Why Walmart Faces an Uphill Battle in China and Brazil



Same-store sales in China

Wal-Mart Stores (WMT), or Walmart, reported a decline of 3% in same-store sales in China (ASHR) in fiscal 4Q16. The decrease was driven by a whopping 8.5% reduction in store traffic. Part of the reason for the declining traffic trend is the onset of higher competition from e-retailers in China (FXI). And while Walmart is stepping up its fulfillment and distribution capabilities in key Chinese (YINN) markets, the results don’t appear to be showing up yet. Besides, the retailer has attributed its sub-par global e-commerce performance on challenges in key international markets, including China and Brazil (refer to Part 6 for further analysis).

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Market share declines

This trend is reinforced by the declining market share that both local and international chains, including hypermarket chain Carrefour SA (CRRFY) and Tesco-partnered (TSCDY) local group Vanguard, have experienced in the twelve weeks leading up to December 4, 2015, compared to three months earlier. While the decline was marginal for the market leader and local chain Sun Art Retail (SURRY), Walmart and Carrefour saw a 0.1% decline in their market shares over the period (according to Kantar Worldpanel).

Singles’ Day impact

The runaway success of China’s Singles Day promotion on November 11 also may have affected the performance of Walmart and other brick-and-mortar retailers. Walmart’s rival Costco (COST) has a presence on Tmall Global, one of Alibaba Group Holding’s (BABA) web portals. According to Alibaba and The Internet Retailer, Costco was the top retailer on Tmall Global on Singles Day in November 2015. The company clocked sales of $3.1 million in just one hour. According to Richard Galanti, CFO of Costco, 300,000 orders were received on Singles’ Day 2015.


Although Walmart reported a 0.8% increase in same-store sales (in constant currency terms), the retailer closed 60 underperforming stores in Brazil in fiscal 2016. Brazil’s problems stem from deeper economic issues, compounded by currency factors and high inflation.

Still, Walmart did exhibit above-category performance in Brazil, growing sales by 1.2% (in constant currency terms) while the overall market contracted by 5.7% (according to Serasa Experian, Walmart International’s President, and David Cheesewright, Walmart International’s CEO).


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