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Walmex first-quarter profit lower than expected

By Elinor Comlay

MEXICO CITY (Reuters) - Mexico's top retailer Wal-Mart de Mexico reported lower-than-expected first-quarter earnings on Monday, dealing another blow to the company after news emerged that it was being investigated for possible bribery.

Walmex shares fell 12 percent after a New York Times report this weekend said parent company Wal-Mart Stores Inc stymied an internal investigation into allegations of bribery at Walmex instead of broadening the probe.

Executives on a pre-recorded call discussing first-quarter results chose not to talk about the bribery allegations and focused instead on prizes and recognition. Walmex does not allow questions from analysts on results calls.

"We received recognition in the quarter," said Chief Financial Officer Rafael Matute, citing a Euromoney magazine award for corporate governance and a Mexican group that, for the 12th-year running, named Walmex a socially responsible company.

Walmex, in which the world's biggest retailer Wal-Mart has a majority stake, said first-quarter earnings rose 4.7 percent to 4.712 billion pesos ($368 million) from 4.502 billion pesos.

Analysts surveyed by Reuters on average expected the company to report a profit of 5.14 billion pesos in the first quarter.

Walmex said earnings before interest, taxes, depreciation and amortization rose 7 percent to 8.645 billion pesos, but that was also below expectations of 9.123 billion pesos.

"It seems that EBITDA was impacted more than expected because of higher electricity and store rental costs," said Paola Sotelo, analyst at brokerage Monex.

Still, revenue rose 14 percent to 96.901 billion pesos from 84.95 billion pesos in the year-earlier quarter, helped by a broader pickup in consumer spending as well as aggressive promotions that boosted sales.

ALLEGATIONS

Legal and retail experts said the bribery allegations, if proven true, could badly hamper the company and its management for years. They could lead to a time-consuming global probe, substantial financial penalties paid to U.S. authorities and the departure of some executives.

"We would like to be able to say more, but we are not prepared to risk the integrity of the investigation," said a further statement from Walmex on Monday, after it lost almost $7 billion from its market capitalization in Mexico.

Two U.S. lawmakers on Monday said they were launching an investigation into the allegations.

Mexico's presidential front runner Enrique Pena Nieto and other Mexican lawmakers also called for a local investigation to begin.

Walmex shares fell 12.01 percent to 37.89 pesos on Monday.

($1 = 12.8035 at end March)

(Reporting by Elinor Comlay, additional reporting by Gabriela Lopez; Editing by David Gregorio)

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