Wal-Mart’s Mexico Division to Spend $1.1 Billion to Expand Chain
Wal-Mart Stores Inc. (WMT)’s Mexican and Central American unit plans to spend 15 billion pesos ($1.1 billion) to open stores and improve its e-commerce technology, aiming to spur growth in the region as U.S. sales slow.
The company expects to spend 8.4 billion pesos opening stores, adding 3.7 million square feet of space, according to a statement yesterday. Mexican floor space will grow 5 percent, with Central American stores expanding 7.6 percent.
Wal-Mart, the world’s largest retailer, is looking to Latin America to help offset declines at home. Sales at Wal-Mart U.S. stores open at least 12 months, excluding fuel, fell 0.4 percent last quarter.
Wal-Mart’s Mexican business, known as Walmex, will spend 3.5 billion pesos of its expansion budget on remodeling and maintenance. It will devote 1.2 billion pesos to logistics and 1.9 billion to e-commerce and other technology.
The company faces headwinds both at home and abroad. David Cheesewright, who became head of Wal-Mart’s international unit this month, said consumers around the world are stressed, with “significant slowdowns” in numerous markets, including the faster-growing developing countries.
Shares of the Bentonville, Arkansas-based company were little changed yesterday in New York, closing at $73.35. The stock has declined 6.8 percent this year. Walmex shares fell 0.6 percent to 28.61 pesos in Mexico City trading. The stock has lost 16 percent this year.
Last week, Wal-Mart’s annual profit forecast trailed analysts’ estimates. Profit per share in the year through January 2015 will be $5.10 to $5.45, the company said. The average of analysts’ estimates compiled by Bloomberg was $5.55. Lower food-stamp payments, higher taxes and struggles to keep shelves fully stocked have weighed on sales.
In addition to the Mexican expansion, Chief Executive Officer Doug McMillon is rolling out more small-format locations. Still, the sluggish economy -- as well as higher health-care costs -- will continue to hurt the domestic business, Chief Financial Officer Charles Holley said last week.
Food, consumables, digital and self-service sales will help drive growth at Walmex, executives said yesterday at a presentation in Mexico City. Walmex CEO Scot Rank said he’s “not satisfied” with the unit’s results last year.
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