Wal-Mart Closes D&S Buy

Wal-Mart says it has finalized its purchase of a 58.2% stake in Chile’s D&S for about $2.8bn. The Ibanez Scott family will retain a 40.1% of the retailer and 1.7% will be owned by other investors. Although the entrance of the retail giant to the Chilean market poses a challenge to local retailers such as Falabella and Cencosud, analysts are optimistic. Celfin Capital has rated Cencosud and Falabella a buy even though it admits the retailer will face tougher competition from Wal-Mart. The entrance of the US retailer, says Celfin, “should raise competition levels in the domestic supermarket industry further. Although we do not expect Wal-Mart to fully replicate its “every day low prices” strategy in Chile (though from a marketing perspective, Wal-Mart is likely to use the slogan), we do anticipate lower prices on the back of improved efficiency levels and selective price reductions.” Patricio Hernandez, equity analyst at Banchile, says competition will start to heat up in the second half of 2010. He explains that for one year, Wal-Mart will not make any major changes to D&S stores or management teams. After that period, Hernandez expects Wal-Mart to start making changes to D&S’s business model – although both are very similar – and implement its lower prices strategy.