EconomyFinancialWalmart raises its profits by 10% thanks to "spending"...

Walmart raises its profits by 10% thanks to "spending" customers and its new businesses

The persistence of inflation is affecting consumers, especially the most price sensitive; however, the context did not mean a blow to the finances of the American retailer Walmart. During the third quarter of the year, its consolidated income grew 12.4%.

This translates into 197,885 million pesos (mdp) compared to the 176,042 mdp obtained in the same period of 2021. In profits, Walmart took 12,153 mdp, which represents an increase of 10%, quarter against quarter, and an operating flow or Ebitda of 21,163 million pesos, which represents a growth of 5.6%.

The increase was driven by a balanced combination of ticket and price. In sales to equal units , the ticket grew 6.2% and traffic 5.2% compared to last year. Some consumers are buying smaller pack sizes or spreading their spending over more trips to the store, but they haven’t stopped consuming.

Sales to the same units, both in Mexico and Central America, grew 40 base points above the market for self-service and clubs measured by ANTAD; while new stores contributed 1.2% of sales.

“The current inflationary environment somehow impacts the reading of market performance, since each competitor implements a different pricing strategy. According to Nielsen, we have been able to increase our market share in the self-service segment in terms of units in each quarter of 2022”, reads the financial report that the company sent to the Mexican Stock Exchange (BMV).

In the last three months, Walmart has opened 26 new stores, 20 in Mexico and six in Central America. So far this year, 57 stores have opened. Currently, the supermarket chain operates 3,677 stores in six countries: Costa Rica, Guatemala, Honduras, El Salvador, Mexico and Nicaragua.

Performance by region

Mexico had a growth of 12.3% in income, that is, 163,548 million pesos, as well as an Ebitda of 17,995 million pesos, which reflects an increase of 4.2%. In Mexico alone, same unit sales grew 11.1%, especially in the Bodega and Sam’s Club formats.

General expenses grew 490 basis points above revenues, due to strategic investments and higher labor costs. Walmart simplified marketing campaigns, transformed processes and signage materials in warehouse stores in the metropolitan area.

It also increased pressure perception by more than 250 basis points and saved almost 600 tons of paper and cardboard, contributing to its goal of zero waste. For the remainder of the year, the idea is to expand the pilot to 200 stores and finish implementing it in the rest of the Bodega stores in 2023.

Another top investment area was e-commerce talent. And Walmart Connect is another of the relevant verticals, since through this business division they are leveraging their data and infrastructure to help advertisers connect with consumers in a meaningful way.

During the quarter, they launched the first Mobile Advertising campaign with Bait and Nestlé, which reached nearly half a million users with geo-targeting. They also launched their Retail Media Platform for Unilever, P&G and Nestlé to self-manage their sponsored product campaigns. Walmart Connect grew 14%.

In Central America, on the other hand, total revenues grew 15%, driven by double-digit growth in same-half sales of 14.4%. From 30,443 million pesos, sales increased to 34,337 million pesos, while the operating flow was 3,168 million pesos, at 16.1%.

The retailer installed energy-efficient equipment and solar panels that generated savings and reduced environmental impact. It also invested in automation initiatives to help employees increase their productivity. These initiatives and simplification projects allowed us to leverage expenses by 60 basis points.

The omnichannel strategy

Walmart is convinced that it wants to be a benchmark and leader in omnichannel. In the last three months, e-commerce grew 19% and sales 16.7%. This platform represents 4.8% of total sales in Mexico and contributed 0.8% to total sales growth.

The growth on demand was driven by Despensa a tu casa de Bodega, which was enabled in 436 stores in almost 200 cities by scope. This means that this format is now their biggest online super player in Mexico. So far this year, the company has delivered more than 1 million orders that generated a growth in sales of 150%.

The retailer expanded its delivery hours to offer more options in the late evening, and this translated into an 8% growth in orders. Additionally, the crowdsourcing model was implemented in 16 Bodega stores with high NPS and delivery time indicators. The plan is to extend this model to 16 more stores in the remainder of 2022.

To date, 295 Walmart and Walmart Express stores are crowdsourced, and 60-minute deliveries represent about 40% of orders that were crowdsourced. The chain of 20 electric vehicles to its fleet, so that it already has a total of 67 units, in line with its objective of having a last-mile fleet of vehicles that do not generate emissions.

The company also implemented the first Cashi marketing campaign that culminated in 4.2 million registered users in three months. And as for Bait , at the end of the third quarter it had 6 million users, of which 4.3 million are active. These figures place Walmart as the fourth player in the telecommunications sector and the first within the Virtual Mobile Operators, by number of users.

On the other hand, Walmart Supercenter did well with its seasonal campaigns. The return to classes represented for the company an increase in sales of 60% compared to 2021 and more than 12% compared to 2019. All the participating categories had double-digit growth, where backpacks and notebooks stood out, which had an increase of almost 80 %.

For Walmart Express, the challenge is to improve conversion performance. The company is focusing its efforts on adjusting the catalog, improving the quality of perishable products, renewing and simplifying signage in stores, and reinforcing monthly events focused on special products.

The retailer has not given up seeking to double its total sales in 10 years and to leverage operating expenses to reinvest in the business. To achieve this, sales growth will come from same unit sales, new unit sales and e-commerce.

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