Walmart to Open Wholesale Outlets in India - Analyst Blog

Per media reports, Wal-Mart Stores Inc. WMT plans to open 50 more wholesale stores in India under its Best Price Modern Wholesale banner over the next four to five years. These stores, known as cash-and-carry outlets, will sell directly to small retailers rather than to individuals. The retail giant already has 20 such stores in the country. Walmart also plans to launch online operations for these small traders.

Walmart ventured into India in 2009 in partnership with Bharti Enterprises when the country opened its doors to foreign direct investment in the retail sector. However, things were not rosy for this retailer as Indian regulators have been reluctant to let large foreign retailers such as Walmart build up their presence in the country, fearing that this would hurt small stores.

In Oct 2013, Walmart decided to terminate the joint venture with Bharti. It also shelved its plans to open own retail stores in India as it faced difficulties navigating Indian regulations that require foreign retailers to get 30% of their products and services from local small businesses. Moreover, Walmart had to suspend its chief executive officer of the joint venture amid lobbying and bribing charges against the company.

These hurdles made it difficult for the company to carry out business in India. Walmart could not open a single store in India in 2013, despite plans to open eight during the year.

The Indian government currently allows international companies to open multi-brand retail outlets with an Indian partner owning a minority stake. However, it allows foreign companies to run 100%-owned wholesale chains.

Walmart has thus decided to take another route to India and announced the opening of wholesale stores. The Indian expansion is expected to boost sales and operating margins of the company, which grappled with declining same-store sales at its U.S. units for four straight quarters in fiscal 2014.

Per sources, Walmart also has plans to open retail stores in India but is waiting for the national elections to get over in May, in case the new government allows direct investment in the retail sector.

Walmart currently holds a Zacks Rank #4 (Sell).

However, better-ranked stocks in the retail sector include Companhia Brasileira de Distribuicao CBD, Foot Locker, Inc. FL and The Kroger Co. KR. While Companhia Brasileira de Distribuicao sports a Zacks Rank #1 (Strong Buy), Foot Locker and Kroger carry a Zacks Rank #2 (Buy).