Wal-Mart de México, S.A.B. de C.V. (OTC:WMMVY) Q4 2025 Earnings Call Transcript

Wal-Mart de México, S.A.B. de C.V. (OTC:WMMVY) Q4 2025 Earnings Call Transcript February 19, 2026

Salvador Villasenor Barragan: Good morning, everyone. I’m Salvador Villasenor, Head of Investor Relations at Walmex, and I want to thank you once again for joining our live Q&A session following our fourth quarter and full year 2025 earnings release, which was published yesterday. As always, we will make an effort to answer as many questions as we can in the 45 minutes we have scheduled for this call. [Operator Instructions] Joining me today is Cristian Barrientos Pozo, President and CEO; Paul Lewellen, our Chief Omnichannel Operating Officer; and Paulo Garcia, our Chief Financial Officer. We’ll now go right straight away to the first question.

Operator: [Operator Instructions] The first question is from Mr. Ben Theurer from Barclays.

Benjamin Theurer: Can you guys hear me, see me?

Salvador Villasenor Barragan: Yes.

Benjamin Theurer: So I wanted to get a little bit your sense as you look at the market in Mexico. And in the presentation yesterday, it was very clear there’s a lot of differences between regions, but also within formats. So I wanted to understand what are your targets for 2026, how to potentially address these issues, be it on the regional side and/or on a format side? What are the things that you can do that are under your control to tackle what seems to be still a somewhat challenging environment?

Q&A Session

Paulo Garcia: So first of all, Ben, on the targets and guidance for the year, we are still elaborating on that and probably you’ll hear more about that in terms of the Walmarts there. I think when you think about the environment, it’s still relatively soft. We still expect the environment to be still probably relatively soft in the first half of the year. The good thing, as you know, we all know the data is the GDP growth expectation for the year is better than actually what we had in 2025. That’s roughly 1.5%. I think 2 things that I’ll say before I pass the button, whether Cristian or Paul want to add up on that. One is — so what we’re seeing in a banner like Bodega in these moments tends to shine further. We talked about the fact that Bodega increasing the penetration in the households of the lower income, and that is helping us.

But at the end of the day, you know the strength of our portfolio, it’s the overall portfolio that we have. And you’ve seen that — across all the last quarters, not very dissimilar performance if you think about Bodega, Sam’s and Walmart. Maybe Walmart Express at times a little bit more volatile, but a very tiny part of our portfolio, as you know, roughly 2%. But maybe Paul or Cristian can elaborate a little bit more what we are doing with the banners in particular.

Cristian Barrientos: Ben, from my perspective, I think we are expecting a different year 2026 compared with 2025, as Paulo mentioned. We have seen in other markets how relevant is as you mentioned, what is in our control today to be prepared when the numbers came, let me say, in growth in the market, we will be very benefit. We have seen in other markets, as I told you, that we can accelerate 3, 4x above the market if we are very well prepared. So that is why the focus will continue in EDLP availability and, of course, the acceleration of e-commerce that’s going to be prepared in the future, maybe near future because it will happen this year. So that’s the focus of the total company.

Operator: Our next question is from Mr. Alejandro Fuchs from Itau BBA.

Paulo Garcia: Let’s go to the next question, and we come back to Alejandro.

Operator: Our next question is from Mr. Froy Mendez from JPMorgan.

Fernando Froylan Mendez Solther: I was — I wanted to ask about private label within your EDLP strategy. What role does it play? What level of penetration should this reach in the midterm under this new enhanced EDLP strategy? And what could the impact on margins be from pushing further into the private label?

Cristian Barrientos: Thank you, Froy. And maybe you saw in the report that we are focused as a company in deliver EDLP, improve availability and accelerate e-commerce. And in EDLP, EDLP is not only about a price gap. It’s a business strategy that differentiates us from the rest of the market. And included in EDLP, private brands play a very important role, the same as the assortment, supply chain, modulars, all this stuff. So for us, private brands is really important, and we have seen in Q4 good evolution of the penetration inside of Walmart. And so particularly in Bodega, as you saw also in the numbers, Bodega was the highest accelerator in sales during Q4. And in Bodega, private brand plays a super important role. So we are seeing a room to improve, a room to grow.

