Walmex post 2Q25: The impact is done: Upgrade to Outperform

Walmex’s stock has borne the cost, albeit too much in our view. Post 2Q25 results, Walmex’s stock has been heavily underperforming (10.3% down) the MEXBOL (1.7% down), reaching its lowest level since late 2020. While SSS and sales performed slightly above our estimates, margins were in our view the main drivers of the underperformance. Discount is in our view too deep to ignore. While we don’t necessarily expect Walmex to reach its historical valuation levels soon —5-year averages of 13.6x EV/EBITDA and 24.4x P/E—, we see current levels as an overreaction of the aforementioned margin underperformance, and our updated estimates lead to multiples above current levels of 9.4x and 17.4x, respectively, yet still well below the aforementioned averages.

2025E Outlook: We now forecast FY25 sales growth of 6.5% YoY, in the midpoint of the 6-7% guidance, as well as a slight (10bps) gross margin expansion. Nonetheless, we forecast an EBITDA margin of 9.9%, a 50bps YoY contraction amid an above-guidance expected growth of 11% in SG&A. After these changes, we raise Walmex to Outperform (from Market Perform), while slightly lowering our PT to P$63 (from P$65).

ANTAD June’s SSS of 4.7% further reflect the soft consumer environment. ANTAD’s figures represent an expected deceleration after the strong May performance (10.3%), as retailers faced some residual benefits from the Hot Sale, while we expected calendar headwinds from a weekend and biweekly paydays standpoint. Further color is presented after the Walmex results’ review.