MEXICO CITY, July 20 (Reuters): Walmart's Mexico and Central America unit, known as Walmex (WALMEX.MX), saw some $3.7 billion wiped from its market value on Thursday after the retailer posted weaker-than-expected margins for its second quarter, although revenues grew.
The stock tumbled 7.4% on Thursday, its steepest daily decline since 2020, decreasing Walmex's market capitalization by 68.6 billion Mexican pesos ($3.7 billion).
Mexico's largest retailer, which operates Walmart, Sam's Club and Bodega Aurrera stores across six countries, on Wednesday posted a 10% drop in net profit, although sales were up 8%, as Walmex spent more than analysts expected.
Net profit was 11.2 billion pesos ($598 million) in the quarter, below analysts' expectation of close to 13 billion pesos, while the core earnings margin hit 9.5%, the lowest level for that quarter since 2020.
"The company faces a very important challenge: regaining profitability," analysts at financial group Banorte said.
Actinver analyst Antonio Hernandez said in a note to clients that the margin pressure came from investments in tech, e-commerce, store openings and labor expenses.
"The benefits of these investments will continue to translate into stronger growth and accelerated market share gains," Chief Financial Officer Paulo Garcia said in a call with analysts on Thursday.
"We're prioritizing investments with the highest returns and dropping those with lower returns," he added.
