Warren Buffet, one of the world’s most renowned investors, once shared a piece of advice to other investors: “Don’t make the same mistakes everyone else is making.”
As simple as this line sounds, is is deceptively difficult to uphold. Walmart in Canada, however, seems to be taking Buffet’s approach to heart and will be going ahead with expansion plans despite the tense economic climate and precarious relations between Canada and America as a result of President Donald Trump’s recent decision to impose a 25% tariff on goods entering the States from Canada.
“Landmark” announcement from Walmart Canada
In his famous 1986 Berkshire Hathaway shareholder letter, Warren Buffet said, “Our goal is more modest: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
If you consider the current state of the retail sector, as well as the extremely tense economic climate, there is absolutely no doubt that this is a time where most a fearful. In America, store closures have been rampant, with some retailers being forced to shut down operations entirely and file for bankruptcy. High inflation rates and stagnant job markets are some of the main contributing factors behind these issues.
As such, it is quite the feat for any company to confidently go forward with an expansion plan. Perhaps this is the company’s plan to make up for losses in American Walmart stores.
The retailer’s expansion plan across the border is a well funded one according to the official announcement that was made in February. The company will be investing $6.5 billion CAD towards expanding operations in Canada. This huge investment will include “dozens of new stores across the country plus five new Walmart Supercenter stores in the Canadian provinces of Alberta and Ontario.” In American dollars, the investment amount works out to approximately $4.5 billion.
According to Gui Loureiro, the regional CEO for Walmart in Canada, Chile, Mexico, and Central America, “Walmart Canada is on an ambitious growth journey to serve even more Canadians—better and differently than ever before. This $6.5 billion investment is the largest we’ve made in Canada towards expanding our footprint since we first arrived here 30 years ago.”
Tariff troubles
When Trump first announced the shockingly high tariff hikes, an agreement was reached to put the increase on a monthlong pause before it comes into effect. The pause had ended a few days ago and as such, retailers across the industry have been warning customers that price increases are inevitable.
Being an American-born retailer, it will be rather interesting to see how things play out with Walmart’s Canada based locations now that the tariff rate has increased. Presumably, the tariffs will not pose a direct threat to the Canadian subsidiary, however due to the now fraught relationship between the two countries, many company’s are on the cusp of panicking.
Perhaps this is why the retailer chose now to enact these ambitious plans. It is a time of fear and uncertainty therefore making it the perfect opportunity for the retailer to be greedy and take advantage of the fear around it, as per Buffet’s advice.
Walmart is actually one of very few American retailers who has managed to successfully establish itself in the Great White North. The company first made its way across the border in 1994 after buying over Woolco, a Canadian retailer. 122 of these stores were converted into the first Canadian Walmart stores and today, the retailer is successfully running more than four hundred Walmart stores and Walmart Supercenter stores.
Additionally, when the company first took over Woolco all those years ago, not only were all of the Woolco employees able to retain their jobs, but they also received a 5% salary bump.