Walmart bullish on global prospects

story by Kim Souza
ksouza@thecitywire.com

The $25 billion revenue growth enjoyed by Wal-Mart Stores Inc. last year was largely due to its assets abroad -  a phenomenon not likely to change anytime soon.

On the world stage Walmart will add pharmacy formats in Mexico City, hypermarkets in India and expanding e-commerce sales from Argentina to the U.K.. — all while shaving operating costs to boost the bottom line.

Cathy Smith, chief financial officer for Walmart International, said there is great potential and obligation for the international division to continue its stellar run now that it makes up a lion’s share of the retail giant’s total growth.

Last year $15.6 billion or nearly 63% of Walmart’s growth resulted from sales generated outside the U.S.

Jeff Davis, senior vice president and treasurer for Walmart, reminded investors in Orlando, “Walmart is the best positioned retailer in the world today.”

He borrowed the line from CEO MIke Duke’s recent statement following Wal-Mart Stores’ fourth quarter earnings report.

Davis and Smith spoke at the Raymond James & Associates 33rd annual conference for institutional investors Thursday, (Mar. 6) in Orlando.

Stewart Samuel, IGD senior North American analyst, expects Walmart to focus its efforts in three key areas: integrating the acquisition of Massmart in South Africa and exploring the opportunities for growth in the wider sub-Saharan Africa; accelerating its e-commerce initiatives; and maximizing its scale to further improve the profitability of its international operations..”

He said though some progress is already being made, Walmart is determined to push ahead faster. But Samuel isn’t surprised to see Walmart investing in mature markets as a way to push gains forward.

Smith said one highlight from fiscal 2012 was the christening of Walmart’s 10,000th store, which happened to be in Mexico - a market Walmart entered 20 years ago. Walmart Mexico has 2,088 business units today, with includes Central America.

Smith said one new innovation in the Mexican market are 24-hour pharmacies located in and around Mexico City.

“We think these pharmacies will be well-received in the large urban area, offering home delivery and complete health and wellness solutions,” Smith said.

In fiscal 2012, Walmart Mexico and Central America experienced top line revenue growth of 9.5% from the prior year.

Smith said India is also a nice growth story, although a small base, in which sales grew 140% in the past year.

Walmart recently opened its first hypermarket in India to complement its wholesale cash and carry business which has been in operation since 2009. Smith said the cash and carry business is No.1 in marketshare, ahead of a well-known competitor who entered the market in 2003. She said the first hypermarket will give the company an “early-mover advantage in India” and believes it will be a driver of future growth.

Expansion in Argentina includes brick and mortar and mobile technology platforms. Smith said supermarkets that offer a wide variety of food in convenient urban locations are on tap for this year.

But a mobile commerce solution used in Argentina is also driving sales. The mobile application works with all three platforms — Android, Blackberry, and  iPhone. Smith said it allows consumers to price compare in a competitor store, by scanning a barcode. The item can be added to a grocery list, along with other item barcodes scanned from a pantry or refrigerator at home. Consumers go online, upload the grocery list and have the goods delivered to their homes.

Argentina posted a 45% top line revenue growth last year and is off to a good start in fiscal 2013, according to Smith.

Growing sales is only half of the profit equation that Walmart has to solve to meet its aggressive low price agenda. Which is why the “Everyday Low Price” strategy is being rolled out globally.

Analysts say it takes two or three years to fully implement “everyday low prices” into various store formats abroad. Japan and Mexico are mature markets that are now seeing the benefits of the low cost price strategies.

At the other end of the continuum China, South Africa and India are just beginning to embrace the strategy.

Smith said Argentina and Brazil continues to struggle with balancing low price and low cost, while the UK and Canada are making great progress toward a mature market status.

Walmart has pledged to reduce operating expenses as a percentage of sales by 100 basis points in the next five years. Smith said Walmart International will shoulder a large percentage of those cost savings.

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Saturday, (March 10) is the one-year anniversary of the earthquake and tsunami that devastated commerce throughout much of Japan. Smith said Japan has a good story to tell with three years of positive growth in same-store sales since the “Everyday Low Price” campaign was rolled out there. She said the chief merchandiser in Japan has done a great job sourcing product from around the world to keep shelves stocked as the much of the country rebuilds.

Smith describes a “wonderful not-invented-here mentality” in terms of merchandising. She said shelves are stocked with world-class products, including U.S. beef, private label items from the UK and rice from China.

“I can’t tell you how odd it is to see Chinese rice for sale in Japan. But since the Tsunami, our merchandisers have done a good job offering taste tests to acclimate Japanese consumers to the quality and value of China’s rice,” Smith said.

Charles Holley, chief financial officer for Wal-mart Stores Inc. recently said, three years into “everyday low prices” it turns out Japanese consumers also appreciate value, in addition to quality.

Walmart International Sales
Fiscal 2012: $125.87 billion
Fiscal 2011:  $109.23 billion
Fiscal 2010:  $97.4 billion
Fiscal 2009:  $96.1 billion

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