October 23, 2019 / 8:26 PM / 23 days ago

Walmex profit beats expectations but company says customers 'becoming more cautious'

MEXICO CITY (Reuters) - Walmart de Mexico, Mexico’s largest retailer, reported a 6.6% jump in third-quarter net profit on Wednesday, surpassing analysts’ expectations despite a weakening consumer environment.

FILE PHOTO: Men walk past the logo of Walmart outside a store in Monterrey, Mexico February 12, 2018. REUTERS/Daniel Becerril

The company, known as Walmex (WALMEX.MX), booked 9.25 billion pesos ($469 million) in net profit during the quarter, which ended in September, up from 8.7 billion pesos a year earlier.

Sales at Mexican stores that have been open at least a year rose 3.8%, far less than the 6.3% same-store growth in the same period last year in parent company Walmart Inc’s (WMT.N) largest overseas market by store count.

The company hinted at signs of trouble on the horizon in Mexico.

“We are dealing with adverse and uncertain socio-economic circumstances in Mexico,” Walmex said in the report. “Our business is resilient, but our customers are concerned about a less favorable outlook and becoming more cautious.”

Central America’s same-store sales dropped 0.2%, hampered by a weak regional economy that has put pressure on discretionary spending.

Strong sales of food and consumables drove the growth, Walmex said in a report accompanying its results. The company also attributed the gains in profit to lower costs and better management of discounts.

The company’s revenue rose 4.9% during the quarter amid weaker sales throughout Mexico’s retail sector in the first half of the year.

“We expect results to be good in comparison with the rest of the sector, however, they will show deceleration compared to the first half of the year,” Signum Research said in a report ahead of results. “We think this trend will persist into the second half of the year.”

Walmart de Mexico added 36 new stores from July to September, bringing its total to 3,327 locations.

Reporting by Julia Love and Noe Torres; Writing by Daina Beth Solomon; Editing by Anthony Esposito and Tom Brown

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