Enrique Ostalé
President of the Board
of Directors Walmart de
México y Centroamérica
Guilherme Loureiro
President and Chief
Executive Officer
Walmart de México y
Centroamérica
MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS AND FROM THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
This has been a year of great challenges for our Company. We continue innovating and adapting to the market to meet the needs of our customers. Our evolution is constant so we may become the leading retail ecosystem for Mexico and for Central America. Our purpose is more alive than ever: to always be close to our customers when and where they need us, providing access and helping them save time and money, and live better.
All our 231,000+ associates in Mexico and in Central America have played a fundamental role in achieving this purpose. To all of them, we extend our sincerest recognition and appreciation for their invaluable work, efforts, and commitment
We are consistently implementing our business strategy, which is based on a flywheel of capacities and assets that mutually reinforce each other, giving us the flexibility needed to travel in the same direction as our customers.
During 2021, the main focus was on three strategic priorities:
WINNING IN DISCOUNT
LEAD IN OMNICHANNEL
ECOSYSTEM OF CHOICE
THE WIN IN DISCOUNT PRIORITY HAS BEEN WELL-ACCEPTED BY OUR CUSTOMERS.
We are leaders in low prices and we have unique positioning in this segment thanks to our Bodega format
This strategy was based on the combination of three pillars
The first one -Every Day Low Prices- was able to broaden the price gap by 80 basis-points in the Bodega format, the highest in recent years.
The second pillar -Efficient Assortment- is where our commercial team worked hand-in-hand with our suppliers to optimize our catalog and its availability, and also include a greater variety of items with competitive prices and quality. This is where our Private Brands become even more important for our customers, positioned as an ally for their family budget. This past year, total self-service sales penetration for our Private Brands increased 90 base points in Mexico, and 200 in Central America.
In the third pillar we maintained a low-cost operation thanks to having simplified the operation of our sales floor business, logistics, and home deliveries, without affecting the shopping experience of our customers. These very achievements allow us to continue fulfilling our purpose of saving people money so they can liver better.
The brick-andmortar stores are the foundation of the business
THE COMMITMENT WE HAVE MADE IS TO LEAD IN OMNICHANNEL AND OUR STRATEGY IS PRODUCING SUCCESS.
Our intention is to provide a new experience in omnichannel shopping for all families in Mexico and Central America.
In the top five cities of Mexico, 88% of the inhabitants currently live within 10 minutes of our stores, and we aspire to be even closer to our customers. Therefore, in light of a challenging economic panorama, we continue investing and we built 131 new units in the region, thus increasing our sales floor by 140,000 m2, our greatest expansion since 2014. Moreover, so our customers may have a faster and more convenient shopping experience with reduced prices for basic items, this year we progressed in migrating our Superama format to Walmart Express and we merged the app with that of Walmart Supercenter.
Our Sam’s Clubs continued innovating with Scan and Go -a unique technology in the sector- which consists of scanning items and paying via cellphone so our members may do their shopping quickly and contactless. Penetration of this technology has doubled since its initial launch.
Convinced that our customers want us to join our stores with our eCommerce businesses to provide a seamless shopping experience, we are in a privileged position to achieve this thanks to the robust physical and digital infrastructure we have built.
This year, our On Demand home delivery service continued its expansion. This service is now offered in 760 of our stores located throughout 120 cities nationwide, covering almost 70% of our bigbox formats. To achieve positioning ourselves as omnichannel leaders, one of our greatest strengths has been to deliver fresh products in just a few hours, maintaining their freshness and quality.
Despensa a tu Casa, our home delivery service at Bodega, allows us to offer same-day deliveries from over 220 stores for our most price-sensitive customers. This strategy was chosen by the Harvard Business School as a case study. We have furthered the crowdsourcing model in over 170 stores and clubs, providing flexibility in serving variable demand quickly and efficiently, thus significantly reducing our delivery time.
We also launched Walmart Pass -our unlimited home delivery membership program- with continued growth in the number of subscribers, in the average ticket, and in customer retention rates.
Our focus on accelerating our extended assortment allows for positioning as the first shopping choice of customers. We have doubled the number of vendors and tripled the number of items, as compared to last year. Some 90 virtual stores with exclusive items and brands have been enabled, advancing our cross-border operation with more than one million items added.
Our results for the year are a source of great satisfaction, with the benefits derived from our investments quite evident. During 2021, net sales for eCommerce grew 36%, and GMV 40%, which now represents almost 5% of sales in Mexico.
The entire team deserves our recognition in implementing the long-term strategy while also executing it amidst an ever-changing environment.
OUR AMBITION IS TO EARN THE LOYALTY OF OUR CUSTOMERS THROUGH THE DEVELOPMENT OF THE WALMART ECOSYSTEM
Evolving strategically, we have established the bases for an interconnected ecosystem whose strength keeps our customers at the center of everything and reinforces that link through solutions aligned with generating greater value and making our units their first choice when shopping.
Tools have been developed to give our customers access to new opportunities in the digital economy. Through Bait, our customers are offered connectivity solutions that include mobile and home-based internet, and low-cost prepaid telephony. This year, Bait has reached 2.3 million users and was the top-rated app in the sector. We launched a distribution channel outside our stores to extend our availability and we will continue focusing on signing up more users.
On the other hand, our Cashi app, which currently has 1.7 million users, provides digital financial solutions to Mexican families. Through the digital wallet, our customers can may different payments commission free. The service to collect remittances has been introduced at our cashiers, making us the second most important chain in the number of points of sale. Also, we have piloted a program with a third party to disperse credit through some 30 Walmart and Bodega units, representing an opportunity to provide access to financial services for our most price-sensitive customers.
