Good morning, everyone. I'm Salvador Villaseñor, Head of Investor Relations at Walmex, and I want to thank you once again for joining our live Q&A session following our fourth quarter and full year 2025 earnings release, which was published yesterday. As always, we will make an effort to answer as many questions as we, as we can in the 45 minutes we have scheduled for this call. As according to others, once again, we kindly ask you to limit yourself to one question only. Joining me today is Cristian Barrientos Pozo, President and CEO, Paul LeCain, our Chief Omnichannel Operating Officer, and Paulo Garcia, our Chief Financial Officer. We'll now go right straight away to the first question.
We will now start the Q&A session. If you have any question, please press the Question button in the browser. Please make sure you are not in full screen mode to see the button. The first question is from Mr. Benjamin Theurer from Barclays. Please go ahead.
Hey, good morning. Can you guys hear me, see me?
Yes.
Yes, hi, Ben.
Hi. Perfect. Thank you very much. Good morning, and, thanks, thanks for giving us opportunity to to ask questions. So I wanted to get a little bit your sense as you look at the market in Mexico, and in the presentation yesterday, it was very clear there's lots of differences between regions but also within formats. So wanted to understand what are your targets for 2026, how to potentially address these issues, be it on a regional side and/or on a, on a format side? What are the things that you can do that are under your control to tackle what seems to be still a somewhat challenging environment? Thank you.
Yeah. So first of all, Ben, on targets and guidance for the year, we'll, we are still elaborating on that and probably hear more about that in terms of the Walmex day. I think when you think about the environment, you know, it's still relatively soft. We still expect the environment to be still probably relatively soft in the first half of the year. A good thing, as you know, we all know the day is the GDP growth expectation for the year is better than actually what we had in 2025. You know, that's roughly 1.5%. I think two things that I'll say before I pass the baton, whether Cristian or Paul want to add up on that.
One is, so what we're seeing in a banner like Bodega in these moments tends to shine further. We talked about the fact that Bodega increasing the penetration in the households of the lower income, and that is helping us. But at the end of the day, you know, the strengths of our portfolio is the overall portfolio that we have. And you've seen that across all the last quarters, not very dissimilar performance, if you think about Bodega, Sam's and Walmart. Maybe Walmart Express at times a little bit more volatile, but a very tiny part of our portfolio, as you know, roughly 2%. But maybe Paul or Cristian-
Yeah.
Can you elaborate a little bit more on what we are doing with the banners in particular?
Yes.
So hi, Ben, and from my perspective, I think, we are expecting a different year, 2026, compared with 2025, as Paulo mentioned. We have seen in other markets, how relevant is, as you mentioned, what is in our control today to be prepared when the numbers came, let me say, in growth in the market, we will be very benefited. We have seen other markets, as I told you, that we can accelerate 3-4x above the market if we're very well prepared. So that is why the focus will continue in EDLP, availability and of course, the acceleration of e-commerce, that it's going to be prepared in the future, maybe near future, because it will happen this year. So that's the focus of the total company.
Perfect. Thank you very much.
Thank you.
Thank you very much for your question. Our next question is from Mr. Alejandro Fuchs from Itaú BBA. Please go ahead.
I think, I think you're on mute. Alejandro, I think you're on mute. Okay. So let's go to the next question, and we come back to Alejandro.
Our next question is from Mr. Froylan Mendez from JPMorgan. Please go ahead.
Hello, guys. Thank you very much for taking my question. I wanted to ask about private label within your EDLP strategy. What role does it play? What level of penetration should this reach in the midterm under this new enhanced EDLP strategy? And what could the impact on margins be from pushing further into the private label?
Well, thank you, Froy. And, you know, maybe you saw in the report that we are focused as a company in deliver EDLP, improve availability and accelerate e-commerce. And in EDLP, EDLP is not only about a price gap, it's a business strategy that differentiate us from the rest of the market. And included in EDLP, private brands play a very important role, the same as the assortment, supply chain, modules, all this stuff. So, for us, private brands is really important, and we have seen in Q4 good evolution of the penetration inside of Walmart. And, so particularly in Bodega, as you saw also the numbers, Bodega was the highest accelerator in sales during Q4. And, in Bodega, private brand plays a super important role.
