Wal-Mart Can Reach $72 Focusing On Existing Intl. Markets For Growth

May 2nd, 2012 by Trefis Team
-8.87%
Downside
59.45
Market
54.18
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WMT
Walmart

Wal-Mart (NYSE:WMT) plans to focus on its existing international operations this year, particularly in China and Brazil, over scouting new regions for growth. According to Wal-Mart International’s CEO Doug McMillon, Wal-Mart’s present strategy is to focus on improving returns in its existing businesses. The company is working hard to solidify its presence in China and Brazil. Wal-Mart competes with other big retailers like Target (NYSE:TGT), Costco (NASDAQ:COST) and Best Buy (NYSE:BBY) as well as online retailers like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY).
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Focus on China and Brazil

Wal-Mart has been operating in Brazil and China for over a decade; however, we believe it still has to focus on connecting with the local economy and emphasize on developing its presence further in these regions.

  • Wal-Mart, which already operates about 300 stores in China, is presently working on introducing an everyday-low-price model. Wal-Mart did face few problems in China last year, that involved pork mislabeling which eventually led to the temporary closure of 13 of its stores in Central China. Thereafter, Wal-Mart has introduced key leadership changes in the region. In February 2012, it named industry veteran Greg Foran as CEO of its Chinese business.
  • This year, in another major development, Wal-Mart increased its stake in Yihaodian, to 51%. We believe a majority stake in Yihaodian would enable Wal-Mart to synchronize its physical presence with its online efforts. Yihaodian operates next-day delivery service for essential daily goods and sells more than 180,000 products online.
  • Wal-Mart, which presently operates about 500 retail units in Brazil, has successfully implemented everyday low pricing in Brazil.
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We believe Wal-Mart’s present strategy of concentrating on its existing international operations over entering new emerging areas is a well thought decision. It is time for Wal-Mart to execute on solidifying its presence in China and Brazil before moving over to other emerging markets.

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