EconomyFinancialWalmart 'takes out the checkbook' in Mexico to modernize...

Walmart 'takes out the checkbook' in Mexico to modernize stores and open gas stations

For Walmart, 2021 was another unusual year that prompted it to innovate and quickly adapt to the environment and the changing needs of consumers. However, although its expenses grew 13.2% year-on-year, the retailer closed 2021 with more sales.

According to its financial report sent to the Mexican Stock Exchange (BMV), its revenues grew by 9.5%, which translates into sales of 214,571 million pesos (mdp) compared to the 195,988 mdp achieved the previous year.

Its profits were 13,254 million pesos, that is, they increased 5.2% compared to the net income it registered in 2020, while its operating flow went from 22,347 million pesos to 23,564 million pesos, this is an increase of 5.4%.

“As we had already anticipated, we are going through an investment phase to accelerate growth, while maintaining our return on investment. Our financial strength gives us the flexibility to balance short-term results and long-term plans,” said Guilherme Loureiro, CEO and CEO of Walmart Mexico and Central America in the report.

In the case of Mexico, retailer revenues during the fourth quarter of 2021 grew 9.1%, driven by sales growth in same units -or stores that have been in operation for more than a year- of 7.8%. In addition, Walmart Connect and the improvement in margins due to changes in the sales mix offset the pressures of logistics costs and investments in prices.

Expenses related to renovations increased four basis points, as the pending works that were limited in their construction were continued due to the coronavirus pandemic. Loureiro detailed in the report that 131 stores opened during the last year and more than 40% of them were inaugurated during the last quarter.

In Central America, on the other hand, the growth of total revenues reached 11.8% during the quarter, to 36,935 million pesos, while the operating flow went from 3,408 million pesos to 3,190 million pesos, that is, -6.4%.

“We saw a reduction in the gross profit margin of 80 basis points due to the execution of our strategy of my format in the region. We are making adjustments in the commercial offer, increasing the penetration of our brands and investing in prices, which is translating in further sales growth and market share gains,” the report reads.

The company finished implementing its new e-commerce platform in all the countries of the Central American region during the last quarter of 2021, and in 2021 e-commerce sales represented 1.7%.

Last month, Walmart announced that in line with its strategy and with the support of its board of directors, it is considering strategic alternatives for its operations in El Salvador, Nicaragua and Honduras.

Although these operations are healthy businesses with consistent and profitable performance, the company assures that they are undertaking this process with the objective of finding ways to further support and accelerate its strategy of positioning both Walmart and its businesses in these countries for the future. long term success.

“The alternatives we are exploring could include, among others, joint ventures, associations or strategic alliances, a sale, or other transactions. It is also possible that no operation will be carried out at all,” the report says.

New stores and projects

During 2021, Walmart México implemented the self-checkout system in 286 self-service stores, completed the deployment of Scan And Go in the 165 Sam’s Clubs and enabled the first self-checkout station in Mi Bodega Cholula. Currently, they have this collection system in more than 370 stores, in which it represents 30% of the transactions.

Throughout the year, the retailer invested 20,466 million pesos in projects with high returns to strengthen the business, which represents an increase of 22% compared to 2020. Likewise, remodeling represented 44% of the investment, since they are enabling stores with omnichannel capabilities.

Last December, Walmart opened the Santo Niño distribution center in Mexicali, which will strengthen the operations of the supply chain in the northern region of the country. This center has the capacity to process more than 5 million boxes per month and will supply 50 Walmart and Bodega stores.

It also began the construction of a new omnichannel distribution center in Tlaxcala, which is expected to start operations in 2024. For this center, the retailer invested 3,000 million pesos, of which 20% will go to technology and innovation. This Cedis will create more than 1,200 direct and 700 indirect jobs.

At the end of the year, the retailer operated 3,620 units in six countries, Costa Rica, Guatemala, Honduras, El Salvador, Mexico and Nicaragua, through self-service stores, membership price clubs and omnichannel sales.

The company’s goal is to double total sales in 10 years and leverage operating expenses to reinvest in the business, and to achieve this, sales growth will come from same unit sales, new unit sales and e-commerce.

Investment in technology and electronic commerce represents 16% of the total, since the intention is to accelerate the execution of key projects such as the deployment of antennas to improve the performance of the wireless network, the replacement of equipment and components to support new functionalities, the transformation of the Back Office and a new data platform.

the sale of gasoline

A few years ago, Walmart began a pilot test in Mexico of six gas stations operated by third parties, under the Bodega, Walmart and Sam’s Club brands. Given the results in terms of traffic and customer satisfaction, the retailer decided to expand the gas stations through a partnership with Gazpro.

This operator will invest in and operate the co-branded gas stations. They are currently testing a complement to the project with small shops attached to gas stations to make it even more convenient for customers. So far they have opened three gasoline stores, one of them was built with used containers and is 90% powered by solar energy.

Gazpro is in the process of obtaining the necessary permits to operate, the idea is to enable more stations by the end of 2022.

The omnichannel strategy

Walmart continues with its intention to be the omnichannel leader in its category. Last year, it focused on three verticals: Cashi, Bait and Walmart Connect. It launched a pilot together with a third party to disperse credit through Cashi in 30 Walmart and Bodega stores. The intention is to grant credits of up to 6,000 pesos so that customers can buy their items and pay for them later.

On the other hand, through Bait, the retailer is providing low-cost connectivity services including prepaid home and mobile Internet. In the fourth quarter of 2021, it added more than 900,000 new users, with which it already reached 2.3 million users.

Meanwhile, Walmart Connect increased the number of advertisers by 50% and the number of campaigns by almost 80% during the year. The goal is to become a media platform in Mexico, that is, to help brands connect with customers in a more meaningful way.

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