So we are seeing a room to improve, a room to grow. We are leveraging in all the markets with a different brand that we have today in, in Mexico. But you know, it's a, it's a clear differentiator for us today. So that's, that's the information that we have today to share with you in terms of penetration, acceleration, all this stuff. So... And also, as, as I mentioned before, EDLP, there is a lot of metrics, but at the end, we're looking for increase our price perception, and, and private brand plays a super important role there. And we have a very good quarter in terms of how we accelerate price perception, and, and private brand was one of the key elements there. So I don't know if you-
Just maybe on numbers, because there were two questions directly on numbers and margin of private brands, building on what Christian said. I think on where we need to go, we said that a couple of times throughout in the past. We want to be in the mid-20s penetration minimum, and that mostly focus in the Bodega. So there's a lot of room to improve, which things Christian was saying that we need to do. But adding more product, more products in categories, and we have lots of white spaces into price points. To the second question, private brands margins. Our brand—Our margins today of private brands is higher than what we have in A brands, but tends to be also the portfolio.
One of the things I want to make it clear, because once there was a doubt, we don't manage private brands for margin. We do manage private brands for the EDLP to help the customer save money and live better with the enterprise points. Of course, there will be categories that we will be having better margins. So as you can imagine, in food and consumables is roughly similar to what we have in A brands. We do have higher margins, in particular in the areas of seasonal entertainment. In the commodities, as you can expect, because it's a commodity, we'll have lower margins than A brands. So but of course, we, we play with it, but we, we manage for what's relevant for the customer.
Excellent. Thank you very much.
Thank you.
Thank you very much for your question. Our next question is from Mr. Ulises Argote from Santander. Please go ahead.
Hi, guys, good morning.
Good morning
... question that I had was trying to get a bit more sense and a bit more detail on those 15 basis points gross margin improvement that we saw in Mexico coming from the other businesses. So just wanted to get your thoughts on how should we think about this kind of trending forward. Are this the initial levels and how much more runway is there left for this? And maybe if you can comment a little bit on which of the businesses actually are becoming more relevant and are contributing more here at the gross margin level. Thank you.
Hit on that one. So as you can see, our new business has been contributing steadily over a quarter-on-quarter, roughly around 20 basis points, sometimes a little bit more than that, in this case, a little bit less, as you've seen it, Ulises. The big one, which is actually becoming more and more relevant, is Walmart Connect, immediately followed, of course, by BAIT. In this particular quarter, Ulises, as you've seen it from what we said in the webcast, Walmart Connect was not the one that drove the most of this improvement. Actually, tended to be in around in the space of the financial solutions as well as BAIT. These were the ones that contributed.
You've seen the size of BAIT these days, so contributing both in terms of the revenues as well to the PNL on a standalone basis. We always say two things about the business, right, Ulises? I will refresh that. One, of course, we do look at them on standalone basis because it's good practice. We need to make sure that they deliver. But of course, the sole reason why they are here is to fold, one, to deliver a pain point of the customer, and now they actually helped overall the core of the business, either more frequency or more average ticket being higher. And that's what we are seeing with some of these businesses. For instance, a customer that is in BAIT, the average ticket is more than two times what we see in a customer that's non-BAIT.
So that's what we are pushing. The other thing that we're doing, at the same time, we're using these funds to continue progressing and investing in the margins, in more EDLP, in order to fuel the growth. In this particular one, our margin was higher, as you've seen it. Though, as we said, it can be volatile, but that's how we actually approach this area.
Thank you very much. Perfect. Very clear.
Thank you.
... Thank you very much for your question. Our next question is from Mr. Felipe Rached from Goldman Sachs. Please go ahead.
Hi, guys. Can you hear me?
Hi. Yes.
Yes.
Hi. Yes, Felipe.
Yeah?
It's good. It's good. Go ahead.
Can you guys hear me?
Yes, it's good.
Well, okay, great.
No, now, no. Now we don't. Now we don't. He's not looking at us. Oh.
Felipe?
Let's move on to the next one.
Yeah.
Our next question is from Ms. Melissa Nguyen from Bank of America. Please go ahead.
Melissa, can you hear us?
Ms. Yun, you are muted. Please unmute your mic.
Look up ourselves.
Our next question is from Mr. Álvaro García from BTG Pactual. Please go ahead.
Good morning, gentlemen. Can you hear me?
Yeah.
Yeah, sure.
Great. Awesome. I have a few questions. The first one on reducing the number of SKUs at Bodega Aurrerá Express by 30%. I was wondering if you can give some more comments on that. And the second one for Paul. Paul, nice to meet you.
Nice to meet you.
I was wondering, you know, as part of your sort of onboarding onto Walmex, into what Mexico and Central America look like as retail markets, if you could maybe share your sort of first take or your first impressions on how different Mexico is relative to the U.S. market, and what that means from a playbook standpoint, for Walmex?
