Wal-Mart says it will slow down store openings in foreign lands
Stores in China and Brazil has retail giant rethinking strategy
Retail giant Wal-Mart is admitting that it made some mistakes and let profitability slip in its haste to open new stores in China and Brazil. "Clearly we'd gotten ahead of ourselves," CEO Charles Holley says. Holley stressed the decision was not a response to slowing economic growth in China and Brazil, or to allegations of corruption in Mexico.
Wal-Mart admitted it had been 'too flexible' in opening stores in China that were hard for shoppers to navigate because they were on multiple levels or in odd shapes.
Wal-Mart International cut its plans for new store space by about 30 percent to the equivalent of around 126 new U.S. Supercenters, reducing its capital expenditure by about $500 million.
In addition, Tesco has scaled back plans to open big stores in China this year. Fellow retailer Carrefour has said the hypermarket format needed to be adjusted in China. Carrefour's Brazil business has been at the center of speculation over a possible takeover.
Research Director at Planet Retail Natalie Berg says that multinationals were beginning to attach a higher priority to smaller stores and ecommerce in emerging markets.
"These big box retailers are recognizing from their current operations in developed markets that perhaps the hypermarket isn't a forever format," she said.
Wal-Mart's like-for-like sales rose five percent in both China and Brazil in the past quarter; its operating income grew "slightly" in China, posting a "slight" loss in Brazil.
Mike Duke, chief executive, said in a statement on released last week that "Our goal is to achieve profitability and returns that are more balanced and to do that, we must improve operational and sales productivity in some of our emerging markets."
Wal-Mart admitted it had been "too flexible" in opening stores in China that were hard for shoppers to navigate because they were on multiple levels or in odd shapes.
Wal-Mart has battled to reduce operating costs in Brazil and to convert shoppers to consistently low prices from the typical Brazilian tradition of yo-yoing discounts and mark-ups.
Wal-Mart's announcement came as it reported international sales in the quarter to the end of July rose 7.2 percent to $32.3 billion, excluding currency effects, marking a slowdown in growth from a 10.9 percent rise in the previous quarter.
Net income came in ahead of market expectations and Wal-Mart raised its profit forecast for the full year. But global revenue of $114.3 billion fell short of Wall Street forecasts in spite of growth in the U.S., partly due to the impact of a stronger dollar.
© 2012, Catholic Online. Distributed by NEWS CONSORTIUM.
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Keywords: China, Brazil, Mexico, retail, Wal-Mart, expansion
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