David Hay — Friday POW!: Walmart de México (Walmex / WMMVY) — the nearshoring HALO franchise
"The dominant consumer franchise in the fastest-growing large retail market in the Western Hemisphere" at ~1× sales — a margin-compression selloff, not a franchise-deterioration one, sitting firmly in the outperforming HALO theme.
One-line take: This week's POW! is Walmart de México (Walmex; BMV: WALMEX*, US ADR: WMMVY) — the dominant retailer in Mexico/Central America (2,600+ stores, six formats, 32.5% organized-retail share, 130M-person market). The 2025 margin pressure was a deliberate management choice (price cuts to take share — it beat the ANTAD benchmark 9 straight periods), not deterioration, so the post-Q4 selloff (net profit −3.9%, two analyst downgrades) "misses the point." Forward levers: ~3.9% 2026 SSS guide, the "One Hallway" digital integration moving build→harvest, AI-logistics DCs cutting costs 15–20%, rising private-label mix. The structural tailwind is nearshoring (Mexico FDI $34.3B H1-25, +10%; northern manufacturing wages +15–20%) plus an 18%-CAGR e-commerce market ($6B capex alongside Amazon) and a USMCA supply-chain moat (83% domestic sourcing). At ~18× fwd / ~1× sales (vs FEMSA ~22×, WMT ~1.4× sales), 14.5% ROIC, 2.9% growing dividend, beta 0.18. Consensus MX$66.32 (~20%), bull MX$81 (~46%). A defensive "boring" HALO hold; FX/peso and a prolonged Hormuz closure are the main risks.
1. Stocks & names mentioned
| Ticker | Name | Research | View | What he said | At |
|---|
| WMMVY | Walmart de México (Walmex; ADR — BMV: WALMEX*) | QT · SA | Positive | Pick of the Week — Walmex, the dominant Mexico/Central-America retailer (32.5% organized-retail share, 2,600+ stores). 2025 margin pressure was a deliberate share-taking choice (beat ANTAD 9 straight periods), not deterioration, so the post-Q4 selloff (−3.9% profit, MS/Barclays downgrades) is overdone. Levers: ~3.9% 2026 SSS, "One Hallway" digital integration (build→harvest), AI-logistics DCs (−15–20% cost), rising private-label mix. Structural tailwinds: nearshoring (FDI $34.3B H1-25, northern wages +15–20%), 18%-CAGR e-commerce ($6B capex vs Amazon), USMCA 83%-domestic-sourcing moat. ~18× fwd / ~1× sales (FEMSA ~22×, WMT ~1.4× sales), 14.5% ROIC, 2.9% dividend, beta 0.18. Consensus MX$66.32 (~20%), bull MX$81 (~46%). A defensive HALO hold; FX/peso + prolonged Hormuz the risks. | read |
| FMX | FEMSA (incl. OXXO; ADR) | QT · SA · STK · FA | Neutral | Valuation peer — FEMSA's retail business (incl. OXXO), "Walmex's biggest competitor," trades at ~22× earnings, the comp that makes Walmex's ~18× look cheap. Not a call on FMX. | read |
| WMT | Walmart Inc (parent) | QT · SA · STK · FA | Neutral | Parent / valuation reference — Walmart Inc, the "slower growing parent (at least longer term)," trades near 1.4× sales vs Walmex's ~1×, framing the relative cheapness of the Mexican franchise. Not a standalone call. | read |
References only (not standalone tickers): Amazon (the comparable ~$6B e-commerce investor in Mexico); ANTAD (the Mexican retail-industry benchmark); Walmex's formats (Bodega Aurrerá, Sam's Club). Walmex prices are in Mexican pesos (MX$). The bottom "Buy List" / "Holds/Trims" lists render as images and are not text-readable — only the text footnotes ("APA shifted to H/T List", "NTR shifted to Buy List") are captured, noted in prose only; portfolio.json is unchanged.
2. Talking points
The franchise — Mexico's dominant retailer
- 2,600+ stores across six formats, 32.5% share of Mexican organized retail, the consumer-staples backbone for 130M people across Mexico and Central America.
- Sitting at MX$57.96, well off the MX$67.34 52-week high; the bull case is the market pricing continued margin pressure without crediting what Walmex is building.
The earnings miss isn't the whole story
- Q4-25: net profit −3.9% to 14.60B pesos (vs 16.68B consensus), revenue +3% to 282.85B (also light); MS and Barclays downgraded on margin concerns.
- The 2025 margin pressure was a management choice — CEO Ignacio Caride invested in price cuts to hold/gain share into a weak, peso-pressured, trading-down consumer. It worked: beat the ANTAD benchmark 9 consecutive periods, gaining share in Mexico and Central America. "A trade-off we respect."