So we are leveraging in all the markets with a different brand that we have today in Mexico. But it’s a clear differentiator for us today. So that’s the information that we have today to share with you in terms of penetration, acceleration, all this stuff. So — and also, as I mentioned before, EDLP, there is a lot of metrics, but at the end, we are looking for increase our price perception and private brand plays a super important role there. And we have a very good quarter in terms of how we accelerate price perception and private brand was one of the key elements there. So I don’t know if you…

Paulo Garcia: Just maybe on numbers because there were 2 questions directly on numbers and margin of private brands, building on what Cristian said. I think on where we need to go, we said that a couple of times probably in the past, we want to be in the mid-20s penetration minimum, and that mostly focused in the Bodega. So there’s a lot of room to improve, which things Cristian was saying that we need to do, but adding more products in categories, and we have lots of white spaces, entry price points. To the second question, private brands margins, our margins today of private brands is higher than what we have in innate brands but tends to be also the portfolio. One of the things I want to let it clear because once there was adopt, we don’t manage private brands for margin.

We do manage private brands for the EDLP to help the customers save money and live better with the entry price points. Of course, there will be categories that we will be having better margins. So as you can imagine, in foods and consumables is roughly similar to what we have in innate branded. We do have higher margins, in particular, in the areas of seasonal entertainment in the commodities, as you can expect, because it’s a commodity, we will have lower margins than a branded. So — but of course, we will play with it, but we manage for what’s relevant for the customer.

Operator: Our next question is from Mr. Ulises Argote from Santander.

Ulises Argote Bolio: So the question that I had was trying to get a bit more sense and a bit more detail on those 15 basis points gross margin improvement that we saw in Mexico coming from the other businesses. So just wanted to get your thoughts on how should we think about this kind of trending forward? Are this the initial levels and how much more runway is there left for this? And maybe if you can comment a little bit on which of the businesses actually are becoming more relevant and are contributing more here at the gross margin level.

Paulo Garcia: On that one. So as you can see, our new business has been contributing steadily over quarter-on-quarter, roughly around 20 basis points, sometimes a little bit more than that. In this case, a little bit less as you’ve seen it Ulises. The big one, which is actually becoming more and more relevant is Walmart Connect, immediately followed, of course, by Byte. In this particular quarter, Ulises, as you’ve seen it from what we said it in the webcast, Walmart Connect was not the one that drove the most of this improvement, actually tended to be around in the space of the financial solutions as well as Byte. These were the ones that contributed. You’ve seen the size of Byte these days. So contributing both in terms of the revenues as well to the P&L on a stand-alone basis.

We always said 2 things about the business, right, Ulises. I will refresh that. One, of course, we do look at them on a stand-alone basis because it’s good practice. We need to make sure that they did deliver. But of course, the sole reason why they are here is twofold: one, to deliver a pain point of the customer and how they actually helped overall the core of the business, either more frequency or more average ticket being higher. And that’s what we are seeing with some of these businesses. For instance, a customer that is in Byte, the average ticket is more than 2x what we see in a customer that’s non-Byte. So that we are pushing. The other thing that we’re doing at the same time, we’re using these funds to continue progressing and investing in margins in more EDLP in order to fuel the growth.

In this particular one, our margin was higher as you’ve seen it. It will always be volatile as we said it, but that’s how we actually approach this area.

Operator: Our next question is from Mr. Felipe Rached from Goldman Sachs.

Felipe Rached: Can you hear me well?

Salvador Villasenor Barragan: Yes, Felipe. Now we don’t. Let’s move on to the next one.

Operator: Our next question is from Ms. Melissa Byun from Bank of America.

Cristian Barrientos: Melissa can you hear us?

Operator: Our next question is from Mr. Álvaro García from BTG Pactual.

Alvaro Garcia: Can you hear me?

Cristian Barrientos: Yes, sure.

Alvaro Garcia: Great. Awesome. I have a few questions. The first one on reducing the number of SKUs at Bodega Aurrera Express by 30%. I was wondering if you can give some more comments on that. And the second one for Paul. Paul, nice to meet you. I was wondering as part of your sort of onboarding on to Walmex into what Mexico and Central America look like as retail markets, if you could maybe share your sort of first take or your first impressions on how different Mexico is relative to the U.S. market and what that means from a playbook standpoint for Walmex.

