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Este informe no está disponible en español. DSN Retailing TodayDense Puerto Rican Market And American Influence Yield Bounty Of Retail Potential For Wal-MartJune 1, 2001 Because Puerto Rico exists as a commonwealth of the United States and uses the dollar as its currency, inclusion in Wal-Mart's International Division has always raised eyebrows. But while Puerto Rico's status as a foreign country may be debatable, its potential for growth is not--regardless of how Wal-Mart chooses to account for the sales and profits. There were only nine discount stores and six Sam's Clubs in operation at the end of the most recent fiscal year. This may seem like a lot on an island that is relatively small, 35 miles wide by 100 miles long, but Puerto Rico's population totals almost four million. By contrast, states such as Oklahoma or Arkansas have smaller populations, but considerably more Wal-Mart stores. Oklahoma's population is only about 3.4 million, and yet Wal-Mart operates 48 discount stores, 32 supercenters, six Sam's Clubs and eight Neighborhood Markets. The population of Arkansas is only 2.6 million, but it supports 41 discount stores, 36 supercenters, four Sam's Clubs and five Neighborhood Markets. Certainly there are major differences in the markets as Puerto Rico has a lower standard of living, a much higher unemployment rate and stronger thread of political instability. In addition, Wal-Mart has far less experience having entered Puerto Rico in 1992, as compared to almost four decades in its home state of Arkansas and neighboring Oklahoma. The comparison is a useful exercise, however, because it illustrates the huge potential to grow sales on the Island where current volume for the 15 Wal-Mart units is estimated to be about $755 million. An argument could even be made that Puerto Rico is understored. Wal-Mart's Sam's Club locations are consistently some of its highest-volume locations with several producing sales in excess of $100 million. Sam's also produced a same store sales increase in the mid-teens during the fourth quarter. The performance of Sam's Puerto Rico locations got the attention of Costco, and it plans to open a club there later this year. JCPenney recently told Fortune magazine that its highest-volume store is a 30-year-old location in San Juan's Plaza Las Americas mall, which draws 12,000 customers daily. Kmart has operated in Puerto Rico for roughly three decades, and its 26 stores there are believed to be among the chain's top performers. It recently opened a store in Juncos and has another unit planned for later this year. Walgreens is another retailer with three decades of experience on the island that has enjoyed success and presently operates 50 stores. A new Belz outlet mall also opened this spring just east of the San Juan airport. The most significant retail development taking place in Puerto Rico is the impending expansion of Wal-Mart supercenters, with the Island's first unit having opened April 4 in Cayey, and another unit planned for later this year. Possibly, in its efforts to implement its best practices strategy and maximize its market share in food, Puerto Rico may be most suitable for smaller Neighborhood Market formats or Mexico's no-frills Bodega format, although Wal-Mart has no specific plans yet. If the early success of the Cayey supercenter is any indication, Wal-Mart will have little problem getting customers to shop its stores for food. At the grand opening, it was hard to find a shopping cartwithout several bags of pulpo (octopus). At $0.97 a pound, the pulpo was a tremendous value, and customers were stocking up. Competitors were priced considerably higher; even the island's Sam's Clubs were priced higher at $1.57 per pound. With one store and an attractive price on staple items of Puerto Rican diets, Wal-Mart quickly extended its low-price image to food. It was a classic case of item merchandising that, along with scores of other opening-day deals, WalMart has used effectively worldwide to attract shoppers and reinforce its EDLP strategy. Competition for the food business is fragmented in Puerto Rico as there are no national competitors, but several chains have double-digit store counts and sales in excess of $100 million. The leading chain is Pueblo International with 50 stores under names such as Xtra Super Food Center and Pueblo International Supermarket, and sales of more than $500 million. Not far behind in volume is Supermercados Amigo, operating 29 stores under the same name with sales of $425 million. The island's third largest grocer is Empresas Cordero Badillo with sales of $350 million from 31 Supermercados Grande. A fourth significant player is J.F. Montalvo with annual sales of $305 million from 21 stores under the names Cash & Carry and Plaza Gigante. Rounding out Puerto Rico's other major grocery players are Supermercados Econo, Mr. Special Supermarkets, Almacenes Pitusa and Supermercados Selectos. The eight chains' combined sales total slightly more than $2.2 billion. That's a lot of market share to pursue. And Wal-Mart should be a formidable competitor as it looks to double its sales volume within a five-year period. *****
Source: Company reports, DSN Retailing Today and analysts estimates, U.S. Census Bureau and Government Development Bank
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