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Nation & World

Walmart faces (another) overseas obstacle

Some international issues easily might be resolved

Reuters

International hurdles are important, one investor says, “but as long as the U.S. is doing well, that’s enough for many investors.”
Reuters International hurdles are important, one investor says, “but as long as the U.S. is doing well, that’s enough for many investors.”

In India, an unfavorable e-commerce ruling is likely to crimp the growth for Walmart. In China, the retailer says an economic slowdown has shoppers tightening their purse strings. And now, a deal to reduce Walmart’s exposure to the slowing market in the United Kingdom is on life support.

These are yet more international headaches for Walmart CEO Doug McMillon. While the struggles abroad are outweighed by strength in the United States, the company’s shares fell on Wednesday — a sign that investors are concerned by its growing array of hurdles overseas.

Walmart stock’s decline sharpened to as much as 3 percent on Wednesday, while the S&P 500 was little changed.

Still, Walmart’s drop was well below the 17 percent swoon for J. Sainsbury, which faces the prospect that its proposed purchase of Walmart’s U.K. unit, Asda, will fall through after objections from regulators.

Walmart’s relatively muted decline may be explained by Wall Street’s focus on the company’s home market and its development of e-commerce to take on Amazon.com.

International events are important, “but as long as the U.S. is doing well, that’s enough for many investors,” said Chuck Grom, an analyst at Gordon Haskett Research Advisors. About two-thirds of Walmart’s revenue came from the U.S. in the fourth quarter.

“The lion’s share of investors will focus the lion’s share of their time on the U.S. business,” Grom said.

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Some of the company’s troubles abroad may be easily fixed. The retailer could find another buyer to take control of Asda if its deal with Sainsbury is unable to overcome skepticism from regulators, who said Wednesday the transaction raises significant competition concerns.

“Walmart will clearly still be looking to offload Asda and there will likely be other suitors waiting in the wings,” said Richard Curry, a partner who covers retail at Rapleys, a U.K. consulting firm.

Other parts of Walmart’s international business are doing well. In Mexico and Central America, sales rose more than 5 percent this past quarter. That’s faster than in the United States.

As long as the U.S. is humming along, investors are likely to remain patient with McMillon’s efforts to reshape the company’s portfolio of international assets.

In addition to agreeing to sell the controlling stake in Asda to Sainsbury, he acquired a 77 percent holding in Flipkart, the Indian e-commerce giant, last year for $16 billion.

Walmart also sold a majority stake in its Brazil operations to Advent International last year.

Its Japan stores have been the subject of deal speculation.

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