Scouting Wal-Mart could end up in SA
Apr 15 2010
Retail Wrap >>

IT CAN only be a matter of time before Wal-Mart lands on these shores. Sooner or later the world’s largest retailer will extend its reach to Africa. It makes sense. The company that in the year to January posted revenue of 408,2bn and net profit of 14,2bn needs to grow. With the post-recession US consumer still in intensive care, Wal-Mart, with operations in 15 overseas territories already, will expand further outwards.

SA would be a handy base for expansion into the growing, if fragmented, African market, especially if Wal-Mart bought an existing player for an automatic regional footprint.

“The US market that has been the driver of growth for Wal-Mart over the years has really slowed down,” says Francisco Chevez, a retail analyst at HSBC in New York. “To generate the kind of growth they have had in the past, they need an additional focus on their international business.”

The normally tight-lipped Wal-Mart, which had been looking at Russia, was surprisingly candid last year when it told analysts it had not found a suitable purchase in that market.

“In my view that’s indicating Russia’s been put on the back burner. It raises the profile of other countries,” Chevez says. “Turkey, Colombia and SA are all likely areas for expansion.”

Wal-Mart declined to comment last week.

From a local point of view, Wal-Mart’s arrival could be a bonanza. “Wal-mart will pay big time,” says Chris Gilmour, an analyst at Absa Investments.

The locals play it down, however. Shoprite chairman Christo Wiese was coy last week. “It is on the same level as the contact we have with the guys from Pick n Pay or Woolworths because we’ re all in the same business,” he said.

In October, Pick n Pay CEO Nick Badminton said his company had met Wal-Mart staff “out of courtesy ”, during a recent visit by that company.

Still, it is a possibility. “If a global player pitches up at some point, things are going to get very exciting,” Massmart CEO Grant Pattison said in February.

So which company would be the best fit? Shoprite, with 106 stores between SA and Ghana, is one option. “The best footprint by far is Shoprite,” Gilmour says.

Shoprite dismisses such talk — perhaps a bit too vehemently. “It would be rather silly for a foreign investor to come into a country like SA with 40-million people,” Shoprite CE Whitey Basson said in February. “If I was Wal-Mart I would not waste my time here. I would play in China. The 1,6-billion people should keep them busy for a long time.”

Massmart, with retail stores, hardware stores and food retailers in 14 countries, “isn’t that far behind”, Gilmour says.

Ackerman family-controlled Pick n Pay, with 117 stores , keeps an open mind. “Any approach or offer would be evaluated on its strategic value ,” chairman Gareth Ackerman said on Friday.

Any dating may be quick. Wal- Mart plays a waiting game but pounces quickly, Chevez says. “They are very opportunistic, when something is right, they will do it.”

Source: www.businessday.co.za, 12 April 2010