Plenty of US retailers and brands are looking overseas for growth. And plenty are finding unexpected obstacles and tripwires along with opportunity.
Consider toymaker Hasbro. The maker of Transformers action figures and Monopoly board games said in its most recent earnings call that the company’s near-term international sales and operating profit have been hurt by “challenging macroeconomic issues impacting both consumers and retailers” in the UK and Brazil. That’s despite the fact that Hasbro has seen rising demand in markets from the US and Canada to China and Russia.
Hasbro, which generated more than two-fifths of its 2016 sales from the international segment, said its full-year outlook for the unit is positive even though it expects both countries will “face challenges going forward,” CEO Brian Goldner said on the call.
Brazil’s economy, the largest in Latin America, recently suffered through its worst recession on record, although it showed a little life in the first quarter of 2017, growing 1% from the fourth quarter. Euromonitor said in a report this year that it expects Brazil’s consumer spending growth will remain weak through 2030, and it doesn’t expect the average household income in the country to overtake its 2014 level before 2025.
Meanwhile, in the UK, the 2016 Brexit vote has not only hurt the value of the pound, but it also has been tied to indications of weakening consumer spending. Appliance maker Whirlpool cut its profit forecast late last year and posted worse-than-expected Q4 results in January because of lower UK demand following Brexit. The company said in its recent Q2 earnings call that sales excluding currency impact in the Europe, Middle East and Africa region dropped 5% because of “continued demand weakness in the UK.”
UK and Brazil are just part of the international puzzles that have affected some US brands’ results. Geopolitical instability and increased local and regional competition have forced US and other global retailers to rethink their international expansion strategies, according to global strategy and management consulting firm A.T. Kearney’s 2017 Global Retail Development Index report.
Its study showed that many global retailers have taken a pause this year to re-examine their store networks, formats and logistics. For example, A.T. Kearney noted that Brazil saw more stores closing than opening in 2016 for the first time in recent history, with Walmart closing more than 60 stores there and others such as Kate Spade shutting the few stores they had in the country.