Walmex, controlled by Bentonville, Arkansas-based Wal?Mart Stores Inc., had a net income of 1.46 billion pesos (US128 million) compared with 1.14 billion pesos in the same period a year earlier, according to the median estimate of five analysts surveyed by Bloomberg. The company is scheduled to report third-quarter earnings after the stock market closes Thursday.

Chief Executive Eduardo Castro?Wright, 49, who took over in November 2002, probably increased sales from existing stores by 5.1 percent during the quarter, said analysts such as Daniel Parker of Bear Stearns & Co. in New York. That's more than five times the same-store growth rate of its nearest competitor, Organizacion Soriana SA.

"They have kept to a sound strategy of offering consumers good products at lower prices that competitors can't match," said Jorge Sigg, who helps manage US320 million of stocks, including Walmex shares, for Grupo Financiero BBVA Bancomer SA. "The company also has a lot of cash to expand stores." Walmex, with about US800 million in cash and no debt, will continue to gain market share from Soriana, Grupo Gigante SA and Controladora Comercial Mexicana SA by opening new stores faster than rivals, Parker said. Walmex set up outlets in Mexico's biggest cities first and now is expanding into smaller population centers.

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Investors have already become accustomed to Walmex increasing sales and profit every quarter and using cash to boost dividend payments and buy back its stock. As a result, the shares haven't been matching gains in the benchmark Bolsa index, Sigg said.

"For investors, there are other companies that are more attractive when you're trying to beat the benchmark," Sigg said in a telephone interview from his Mexico City offices.

Walmex shares have risen 21 percent since the beginning of the year, trailing the Bolsa index's 26 percent gain. The stock under-performed the index in 2003 and 2002. Walmex shares 28 centavos, or 0.7 percent, to 38.89 pesos in Mexico City at the 3 p.m. close.

Walmex, the second?largest Mexican company by market capitalization, has been increasing its investments in new stores and boosting its operating profit margins by cutting costs, said Bear Stearn's Parker. In the third quarter, it opened about 15 new stores compared with three openings in the previous quarter and six in the third quarter last year. Walmex accounted for 8 percent of Wal?Mart's US69.7 billion sales in the first half of this year.

Walmex's competitors consistently lag the chain's sales increase in existing stores and lack resources to keep up with the number of new Walmex stores. Sales for Soriana, Gigante and Comercial Mexicana together were 101.9 billion pesos in 2003, lower than Walmex's sales of 120.6 billion pesos.

The three competitors agreed last year to combine purchasing, warehousing and distribution operations to cut costs and compete better with Walmex. Mexico's antitrust agency limited the scope of the alliance called Synergia and analysts now doubt it will be very effective.

"It was a good idea in theory," Parker said. "I don't think it will be very successful in practice."