Wal-Mart de México, S.A.B. de C.V. (WALMEX)

Wal-Mart de México, S.A.B. de C.V. (WALMEX) Webcast Results for the Fourth Quarter 2016 Mexico City, February 15 th, 2017 PILAR DE LA GARZA: Good afternoon. This is Pilar de la Garza, Investor Relations Senior Director for Walmex. Thank you for joining us today to review the results for the fourth quarter and full year 2016. On today s call with me are Guilherme Loureiro, President and Chief Executive Officer for Walmart de México y Centroamérica, and Pedro Farah, Chief Financial Officer. The date of this call is February 15, 2017. Today s call is being recorded, and will remain available at www.walmex.mx. Before we start, let me remind you that the contents of this call is property of Wal-Mart de México S.A.B. de C.V. and is intended for the use of the company s shareholders and the investment community. It should not be reproduced in any way. This call may contain certain references concerning Wal-Mart de Mexico S.A.B. de C.V. s future performance that should be considered as good faith estimates made by the Company. These references only reflect management s expectations and are based upon currently available data. Actual results are always subject to future events, risks and uncertainties, which could materially impact the Company s actual performance. Now it s my pleasure to introduce Guilherme Loureiro. Gui GUILHERME LOUREIRO: Thank you Pilar and good afternoon everyone, thank you for joining us to hear more about our fourth quarter earnings and year-end results. We are happy to announce that we closed 2016 strong by delivering another solid quarter. With consistent and sustainable sales growth across all our business while growing profits faster than sales. During 2016 we continued to build on a successful strategy while making strategic investments in our business to ensure a sustainable long term value creation for our shareholders. I would like to begin by discussing our sales performance, and then Pedro will discuss our financial results for the quarter and full-year. 1

We are committed to driving topline sales and based on our 3-3-1 strategy, we exceeded our total sales growth objective of 7% during the fourth quarter and the full year 2016. In the fourth quarter we delivered growth of 8.9% on a constant currency basis. Mexico grew 8.9% and Central America 9.0%. For the full year 2016, total revenues grew 9.0% on a constant currency basis, Mexico grew 9.1% and Central America 8.2%. Our performance was driven by continued same store sales growth momentum in both Mexico and Central America. Same store sales in Mexico grew 7.9% in Q4, and 8.0% in the full year 2016. In Central America same store sales grew 5.0% during Q4 and 4.9% in the full-year period. We have been consistently executing against our strategy, and I would like to highlight that our two year stack growth for total revenue for the year was 17.6% in Mexico and 15.5% in Central America on a constant currency basis. In terms of same store sales growth for the year, our two year stack was 14.6% in Mexico and 9.6% in Central America on a constant currency basis which clearly demonstrates the progress we have made on our strategy. We continue to see consistent and sustainable growth across all the countries in which we operate. In 2016 Mexico delivered the highest same store sales growth with an 8.0% increase. In Central America, Nicaragua was the country with the highest same store sales growth, while Costa Rica delivered a lower but solid growth, given its high penetration and market maturity. We also drove healthy growth across all regions in Mexico; the Northern region of the country had the highest same store sales growth, followed by the Central region. We also saw a great performance in the Metro and Southern regions. 2

Despite tough comps last year, growth was also consistent across all our formats with Sam s showing the strongest performance. The focus on our Member has been key to the format s success. We implemented a member satisfaction tracking indicator that allows us to constantly improve the way we serve them. In terms of merchandise divisions, all experienced strong growth. Apparel had the strongest performance followed by Food and Staples and General Merchandise respectively. Pharmacy remains the only underperforming division and we already have plans in place to improve its performance. Our sales benefitted from macroeconomic tailwinds, such as remittances that sustained a higher disposable income; however our operational excellence, clear value proposition and committed associates are what set us apart from the competition. The quality of our growth has allowed us to outperform ANTAD s self-service division for 8 consecutive quarters. We have been consistently expanding the gap vs. ANTAD, from 40 basis points in 2014 to 330 basis points in 2016. In fact, during the fourth quarter, we outperformed every ANTAD division. Mexico same store sales grew 7.9% in Q4, 240 basis points above the 5.5% growth of total ANTAD, 330 basis points above the 4.6% growth of ANTAD self-service, excluding Walmex, 190 basis points above the 6.0% growth of specialized stores and 180 basis points above the 6.1% growth of department stores. The quality and consistency of our results indicate their sustainability. Viewing our performance at the individual format level highlights the broad and consistent nature of our results. In 2016 all of our formats individually surpassed ANTAD with Sam s delivering the highest same store sales growth, followed by Walmart. During the full-year of 2016 Walmex same store sales grew 8.0%, 330 basis points above the 4.7% growth of ANTAD selfservice excluding Walmex. 3