Sure. Thank you for the question, Alvaro. I've been with Walmart for over 35 years, and I would say that we have more in common than we do different. And I would say the biggest similarity is around culture, and our people are definitely an enabler of our success. And from a global leverage standpoint, I think the way that I would describe it is that Walmart has no boundaries. So when we're looking at either technology, AI, global leverage, we're able to take best practices from around the world and apply them globally. And that's exactly what we're doing this year in Walmart Mexico.
Just a few examples of that, that I would give is when you think about how there are no boundaries, and we can enable the stores from an AI and technology standpoint, you could start at the front end, with Coastal, which is a global platform which allows our registers to run the same around the world. You can go to the sales floor, where we have the same tools and same, technology to speed up, the way that we process freight from the back room to the sales floor, the accuracy of our own hands, the availability of our products, the availability of what we can pick, and what is available inside of our catalogs for our customers to purchase, regardless of where, when, and how they want to shop.
And then I would lastly say, from an inventory standpoint, whether it's our logistics system and the exciting technology that we're implementing there in Mexico, and how that's going to enable us in the stores to get more efficient. I would say we're more alike than we are different. Speed is critically important to us this year in Mexico, and I think you're going to see that, and it's going to come through loud and clear.
Great. Thanks.
On the SKU, on the SKUs.
Yes, on the SKUs and Bait, I can tell you not only in Bait, but in Mi Bodega, the 30% reduction or SKU rationalization is a process that we are undergoing right now. Space is critically important, and devoting the majority of our space to those items that drive the most sales and the most traffic inside of our stores, it's nothing new about that. We're constantly reevaluating our assortment across all of our banners. But these two are very, very important as it comes or relates to our purpose, which is saving people money so that they can live better. And that also drives our price and our price perception.
Wonderful. I'll sort of get back in the queue. Thank you very much. Nice meeting you.
Thank you.
Thank you very much for your question. Our next question is from Mr. Antonio Hernandez from Actinver. Please go ahead.
Hi, good morning. Thanks for taking my question. Do you wanted to get a sense on Bait from a PNL perspective? I mean, we know, we all know that it's part of the ecosystem, and it's not per se a PNL driver, but wanted to get a sense. I mean, you've already gained so much of a very large scale in a very short period of time. So if you can provide more light on that, and maybe if there's any specific target, that would be very helpful. Thanks.
Yeah, Antonio, thanks. So I'll say what the things that we have mentioned this about in the past. So BAIT, I said to you, it's in the past, guys, it's already a profitable business. We always said that was not so driver at beginning as we were building it, because we wanted, of course, helping people getting access to affordable phones, so to speak, and affordable prices, and also help the overall business. But we also see as the business is evolving, it can also get better, it can also contribute more to overall, even on a standalone basis. We have the view that this business can easily go and actually have an operating margins in line to what we have in the rest of the business in the near term.
So that's actually where we actually are heading to. At the same time, as I said, and Cristian always talks about that, the role of this business is to help the core, right? That's why actually I mentioned that the frequency, the ticket of the BAIT customer is more than 2 times the one that actually you see that's a non-BAIT. That's actually what we're also trying to, to push as we fulfill our purpose.
Okay. And do you have any idea of the scope that maybe you could achieve in terms of the amount of users?
No, I'm not going to throw that number, but you can expect us to continue growing. I'm not going to put a number in the market that hold me accountable on that.
Mm-hmm. Thank you very much.
Appreciate it. Thanks so much.
Thank you, Antonio.
You're welcome.
Thank you very much for your question. Our next question is from Mr. Alex Wright from Jefferies. Please go ahead. Our next question is from-
Can we proceed?
-Ms. Melissa Nguyen from Bank of America. Please go ahead.
Hi, can you hear me this time?
Yeah.
Yeah, Melissa.
Okay.
Yes.
Sorry about that. I had some technological difficulties, so I do apologize if this question's already been asked. But it—can you please provide some more context around the decision to reduce the Bodega Express assortment by more than 30%? How are consumers responding to cuts, given the differentiation that's historically been provided by the broad assortment? And should we think about this maybe as a broader shift in your strategy, moving toward a narrower and more private label-oriented mix in the concept? Thank you.
Just say, Melissa, we actually answered this question just before. Not sure if you listened.
I-
If you-
... Sorry.
Okay.
I did not. But I can... Sorry.
Let's do one thing, Melissa. We'll, we'll try to elaborate a bit more on the, on the question. So Paul will add, will add a few things to your benefit.
Yeah. I would tell you, our strength comes from a very diversified format portfolio, especially with Bodega. And when I think about Bodega, I think about value, and I think about how critically important price is to value. I think about the experience that our customers have inside of our store. The assortment, to your point, is critically important. In our two smaller formats, though, space is a premium, and we want to make sure that we are dedicating space, space to the items that are producing the greatest amount of sales and sales results for our customers. Also, they're tailored to our customers' needs. And these, these are things that our customers have actually told us, that they want more space dedicated. We don't have a ton of back room space in Bodegas, as you know.
