Walmex May Sell Restaurant Group

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According to media reports, Walmex, the Mexican subsidiary of the giant retailer, Walmart Stores (WMT), is weighing its options on selling its restaurant chain in the country. 

The restaurant group consists of Vips chain with 265 restaurants, 92 El Porton restaurants and seven Ragazzi restaurants. While the Vips and the El Porto restaurants specialize in Mexican foods, the Ragazzi restaurants specialize in Italian cuisine. Though the groups of restaurants serve about 79 million customers, the largest portion is served by the Vips restaurants which serve Mexican breakfast, dinners, hotcakes and cheesecakes but in a format which is similar to a U.S. diner.

The Walmex restaurants have been reporting declining same store sales for quite some time and they were able to open only two outlets in the last two years. The sellout comes at a time when Mexican food is becoming increasingly popular in the U.S., with more and more Mexican-inspired cuisines being offered by fast-casual and quick-service operators. Companies like Taco Bell and Chuy’s Holdings Inc. (CHUY) offering Mexican delicacies are gaining popularity in the country.

Alsea – owner of Burger King as well as more upscale restaurants such as PF Chang's in Mexico – and Coca-Cola bottler and retailer Fomento Economico Mexicano SAB de CV or Femsa (FMX), are expected to emerge as possible buyers of the restaurant group. Femsa will expand its footprint in South America and as per media reports; the company is geared to expand its Oxxo convenience stores throughout the region.

The world’s leading meat processor, Tyson Foods Inc.’s (TSN) subsidiary, Tyson Mexican Original Inc. has purchased Don Julio Foods of Clearfield, Utah, thereby adding the two popular brands of Don Julio and Clover Club. It is also buying assets of the California-based Circle Foods LLC adding the popular brands like Nuevo Grille and Tortillaland handheld Mexican products, Tortillaland uncooked tortillas and ROTILAND Indian flatbreads.

Wal-Mart employs more than 234,000 people in Mexico in several companies, including restaurant chains, three supermarket chains, clothing retailer Suburbia and a bank. Currently, shares of the company carry a Zacks Rank #3 (Hold).

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