For Walmart Inc, Brazil has been more of a nightmare.
The world’s top retailer on Monday retreated from Latin America’s biggest market, selling a majority stake in its Brazilian unit to private-equity firm Advent International Corp.
Walmart is to retain a 20 percent stake in the business after the deal, which would result in a US$4.5 billion non-cash net loss in the quarter.
The long-rumored sale is the latest move by Walmart to reshape its global footprint, following deals in the UK and India.
Advent is betting that it can succeed where Walmart fell short. The company plans to focus on the wholesale, or cash-and-carry, strategy that has boosted growth for rivals such as Carrefour SA, a person familiar with the deal said.
Walmart received no payment for the business, but could receive as much as US$250 million from Advent based on the unit’s future performance, a Walmart spokesman said.
Brazil is not Walmart’s first overseas stumble. In 2006, it retreated from South Korea and Germany after failing to gain traction in those hyper-competitive markets, and more recently it changed tack in China after an initial investment failed to produce results.
It is also now stepping back from Britain, merging its Asda business with rival J Sainsbury PLC after its reputation as England’s lowest-price retailer was undercut by German discounters.
Walmart entered Brazil in 1995, and grew quickly thanks to twin deals about a decade later, acquiring local retailers Sonae — which was big in the south of the country — and supermarket chain Bompreco.
However, Walmart did not integrate the acquisitions, and never fully benefited from the nation’s rapid growth. Its 465 Brazilian units today operate under a slew of banners, from Bompreco to Maxxi to TodoDia.
An additional problem was the company’s dogmatic belief that shoppers around the world would embrace its one-stop, everyday-low-price approach just as Americans have done.
However, that model never really connected with consumers in Brazil, where the minimum wage is less than US$275 a month, forcing shoppers to hit multiple stores to stretch out their paychecks.
Doug McMillon, who ran the international division for five years before taking the CEO job, said in 2013 that “we’re not making the most” of Brazil.
Rival Carrefour found success with an early foray into wholesale outlets, known as atacado in Portuguese, which were a big hit with Brazilians when unemployment and sweeping social-spending cuts sharply curtailed their spending power.
The French retailer took its Brazilian unit public last year and analysts at Goldman Sachs Group Inc expect Carrefour to double its store count in the country by 2020.
Walmart tried to adjust: It closed about 60 poor-performing stores, remodeled about 120 others and shuttered part of its e-commerce business. In 2016, the company also installed a new CEO, Flavio Cotini, its fifth Brazilian chief in less than a decade.
Without any improvements on the horizon, Brazil has become an odd fit in Walmart’s international game plan, which calls for aggressive expansion in India and China. Investments there, such as last month’s US$16 billion acquisition of Indian e-commerce leader Flipkart Online Services Pvt, require Walmart to retrench in other markets.
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