We also outpaced total ANTAD s 5.6% same store sales growth by 240 basis points. Total ANTAD comprises self-service, department and specialty stores. Now shifting to Central America, same store sales growth on a constant currency basis was positive in the four formats that we operate, with Bodega and Walmart delivering the highest increases. Now, putting it all together we see that while same store sales remain the key growth driver in both Mexico and Central America, new stores and ecommerce are effectively contributing to our growth. ecommerce still represents a small part of our overall business, but it is growing faster than the market at 27%. Importantly, sales from new stores contributed to 2.4% of total sales growth in Q4, and 1.8% to the full year results above our guidance. In 2016, we not only exceeded our new store sales guidance but we have done so more profitably, our new stores sales plan attainment improved 300 bps from the average we had in past years. During the quarter we opened 45 new stores, with 32 in Mexico and 13 in Central America. During the full year we opened 92 new stores, 58 in Mexico and 34 in Central America. We also launched smaller store prototypes in all our formats that will be part of our growth vehicles for the future. 4

Regarding ecommerce, we continue to add value to our business and to leverage our assets. ecommerce delivered strong growth increasing sales by 37% in Q4 and 27% in the full year. During the fourth quarter ecommerce contributed 0.4% of total sales growth, while in the full year ecommerce contribution to growth was 0.2% We made strategic investments in technology for our omnichannel business; we re-launched the Superama mobile App as well as the Walmart Grocery Home Shopping platform. By the end of 2016, customers had access to 156 Walmart pickup locations, offering a seamless shopping experience to our customers. We also made good progress towards becoming a digitally enabled retailer. For example, in sams.com.mx we now offer online membership sign up and renewal service through which we issued more than 46,000 digital memberships. Last but not least, we are very proud to share with you how we lead in social responsibility and environment areas. Walmart de México y Centroamérica has been included in the recently launched FTSE4Good Emerging Index, an Index that evaluates environmental, social and governance performance of its constituents. Walmex is the only Mexican Retail company currently in the Index, being chosen after the evaluation of over one thousand companies in 20 countries. Also, in 2016, 109 of our female suppliers participated in the Women Owned Business program, fulfilling the objective of doubling the volume of their purchases. The Program is a global initiative launched in 2011 to empower women entrepreneurs by providing them with greater access to the markets and tools needed to help them grow their businesses. Before I finish my remarks, I would like to reiterate that I m proud of what we accomplished in 2016, not only in quantity but in the quality of our results. Our associates are doing a great job and their efforts are much appreciated. In 2017 we plan to build on our successful strategy, leveraging our base and continuing to invest strategically to better position our company for the future. We believe this balance is critical to ensure the long term value creation for all of our shareholders. Now let me turn it over to Pedro. 5

PEDRO FARAH: Thanks Gui, and good afternoon to all of you. As Gui said, we have delivered a solid quarter not only in terms of sales, but also growing profits faster than sales. We are committed to maintaining our operational discipline and to investing strategically in order to position our business for the future. As a reminder, on August 10 th, the company announced that we had reached a definitive agreement for the sale of Suburbia to El Puerto de Liverpool, S.A.B. de C.V. The closing of this transaction is still subject to approval by the competent authorities. Therefore, the Company now presents Suburbia results separately within discontinued operations, and the numbers I will be discussing in the rest of this presentation reflect this. Let us begin by looking at our EBITDA margins As you may recall, in 4Q15 we had two one-time non-cash effects, the first one related to store closures and impairment, as the portfolio quarterly review has become a business practice to improve our store base; and the second one related to a revised vacation accrual estimate. The total impact of both of these effects was approximately 50 basis points. After eliminating these effects, our 4Q16 operational leverage still improved significantly. We were able to improve EBITDA margins in both Mexico and Central America as I will show in more detail in the following slides. In Mexico total revenues increased 8.9%. Gross margin increased 30 bps year-on-year. It was positively affected by the re-classification of certain supplier rebates for promotional activities that were previously reflected as SG&A reduction. The impact of this effect is 12 bps. SG&A grew 6.9%, 200 bps below revenue growth. Other income grew significantly as in 4Q15 the amount related to non-cash store impairments was higher than in 4Q16. Operating income grew by 18.8%, exceeding our growth in revenue, while EBITDA growth was 17.2%. Adjusted for last year s one-timers, EBITDA would have grown 11.4%, still above total revenue growth. In Central America total revenue grew 9.0% at a constant currency basis, gross margin expanded by 70 bps and general expenses grew 9.7%. What particularly stands out is the 32.0% operating income growth and the 25.7% EBITDA growth at a constant currency basis. 6

