Walmart's Mexican expansion delay has international implications
The timing of store openings in Mexico and Central America will be delayed by as much as 90 days due to what the company described as “process changes” that will increase the time required to open a store.
Wal-Mart de Mexico, S.A.B. de C.V. in an update to its expansion program disclosed to the Mexican Stock Exchange that it contemplated completing its 2012 expansion program 60 to 90 days later than originally planned. As a result new store openings for the current year will now range between 325 and 335 units.
The update did not indicate the number of units previously planned, but in a separate filing earlier this year the company said it planned to open between 410 and 436 stores. The company also didn’t elaborate on the motivation for the process change which is occurring against the backdrop of ongoing investigations into allegations that Wal-Mart de Mexico executive bribed Mexican officials to accelerate growth.
“The revision to the expansion program is primarily due to additional steps the company is adding to its real estate process that extend the average time required to open a store,” the company said. “These steps include reinforcing documentation that supports real estate projects and enhancing processes with our business partners. Another factor that explains the change is that stores rescheduled for the latter part of December are now being moved into January of 2013 due to operational considerations of the Christmas season.”
No further details were disclosed on the nature of process enhancement with business partners, but Wal-Mart de Mexico did say the changes would strengthen is overall growth development process and that it will continue to invest in the region.
The company operates a total of 2,785 units in Mexico and Central America consisting of a wide range of formats with 2,157 stores in Mexico and 626 stores in Central America.
The format that has experienced the most dramatic growth in recent years is Bodega Aurrera. The no-frills, low-price concept focused on lower income shoppers now numbers 1,268 units through out Mexico. That’s more than double from five years earlier the explosive growth resulted from the introduction several years ago of smaller format Mi Bodega and Bodega Express stores. There are now 643 of the Express stores, 237 Mi Bodega stores and 388 of the original Bodega Aurerra stores. Wal-Mart de Mexico has opened a total of 82 stores so far this year and of that total 75 units are in the Bodega Aurrera format, including 56 Express stores.
The delay to expansion in Mexico is noteworthy because if Walmart is enhancing real estate procedures there then the potential exists for those enhancements to be applied to other international markets with a similar effect on 2012 growth targets. Guidance Walmart provided to investors last year calls for international square footage to occur at nearly twice the rate of the U.S. However, when Walmart discloses capital expenditure plans to investors it doesn’t provide details on the number of units it expects to open internationally or where those units will be located. Instead, it offers a square footage figure, which in the case of the current year, is estimated to range between 26 million and 28 million square feet of new selling space compared to a domestic expansion of 14 to 15 million square feet for Walmart U.S. and one million square feet for Sam’s Club.