In This Market, Expansion Is the Only Answer for Wal-Mart
Wal-Mart’s (NYSE:WMT) South African unit is struggling, and while investors are waiting for the retailer to lay out its plans for expanding into other, more lucrative African countries, the company seems to be dragging its feet.
Wal-Mart has a 51 percent stake in Massmart Holdings Inc., but according to Reuters, the company isn’t growing as successfully as anticipated, evidenced by a poorer-than-expected first-half sales profit posted Thursday. Much of the problem can be attributed to South Africa’s weak market and dropping consumer demand, but while Massmart’s rivals are combatting that loss by expanding into other rising sub-Saharan economies, the Johannesburg-based Africa unit’s plans to expand aren’t as ambitious as many investors would hope.
Currently, Massmart has a presence in 11 African countries outside South Africa running 29 stores. These serve to contribute about 8 percent of the company’s total sales, Reuters reports. CEO Grant Pattison maintained at his company’s presentation Thursday that “We want to slightly shift our focus away from South Africa and put more resources into African growth”; still, only five of the 15 stores Massmart plans to open over the next three years are planned to be outside of South Africa.