The self-service chain sector in Mexico has lost 2,861 million dollars on the Mexican Stock Exchange (BMV) between Monday, May 16 and Monday, May 23, while in the United States supermarkets had a loss of 136,268 million dollars in market value during the same period on Wall Street.
Of the four companies listed on the BMV, only Wal Mart de México y Centroamérica (Walmex) and Soriana have had declines in their capitalization, by 2,919 million and 18 million dollars, respectively.
In contrast, Chedraui earned $58 million and La Comer $18 million. However, since Walmex was the one with the highest value, the weekly balance was negative.
On the contrary, of the five largest supermarket chains in the United States, Walmart, Costco, Lowe’s, Target and Kohl’s, the one that had the greatest loss was Walmart (-70,473 million dollars) followed by Target (-30,219.00 million ).
Inflation has a different impact
The difference in losses is due to the fact that some of the US supermarket chains reported strong impacts on their profits last week due to higher operating costs due to high inflation in the United States, while Mexican stores have shown more resilience in the face of inflationary pressures. analysts explained.
On Tuesday, May 17, Walmart shares in the United States fell 11.38% to $131.35 each, hitting a 52-week low, after reporting that its earnings fell 23.7% in the first quarter of 2022.
Target, for its part, reported on Wednesday of last week that its earnings per share went from $4.17 in the first quarter of 2021 to $2.16 in the same period of 2022, a reduction of 40.7%, causing the worst fall on Wall Street since 2020.
“Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability well below our expectations and well below where we expect to operate over time,” said Brian Cornell, CEO. of Target when presenting the results of the first quarter of the year on Wall Street.
Despite the fact that both countries have registered high inflation rates, in Mexico the self-service chains are accustomed to high inflation rates and lower economic growth, so unlike their peers in the United States they have already developed a strategy to operate in this type of environment, explained Marisol Huerta, Consumer Analyst at Banco Ve Por Más (Bx+).
“We are talking about two different markets. In Mexico they already know how they are going to respond to this type of adversity because it has been repeated more, while in the United States it is an economy that has been a little more stable with greater purchasing power, ”he commented.
In addition, in Mexico, self-service chains “have great flexibility to accommodate their offer and vary the presentations, sizes, and even qualities depending on the mood of the consumer. In the United States, its flexibility is less since the model focuses more on its own operation and execution on the floor, while in Mexico the execution of the offer begins with a much more open dialogue with suppliers, and for this reason the reaction is usually faster”, explained Carlos Hermosillo, an independent analyst.
Another reason why U.S. chains saw their profits hurt the most was because, in an environment of such uncertainty, they made errors in operational execution, said Jerónimo Cobián, an analyst in self-consumption and self-service companies at Actinver Casa de Bolsa.
Carlos Hermosillo said that in the United States most retailers increased their inventories to cover themselves in case of supply problems, “and that created an imbalance in the adequacy of the inventory compared to real demand.”
They take action
Marisol Huerta warned that the strong impacts of inflation in self-service chains cannot be ruled out in Mexico, so the increase in costs will remain a latent risk for the sector.
He explained that it will be until July when the financial results of the supermarket chains in Mexico corresponding to the second quarter of the year will be known.
However, some chains have already felt the impact of inflation on higher operating costs and so stated in their report to investors.
In a conference with analysts on the occasion of its results report for the first quarter of the year, at the end of April, the CEO of La Comer, Jorge O’Cadiz Salazar, explained that the contraction in the company’s EBITDA margin was due in part to to 25% increase in electricity costs.
The general director of Walmex, Guilherme Loureiro, stated in a conference that the high inflation in the country affects the customers of the chain of stores, for which they are carrying out actions to keep prices low.
Since Monday, May 16, the shares of the five United States supermarket chains that operate on the Stock Exchange had losses. The biggest decliner in the period was Target, down $64.45, or 29.51%, in its share price to $153.9 each.
In Mexico, only Walmex and Soriana have had reductions. The former fell 4.27% to 72.45 pesos a share and the latter lost 0.47%, trading at 21.55 pesos each.