According to Reuters,
Wal-Mart Stores Inc
) South African unit Massmart is planning to take a majority
stake in Kenya-based supermarket chain Naivas. Massmart's
acquisition of the majority stake will give Walmart a strong
foothold in the fast growing east African economy.
Though the parties are yet to agree on the price, it is
speculated that Massmart will have to pay a premium for Naivas,
given the limited number of available retailers that would fit
its business model. Moreover, Naivas has the potential to grow,
given the rising middle class population in East Africa.
Currently, Naivas has 28 stores and plans to open 2 more outlets
by the end of the year.
Walmart has been expanding itself internationally, especially
in the emerging markets through new stores, positive comparable
store sales and accretive acquisitions. The company's significant
exposure in the international markets makes it the largest
retailer in the world. The acquisition of a 51% stake in Massmart
Holdings Ltd in Mar 2012 has given Walmart an opportunity to
capture the fast growing markets of South Africa. In Sep 2012,
Walmart received an opportunity to set up a store in India as the
government agreed on 51% foreign direct investment (FDI) in
multi-brand retail. Walmart paid $316 million for several other
business acquisitions in fiscal 2013, including acquisition of
the controlling interest in Yihaodian, an e-commerce business in
Besides acquisitions, Walmart has also been focusing on
expanding its online business. We are also impressed with the
company's size and scale of operations. However, Walmart has
always remained under media scrutiny due to its size and scale of
Moreover, the recent debate to increase the minimum wage of
workers to at least $12.50 per hour from a minimum wage of $8.25
per hour is becoming a concern for Walmart. This will make it
harder for Walmart and other big box stores to pass on the wage
hike as a price increase. In response to this, Walmart has even
warned that it would scrap plans for three of the six stores it
had hoped to build in Washington if the bill becomes law.
Walmart is scheduled to report its second quarter of fiscal
2014 results on Aug 15. Walmart is confident of its strong
international network, its e-commerce business and cost saving
initiatives but continues to expect decline in consumer spending
going ahead as middle-class consumers struggle to cope with
rising gas prices, delayed income tax refunds and higher payroll
Walmart holds a Zacks Rank #3 (Hold).
Other retailers and wholesalers that are presently doing
favorable business include
Ross Stores Inc
). While hhgregg holds a Zacks Rank #1 (Strong Buy), Ross Stores
and Delhaize carry a Zacks Rank #2 (Buy).
DELHAIZE-LE (DEG): Free Stock Analysis Report
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ROSS STORES (ROST): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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