Walmart Connect -our omnichannel platform for communication and media- offers advertising space, leveraging our massive omnichannel scope regarding segmentation capabilities and customer intelligence. Throughout the year, Walmart Connect achieved a 50%-increase in the number of advertisers, and 80% in the number of campaigns.
OUR CUSTOMER CENTRICITY, THE USE OF TECHNOLOGY AND DATA, OUR LOGISTICS INFRASTRUCTURE, AND THE WORK DONE BY OUR TALENT ALL SERVE AS ENABLERS TO EXECUTE AND INCREASE THE POTENTIAL OF OUR STRATEGY
Like each year, we focus on delighting our customers and serving them when and where they need. In 2021, we initiated our training program on Customer-Centric Culture and continued forward with the implementation of the Customer Journey methodology. By adopting the omnichannel NPS (Net Promoter Score) companywide, we have been able to accomplish an increased customer-centric vision, measuring their satisfaction from a broader viewpoint.
Our Technology and Systems area ensures that omnichannel service is provided to our internal and external customers. A new model has been implemented to be better connected internally and with our customers, based on a cell design, and which consists of six points jointly developed: Creating new technological capabilities, Operating Excellence, Deliveries that are internal-customer centric, Technological Enablers, and one single team for technology and Information Security. Furthermore, our network connectivity was increased through a more modern technology to improve connectivity by 8x and reduced costs by 15%, throughout stores, distribution centers, and the offices.
Aware that our strategy requires investments, our efforts in expense management and productivity is being intensified. The Smart Spending project was put into effect this year, which serves to reinforce our culture of Every Day Low Costs through the use of technology and data analysis, producing greater efficiency in management and operating costs and thereby generating savings. For example, a change in our logistics fleet scheduling resulted in annualized savings of 140 million de pesos.
From identified savings in Mexico, we executed 1.0 billion pesos in 2021. Working with agility and driven by data, we are constantly transforming to guide the decisions of our business.
In 2021, our logistics capacities were further consolidated to offer our customers quick and efficient service, thereby increasing productivity. Our Santo Niño DC was opened in Mexicali to reinforce operations in the northern region of Mexico. This DC has the capacity to process more than five million tons of cases each month and supply 50 Walmart and Bodega units. In addition, we began building the new omnichannel DC in Tlaxcala, which will start operating in 2024, becoming part of our logistics network of 31 DCs throughout Mexico and Central America. Walmart Fulfillment Services (WFS) was launched so our Marketplace vendors may use our world-class supply chain to deliver orders with agility and efficiency, making it one of the primary enablers of our long-term strategy and a competitive advantage for our Company.
We are becoming the leading omni-driven ecosystem, and our financial strength serves as a competitive advantage
2021 was a challenging year, marked by resilience and innovation. We made strategic decisions focused on our customers, which allowed us to earn their trust and grow above the market.
Performance has been solid and our consolidated results have been positive. Revenues reached 736 billion pesos, a 4.9% growth over last year, and 6.3% on a constant currency basis. We grew above the selfservice and clubs market for the eighth consecutive year, as measured by ANTAD, the Mexican retail association.
Gross margin grew 20 basis points , reaching 23.3%. Our SG&A grew 4.9%, that is, 15% of total revenue, primarily driven by strategic investments.
Operating income grew 9.5% and EBITDA reached 81.2 billion pesos, which implied a 7.7% growth and an 11.0% margin.
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We use our scale for good and therefore we are on the way to becoming a regenerative company that places nature and humanity at the center of all our business practices; a company that works to restore, renovate and conserve our planet, for us, our families, the communities in which we operate and for future generations.
THIS YEAR, WORK HAS CONTINUED ON THE FOUR PILLARS THAT ENCOMPASS THIS AMBITION: OPPORTUNITY, SUSTAINABILITY, COMMUNITY, AND ETHICS AND INTEGRITY.
Our first pillar is to continue providing opportunities to our associates and suppliers. In 2021 we created 6,234 new jobs and increased our talent pool with a total of 6,792 associates with disabilities, a 51% increase over 2020. Our program aimed at helping to develop small farms in Mexico -Pequeño Productorhas been a catalyst for production project for 10 years, where we have created 1,590 new jobs and trained 23,637 small farmers throughout Mexico.
Our third pillar is community. Despite an atmosphere full of uncertainty, we remain committed to caring for the communities we serve. This year 1,996 million pesos were allocated to social impact programs, thus benefiting more than 2 million people.
Sustainability, our second pillar, has progressed considerably. In 2021, some 52.5% of our energy was supplied by renewable sources. We continue driving a circular economy by having reduced the use of 1,881 tons of virgin plastic and we avoided sending 68.6% of our waste to landfills.
In keeping with our fourth pillar, we operate with the highest standards in ethics and integrity. Our new Code of Conduct was launched in 2021, in addition to updating our Supplier Standards.
We are constantly evolving so we can serve our customers better. Our Company has great potential for growth, and it is exciting to continue moving forward with firm steps. This year has taught us that challenges make us better, and we are proud of what we have accomplished together to broaden our capacities and connect the needs of our customers to solutions that provide access to better quality products and services, and to continue helping people save money and live better.
Thank you for your interest in our Company
Enrique Ostalé
President of the Board
of Directors Walmart de
México y Centroamérica
Guilherme Loureiro
President and Chief
Executive Officer
Walmart de México y
Centroamérica