Wal-Mart de Mexico May Say Adios to Its Restaurant Unit
Wal-Mart Stores Inc.’s (NYSE:WMT) Wal-Mart de Mexico is making waves again, but this time, the company is doing it on purpose.
Wal-Mart de Mexico, controlled by Walmart and known locally as Walmex, is now showing interest in selling its struggling restaurant unit, which is composed of 364 restaurants. The unit only accounted for 1.7 percent of Walmex’s revenue in 2012 and opened just two new restaurants between 2011 and 2012. Though it serves 79 million customers annually, Reuters contends that Walmex is considering selling off the restaurant division as it continues to receive interest from potential buyers and is already combating weak same-store sales.
Walmex’s 364-strong restaurant group includes 265 restaurants from the popular Vips chain, 92 El Porton restaurants, and seven Ragazii restaurants. Specializing in a range of food from Mexican breakfasts and dinners, American-style hotcakes and cheeseburgers, and Italian cuisine, Wal-Mex promises to satisfy just about any palate. But Mexican billion Carlos Slim supplies steep competition with his Sanborns restaurant and retail chain. The division went public earlier in the year and earned itself almost $1 billion.
Wal-Mart now might be looking for similar pay-offs, with analysts expecting it to go for something between $600 and 700 million. Though Walmex maintained that there is no guarantee it will reach a deal, analysts point to Alsea, operator of Burger King (NYSE:BK) as well as other upscale restaurants in Mexico, as one of the possible contenders that could be interested in Vips. Femsa, Coca-Cola bottler and retailer, too, could fit the bill with its recent reports of an interest in breaking into the fast-food industry.
Walmex’s same-store sales fell 2.4 percent in May, marking the company’s second monthly decline as the investigation over whether Wal-Mart executives bribed Mexican officials continues.
Investing Insights: Will Abercrombie & Fitch Continue to Trend?