Wal-Mart Brazil lends valuable learnings
BENTONVILLE, ARK. —At a Wal-Mart-hosted meeting later this week in the Brazilian coastal city of Salvador, financial analysts will provide insight into Wal-Mart’s operations in one of the world’s hottest markets and perhaps provide a glimpse of future developments in the United States.
Wal-Mart’s business in Brazil, consisting of more than 300 stores operating under 10 different formats, was a key driver of the financial performance of the company’s international division, which last year saw sales surge 17.5% to $90.6 billion and operating profit increase 12% to nearly $4.8 billion.
“We consistently gained market share through fiscal 2008 and operating income in Brazil was above plan for the quarter and the full year,” stated Wal-Mart vice chairman Mike Duke. “Brazil operations, including the acquisitions in the Northeast and the South, keep improving and delivering results ahead of plan.”
In early 2004 and late 2005, Wal-Mart made two acquisitions in Brazil that transformed its approach to serving the market from a strategy primarily focused on supercenters to one that emphasizes formats geared toward specific customer segments. The multiformat strategy is one of the reasons Brazil is a special place for Wal-Mart and why U.S. retailers may want to heed the manner in which the company is serving customers there. The strategy is also employed by Wal-Mart in Mexico, and other international retailers use multiple formats within the same market to serve different demographic groups. In the United States, however, Wal-Mart has taken a different path. Expansion efforts in its home market are focused almost exclusively on supercenters, which do come in a range of sizes and merchandising schemes to serve the demographics of the communities in which they are located.
That strategy could be in for a change based on a growing body of evidence ranging from the reduced pace of domestic supercenter expansion, Wal-Mart’s track record of success as an international multiformat operator and the international background of U.S. Stores division president Eduardo Castro-Wright, who oversaw Wal-Mart’s Mexican business for four years before joining the U.S. team three years ago.
In addition, Wal-Mart has confirmed it will open a small format store called Market Side this year in Phoenix, but has offered no details about the concept. Beyond this new concept, though, among those speculations emerging from industry insiders with Wal-Mart contacts is that the company is developing at least one, and possibly more formats, that will target specific niches but won’t carry the Wal-Mart name. While having a value orientation, the new concepts will focus on specific consumers based on narrower demographic profiles than its existing concepts. Wal-Mart’s approach to such independent concept stores has been likened to Aldi’s strategy of developing Trader Joe’s completely independently of its namesake stores.
Such an approach would be a new strategic direction for Wal-Mart, which hasn’t introduced a new concept domestically since 1998 when it opened the first Neighborhood Market stores. Those units were, and still are, closely affiliated with Wal-Mart and they appeal to a customer base that is essentially the same, but wants a more convenient experience. Clearly there are benefits to such an affiliation, but for a retailer whose continued domestic growth is dependent on selling more to its existing customers while attracting new customers, the introduction of new formats is seen as an inevitable development if Wal-Mart wants to keep pace with an evolving market.
Until now, the company hasn’t needed any new formats to support its domestic growth. Its supercenters have been gaining share from competitors since the first units opened two decades ago, but growth has begun to slow. Format development has also taken a back seat to other issues, as Wal-Mart has been preoccupied resurrecting its image and executing a transformation plan that is now in its third year. That plan focused primarily on operations, merchandising and marketing under the leadership of Castro-Wright.
Wal-Mart entered Brazil in 1995, but weak economic growth, coupled with high inflation and unemployment, led to slow expansion, and by 2003 there were only 25 Brazilian Wal-Mart stores. When the economic outlook began to improve several years ago, so did Wal-Mart’s attitude toward growth and acquisitions. In February 2004, Wal-Mart paid $300 million to acquire 118 stores from Bompreco S.A. Supermercados do Nordeste, and less than two years later, in December 2005, Wal-Mart paid $720 million to acquire 139 stores in southern Brazil from Sonae.
Tuesday Morning promotes Bowman to cfo
DALLAS Tuesday Morning has promoted Stephanie Bowman to the position of evp and cfo. Bowman was previously serving as vp of finance for Tuesday Morning, prior to that she served as vp of finance for Summit Global Partners.
“Stephanie has an extensive knowledge of financial management and because of her current position with Tuesday Morning, understands the company’s systems, personnel, and culture. She is positioned to hit the ground running,” stated Michael Marchetti, evp, coo and acting cfo.
Tuesday Morning reported that net sales for the third quarter ended March 31 were $178.4 million compared to $189.2 million for the quarter ended March 31, a decrease of 5.7%. Comparable-store sales for the quarter ended March 31 decreased by 8.2% comprised of a 6.6% decrease in traffic and a 1.6% decrease in ticket.
Based on the third quarter sales results, the company currently expects diluted earnings per share for the third quarter to be in the range of (10 cents) to (12 cents).
Best Buy names Mikan to to board
MINNEAPOLIS Best Buy has announced the appointment of Mike Mikan to its board of directors. Mikan currently serves as evp and cfo of UnitedHealth Group.
“We are delighted to welcome Mike Mikan to Best Buy’s board of directors,” said Richard Schulze, Best Buy’s founder and chairman of the board. “With his deep financial experience, Mike will be a valuable addition to our board. We think his guidance and judgment will be important as we continue to grow Best Buy into the future.”
Mikan was appointed evp and cfo of UnitedHealth Group, in November 2006. Mikan previously served as cfo for UnitedHealthcare and chief financial officer for Specialized Care Services (now OptumHealth).