Paul Lewellen: Sure. Thank you for the question, Alvaro. I’ve been with Walmart for over 35 years, and I would say that we have more in common than we do different. And I would say the biggest similarity is around culture and our people are definitely an enabler of our success. And from a global leverage standpoint, I think the way that I would describe it is that Walmart has no boundaries. So when we’re looking at either technology, AI, global leverage, we’re able to take best practices from around the world and apply them globally. And that’s exactly what we’re doing this year in Walmart, Mexico. Just a few examples of that, that I would give, is when you think about how there are no boundaries and we can enable the stores from an AI and technology standpoint, you could start at the front end with Coastal, which is a global platform, which allows our registers to run the same around the world.

You can go to the sales floor where we have the same tools and same technology to speed up the way that we process freight from the back room to the sales floor, the accuracy of our on hands, the availability of our products, the availability of what we can pick and what is available inside of our catalogs for our customers to purchase regardless of where, when and how they want to shop. And then I would lastly say from an inventory standpoint, whether it’s our logistics system and the exciting technology that we’re implementing there in Mexico and how that’s going to enable us in the stores to be more efficient. I would say we’re more like than we are different. Speed is critically important to us this year in Mexico, and I think you’re going to see that, and it’s going to come through loud and clear.

Paulo Garcia: On the SKUs…

Paul Lewellen: Yes. On the SKUs in BAE, I can tell you not only in BAE, but in Mi Bodega, the 30% reduction or SKU rationalization is a process that we are undergoing right now. Space is critically important and devoting the majority of our space to those items that drive the most sales and the most traffic inside of our stores, it’s nothing new about that. We’re constantly reevaluating our assortment across all of our banners. But these 2 are very, very important as it comes or relates to our purpose, which is saving people money so that they can live better, and that also drives our price and our price perception.

Operator: Our next question is from Mr. Antonio Hernandez from Actinver.

Antonio Hernandez: Just wanted to get a sense on Byte from a P&L perspective. I mean we all know that it’s part of the ecosystem and it’s not per se a P&L driver. But wanted to get a sense, I mean, you’ve already gained so much of a very large scale in a very short period of time. So if you can provide more light on that and maybe if there’s any specific target, that would be very helpful.

Paulo Garcia: Yes, Antonio, thanks. So I’ll say what the things that we have mentioned this about in the past. So Byte, I said to you, it’s in the past, guys, it’s already a profitable business. We always said that was not sole driver at the beginning as we were building it because we wanted, of course, helping people getting access to affordable phones, so to speak in affordable prices and also help the overall business. But we also see as the business is evolving, it can also get better, it can also contribute more overall even on a stand-alone basis. We have the view that this business can easily go and actually have an operating margins in line to what we have in the rest of the business in the near term. So that’s actually where we actually are heading to.

At the same time, as I said, and Cristian always talks about that, the role of this business is to help the core, right? That’s why actually I mentioned that the frequency — the ticket of the Byte customer is more than 2x the one that actually you see that’s a non-Byte. That’s actually what we’re also trying to push as we fulfill our purpose.

Antonio Hernandez: Okay. And do you have any idea of the scope that maybe you could achieve in terms of the amount of users?

Paulo Garcia: No, I’m not going to throw that number, but you can expect us to continue growing. I’m not going to put a number in the market that holds me accountable on that.

Operator: Our next question is from Mr. Alex Wright from Jefferies. Our next question is from Ms. Melissa Byun from Bank of America.

Melissa Byun: Can you hear me this time?

Paulo Garcia: Yes, Melissa.

Melissa Byun: Sorry about that. I had some technological difficulties, so I do apologize if this question has already been asked. But can you please provide some more context around the decision to reduce the Bodega Express assortment by more than 30%? How are consumers responding to cuts given the differentiation that’s historically been provided by the broad assortment? And should we think about this maybe as a broader shift in your strategy moving toward a narrower and more private label-oriented mix in the concept?

Paulo Garcia: Just say, Melissa, we actually answered this question just before. I’m not sure if you listen…

Melissa Byun: I did not but I can — sorry.

Paulo Garcia: Let’s do one thing, Melissa, we’ll try to elaborate a bit more on the question. So Paul, will add a few things to your benefit.

Paul Lewellen: Yes. I would tell you, our strength comes from a very diversified format portfolio, especially with Bodega. And when I think about Bodega, I think about value and I think about how critically important price is to value. I think about the experience that our customers have inside of our store. The assortment, to your point, is critically important. In our 2 smaller formats, though, space is a premium, and we want to make sure that we are dedicating space to the items that are producing the greatest amount of sales and sales results for our customers. Also, they’re tailored to our customers’ needs. And these are things that our customers have actually told us that they want more space dedicated. We don’t have a ton of backroom space in Bodegas as you know.

