, while the U.S. economy expanded 0.7 percent, the smallest increase in four years.

``The downturn in economic activity and remittances are having a larger negative effect on sales than previously anticipated,'' wrote Deutsche Bank Securities analyst Reinaldo Santana in a July 5 report.

The company has seen sales growth slow as Mexicans living in the U.S. send home less money, Santana wrote. Remittances rose 3.4 percent in the first quarter, the slowest growth in eight years, as a U.S. housing slump hurt workers in the construction industry.

Net sales rose 8.6 percent to 50.9 billion pesos. Sales at Walmex stores open at least a year rose 0.9 percent from a year earlier after adjusting for inflation.

Walmex said earnings before interest, taxes, depreciation and amortization rose 11 percent to 4.89 billion pesos, the slowest pace since 2004.

A year earlier, sales at older stores climbed 7 percent, helped by the presidential elections and the World Cup, Walmex Chief Executive Officer Eduardo Solorzano said.

``It was a very tough comparison compared with last year,'' Solorzano said.

Shares of Walmex rose 55 centavos to 41.45 pesos in Mexico City trading before results were released.

To contact the reporter on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net

To contact the editor responsible for this story: Michael Nol at mnol@bloomberg.net

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