Money Transfer Company Xoom (XOOM) Spikes on Deal with Colombian Retailer

Jacob Harper |

In a move that will greatly expand money transfer services in an underserved country, digital money wire company Xoom Corporation (XOOM) announced on Dec. 12 that they had entered into a deal with Grupo Exito, Colombia’s largest retail chain, to provide a money transfer service. The announcement sent Xoom’s shares upwards, energizing a business that has had an otherwise lackluster year.

Grupo Exito controls the supermarket chains Exito, Carulla, and Surtimax, which sport some 210 locations throughout Colombia. The proposed service will allow customers to send up to $1,000 USD for cash pickup at one of the Grupo Exito locations.

In a statement announcing the deal, Xoom’s Senior Vice President Julian King touted the demand for and convenience of the service, noting that “(Grupo Exito stores) are open late every day of the year, Sundays and holidays included.” Colombian citizens on the receiving end of the transfer service do not need to purchase anything from the Grupo Exito stores, and on their end can use the service free of charge.

By tapping into an underserved market, Xoom is getting a late year bump that stands in contrast to an otherwise underwhelming year. Xoom went public in Feb. 2013 amid high hopes, as the company offered wire transfer services in 30 countries, and unlike counterparts Western Union (WU) and Moneygram International (MGI) , Xoom lacks brick-and-mortar storefronts and is entirely digital, with 25 percent of transfers done via mobile.

However, earnings have not been what investors had originally hoped for, and the company’s shares had declined nearly 25 percent in value in the fourth quarter of 2013.

The expected revenue bump following the announcement of the deal with Grupo Exito assuaged investor fears, leading to a significant uptick going into the weekend that brought the company’s valuation to where it had been after its first day of trading. On Dec 13 shares of Xoom were up 7.77 percent in midday trading, to hit an even $26 a share.

Xoom went public on Feb 15 at $17 a share and rose to $25.49 by the end of that day.

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Companies

Symbol Name Price Change % Volume
MGI Moneygram International Inc. 11.62 -0.18 -1.53 284,254
XOOM Xoom Corporation n/a n/a n/a 0
WU Western Union Company (The) 22.01 -0.13 -0.59 3,246,645
KVAEF Kvaerner Asa Ordinary 1.31 0.00 0.00 0

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