One benefit of invesing in Inside Value selection Wal-Mart (NYSE:WMT) is that the business provides some international exposure for investors as well. Luxury-goods retailers Coach (NYSE:COH) and Tiffany & Co (NYSE:TIF) can also make this claim, but in discount retailing, Costco (NASDAQ:COST) and Wal-Mart are among the few firms that can boast of meaningful revenues from their international operations.

Of course, international exposure can be both a blessing and a curse, as Wal-Mart followers know after watching the company shut down its South Korean and German operations in the last year. However, Japanese retailer Seiyu, of which Wal-Mart owns 53%, believes it will turn the corner and become profitable in fiscal 2007.

Right now, there are only a few signs of optimism at Seiyu. According to reports from the Associated Press and TheWall Street Journal, Seiyu's operating loss declined by 45%, from 2.48 billion yen in the first six months of last year to 1.36 billion yen in the first half of this year. In addition, same-store sales results through the first six months increased for the first time in 14 years. However, the company reported a larger loss than a year ago because of asset writedowns.

While Seiyu has reported losses since 2002, its balance sheet shows no signs of any immediate stress, thanks to the common-stock and preferred-stock offerings executed in the last year. Assuming that Seiyu can continue trimming costs and expanding margins, there is reason to be optimistic that the company will not just be profitable in 2007, but grow profits in subsequent years.

A large part of that success will likely depend on continued supply-chain improvements and store renovations. In future reports from the company, I'm especially looking forward to hearing about Seiyu's new distribution center for the Tokyo market. I'm eager to know how it's aiding results, and whether there's room to replicate the distribution strategy in one or two of Seiyu's other large markets.

For U.S. investors, the easiest way to get a piece of a recovery in Seiyu is by owning shares of Wal-Mart. Seiyu's currently listed pink-sheet shares in the U.S. are so thinly traded that an investment will likely be difficult at best. The beneficial effects of Seiyu's recovery are likely to be small for Wal-Mart shareholders, simply because the company's other operations are currently so much larger. But if the turnaround is successful and the company shows signs of growth in future years, it would provide an additional reason for optimism about the long-term potential of Wal-Mart's international operations.

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Wal-Mart is a Motley Fool Inside Value pick, while Costco is a Motley Fool Stock Advisor selection. Whatever your investing style, the Fool has a newsletter for you.

At the time of publication, Nathan Parmelee owned shares in Costco, but had no interest in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.