Yahoo Finance Walmart Is Losing Market Share in Key Overseas Markets
Walmart Earnings Preview: What Investors Can Expect in 2Q16
Walmart’s international performance
Walmart’s (WMT) performance in international markets is likely to be mixed in 2Q16. Prospects appear brighter for Walmex and Walmart Canada. Sales in Mexico grew at the strongest pace in two years, driven by comps growth in most formats, including warehouse clubs. Mexico’s economy and retail spending also tend to benefit when fundamentals are bullish in the US economy, which is presently the case.
Canada growth
Store comps in Canada rose 1.8% in 1Q16, helped by e-commerce sales, which were up by over 40%. WMT also expanded its market share. The company announced the acquisition of 13 of Target’s (TGT) stores after the latter announced it was exiting Canada. WMT will also be adding 29 super centers this year in Canada as part of its expansion strategy.
Market share trends
Walmart’s market share appears to have declined in two of its largest international markets, the United Kingdom and China. ASDA’s market share in the United Kingdom grocery market fell to 16.4% in the 12 weeks ended July 19, compared to 16.9% in the 12 weeks ended February 1. Although UK grocery market sales grew 1.1% over the year, German discount chain Lidl has posted the strongest sales gain among supermarket chains. Its sales grew by 8.1% over the 12 weeks ending July 19. The United Kingdom’s largest supermarket chain, Tesco’s (TSCDY), had a market share of 28.5%.
Walmart’s share of China’s grocery market was estimated at 4.7% in the 12 weeks ending June 12, 2015. That’s down from 4.8% in the 12 weeks ending March 20, 2015.
But China’s store comps may still come in positive, spurred by higher web sales. Read about Walmart’s buyout of Yihaodian in the next article of this series.
Future trends
Walmart’s geographical diversification is a double-edged sword. On the one hand, it provides the retailer higher growth opportunities compared to peers. On the other hand, international margins can prove slender compared to domestic operations—particularly in the grocery business. Plus, the retailer (XRT)(XLY) lacks sufficient scale in most markets in order to meaningfully pressure suppliers to lower costs, as it has done in the United States.
Read more about supplier pressures, cost trends, and how the higher dollar is expected to affect Walmart’s earnings in Part 5 of this series.
Walmart and Tesco together make up ~0.3% of the portfolio holdings in the iShares MSCI ACWI ETF (ACWI). Walmart is also part of the iShares Core S&P 500 ETF (IVV), at 0.6% of its portfolio.
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