A day after cutting its expansion plan for this year, Wal-Mart de Mexico SAB, the unit that is under investigation after reports that it bribed Mexican officials to get stores open faster, saw its stock price tumble Thursday by the most since May.
The shares fell 5.1 percent in Mexico City, after earlier declining as much as 5.5 percent, the biggest intraday drop since May 31. The benchmark IPC index of 35 Mexican companies slipped 1.2 percent.
Bentonville-based Wal-Mart Stores Inc.’s Mexico subsidiary will open between 325 and 335 locations in Mexico and Central America this year, down 23percent from its previous estimate of as many as 436, according to a statement to the Mexican stock exchange Wednesday. New steps required to open a store set back development plans by 60 days to 90 days, Wal-Mart de Mexico said.
“It’s bad news” and the delays are likely to hurt the stock’s performance, Raul Ochoa, an analyst at Interacciones Casa de Bolsa, said in a telephone interview Wednesday from Mexico City. “We’re talking about a whole quarter. That’s a lot of lost sales days.”
Ochoa said he’s reviewing his buy recommendation.
JPMorgan Chase & Co. slashed its 2012 earnings estimate by 8.2 percent after the announcement, according to an e-mailed research note from analysts including Andrea Teixeira, who has a neutral recommendation on the stock.
There’s “no indication of how long it may take for the company to be out of the bribery investigation, which adds more uncertainty,” the JPMorgan analysts said in the note. “If the investigation drags on for long, the company will continue to grow its salesarea at a single-digit pace.”
JPMorgan now projects 8 percent growth in store sales space in 2012 and 2013, the note said.
In April, the world’s largest retailer confirmed that it had started a probe into its Mexican operations in response to allegations that executives bribed officials to accelerate expansion. The U.S. Justice Department and the U.S. Securities and Exchange Commission are also investigating.
Officials at Wal-Mart Stores Inc. have been sued by a group of New York pension funds on allegations of mismanagement in failing to prevent bribery.
Investors including the New York City Employees’ Retirement System, Police Pension Fund, Fire Department Pension Fund and Board of Education Retirement System contend that company officials were dutybound to control “widespread corruption” and a subsequent cover-up at Wal-Mart de Mexico, according to a complaint filed on June 11 in Delaware Chancery Court.
Last year, Walmex, as it is known, generated about 21 percent of Wal-Mart’s international sales growth.
More than half of the Mexican locations are relatively small Bodegas Aurrera stores. Theirsuccess prompted Wal-Mart to use them as the inspiration for new, small-format locations in the U.S. and elsewhere in Latin America.
In the past decade, Wal-Mart de Mexico expanded its stores by an annual average of 37 percent, outpacing Mexico’s economic annual growth average of 1.3 percent for the same period by 29 times.
Mexico may grow between 3.5 percent and 4 percent this year, central bank Gov. Agustin Carstens said Wednesday.
In Mexico, Wal-Mart also put several retail concepts on one patch of real estate. Configurations include a large discount store, Sam’s Club, Suburbia apparel store and a Vips restaurant, all facing one parking lot.
The changes for real-estate developments in Mexico seek to “improve documentation,” Walmex spokesman Antonio Ocaranza said in a telephone interview. He declined to comment about the bribery investigations.
In New York, Wal-Mart shares fell 1.2 percent Thursday to $67.70, on a day when the overall market was down more than 2 percent.
Information for this article was contributed by David Welch of Bloomberg News.
Business, Pages 21 on 06/22/2012