Most of it is stored on the sales floor on our top steel. So space is a premium. And I think the merchants and our commercial team have done a fantastic job in making sure that we have tailored the assortment and diversified the assortment to the customers that we serve. And the last thing I would say is that it’s all about trust and our customers trust us, especially in Bodega to deliver price, that value, that experience and the assortment in a lot of cases for a one-stop shop. So SKU rationalization and the way that we rationalize SKUs by category, it honestly is nothing different or anything that we don’t do on an annual basis across our commercial teams. So it is the right thing to do for these 2 formats. But again, the strength comes from the diversification of all 3.

Cristian Barrientos: If I may add, Melissa, in this point, maybe you know that I run this business a long time ago. And in a small format is so important availability. So the way to reach right numbers in availability came from our right assortment. So today, we’re taking advantage of the program that we have here in Mexico shop. So it’s an asset that we have today to run faster and have the right assortment for the customer. So we will improve availability. So immediately, sales came. So you can see numbers in the past in Bodega Aurrera Express what happened, and that’s the idea to evolve every year.

Operator: Our next question is from Mr. Felipe Rached from Goldman Sachs.

Felipe Rached: Sorry for the tech issue before. I hope you can hear me well now?

Paulo Garcia: Yes, perfect, Felipe.

Felipe Rached: Great. So I was wondering if you guys could share more details on what you expect to be the main drivers for the e-commerce acceleration going forward and whether you think any further investments will be necessary in that front. And still in this context, it would be very interesting to hear more on how the maturation process of the One Hallway initiative in Mexico so far compared to the one that you guys observed in the U.S. So anything you can share on that would be very interesting.

Paulo Garcia: Okay. Maybe we’ll try to answer the question and to…

Cristian Barrientos: So first of all, thank you, Felipe, for the question. As you saw in the report, we define — really important element to focus on the fundamental and the acceleration of e-commerce is critical here in Mexico and all over the world, and we have a huge opportunity. We — you saw the numbers. We are still depending in 1P in a few categories in the quarter that didn’t perform so well. We are evolving on demand. And as you mentioned, we are in the learning curve in One Hallway. But for us, I think the huge opportunity that we have today is to take advantage of the footprint that we have in Mexico to accelerate and accelerate speed to the customer and also reach more customer because today, we are serving not all the households here in Mexico because of — because we need to evolve our operational model to reach homes.

And we’re right now evolving that last quarter. We extend our reach and we added in our fleet, let me say, Valle de Bravo, San Miguel de Allende, some cities that we didn’t get because of the restriction that we had. And today, we are adding more cities. Next quarter, we’re adding more than 20 cities to reach that. So in summary, speed, reach and assortment will be critical for us, and we have the footprint, we have the team looking forward to accelerate more both business, both that Paul shared in the idea that we have today. We’re in a journey to unify our platform. So we will be ready to adapt or connect, let me say, as a global platform. So that allow us to receive the assortment from the U.S., the assortment from all over the world, in the Walmart world and in both sides.

But the most important part is we will receive, but we can deliver or we will deliver to the customer with the speed. And that’s the idea to increase assortment, reach and also accelerate the deliveries.

Paul Lewellen: Cristian, can we also talk about total availability. I think I would say the journey that we’re on from a store mapping, store location, modular integrity, on-hand accuracy and being able to fulfill the items on the shelf, the moment of truth in a very timely manner with precision and accuracy like we’ve never done before. This availability journey that we are on allows us to have real-time data down to an item level and where it is located across all stores, increasing our availability, improving our availability and our pickability of items for on-demand.

Cristian Barrientos: And helping customer, shoppers, pickers to be faster.

Paul Lewellen: That’s right.

Operator: Our next question is from Mr. Miguel Ulloa from BBVA.

Miguel Ulloa Suárez: Can you hear me?

Paulo Garcia: Yes.

Miguel Ulloa Suárez: Perfect. A couple on my side would be regarding the slowdown in e-commerce. Could you provide a little more color on categories or what happened in the whole market and how you are reading going forward?

