Walmart Stores and Advent International Corp are reportedly in talks as the giant retailer seeks to offload a major interest in its operations in Brazil. Per sources Goldman Sachs is advising Walmart. Other PE firms which are considering making an investment in Walmart’s Brazilian unit include Acon Investments LLC and GP Investments Ltd.
The overseas business of Walmart is no longer a growth driver like it used to be in the past. In Brazil this is partly as a result of an economic recession while in the United Kingdom the sluggish growth has been attributed to the heightened competition.
Two years ago the chief executive officer of Walmart, Doug McMillon, indicated that the retailer’s global operations would be reviewed. At the time there was speculation that the retail giant was intending to restructure or even get out of struggling markets. Analysts consistently pointed Brazil as being one of the potential targets.
In 2016 Walmart shut down a little over 10% of the stores it had in Brazil besides shedding non-core businesses in South America. Walmart also sold its online retail operations in China to JD.com and instead of going it alone acquired a stake in the No. 2 e-commerce firm in the world’s most populous country. Walmart’s partial exit from Brazil coincides with the retailer’s COO, Judith McKenna, planning to take the reins of the company’s international unit.
Walmart’s operations in Brazil started in 1995 and it went on to become the third-biggest retailer in South America’s biggest economy after acquiring two firms ten years later. It also grew by rapidly launching new stores. The growth phase however ended in 2013.
Per information obtained on Walmart’s website, the giant retailer currently has 471 outlets in Brazil. In 2016 the Brazilian unit generated revenues totaling approximately $9.4 billion. However for the last seven years the retailer has recorded operating losses in Latin America’s biggest economy. This has been attributed to the aggressive expansion strategy which left the company with uncompetitive prices, labor troubles, inefficient operations and poor locations.
It is understood that possible investors were sounded out by Walmart a couple of months ago but there was no interest and consequently the giant retailer sought out buyout firms. But as the Brazilian economy recovers Walmart’s sales have begun to recover. Compared to 2016 Walmart’s holiday sales in 2017 were 5.6% higher per, Serasa Experian, a credit data supplier.