Reports that Wal-Mart is looking at developing new formats in the U.S. have finally been confirmed by the company and now the question is whether it makes more sense to build them from the ground up or push ahead into the convenience store channel, for example, by acquiring an existing business.
For its part, Wal-Mart has not signaled any intention to acquire a chain(s). In fact, company spokesperson John Simley told The Associated Press, "It would be wrong to speculate about how that (new format development) might translate into future M&A activity."
While Wal-Mart is downplaying acquisition talk, it has not stopped analysts from speculating that a purchase may be the best way forward to building a new business.
Wal-Mart's path to growth in the U.S. has traditionally been accomplished organically, although Sam's did purchase some rival clubs as it grew.
"Wal-Mart has been building things from the ground up for a long time," Patricia Edwards, a portfolio manager at Wentworth, Hauser & Violich, told the wire service.
Robert Buchanan, retail analyst at A.G. Edward & Sons, said exploring new formats makes sense for Wal-Mart but he doesn't see the retailer "going on a buying spree."
The retailer's track record with acquisitions in overseas markets has been spotty.
Discussion Questions: What would you see as the pros and cons of Wal-Mart following an acquisition path to enter the convenience store channel? Are there candidates that you believe would be a good fit with Wal-Mart to help it meet its competitive challenges going forward?