Wal-mart (WMT) Lower; Fitch Sees Tough Environment in FY13 for Large Food Retailers
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Wal-mart (NYSE: WMT) shares are a little pressured today following new data out of Fitch on Monday.
In particular, Fitch said that the largest global food retailers will see continued pressure into 2013. The biggest concerns are uncertainty surrounding business models as well as a weak macro environment.
Fitch named off Carrefour, Tesco and Metro, which all come in slightly behind Wal-mart for global food-retailing dominance.
"Major food retailers will focus on adapting their business models in 2013 to cope with changing consumption patterns, while they also face low like-for-like sales growth and pressure on operating margins. Failure to remain competitive through this period of change could lead to negative rating actions in 2013.
We expect retailers to increase the space devoted to fresh products, while reducing their focus on non-food products, where they face stiff competition from specialist retailers. We also expect retailers to stop expanding their portfolio of large stores and concentrate instead on smaller and convenience store formats as an ageing population and high petrol prices lead to changes in consumer behaviour.
An acceleration of retailers' multi-channel strategy will also lead to more online services and more innovative ways to combine their online and bricks-and-mortar operations. This includes the roll-out of "drive-thru" supermarkets, where customers can order online and pick up their shopping at a time that suits them.
As they go about reforming their business models, we expect food retailers to pay particular attention to restoring their credit profiles through improving internal cash flow generation. This is also likely to include a tendency to pay dividends in scrip and to exit foreign markets where they don't have a clear leadership position."
Wal-mart is down 0.3 percent today.
In particular, Fitch said that the largest global food retailers will see continued pressure into 2013. The biggest concerns are uncertainty surrounding business models as well as a weak macro environment.
Fitch named off Carrefour, Tesco and Metro, which all come in slightly behind Wal-mart for global food-retailing dominance.
"Major food retailers will focus on adapting their business models in 2013 to cope with changing consumption patterns, while they also face low like-for-like sales growth and pressure on operating margins. Failure to remain competitive through this period of change could lead to negative rating actions in 2013.
We expect retailers to increase the space devoted to fresh products, while reducing their focus on non-food products, where they face stiff competition from specialist retailers. We also expect retailers to stop expanding their portfolio of large stores and concentrate instead on smaller and convenience store formats as an ageing population and high petrol prices lead to changes in consumer behaviour.
An acceleration of retailers' multi-channel strategy will also lead to more online services and more innovative ways to combine their online and bricks-and-mortar operations. This includes the roll-out of "drive-thru" supermarkets, where customers can order online and pick up their shopping at a time that suits them.
As they go about reforming their business models, we expect food retailers to pay particular attention to restoring their credit profiles through improving internal cash flow generation. This is also likely to include a tendency to pay dividends in scrip and to exit foreign markets where they don't have a clear leadership position."
Wal-mart is down 0.3 percent today.
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