(Bloomberg) -- Wal-Mart de Mexico has become the country's rock during the deepening coronavirus crisis. It's also the best performing local stock this year.
Walmex is up 4% so far in 2020, bucking a global rout that has sent the benchmark Mexbol index down 22% and sparked concerns about an impending recession. Walmex has also outperformed parent Walmart Inc., which is down 3.8%.
While Walmart in the U.S. faces aggressive competitors, Walmex dominates in Mexico, where it has 2,572 stores compared with just 810 for its closest rival Organizacion Soriana SAB. Its Great Value brand of products and low-income-oriented Bodega Aurrera stores are sought after by consumers, especially when times get tough, said Marisol Huerta, an analyst at Banco Ve Por Mas.
After weeks of panic buying, the company is set to keep running even as much of Mexico shuts down under a national emergency declared Monday night. All together, that makes Walmex one of the country's most defensive stocks, Huerta said in a telephone interview.
“In times of crisis, when the people are looking at prices, Walmex is very attractive,” Huerta said. “It knows what the market and the consumer want.”
Mexicans grew increasingly nervous in March watching the spike in coronavirus cases in Europe and the U.S. Stockpiling picked up, emptying shelves of sanitizing wipes and eggs -- even as President Andres Manuel Lopez Obrador downplayed the risks and told people to go out to eat, if they could afford it. Walmex said March 27 that it would remain open and was ready to face the crisis with “always low prices.”
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Pallets of tuna, crackers and mayonnaise were stacked near the checkouts of its big box and smaller supermarket formats. Elderly baggers were sent home. But the company said it is hiring 5,250 new employees across Mexico and Central America to meet rising demand.
Walmex is also backed by one of the most developed online delivery networks in the country, Huerta said. While e-commerce is a tiny fraction of total sales, Huerta said online sales are getting a big boost as Mexicans increasingly hunker down at home, and that trend will continue.
Itau BBA analyst Joaquin Ley said March same-store sales could be in the mid-to-high 20% range. At the same time, “panic purchases” could hurt profitability as consumers stock up on lower-margin staples over general merchandise, he said.
“While we are aware that most stocks and indexes are trading at a material discount to historical averages, Walmex's defensive nature in the current uncertain environment could prove supportive to the current valuation,” Ley said in a March 26 note where he raised his call on Walmex to market perform from underperform.
The stock has 11 buy ratings, 11 holds and one sell, according to analysts tracked by Bloomberg.
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