Most of it is stored on the sales floor on our top steel. So space is a premium, and I think the merchants and our commercial team have done a fantastic job in making sure that we have tailored the assortment and diversified the assortment to the customers that we, we serve. And the last thing I would say is that it's all about trust, and our customers trust us, especially in Bodega, to deliver price, that value, that experience and the assortment, in a lot of cases, for a one-stop shop. So SKU rationalization and the way that we rationalize SKU, SKUs by category, it honestly is nothing different or anything that we don't do on an annual basis across our commercial teams. So it is the right thing to do for these two formats. But again, the strength comes from the diversification of all three.
If I may add, Melissa, at this point, maybe you know that I ran this business a long time ago, and, in a small format, it's so important, availability. So the way to reach right numbers in availability came from a right assortment. So today, we're taking advantage of the program that we have here in Mexico.
... so it's an asset that we have today to run faster and have the right assortment for the customer, so we will improve availability. Immediately, sales came. You can see numbers in the past and where Express what happened, and that's the idea, to evolve every year.
Great. Thank you so much for the additional coloring, and apologies for the redundancies.
You're welcome, Melissa.
Thank you.
Thank you very much for your question. Our next question is from Mr. Felipe Rached from Goldman Sachs. Please go ahead.
Good to see you.
Hey, guys. Sorry for the technical issues before. Hope you can hear me well now.
Yeah, perfect, Felipe.
Great. Great. So I was wondering if you guys could share more details on what you expect to be the main drivers for the e-commerce acceleration going forward, and whether you think any further investments will be necessary in that front. And still in this context, it would be very interesting to hear more on how the maturation process of the One Hallway initiative in Mexico so far, compared to the one that you guys observed in the U.S. So anything you can share on that would be very interesting. Thanks.
Okay. Maybe we'll try to answer the question.
Yeah.
You talk about it.
So first of all, thank you, Felipe, for the question. As you saw in the report, we defined three big, or really important element to focus on the fundamental, and the acceleration of e-commerce is critical here in Mexico and all over the world, and we have a huge opportunity. You saw the numbers. We are still dependent in 1P or in a few categories in the quarter, that didn't perform so well. We are evolving in one, in On Demand. You know, as you mentioned, we are in a learning curve in One Hallway.
But for us, I think the huge opportunity that we have today is to take advantage of the footprint that we have in Mexico to accelerate and accelerate speed to the customer, and also reach more customer. Because today we are serving not all the households here in Mexico because we need to evolve our operational model to reach homes. And we're right now evolving that. Last quarter, we extended our reach, and we added in our fleet, let me say, Valle de Bravo, San Miguel de Allende, some cities that we didn't get because of the restrictions that we had, and today we are adding more cities. Next quarter, we're adding more than 20 cities to reach that.
So in summary, speed, reach, and assortment will be critical for us, and we have the footprint, we have the team. Looking forward to accelerate more both business both. I've mentioned that Paulo Garcia shares in the idea that we have today. We're in a journey to unify our platform, so we will be ready to adapt or connect, let me say, as a global platform. So that allow us to receive the assortment from the U.S., assortment from all over the world, in the Walmart world, in both sides. But the most important part is we will receive, but we can deliver, or we will deliver to the customer with the speed. That's the idea, to increase assortment, reach, and also accelerate the deliveries.
Cristian, can we also-
Yes.
Talk about total availability? I think I would say the journey that we're on from a store mapping, store location, modular integrity, on-hand accuracy, and being able to fulfill the items on the shelf, the moment of truth, in a very timely manner with precision and accuracy like we've never done before. This availability journey that we are on allows us to have real-time data down to an item level and where it is located across all stores, increasing our availability, improving our availability, and our pickability of items for on demand.
Helping customer-
Absolutely.
shoppers, pickers, to be faster.
That's right.
Great. Very clear. Thanks, guys, and apologies again for the technical issues.
No, no, no.
It's okay. It's okay, Felipe.
Thank you very much for your question. Our next question is from Mr. Miguel Ulloa from BBVA. Please go ahead.
Hi, guys. Can you hear me?
Yes.
Yes.
Perfect. A couple on my side would be regarding the slowdown in e-commerce. Could you provide a little bit more color on categories or what happened in the whole market, and how you are reading going forward?
