Yahoo Finance Walmart: Price Wars In The United Kingdom’s Grocery Market
Interested In Walmart? What Investors Need To Know (Part 14 of 28)
United Kingdom’s market
The United Kingdom has been one of the most successful overseas forays for Walmart (WMT). The company operates ~576 stores in the country—the second highest among overseas operations after Mexico.
In the United Kingdom, the market is dominated by the big four grocery chains. The chains include Tesco (TSCDY) (TSCO.L), Sainsbury (SBRY.L) (JSAIY), Wm. Morrison (MRW.L) (MRWSF), and ASDA—Walmart’s subsidiary in the United Kingdom.
ASDA is number two in the country. It’s second to home-grown Tesco. The market share for Walmart’s ASDA was estimated at 16.9% in the 12 weeks through February 1—compared to 29% for Tesco.
Walmart’s strategy
Walmart employed its “Everyday Low Prices” and “Everyday Low Costs” strategies. The company invested significantly to ensure price leadership in the country—in an effort to compete with discount retailers Aldi and Lidl. Walmart also benefited from the success of its private brands portfolio in the United Kingdom—perhaps more than in any other international market.
The phenomenal growth in Walmart’s e-commerce channel also contributed to its success. In the United Kingdom, e-commerce sales grew 20% on a constant currency basis in 3Q15. Recently, Walmart launched click-and-collect in the United Kingdom. It’s expected to fuel more growth in omni-channel.
Near-term headwinds
Walmart expected to open a record 148 new locations in 4Q15—including six additional London tube stations. However, ASDA’s market share declined to 16.9% in the 12 weeks through February 1—from 17.3% in the same period last year. Sales declined by 1.7% as well—despite the size of the overall market increasing by 1.1%. This will likely affect the retailer’s fourth quarter results. The results are due to release on February 19.
Lower gas prices spurred spending. This increased the size of the overall market. The trend benefited high-end chains like Waitrose and discount retailers like Aldi and Lidl. Prices are deflating due to the discounting environment. However, the improved labor market is benefiting high-end chains. Walmart is caught in the middle of the two extremes. It may need to tweak its strategy to ensure positive comps in the coming quarters.
Walmart is part of ETFs like the Consumer Staples Select Sector SPDR ETF (XLP) with an ~7.5% weight, the iShares Russell 1000 Value (IWD) with an ~1.2% weight, the iShares S&P 100 (OEF) with an ~1.2% weight, and the SPDR MSCI World Quality Mix ETF (QWLD) with an ~1% weight.
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