News is out today that Wal-Mart will spend $878 million to buy out the minority shareholders in Japanese supermarket Seiyu Ltd. The company already owns 51% of Seiyu and has always lost money -- by some accounts over $1 billion. So why would Wal-Mart throw more money at what appears to be a losing proposition? The 24/7 Wall Street blog has a possible answer:
Because its growth in the US is behind it and during the last quarter it was more clear than ever that international operations are the company's only real growth area.
Wal-Mart's strongest market is Mexico. China is probably next, but the government there has already put in a union and a branch of the communist party. So, it is hard to predict how stable WMT's business may be in the world's most populated country. WMT has already pulled out of West Germany and Korea due to lack of ability to pick up significant market share and to make a profit.
Why pay a huge premium for a minority interest in its Japan operation? Because Wal-Mart is running out of big markets.
For more insights, check out the BNET feature package on Wal-Mart's difficulties.
(Image of Wal-Mart store by code poet, CC 2.0)