- Forward picture differs: ~3.9% 2026 SSS guide with the bulk of the investment behind it; "One Hallway" digital integration moving build→harvest; new Bajío/Tlaxcala AI-logistics DCs to cut logistics costs 15–20%; private-label mix pushing to the mid-20s%.
Nearshoring — the structural tailwind
- Mexico drew $34.3B FDI in H1-25 (+10% YoY, 36% into manufacturing). Northern manufacturing wages (Monterrey, Cd. Juárez, Tijuana, Bajío) run 15–20% above national averages; retailers there see double-digit discretionary SSS. Walmex's Bodega Aurrerá and Sam's Club skew to exactly these corridors.
E-commerce — the second inning
- Mexican e-commerce $52.6B (2025) → $62.2B (2026), ~18% CAGR through 2031; smartphone penetration >85%, digital-wallet adoption +21% CAGR. Walmex committed $6B alongside Amazon's comparable bet — the two most capable operators both wagering the digital-grocery opportunity is large. Walmex's store density (unmatchable quickly) + cross-income brand trust is the edge over a pure e-tailer.
USMCA supply chain — a widening moat
- Sourcing 83% domestically (Chinese imports cut from 80% to 60% since 2018) insulates Walmex from tariff volatility — primarily a cost-structure story: domestic sourcing is more responsive, easier to replenish, increasingly competitive as Mexican manufacturing grows.
Valuation — a discount to history and peers
- ~19.4× trailing / 18× forward (low end of its range) vs FEMSA's retail ~22×; ~1× P/S for a 32.5%-share, 14.5%-ROIC business in a growing market ("looks obvious in retrospect"). WMT, the slower-growing parent, trades ~1.4× sales.
- Consensus PT MX$66.32 (~20% upside); bull MX$81 (~46%, modest re-rating on margin recovery). 2.91% well-covered, growing dividend; 20%+ ROIC; no balance-sheet risk — "paid to wait for the margin recovery," a 2026 event per management.
Technicals & the defensive case
- Consolidating/basing after a pullback; held above the MX$50.79 52-wk low through real pressure (institutional support). MX$55-57 is support; a move back through MX$60 on a Q1 beat / positive ANTAD print / margin stabilization would confirm the base.
- Mexican staples are relatively insulated from oil/Hormuz noise; beta 0.18 makes Walmex a portfolio stabilizer as much as a growth name.
Arguing the other side
- Multiple YoY profit declines in 2025; the "investing for the long term" narrative has a credibility limit (MS's Underweight: margin recovery "keeps getting pushed to the next quarter"). A still-weak H1-26 consumer could make the 3.9% SSS guide optimistic.
- Peso depreciation risk — a weaker MXN inflates import costs and erodes consumer purchasing power; the Iran-War/oil risk-off hits EM currencies. FX translation must be sized for USD investors. No confirmed uptrend yet; a months-long (vs weeks) Hormuz closure would drag the shares.
- Counterpoint: at 18× fwd / 2.9% yield / 14.5% ROIC / 32.5% share, much bad news is priced; share gains every quarter of 2025 mean the pressure is from investment, not displacement — "very different problems" the market is pricing identically.
3. In plain English
WMMVY — Walmart de México (Walmex) Positive
Walmex is Walmart's Mexican arm — by far the biggest retailer in Mexico and Central America, with over 2,600 stores (including Bodega Aurrerá and Sam's Club) and about a third of the country's organized retail market. Its profit dipped last year and the stock sold off, but Haymaker argues that's misunderstood: management chose to cut prices to win customers from rivals during a tough economy, sacrificing short-term profit to grab market share — and it worked, beating the industry for nine quarters straight. With most of that spending now done, profit margins should recover in 2026. (US investors can buy it as the WMMVY ADR; it's listed in Mexico as WALMEX*, and prices in the article are in pesos.)
The bigger reason to own it is "nearshoring" — companies relocating factories to Mexico to be near the U.S., which is pouring money and high-paying jobs into exactly the regions where Walmex's stores are concentrated. Add a fast-growing online-shopping market (Walmex is investing $6 billion, matching Amazon) and a supply chain that now buys 83% of its goods locally (shielding it from tariffs), and you have a dominant, defensive business trading unusually cheap — about 1× sales and 18× earnings, with a ~3% dividend and a 14.5% return on capital. It's the kind of steady, "boring" compounder that holds up when markets are jittery (its share price barely moves with the market). The main risks are a falling Mexican peso and a prolonged Middle East oil shock. Analysts see ~20% upside, with a bull case near 46%; Haymaker is a patient buyer.
Summary derived from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.