By Cyntia Barrera Diaz and Gabriela Lopez
MEXICO CITY (Reuters) - Mexico's Wal-Mart arm sees a tough 2008 due to an economic slowdown but the company, Mexico's leading retailer, expects good first-quarter results.
"The macroeconomic environment is not favorable because there is a slowdown ... led by the United States," Wal-Mart de Mexico Chief Executive Eduardo Solorzano said on Wednesday.
"Maybe this has also been accompanied by inflationary pressures in raw materials and that ends up having an impact on many of the products we sell," he told the Reuters Latin America Investment Summit in Mexico City.
The retailer, known as Walmex, was hurt last year by a slowdown in the Mexican and U.S. economies, along with most Mexican retailers.
A slump in the U.S. construction sector, which employs many Mexican immigrants, also reduced the amount of money that they send back home, and a U.S. recession is feared this year.
Nevertheless, Walmex (WALMEXV.MX: Quote, Profile, Research, Stock Buzz), an affiliate of giant U.S. retailer Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz), plans to open 205 new stores in Mexico this year as it targets its price reduction campaign more than ever on low income clients.
Solorzano said first-quarter results are likely to be decent. "I think (the first quarter) will be a good quarter, not spectacular," he said.
The January-March period benefits from an extra day this Leap Year.
"We expect Walmex to post the strongest results both in March as well as in the first quarter as increased value proposition and better shopping experience have delivered strong customer traffic," Credit Suisse said in a report.
Analysts expect Walmex first-quarter same-store sales, or those recorded at stores that have been open for at least 12 months, to rise about 3.26 percent in real terms compared with a 5.9 percent increase in the same period of 2007.
Despite the challenging year ahead, analysts are confident Walmex will weather the storm.
"We think this will be a difficult year, but we expect (Walmex) to have a better performance in the second half of 2008 ... helped by a strong growth in sales space," Ixe brokerage said in a report.
Walmex shares fell 3.97 percent to end at 45.50 pesos after gaining 8 percent on Tuesday.
(For summit blog: summitnotebook.reuters.com/)
(Additional reporting by Alistair Bell)
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