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Not Wal-Mart Stores, Inc. (WMT), But This Other Stock Is a Buy?

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Wal-Mart Stores, Inc (NYSE:WMT)Wal-Mart Stores, Inc. (NYSE:WMT) is without a doubt the biggest retailer in the world and a stable long-term investment. Having said that, it always helps to have some international exposure beyond the international markets that Wal-Mart serves. With that in mind it got me wondering, would investors benefit from investing in the world’s second biggest retailer, Carrefour, or would Costco Wholesale Corporation (NASDAQ:COST) provide a better return?

What does Carrefour offer?

This is a very good question, Carrefour offers international exposure, just like Wal-Mart Stores, Inc. (NYSE:WMT), although the company is nowhere near as large as Wal-Mart Stores, Inc. (NYSE:WMT) (Carrefour is about the same size as Costco Wholesale Corporation (NASDAQ:COST)), Carrefour has a very broad international presence. Indeed, the company has nearly 10,000 stores, some of different formats, in 33 countries.

On the other hand, Carrefour has a rather large exposure to Europe, with around 73% of the company’s sales coming from the region. Although, it would appear that the company is not suffering as much as some would believe, as during 2012 the company’s sales within Europe only declined about 2.4%, which was for the most part offset by growth in faster growing Asian and Latin American markets, where the company grew sales 4.8% and 10%, respectively.

Revenue breakdown

Carrefour

Region Revenue Split Total Revenue
Asia 8.3% E7.2 B
Europe (ex France) 27% E23.7B
France 46% E39.5B
Latin America 17% E16.1B

Most of Carrefour’s revenue comes from its home country, France. That said, 54% of the company’s revenue does come from the rest of the world with a large portion coming from the fast growing Latin America region. Carrefour has been working on streamlining operations during the past few years and as a result, the company’s activities in Greece, Singapore, Colombia, Malaysia and Indonesia have all been discontinued, which reduced the company’s revenue by $6.7 billion during 2012.

In comparison, discount retailer Costco Wholesale Corporation (NASDAQ:COST), does not have as much international exposure, with no exposure to Europe.

Costco

Region Revenue Split Total Revenue
Canada 16% $16 B
Rest of world 12% $12 B
US 72% $72 B

Costco’s revenues are mostly derived from the US market, but as you can see it does have some international operations.

Wal-Mart

Region Revenue Split Total Revenue
International 28% $132 Billion
US 72% $338 Billion

Finally, as a comparison, here is the breakdown of Wal-Mart Stores, Inc. (NYSE:WMT)’s revenue. Most of the company’s revenue comes from the US. However, Wal-Mart’s total revenue is almost 150% larger than that of Carrefour and Costco, so, although Wal-Mart Stores, Inc. (NYSE:WMT) derives the majority of its revenue from the US, its international revenues are actually greater than Carrefour’s total revenues.

Size and growth

Carrefour
Market cap $16
Revenues 2012 $106
Revenues 4-yr CAGR -2.9%

Figures in billions; sales reported in Euro’s exchange rates may have an effect.

Carrefour is by far the smallest company by market cap in the group, but the second largest in revenue terms. The reason for this lies in Carrefour’s poor performance over the last few years, which has spooked investors and sent the share price and market cap swirling down.

Obviously, the majority of this poor performance is down to the deteriorating economic situation in Europe. Having said that, as market capitalization goes, Carrefour has never really fulfilled its potential, as during the company’s pre-credit-crisis hay-day its market capitalization only reached a high of $61 billion, only slightly larger than that of Costco’s current market cap.

Costco
Market cap $44.3
Revenues 2012 $99
Revenues 4-yr CAGR 8.5%

Figures in billion of $US

Costco’s revenue growth has been the fastest out of all three companies during the last four years.

Wal-Mart
Market cap $242
Revenues 2012 $470
Revenues 4-yr CAGR 3.8%

Figures in billions of $US

Wal-Mart Stores, Inc. (NYSE:WMT) blows both Costco and Carrefour out of the water on both size and revenue, but the company does have the slowest CAGR of the three; because of the company’s colossal size it becomes harder to eek out revenue growth.

So why Carrefour?

With sales falling, the share price depressed and net income negative Carrefour does not look to be a suitable investment for anyone. However,  Carrefour’s losses have not gone unnoticed and during 2012, the company parachuted in new chief executive George Plassat, who has begun a three-year turnaround plan focused on reducing debt, cutting overhead and returning autonomy to individual stores in order to reduce admiration costs.

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