Wal-Mart in talks to sell major stake in Brazil operations

Above, a man talks on his mobile phone in front of a Wal-Mart store in Sao Paulo, Brazil. Wal-Mart’s operations in Brazil had not improved over the last two years, which coincided with the country’s harshest recession in decades. (Reuters)
Updated 22 January 2018

Wal-Mart in talks to sell major stake in Brazil operations

SAO PAULO: Wal-Mart Stores is in talks with buyout firm Advent International Corp. and other funds to sell a major stake in its Brazilian operations, two people with direct knowledge of the matter said on Sunday.
Wal-Mart is being advised by Goldman Sachs & Co, according to one of the sources who spoke on condition of anonymity. Other private equity firms that are looking into the investment in the Brazilian unit are GP Investments and Acon Investments, the source added.
Wal-Mart officials in Brazil declined to comment. Advent and GP declined to comment. Goldman and Acon did not immediately reply to requests for comment.
Wal-Mart’s overseas business is not the growth driver it once was as it has continued to grapple with an economic slowdown in Brazil and competition from discount retailers in the UK.
In 2016, Wal-Mart Chief Executive Officer Doug McMillon flagged to investors that he was planning to review its global operations. His comments had sparked speculation that Wal-Mart would look to restructure or even pull out of markets where it has struggled. Brazil was among the countries most often cited by analysts as a potential target.
During the same year, Wal-Mart shuttered at least 10 percent of its stores in Brazil and shed non-core businesses across Latin America. It also sold its e-commerce business in China to Chinese e-commerce company JD.com and picked up a stake in JD.com instead of trying to crack the market on its own.
A partial exit by Wal-Mart from Brazil comes as Chief Operating Officer Judith McKenna takes over the international unit of the world’s biggest retailer. The move would give a new partner the chance to turn around a sprawling operation that has struggled to turn a profit.
Wal-Mart entered Brazil in 1995 and had grown into the country’s third-largest retailer following two major acquisitions in 2004 and 2005 and a period of rapid store expansion that came to a halt in 2013.
It currently operates 471 stores in Brazil, according to the company’s local website. The retailer’s Brazilian unit reported revenues of almost 30 billion reais (SR35 billion) in 2016.
Wal-Mart has posted operating losses in Brazil for seven years in a row after an aggressive, decade-long expansion left it with poor locations, inefficient operations, labor troubles and uncompetitive prices, Reuters reported early in 2016.
One of the people with knowledge of the deal said Wal-Mart’s operations in Brazil had not improved over the last two years, which coincided with the country’s harshest recession in decades.
Wal-Mart began sounding out possible investors in the unit several months ago but got no interest from rival retailers, which led the company to seek out buyout firms, the source said.
The retailer intends to keep a stake in the Brazilian unit to be able to recoup part of its losses in the country later if an economic recovery and restructured operations boost results, according to the source.
Retail sales in Brazil are starting to recover from the recession. Christmas sales were 5.6 percent higher than a year ago, according to credit data supplier Serasa Experian.
Earlier on Sunday, newspaper O Globo said private equity Advent was in talks to acquire 50 percent of the Wal-Mart unit. The paper did not say how it got the information or any details on the state of the talks.

Davos: IMF raises Saudi economic growth forecast for 2020

Christine Lagarde said the IMF is making “a further downward revision” in its global economic forecasts. (WEF)
Updated 4 min 20 sec ago

Davos: IMF raises Saudi economic growth forecast for 2020

DAVOS: The International Monetary Fund (IMF) has raised its forecast for growth in Saudi Arabia for 2020 — although said the economy will grow more slowly than expected this year.

In its World Economic Outlook update for January, the IMF raised its growth forecast for the Kingdom by 0.2 percentage points, to 2.1 percent. 

However, the IMF lowered its projection for this year to 1.8 percent, down from 2.4 percent in its October report.

The global lender on Monday unveiled a gloomy global economic outlook, as it warned of risk factors ranging from the US-China trade war to Brexit.

Christine Lagarde, managing director of the IMF, and Gita Gopinath, chief economist, shared the IMF's outlook in Davos, Switzerland, ahead of the World Economic Forum's Annual Meeting.

Lagarde said the IMF is making  “a further downward revision” in its global economic forecasts.

“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” she said. 

Lagarde urged policymakers to address economic vulnerabilities, especially by reducing high government debt.

Gopinath said the IMF had revised its global growth forecast for 2019 to 3.5 percent, 0.2 percentage points lower than the previous estimate.

The growth forecast for 2020 is 3.6 percent, 0.1 percentage point lower than previously forecast. 

“The downward revisions are modest; however we believe the risks to more significant downward corrections are rising,” Gopinath told a press conference in Davos.

“The global expansion is weakening, and at a rate that is somewhat faster than expected.”

Gopinath said we are not necessarily “staring at an imminent global downturn,” but pointed to “two key sources of risk” in the future: An escalation in trade tensions, and a possible worsening of financial conditions.

China’s growth slowdown could be “faster than expected” if the trade war with the US continues, she added, while Brexit and a protracted US government shutdown also pose risks.

“Policymakers need to act now to reverse headwinds to growth and to prepare for the next downturn,” she said. 

Economic growth in the Middle East and North Africa is forecast at just 2.4 percent this year, below the global average and a decline of 0.3 percentage points on the projections laid out in the previous World Economic Outlook, released in October.