PREVIEW-Mexico's Walmex net seen up; margins may suffer

WHAT: Wal-Mart de Mexico Q4 results

WHEN: Thursday, Feb. 11

REUTERS FORECAST: Net profit +11.7 pct

MEXICO CITY, Feb 5 (Reuters) - Wal-Mart de Mexico could
post a solid rise in net profit for the crucial holiday
quarter, but concerns over margins linger after Mexico's top
retailer spent heavily on advertising.

The company, known as Walmex (WALMEXV.MX), is expected to
report fourth-quarter earnings of 5.50 billion pesos ($419
million), up 11.7 percent from a year earlier, according to a
Reuters survey of six analysts.

"Fourth-quarter results should not be a catalyst for the
share price," Santander analysts said in a report. "On the
contrary, they might disappoint some investors."

The quarterly earnings growth forecast is above the 4
percent increase in the fourth quarter of 2008.

"We remain optimistic on Walmex based on organic expansion
potential in both Mexico and Central America, a balanced sales
mix ... as well as on our expectations that losses from the
banking business should be lower in 2010," Santander added.

Walmex recently purchased 519 stores in five Central
American countries from parent Wal-Mart Stores (WMT.N).

Analysts expect fourth-quarter revenue to show an increase
of 10.5 percent to 80.28 billion pesos, including sales from
all store formats and membership income.

Operating profit and earnings before interest, tax,
depreciation and amortization and operating profit are both
seen rising more than 11 percent.

However, two analysts see profit margins contracting in the
period. They pointed to Walmex's strong advertising to keep
traffic flowing as harsh economic times made consumers think
twice before spending on nonessential products.

The Christmas season, which sometimes accounts for 30
percent of retailers' annual sales, also drew wary consumers
into stores.

Walmex plans to report its quarterly results on Thursday
after markets close.

Following is a table with the average of the analysts'
estimates in pesos, without adjusting for inflation:
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2009 2008 PERCENT

OCT-DEC OCT-DEC CHANGE
-------------------------------------------------------------
Revenue 80.284 bln 72.669 bln +10.5 pct
EBITDA 8.652 bln 7.754 bln +11.6 pct
Operating profit 7.450 bln 6.693 bln +11.3 pct
Net profit 5.495 bln 4.920 bln +11.7 pct
=============================================================
($1 = 13.10 pesos at end December)
(Reporting by Gabriela Lopez; Editing by Lisa Von Ahn)