Wal-Mart’s Mexican Mess – The Wall Street Journal.

April 24, 2012 Leave a comment


I thought you would be interested in the following story on WSJ.com.

Wal-Mart’s Mexican Mess

http://online.wsj.com/article/SB10001424052702303978104577362322760689462.html

Wal-Mart‘s WMT +2.02%Mexican crisis is a $10 billion problem. At least that was the stock market’s first take. Investors wiped that amount of the company’s market capitalization following allegations in the New York Times of bribery at its Wal-Mart de Mexico subsidiary.

At first glance, the 5% share price fall looks harsh given that Wal-Mart’s 69% stake in the subsidiary generated about 5% of its sales last year. The business is not about to vanish overnight. But investors are right to be cautious.

WALMARTHERD

First, the international business, of which Mexico is a key part, helped Wal-Mart boost sales by an average of 5.2% annually over the last five years. The U.S. business grew only 3.2% a year. Wal-Mart’s ability to expand further in Mexico might now be affected. Hobble Wal-Mart’s international operations and it is left with a U.S. business that competes with the Internet and has become increasingly reliant on a low-margin grocery business.

Filed under II. Competitor Analysis, III. Global Strategy

About Ben Gomes-Casseres
Author or REMIX STRATEGY. Professor at Brandeis University. Researcher, speaker, consultant on strategy of business combinations.

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