Strong total sales growth, share gain in all countries, leverage and income growth, contributed for a strong quarter, which capped a good year. Consolidated results for Walmex show 11.8% revenue growth, 40bps of gross margin improvement and 11.0% expenses growth resulting in operating income growth of 22.8% and an EBITDA growth of 21.0%. Now I will cover our full year performance. During 2016 we made strategic investments to better position our business in the future while still leveraging the base. Throughout the year we invested $14.3 billion pesos in our business, 14.4% more than in 2015 and in line with our guidance. Our capital allocation is in line with our long-term strategy. We are becoming more productive in our remodels and new stores investments and thereby freeing capital to build strong foundations to become a more digitally enabled company. In addition, we also had notable increases in operating expenditures related to remodeling, maintenance and portfolio management in addition to implementing staffing initiatives and changes to store compensation plans to make them more inclusive and pay for performance. While doing the above, we managed to leverage our base expenses so as to preserve the long term health of our business. In this slide we summarize the results for Mexico in 2016 which were very strong. Full year total revenue increased 9.1%, gross margin improved 40bps, and general expenses grew 8.5%, 60bps below revenue growth. EBITDA grew 13.9%, and considering 2015 one-timers it would have grown 12.1%, still above total revenue growth. In Central America, total revenue grew 8.2% on a constant currency basis and gross profit improved by 70 bps. Expenses grew 7.9%, slightly below revenue. Operating income grew more than 3 times total revenue growth at 30.0% and EBITDA grew 23.0%. 7

I would like to note Central America s relevance in the portfolio increased as a function of FX variations but also due to their strong performance. As a percentage of total revenue, Central America s participation increased from 16.6% to 18.7%. Central America s expenses as % of sales are higher than that in Mexico so their relative contribution to the consolidated results negatively impacted consolidated leverage. More importantly, Central America contributed to 30% of Walmex consolidated Operating income increase. We believe that Central America s growth potential will continue to be an important element in Walmex s high quality revenue and earnings growth. Walmex consolidated full year results were strong. Revenue grew 11.9%, gross margin expanded 50bps and expenses grew in line with sales, mainly due to Central America s higher penetration in the portfolio and higher contribution to expenses growth as I mentioned in the previous slide. Operating income and EBITDA grew 20.2% and 17.7%, both faster than the revenue growth. As you may recall, during Q3, we stepped up our hedging efforts in this volatile currency environment, and increased our US Dollar position to cover the purchase of import merchandise for the holiday period. The resulting exchange rate gain on our Dollar position was $432 million pesos in financial income for the full year 2016. The net income recorded in discontinued operations related to Suburbia was $4.8 billion pesos. Net income grew 26.5% Now moving to the balance sheet. As we grow and reinvest in the business our financial strength increases. We delivered strong free cash flow and closed the year with $28.0 billion pesos, $3.2 billion pesos or 12.8% more than last year driven by the strong cash generation from our operations and our increased focus in working capital. As I mentioned before, we invested $14.3 billion pesos in our business, in line with our guidance, and our inventories increased 7.9%, below our total revenue growth. Operating cash flow increased 14.9% vs. last year reaching $51.3 billion, which represents the highest operating cashflow growth in the past 6 years. We had a strong working capital performance; among others, we have enjoyed good progress in reducing our inventory levels. After investing $14.3 billion pesos in higher return projects, we still returned $29.0 billion pesos to our shareholders in the form of dividends. 8

We have a commitment to return excess cash liquidity to our shareholders. On February 21st, 2017 we will distribute the final installment of last year s dividend declaration of $0.14 pesos per share. Today, the Walmex Board of Directors agreed to recommend a proposal to shareholders for an ordinary dividend of $0.64 pesos per share and an extraordinary dividend of $1.86 pesos per share, which includes $0.96 pesos per share relative to the sale of Suburbia and subject to the closing of the transaction. Total dividends add up to $2.50 pesos per share. With the latest Walmex share price, the yield would be approximately 6.3% We expect the annual shareholders meeting to be held on March 30th 2017 to vote on the proposal. So, the proposed schedule for dividend payment is as follows: Ordinary dividend to be paid in four installments of $0.16 pesos per share in April, August and November 2017 and February 2018. Extraordinary dividend to be paid on two installments, the first one of $0.53 pesos per share on April 2017 and the second one of $0.37 pesos per share on November 2017. The date of the payment of the dividend relative to the sale of Suburbia will be announced after the closing of the transaction. In closing, I would like to summarize the key highlights of 2016: We continue to deliver strong, consistent, sustainable and profitable growth while driving our unmatched cash generation Walmex operational excellence efforts and clear value proposition has translated into important share gains We were able to drive operational leverage while investing in our business for the future We remain confident that the investments we are making in our associates, stores, supply chain and digital capabilities are key to improve and secure a successful future. Thank you very much, and as always, we will make ourselves available to receive your calls to answer any questions you may have. 9