© Reuters. FILE PHOTO: A Walmart sign is pictured inside a Walmart store in Mexico City, Mexico March 28, 2019. REUTERS/Edgard GarridoGLOBAL BUSINESS WEEK AHEAD


MEXICO CITY (Reuters) -Walmart’s Mexico unit posted a nearly 12% quarterly net profit increase as tighter operations and new income streams largely offset higher expenses amid swelling inflation, a day after its parent posted a profit warning.

The retailer’s Mexican net profit of 10.89 billion pesos ($540.84 million) and revenue of 195.62 billion pesos for the April-June period both slightly outdid a consensus of analyst estimates, the same day shares slid following a slashed profit forecast from Walmart (NYSE:) over inflation concerns.

The retailer has vowed to work with suppliers to drive prices down, and credited logistics efficiencies along with income from advertising, mobile services and a financial services app with helping compensate for a 13% jump in expenses across Mexico and Central America.

It also touted more self-checkout counters and digital processing systems as methods that have boosted productivity.

“We’re administering costs efficiently and focusing on simplifying our business to be able to compensate this impact,” the company said in a statement accompanying results. “We were able to keep the base of operating expenses stable.”

The company known locally as Walmex also said it planned to keep up spending in its workforce, calling it a key investment area that had helped reduce turnover.

In addition to same-store sales up in Mexico, online shopping in the company’s core market has now pulled past 5% of total sales, compared with 4.6% in the first three months of the year.

Mexican brokerage Monex called the results positive overall, but noted Walmex will need to diversify products and formats into 2022 to appeal to price-conscious shoppers.

“Greater competition in the sector will persist due to the focus on prices,” Monex said in a report.

Walmart de Mexico said its earnings before interest, taxation, depreciation and amortization (EBITDA) margin slid to 10.3% from 10.4% a year earlier, while the gross and operating margins ticked up just slightly from the second quarter of 2021.

($1 = 20.1353 pesos at end-June)

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