Prospects for Walmart’s International segment
Walmart’s top line is expected to see no growth in fiscal 2016, which ends January 31, 2016. This is due to forex (foreign exchange) headwinds from a higher-than-expected US dollar. In constant-currency terms, the company expects to generate growth of 3% in sales. For various reasons, Walmart is also facing headwinds in three of its largest markets: the United Kingdom, China, and Brazil.
The United Kingdom’s grocery market industry is seeing deflationary trends. The advent of German discount chains Aldi and Lidl has led to fierce price wars for market share. Tesco (TSCDY) and Walmart, the number-one and number-two players, respectively, have been losing market share.
Asda, Walmart’s UK arm, had a market share of 16.7% in the 12 weeks ended September 13, 2015, compared to 17.5% in the 12 weeks ended January 6, 2013, according to Kantar Worldpanel.
The macro picture remains weak in both Brazil and China. Walmart is focusing on markets that are expected to see higher growth in terms of consumer spending, notably the United States and China[1. According to comments by Doug McMillan, Walmart’s chief executive officer].
China partner to sell stake
On October 9, Reuters reported that one of Walmart’s minority partners in China, a unit of China Resources Enterprises (or CRE), has put its share of Walmart stores on the market for ~$525 million.
Market share losses
Walmart’s market share in China was estimated at 4.9% in the 12 weeks through August 7, 2015, compared to 5.9% in the 12 weeks ended January 25, 2013. The market share of French hypermarket (RTH) chain Carrefour (CRRFY) fell from 4.2% to 3.4% over the same period, according to Kantar Worldpanel.
Walmart’s also looking to step up its focus on China’s online market. It recently bought out the remaining stake in Yihaodian, its e-commerce venture in China. For more analysis on the deal, read our earlier article Walmart’s Yihaodian Buyout: Why WMT Upped the Ante in China