WMT Walmart Inc

By Anthony Harrup 

MEXICO CITY -- Retailer Wal-Mart de Mexico SAB reported growth in sales and profit in the third quarter as Mexicans continued to consume at a solid pace thanks to credit and employment growth amid subdued inflation.

Walmex, as the unit of Bentonville, Ark.-based Wal-Mart Stores Inc. is known, reported a profit of 10.05 billion Mexican pesos ($543 million) in the three months through September, compared with 5.92 billion pesos in the year-earlier quarter.

Net profit from continuing operations rose 17% from a year before to 6.7 billion pesos. Walmex agreed in August to sell clothing store chain Suburbia to department store operator El Puerto de Liverpool SAB for about $1 billion. The deal is awaiting antitrust approval to close.

Sales rose 11% to 126.86 billion pesos, while earnings before interest, taxes, depreciation and amortization, or Ebitda, a measure of operating cash flow, rose 12% to 11.79 billion pesos.

The median estimate of analysts polled by The Wall Street Journal called for net profit of 6.59 billion pesos on sales of 127.15 billion pesos and Ebitda of 11.94 billion pesos.

Walmex shares closed down 0.4% on the Mexican stock exchange before the report.

Same-store sales, which only count stores that have been open at least one year, grew 7.2% in Mexico and 5.6% in Central America. The depreciation of the Mexican peso against Central American currencies contributes to higher growth in peso terms.

"In particular in Mexico, we had a difficult base of comparison and a competitive environment with a lot of promotional activity," Walmex Chief Executive Guilherme Loureiro said in a webcast.

The slower sales growth has more to do with tough comparisons and aggressive competition than a deceleration in Mexican retail, said Carlos Hermosillo, head of equity research at Actinver Casa de Bolsa.

He noted that rival Organización Soriana SAB also had a strong third quarter, with same-store sales up 9.1% from a year before.

Soriana boosted its No. 2 position among Mexican supermarket chains -- behind Walmex -- with the acquisition this year of 143 Comercial Mexicana stores and applied the well-known "Julio Regalado" promotional campaign at both Soriana and Comercial Mexicana brand stores.

The Mexican economy has been growing below potential and is expected to expand slightly more than 2% this year, while retail sales have remained robust, increasing 8.3% in the first eight months.

Retailers cite the positive impact of job creation, consumer credit and growth in remittances from Mexicans living abroad, which are boosted in peso terms by a weaker local currency.

On the other hand, inflation crept above the central bank's 3% target in mid-October, while consumer confidence has sunk to multiyear lows in part because of the sharp peso depreciation.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

October 25, 2016 17:47 ET (21:47 GMT)

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