Wal-Mart’s tie ups in India and UK could be its potential growth engine

While Wal-Mart has struggled to compete in its home ground, its potential tie-up with UK’s Sainsbury Plc and India’s Flipkart promises to be the growth engine it once was.

Wal-Mart, the world’s biggest brick-and-mortar retailer is making urgent efforts to stem the loss of market share from its peers as it moves to strategically partner with local players in India and in the UK.

Wal-Mart is holding talks to merger its ASDA with Britain’s J Sainsbury Plc, in which it already has a minority stake while it is also looking to purchase a majority stake in India’s leading online retailer Flipkart for $10-$12 billion.

The moves underscores Walmart’s new found energy to better compete with its peers, which ranges from German grocer Aldi Inc to Amazon.com Inc, the world’s largest online retailer.

Incidentally, Wal-Mart’s underperformance in its international business contributed less than a quarter to its total revenue of $500.3 billion in fiscal 2018.

“Walmart has simply been too slow to react when it comes to their overseas business,” said Burt Flickinger, managing director, Strategic Resource Group. “They have finally started taking corrective action and are now dedicating their resources to where they think they can grow”.

Significantly, the moves also marks a a change in Walmart’s traditional approach of building a business on its own.

“Walmart is clearly moving away from trying to crack tough foreign markets by itself to striking partnerships because it realizes that is the fastest way to bridge the gap with competitors,” said Laura Kennedy, vice president, retail sales and shopper practice at Kantar Consulting.

Walmart’s spokesman declined to comment on the negotiations in the UK and India.

Time will tell whether Wal-Mart’s latest move will turn Walmart International into the growth engine it once was, said analysts.

For now, judging from the market’s reactions stemming from the talks in India, investors have largely supported Chief Executive Doug McMillon’s decisions to jumpstart global growth.

“In the short term, the Flipkart deal may look pricey, but the markets haven’t punished Walmart because investors realize this is probably their best chance to have a fair fight with Amazon in India,” said Ken Murphy, portfolio manager at Aberdeen Standard Investments.

Although Walmart’s shares have fallen by 20% from its all-time high in January due to concerns revolving around its online performance in the U.S. , in the past 12 months, they have however outperformed the wider S&P 500 index.

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