Wal-Mart Stores Inc. is reportedly considering closing as many as 30 stores in Brazil and leasing space in other stores to home-furnishings retailers. It’s part of an ongoing evaluation of the world’s largest retailer’s international business, which includes evaluating whether to exit underperforming foreign markets.
A local Brazilian newspaper, Valor Econômico, on Wednesday reported on the possible closures.
“We are constantly reviewing our portfolio and making decisions based upon what’s best for our business and the customers we serve,” said Jo Newbould Warner, a spokeswoman for Wal-Mart International.
The retailer operates 588 stores in Brazil, which has been hit with a stinging recession. Consumers have cut spending at a time when Brazil, the world’s third-largest market, is expected to grow at it slowest pace in 15 years.
Wal-Mart Stores chief executive officer Doug McMillon recently promised to review Wal-Mart’s international store base to divest of underperforming units and the company has already started selling non-core assets in Latin America, including real estate in Chile and a Mexican restaurant chain.
For the third quarter ended Oct. 31, Mexico and Canada posted strong positive comps, while the U.K., Brazil and China posted negative comps. Walmex net sales increased 7.4 percent and net sales in Canada advanced 5.7 percent. Sales in China grew 2.7 percent, driven by new store openings; however, comps declined 0.7 percent.
During the third quarter, global e-commerce sales and gross merchandise value grew at a rate of about 10 percent, primarily due to continued economic challenges in major international markets such as Brazil, China and the U.K.
Brazil’s economy has been suffering from weakening consumer demand and a steep fall in the value of the Brazilian real, which lost more than 30 percent of its value against the U.S. dollar this year.
The country, which boasts the largest economy in Latin America and eighth-largest worldwide, is suffering from a slowdown in commodities. Brazil drastically increased its exports to China over the past decade, but the shaky Chinese economy has been generating less demand for those goods.
Wal-Mart Brazil entered Brazil in 1995 with two Supercenters and three Sam’s Clubs. Two acquisitions propelled Wal-Mart Brazil to the third-largest retailer in the country, the purchase of Bompreço’s 118 stores in the northeast region of Brazil, and Sonae’s 140 stores in the southern region.
However, Wal-Mart has lagged behind rivals Casino Guichard Perrachon & Cie’s GPA SA and Carrefour SA. In recent years, price cuts combined with wage increases and higher operating costs are said to have eroded Wal-Mart’s profitability.