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Can Walmart's Plans for Asda Enhance International Business?

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A lot is being spoken about Walmart Inc.’s (WMT - Free Report) plans to merge its UK grocery unit, Asda with J Sainsbury plc (JSAIY - Free Report) . Well, sources revealed that Sainsbury has been in advanced talks to combine with Asda, which was scooped up by Walmart in 1999 in a bid to expand its international operations. However, Walmart will continue to hold stake in the merged entity – which is likely to give tough competition to UK’s supermarket biggie Tesco PLC (TSCDY - Free Report) .

Though none of these companies confirmed the news, reports suggest that this move comes as part of Walmart’s efforts to correct the slipups made in the international space. Notably, Walmart’s Asda has been losing market share to discount chains like Aldi and Lidl for quite some time, thereby weighing on Walmart’s UK operations. Walmart’s recent decision to shut its first-party e-commerce business in Brazil further reflects its commitment toward allocating resources in profitable regions only.

To this end, Walmart’s big plans to acquire major stake in Flipkart underscores its focus on lifting performance in the attractive Indian market, where it has been underperforming for a while now. Also, the U.S. big box retailer has been expanding in China, as evident from its alliance with China’s JD.com Inc. as well as its moves to fortify Sam’s Club store base in Asia’s largest country.

These moves, which underscore Walmart’s efforts to shift focus on profitable areas, also reflect its constant shots to combat the growing dominance of Amazon (AMZN - Free Report) , which shook the grocery space with its takeover of Whole Foods Market. Ever since the e-commerce biggie’s intrusion into the grocery space, retailers, particularly Walmart, have been making constant attempts to stay firm in the game.

Most recently, Walmart inked a deal with Postmates to extend its online grocery delivery service, with an intent to cover more than 40% of the families in the United States. In earlier developments, the company tested same day deliveries with Deliv, while it also partnered with ride-hailing services like Uber and Lyft for speedy online grocery deliveries. Moreover, Walmart acquired delivery startup Parcel, Inc., which specializes in same-day delivery for perishable and non-perishable products.

 


 

Notably, these robust moves have helped this Zacks Rank #3 (Hold) stock rally 18.8% in a year, outperforming the industry’s 15% upside. That said, we believe that Walmart’s strategy of focusing on more profitable markets should improve the shape of its international business, and fuel further growth at the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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