Wal-Mart International to Drive Growth

December 13th, 2010 by Trefis Team
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Wal-Mart’s (NYSE:WMT) international operation is expanding, with its total number of stores internationally increasing from an estimated 2,300 in 2005 to around 4,110 in 2009. [1] Wal-Mart’s value proposition of offering a wide variety of merchandise for low prices has attracted a large number of consumers in the US as well as internationally. We expect majority of growth to come from developing markets like Mexico, Brazil and China – where Wal-Mart has a sizeable presence – and this will result in greater store expansion.

Wal-Mart competes with Costco (NASDAQ:COST), Target (NYSE:TGT) and BJ’s Wholesale (NYSE:BJ).

While we expect Wal-Mart’s international store count will reach 6,060 in 2016, Trefis members predict store count to reach 6,760 – representing an upside of 4% to our price estimate for Wal-Mart’s stock.

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We currently have a Trefis price estimate of $65.42 for Wal-Mart’s stock, about 21% above the current market price of $54.13.

International Is the Way To Go

Wal-Mart already has a large scale presence in the US and risks self-cannibalization if it decides to continue expanding at the current rate. Hence Wal-Mart is shifting its focus to organic growth in those international markets where it already has a presence and pushing sales online domestically. We expect that the majority of growth will come from emerging economies like China and Brazil which are seeing rising income levels.

Emerging Economies A Huge Opportunity

Wal-Mart’s value proposition of every day low prices (EDLP) is received well by consumers abroad, and the company is likely to build on the advantage. Although transaction per customer is likely to be low in developing economies, the customer base is large enough to justify the economic rationale behind international expansion. We predict that the international segment accounts for around 32% of Wal-Mart’s stock value.

Member Forecast

The baseline Trefis estimate projects that Number of Wal-Mart International Stores will increase from 4,387 in 2010 to 6,062 by 2016. In comparison, the Trefis community forecasts a slightly higher number, from around 4,798 to around 6,760 during the same period.

Our complete analysis for Wal-Mart’s stock is here.

Notes:
  1. As reported by the company [↩]