An island of opportunity

Discount Store News, Oct, 1999

Puerto Rico was one of Wal-Mart's first owned and operated international divisions that was genuinely located "overseas." The first Wal-Mart in Puerto Rico was a 91,000 sq. ft. conventional discount store that opened in August 1992 in the Fajardo Xtra Consumer Mall in Fajardo. It was Wal-Mart's second international arena, and Wal-Mart entered the commonwealth a little more than a decade after it entered Mexico.

Wal-Mart's growth in Puerto Rico has been deliberate and steady. Wal-Mart operated 15 stores in Puerto Rico, including six Sam's Clubs and nine conventional discount stores, as of Jan. 31, 1999. The last major expansion in Puerto Rico took place in 1997 when Wal-Mart opened two discount stores and one Sam's Club after several years of status quo.

However, a Wal-Mart growth spurt is likely in Puerto Rico in the near future.

Wal-Mart revealed in mid-1999 that 75 to 80 new retail units would be developed during fiscal 2000 in seven of its overseas markets, including Puerto Rico.

When it entered the Puerto Rican market in the early 1990s, Wal-Mart faced more than a dozen Kmarts on the island as well as competition from a major supermarket chain.

Thus far, food retailing through supercenters doesn't seem to be in the cards for Wal-Mart in Puerto Rico, perhaps due in part to competitive factors. Wal-Mart's major retail grocery competitor in Puerto Rico is Pueblo, a regional Caribbean grocery chain. Pueblo is the largest supermarket chain and video rental outlet in Puerto Rico and the U. S. Virgin Islands, operating approximately 50 supermarkets and 44 Blockbuster Video stores.

During the past few years, Pueblo has improved its operational efficiency in its core Caribbean markets. Pueblo also discontinued unprofitable operations in an effort to improve its core business in Puerto Rico and the Virgin Islands.

Puerto Rico's economy remains difficult to predict, in part because of the lasting impact of damage caused by Hurricane Georges, which ravaged the island in September 1998. In the recent past, relatively high rates of unemployment and consumer price inflation have made Puerto Rican retail sales sluggish, according to a report by the securities firm Lehman Brothers.

While unemployment rose immediately after the hurricane struck, by December the island recorded its highest employment level ever, according to a report from the Government Development Bank of Puerto Rico which was published in December 1998.

Retailing in Puerto Rico may also be on an upswing.

Overall retail sales in Puerto Rico rose 6.4% during 1998 to $13.34 billion, according to Government Development Bank of Puerto Rico statistics, which were published in March 1999. The sales gain was the island's best showing since 1993 when sales jumped 7.1%.

In 1998, Puerto Rico's gross national product totaled about $35 billion and showed real growth of 3.1% with inflation at the consumer level running at about 5.2%, according to Lehman Brothers.

Puerto Rico, despite its difficulties, will likely remain a good Wal-Mart market because of the island's need for low-priced goods. Typical annual income for a family of four on Puerto Rico is $27,000.

PUERTO RICO

YEAR WAI-MART ENTERED: 1992

STORE COUNT: 15 stores

DISTANCE FROM

SAN JUAN, PUERTO RICO TO BENVILLE: 2,138 MILES/3,465 KM.