Walmart Unit Eyes Kenya - Analyst Blog
August 14 2013 - 11:05AM
Zacks
According to Reuters, Wal-Mart Stores Inc's
(WMT) 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 China.
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
operations.
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 taxes.
Walmart holds a Zacks Rank #3 (Hold).
Other retailers and wholesalers that are presently doing
favorable business include hhgregg Inc (HGG),
Ross Stores Inc (ROST) and
Delhaize Group (DEG). 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
HHGREGG INC (HGG): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
HHGREGG (CE) (USOTC:HGGGQ)
Historical Stock Chart
From Jun 2024 to Jul 2024
HHGREGG (CE) (USOTC:HGGGQ)
Historical Stock Chart
From Jul 2023 to Jul 2024