Comparable-store sales-wise, the year is getting slightly more difficult for Motley Fool Global Gains selection Wal-Mart de Mexico (OTC BB: WMMVY).
Wal-Mart de Mexico, which is better known as Walmex, is majority-owned by Wal-Mart (NYSE:WMT). But I imagine you picked up on that pretty quickly.
Walmex reported a 2% gain in same-store sales for July before inflation, but it's the 2% decline in comps after taking into account inflation (on a real basis) that matters. It's not a strong result, but it's also not bad, considering the company had one fewer weekend to work with this year than it did last year in July.
The decline in same-store sales will slow down the company's profit growth, but Walmex did increase its overall sales by 5% after inflation through new store openings in the past year. In addition, the company showed in the second quarter that it continues to find efficiencies in its cost structure, and at this point in its development it can increase its operating income even during a period of slowing sales.
The Mexican economy is highly tied to the U.S. economy, so as our economy slows, in turn, consumption in Mexico slows. This hurts all retailers in Mexico. However, Walmex's dominant position in Mexico and rock-solid balance sheet allow it to be aggressive in a tough environment and continue investing in new offerings to draw in customers, such as the banking services being rolled out now.
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Nathan Parmelee has a beneficial interest in shares of Wal-Mart, but doesn't own shares in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.
