Wal-Mart’s International Operations Drive $71 Value
Wal-Mart (NYSE:WMT) has been focusing on expanding its international presence through various strategies. It has about 5,651 stores globally and the majority of its recent growth has come from developing markets like Mexico, Brazil and China. In this analysis, we discuss Wal-Mart’s international operations and its growth strategies in developing countries. We maintain a $71 price estimate for Wal-Mart’s stock, implying about 5% premium to the current market price.
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International operations
- Wal-Mart’s international segment has been a major growth driver for the company mainly since 2008 when the economy saw a downturn. According to our estimates, the international segment contributes approximately 40% to Wal-Mart’s present valuation. The retailer is focusing on international growth with organic growth taking priority in markets where it already has presence. The majority of future growth is expected to come from China and Brazil.
- The company has successfully implemented its everyday low pricing strategy in Brazil. However, in China, despite being present for more than a decade, it is struggling to connect with the consumers. It is working on introducing its everyday-low-price model in China as well.
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Important Initiatives
- Wal-Mart plans to establish a strong presence in China’s e-commerce market. In 2011, it bought a majority stake in Yihaodian, a fast-growing online retailer of groceries, consumer electronics and apparels.
- It is undertaking several initiatives to increase its footprint globally. It acquired Massmart Holdings to build its presence in Africa, and has a joint venture with Bharti Enterprises to operate in India.
- To fend off competition from Target’s arrival in the Canadian retail market, Wal-Mart is leaving no stone unturned to stay competitive. It has plans to complete at least 73 projects this year, adding about 4.6 million square feet of retail space and taking the total store count to over 375 by the end of 2012.
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