Walmart's Mexico unit considers 'strategic alternatives' in Central America

© Reuters. FILE PHOTO: Men walk past the logo of Walmart outside a store in Monterrey, Mexico February 12, 2018. REUTERS/Daniel Becerril/File Photo

MEXICO CITY (Reuters) -Walmart's Mexico unit said on Monday it is considering "strategic alternatives" to its operations in Central America, including a sale or joint venture, a move analysts said would help it focus on the more profitable Mexican market.

Walmart (NYSE:WMT) de Mexico, known locally as Walmex, runs about 860 stores in Central America, making up almost a fourth of its footprint.

"We think there can be attractive opportunities for greater growth in El Salvador, Honduras and Nicaragua," the company said in a statement.

"These alternatives could include, but are not limited to, potential joint ventures, partnerships or strategic alliances, a sale, or other transactions."

Walmex opened 31 new stores - 28 in Mexico and three in Central America - during the third quarter of 2021.

Sales slid at the retailer's supermarkets in Central America during the pandemic, but in the third quarter last year each country logged an increase in same-store sales, led by Honduras.

Walmex in Central America operates https://www.reuters.com/companies/WALMEX.MX discount stores, supermarkets, hypermarkets, warehouse stores and wholesale-price membership stores.

"The company is choosing to focus on its strongest markets and leave in other hands the operations of some countries that are undergoing complex political and sanitary situations," said Alejandra Marcos, senior analyst in Intercam.

The changes will not reach the entire region, since the announcement does not include operations in Costa Rica and Guatemala, but Intercam analysts said Mexico was the company's "crown jewel".

Barclay's analysts Benjamin M. Theurer and Antonio Hernandez said Walmex had "some work to do" in the Mexican market after underperforming peers like Chedraui and La Comer.

Walmex's revenue in Central American totaled 30 billion pesos ($1.5 billion) in the third quarter of 2021, up 13.9% from the same period a year earlier, according to a company filing.

Walmex's operating income in Central America grew 22.4%, and the earnings before interest, taxes, depreciation and amortization increased 14.6%, reaching a 9.1% margin in the same period.

($1 = 20.5800 Mexican pesos)