Will Walmart's International Segment Continue To Fuel Growth?

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Apart from having a dominant store and online presence in the United States, Wal-Mart Stores Inc. WMT is also gaining from its solid international operations. With operations spread in China, Mexico, Canada and UK, international forms Wal-Mart's second-largest segment, in terms of revenues. Evidently, international sales constituted about 24% of the company's total sales in fiscal 2017.

Notably, this segment has been delivering an impressive performance for a while now, which along with the company's aggressive efforts to counter Amazon's AMZN growing dominance has helped it deliver a stellar past record. Thanks to these factors, this supermarket giant has seen its shares gain 43.5% this year, faring even better than the industry's rise of 34.2%. So, let's delve deeper into Wal-Mart's international performance, which is likely to keep driving this Zacks Rank #2 (Buy) company's growth.





 

Wal-Mart International: Solid Growth Avenue

The big box retailer has been recording year-over-year currency-neutral sales for more than a year now. Evidently, sales grew 2.5% on a currency-neutral basis each, in the second and third quarters of fiscal 2018 while it was up 0.8% and 3% in the first-quarter fiscal 2018 and fourth-quarter fiscal 2017, respectively.

In the reported third-quarter fiscal 2018, Wal-Mart's international sales remained strong with 10 out of 11 markets recording positive comparable store sales (comps). Notably, Mexico and China performed exceptionally well, while results in UK also improved in the quarter.

Well, Wal-Mart de Mexico, or Walmex has been leading the company's international growth for quite some time now. In the third quarter, Walmex sales jumped 9.2%, driven by strength across both stores and online. The company has been enriching consumers' experience in the region through strategies like online grocery, while it also launched an e-commerce marketplace there recently that fueled merchandise assortment by 20%. Also, there were rounds last week that Walmex is planning to install Wi-Fi across most of its chains in Mexico by next summer to augment online sales and encourage tech-friendly shopping.

Moving to China, sales advanced 4% in the third quarter, backed by improvements across core categories like fresh and consumables. Notably, e-commerce sales in China have been growing at an impressive rate. Consequently, the company's constant e-commerce initiatives, particularly its alliance with JD.com has been driving its performance in China. Incidentally, during the third quarter, Wal-Mart increased its stores count (that provide speedy grocery deliveries via JD Daojia) to 140.

Further, results in Canada were aided by efficient price investments, which led to market-share gains of major categories. Also, the company's solid online initiatives like enhancing assortments, launch of e-commerce marketplace and expansion of outlets that provide online grocery pickup fueled the 1.9% rise in Canadian sales in the quarter. Wal-Mart's UK sales also grew 3.6% on the back of efforts to enhance in-store experience and pricing.

The departmental biggie remains committed toward achieving growth across all its markets, on the back of its fresh products; expansion of online grocery and private brands. That said, we remain encouraged about Wal-Mart's International segment performance.

Looking for More? Don't Miss These Trending Retail Stocks

Burlington Stores, Inc. BURL carrying a Zacks Rank #2 has a splendid earnings surprise history and an impressive long-term earnings growth rate of 17.5%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Ross Stores, Inc. ROST delivered an average positive earnings surprise of 5.5% in the trailing four quarters and has a long-term earnings growth rate of 10%. The company carries the same Zacks Rank as Burlington and Wal-Mart.


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Amazon.com, Inc. AMZN: Free Stock Analysis Report
 
Wal-Mart Stores, Inc. WMT: Free Stock Analysis Report
 
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