Christian, feel free to build on that one. We are still in... When you think about extending assortment, particularly when 1P, but also marketplace, we're still very... The categories like TVs, laptops, during, particularly during the season, the one thing and furious didn't perform so well. Therefore, that tends to impact us, and that's when you see the e-commerce numbers. You see that our on-demand business pretty much grew almost 20%, but our extended assortment grew much less, mid-single digit, and that was impacted by 1P. That's what it impacted in the short term. As you know as well, we're also going through the transition on One Hallway, and the goal of the One Hallway, of course, is to increase, broaden our assortment so that we can diversify the assortment. Today, we have roughly 20 million SKUs.
In the future, we can go up to more than 100 million SKUs in the next couple of years. So that's the journey we are in. It's a gradual implementation. It's a gradual progress. Don't expect to happen from one quarter to the other, but gradually, we'll see improvements over and above the things that Kristen already talked about, that we are 100% focused, which is speed and reach. So it's about speed, reach, and assortment.
Thank you very much.
You're welcome.
Thank you again.
Thank you very much for your question. As a reminder, if you have a question, please press the question button in the browser. Please make sure you are not in full screen mode to see the button. Our next question is from Mr. Alejandro Fuchs from Itaú BBA. Please go ahead.
Thank you, operator. Hola, Cristian, Paulo. Paul is-
Hola.
Thank you. Thank you for the space for questions. First of all, welcome, Paul, to Mexico and to Walmex. Best of lucks. I want to make two brief questions. The first one on same-store sales in Mexico. We saw a slight decrease in traffic, and most of the growth coming from ticket. Wanted to see if you can maybe explain to us a little bit more color on how much of this is mix, how much of this is price? That'll be the first one. The second one, maybe from Paulo, on gross margins. The improvement on the commercial front, from lower shrinkage and general merchandise, how sustainable is this improvement on commercial margin going forward?
And if you can give us maybe a little bit more color on those two, general merchandise and on the food side, that'll be very helpful. Thank you.
Super. Thank you, Alejandro, and first of all, I will begin with the traffic. As you mentioned, was negative, almost flat, but we always see the trend. So we began the year with more negative traffic in the first quarter, and we're seeing a very good, let me say, response of the customer with the program that we're putting in place. Q3, Q4, we saw almost zero. And as you know, and as you saw in the reports, we have seen an evolution of the focus and that we're looking today in the fundamentals from the DLP, availability, and e-com, that both... Those three are helping us to accelerate.
The idea in the coming months is to be very, very well prepared because we're waiting for the country to improve growth. Now, you know very well that we ended 2025 with 0% growth in the market as a total Mexico. We are expecting 1.5%, and we have a lot of data in other markets. When you are very well prepared and the economy turn, you receive all these benefits in the future. So that is why we will be continued focused on these three pillars that is crucial for the business. Crucial for brick and also crucial for e-com.
Recently, Paul mentioned that we are working very hard to mapping all our stores, all our items in the sales floor, also in back room, trying to connect with e-com business and create more speed, more reach, and take advantage of the assortment that we have. So that's the idea, to combine all together, and then we will continue to focus on and we know we will be very well prepared when the economy turn a little bit. Okay, and the second one was? Was around margin. Thanks, Alejandro. Yeah, so let me talk about the. As you said, you've seen the improvement in the omni-channel margin was mostly from GM, mix, and shrink. Let me start from the second and then talk about the first.
So the second one, yes, it's an area that we are attacking. It's an area because at the end of the day, it's waste, and it's waste that we better can elsewhere invest it, to invest in pricing for our customers. We're putting a lot of energy there across all the teams. It's an end-to-end process. It's merchants, it's operators, but everyone that is involved. And we are topping that up with AI tools and machine learning, whether that's in terms of to optimize the replenishment, but it's also improved the demand forecasting, because we still have a little bit of manual process in the way we actually look at the perishables. So that is something that we are really attacking and left and center.
On the general merchandise, Alejandro, goes a little bit what I also said to what, on the e-commerce response, so the extended assortment. So the categories that actually didn't perform so well tend to be, as you know, categories that they don't enjoy the best margins as well. And as a result of that, of course, we tend to have an im- a benefit, on, on that. I think what you can expect from us going forward is the new business continuing to helping our margins, and we continue to invest in behind the EDLP for our, for our customers. And you, of course, might see volatility quarter-over-quarter, as we always had it every single year.
Super clear. Thank you, Cristian and Paulo.
Thanks, Alejandro.
Thank you very much for your question. That was the last question. I will now hand over to Mr. Salvador Villaseñor for final comments.
Well, thank you very much for joining, and thank you for all your questions, and we hope to see you all at our Walmex Day on March 25th. Thanks again.
Thank you very much.