Insight: Lost in translation - Wal-Mart stumbles hard in Brazil
By Brad Haynes and Nathan Layne
CAMPO GRANDE, Brazil/BENTONVILLE, Arkansas (Reuters) - When Wal-Mart Stores Inc. (WMT.N: Quote) first expanded into Brazil's midwestern farm-belt city of Campo Grande seven years ago, the economy was booming and executives were eager to open stores even in sub-prime locations on one-way streets heading out of town.
It didn’t last. At the end of December, the U.S. retailer closed both of its Maxxi brand cash-and-carry stores in Campo Grande as part of a restructuring that shuttered 60 locations across Brazil, including some Supercenters. Shoppers said the stores could not compete on assortment, price or location.
"It was never clear who Maxxi was for. It wasn't cheap enough for the poor. But there was no appeal for the middle class," said Ordecy Gossler, 40, a public accountant filling his cart with cleaning supplies and toilet paper at Atacadão, a rival chain run by France's Carrefour (CARR.PA: Quote).
"When they announced in December that both Maxxis were closing, no one in my office knew where they were."
Today, Wal-Mart has just one Supercenter left in this city of 850,000 people, whose demographic of thrifty shoppers had once seemed suited to the world's largest retailer. It shuttered the city’s other one at the end of the year, as traffic dwindled in the shopping mall it was meant to anchor.
The retreat from Campo Grande is emblematic of Wal-Mart’s broader issues in Brazil, a once-red-hot destination for foreign retailers and other companies that has turned stone cold. And the lackluster performance in Latin America's largest economy shows how tactics that helped Wal-Mart build success in the U.S. sometimes get badly lost in translation overseas.
International results have been anemic, despite $22 billion in capital investment over the past five years. Wal-Mart last year generated a 4.5 percent operating profit margin from international markets, well below the 7.4 percent return posted from the U.S.
Seeking higher returns, Wal-Mart CEO Doug McMillon in October announced a strategic review of the company’s global assets. Some securities analysts have speculated Wal-Mart could exit Brazil, as well as other markets in Latin America where it is already closing an additional 55 stores. Continued...