Paulo Garcia: And Cristian to build on that well. We are still — when you think about the extended assortment, particularly 1P, but also marketplace, we still very [Technical Difficulty] categories like TVs, particularly during the season, when Buen Fin and Fin Irresistible didn’t perform so well. So therefore, that tends to impact us. And that’s when you see the e-commerce numbers, you see that our on-demand business pretty much grew almost 20%, but our extended assortment grew much less mid-single digit, and that was impacted by 1P. So that’s what an impact in the short term. As you know as well, we’re also going through the transition on One Hallway. And the goal of the One Hallway, of course, is to increase and broaden our assortment so that we can diversify the assortment.

And today, we have roughly 20 million SKUs. In the future, we can go up to more than 1 million SKUs in the next couple of years. So that’s the journey we are in. It’s a gradual implementation. It’s a gradual progress. We don’t expect to happen from one quarter to the other. But gradually, we’ll see improvements over and above the things that Cristian already talked about that we are 100% focused, which is speed and reach. So it’s about speed, reach and assortment.

Operator: [Operator Instructions] Our next question is from Mr. Alejandro Fuchs from Itau BBA.

Alejandro Fuchs: First of all, welcome, Paul, to Mexico and to Walmex, best of luck. I want to make 2 brief questions. The first one on same-store sales in Mexico. We saw a slight decrease in traffic and most of the growth coming from ticket. I wanted to see if you can maybe explain to us a little bit more color on how much of this is mix? How much of this is price? That will be the first one. And the second one, maybe for Paulo on gross margins. The improvement on the commercial front from lower shrinkage and general merchandise, how sustainable is this improvement on commercial margin going forward? And if you could give us maybe a little bit more color on those 2 general merchandise and on the food side, that will be very helpful.

Cristian Barrientos: Thank you, Alejandro. And first of all, I will begin with the traffic, as you mentioned, was negative almost flat, but we always see the trend. So we began the year with a more negative traffic in the first quarter, and we’re seeing a very good, let me say, response of the customer with the program that we’re putting in place. Q3, Q4 was almost 0. And as you know, and as you saw in the reports, we have seen an evolution of the focus and that we’re looking today in the fundamentals on the EDLP availability and e-com that those 3 are helping us to accelerate. And the idea in the coming months is to be very well prepared because we are waiting for the country to improve growth. You know very well that we ended 2025 with 0% growth in the market in — as a total Mexico.

We are expecting 1.5%. And we have a lot of data in other markets when you are very well prepared and the economy turn, you receive all these benefits in the future. So that is why we will be continue to focus on these 3 pillars that is crucial for the business, crucial for brick and also crucial for e-com. Recently, Paul mentioned that we are working very hard to mapping all our stores, all our items in the sales floors, also in backroom, trying to connect with e-com business and create more speed, more reach and take advantage of the assortment that we have. So that’s the idea to combine all together, and we will continue to focus on it, and we know we will be very well prepared when the economy turn a little bit. Okay? And the second one was?

Paulo Garcia: It was around margin. Thanks, Alejandro. Yes. So let me talk about — as you said, you’ve seen the improvement in the omnichannel margin was mostly from GM mix and shrink. Let me start from the second and then talk about the first. So the second one, yes, it’s an area that we are attacking. It’s an area because at the end of the day, it’s waste. And it’s ways that we better can elsewhere invested to invest in pricing for our customers. We’re putting a lot of energy there across all the teams. It’s an end-to-end process. It’s merchants, it’s operators, but everyone that is involved. And we are topping that up with AI tools and machine learning, whether that’s in terms of to optimize the replenishment, but it’s also improve the demand forecasting because we still have a little bit of manual process in the way we actually look at the perishables.

So that is something that we are really attacking left and center. On the general merchandise, Alejandro, goes a little bit what I also said to what on the e-commerce response or the extended assortment. So the categories that actually didn’t perform so well tend to be, as you know, categories that don’t enjoy the best margins as well. And as a result of that, of course, we tend to have a benefit on that. I think what you can expect from us going forward is the new business continue helping our margins, and we continue to invest behind the EDLP for our customers. And you, of course, might see volatility quarter-on-quarter as we always said it every single year.

Operator: That was the last question. I will now hand over to Mr. Salvador Villasenor for final comments.

Salvador Villasenor Barragan: Well, thank you very much for joining, and thank you for all your questions, and we hope to see you all at Walmex Day on March 25. Thanks again.

Cristian Barrientos: Thank you very much.

Paul Lewellen: Thank you.

Operator: Walmex would like to thank you for participating in today’s video conference. You may now disconnect.