The Wal-Mart Watch Blog
Germany

4 comments | Jan 28, 2009

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After German holding company Arcandor, which owns major e-shopping and brick-and-mortar businesses in Germany had faced a year of declining sales, their shares shot up 12 percent today on news Wal-Mart may be interested in a deal. This market swing is surprising given Wal-Mart’s failure in the country as recently as 2004; the company proved unable to adapt to Germany’s unique retail and labor laws which forbid opening stores on Sundays or selling items below cost, and have tough provisions to protect unionization and collective bargaining. And Arcandor’s largest brick-and-mortar location, Kaufhaus Des Westens, sells upscale clothing lines and accessories, a far cry from Wal-Mart’s strengths. Only time will tell whether Wal-Mart really is serious about breaking into such a difficult market, albeit through a partnership.

Arcandor up on talk of Wal-Mart interest [Reuters]

Shares in Arcandor rose more than 12 percent on Wednesday as traders cited market talk Wal-Mart Stores, the world’s largest retailer, was interested in the German retail and tourism group.

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6 comments | Jan 28, 2009

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WAL-MART FORCING CFL MANUFACTURERS TO 'COMPROMISE ON QUALITY'?

• Why Efficient Light Bulbs Fail to Thrive [New York Times Green Inc. Blog]
  So there was great pressure by agencies, by retailers, to bring the cost down on this technology so that we can get big market penetration. Unfortunately, given the lack of really good, understandable specifications, what happened was when you reduce price you inevitably compromise something. In the case of compact fluorescents, we’ve compromised on quality.
  

• Is the Green Movement a Passing Fancy? [Associated Press via BusinessWeek]
  Please tell me that "green" isn't a fad. I don't know about you, but for the past two years I have been on green overload. Everywhere I turned, read, listened, and watched, the race to say "I am greener than you" has been on for individuals and businesses alike.

WAL-MART SQUEEZING SUPPLIERS MORE THAN EVER

• Retailers want prices lowered [Bloomberg News via Cincinnati Enquirer]
  Consumer-products makers raised prices last year after the cost of oil and pulp needed to make Huggies diapers, Charmin toilet paper and Kleenex tissues rose to records. Now that those expenses are tumbling, retailers like Wal-Mart Stores Inc. aim to keep suppliers from expanding their profit margins, said Grace Barnett, an analyst with Fitch Ratings in New York. "There's no way Wal-Mart is going to let their suppliers reap significant benefit from lower costs," she said. "As a retailer, you are not having a great time as it is and you've discounted the heck out of yourself just to get traffic in the door."

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7 comments | Jun 18, 2008

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Today, the Financial Times reported that Wal-Mart is expanding its overseas expansion. Well color me surprised! Currently, international sales constitute 26% of the company’s net sales and this is while Wal-Mart is lowering its capital expenditures. In layman’s terms, this means that they’re slowing growth- or rather, they are being forced to by the market. So in order to sustain the company, Wal-Mart is looking to conquer new markets abroad. Thankfully, Asia and Eastern Europe are still up for grabs! 

Wal-Mart readies for overseas expansion

Wal-Mart, the world’s largest retailer, is embarking on a further round of international expansion on the back of a systematic overhaul of the way it runs its business, which is expected to deliver more than $100bn in sales this year.

The retailer is actively exploring a first move into Russia and neighbouring countries, while preparing to open its first wholesale warehouse stores in India next year in a joint venture with Bharti Enterprises.

Wal-Mart already has operations in 13 countries, which accounted for 26 per cent of its net sales last year.

Wal-Mart’s international square footage growth rate is now above that in the US, where it has now slowed the expansion of its profitable Supercenter format in the face of market saturation.

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3 comments | May 13, 2008

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This is the third in a series of posts on Wal-Mart’s 2008 shareholder resolutions. The full list of resolutions - and Wal-Mart’s statements regarding them - can be found in the company’s 2008 proxy here (PDF).

Resolution #7 on this year’s proxy proposes the establishment of a human rights committee at Wal-Mart. Below, the details of the proposition, why Wal-Mart’s shareholders would benefit and how the company has reacted to the proposal.

Wal-Mart’s Public Image Problem
Reports of human rights violations have dogged Wal-Mart for years - particularly in the company’s supplier factories, most of which are overseas. These violations have thoroughly damaged Wal-Mart’s reputation, with everyone from U.S Senators to Wal-Mart employees to factory workers themselves speaking out about the inhumane conditions in Wal-Mart’s supplier factories. Bama Athreya, director of the International Labor Rights Forum, testified before Congress on the issue of toy safety, explaining that “Wal-Mart bears a lion share of responsibility for pushing the toy industry to a place where worker health and safety are basically nonexistent.”

Wal-Mart also holds the ignominious title of being the only company investigated by Human Rights Watch for its domestic labor practices. The group’s 2007 report labeled Wal-Mart’s union-busting policies a violation of basic human rights, saying:

It pursues its anti-union agenda relentlessly, often from the day a new worker is hired, devoting considerable time and resources at all levels of the company to the anti-union drumbeat.

The constant stream of allegations have damaged Wal-Mart’s reputation and in turn, its profits. In 2007, a Bank of America analyst’ report found that Wal-Mart’s profits had suffered as a result of organized labor’s opposition to the company and its unethical labor practices.  The report noted that the union’s campaign “has cost WMT [Wal-Mart] real estate sites in key locations, adversely impacted comp store sales to some degree, and has distracted m management from focusing on its retail strategy. Additionally, Lee Scott now spends a large amount of time improving WMT’s image domestically and abroad, and WMT has been forced to focus advertising dollars on defending their brand.”

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53 comments | May 12, 2008

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In this article from the Arkansas Democrat-Gazette, author Steve Painter makes the important correlation between Wal-Mart’s increasing international expansion and the company’s difficulty expanding in the U.S. Just last week the company lost a 2-year-long site fight on the south side of Chicago, a crucial city in the company’s urban expansion plans. Wal-Mart has met opposition to its international plans as well, including protests in India which have stymied the company’s plans there. Were all international markets aware of Wal-Mart’s business practices, we’re pretty sure the company’s expansion efforts abroad wouldn’t be going so well.

Foreign markets fertile for Wal-Mart [Arkansas Democrat-Gazette]

In Brazil, Wal-Mart Stores Inc. is counting on its small format Todo Dia neighborhood grocery stores to drive sales among low-income customers.

In Canada, Wal-Mart continues to add supercenters to its traditional base of discount stores, gaining market share.

In India, Wal-Mart partner Bharti Enterprises recently opened the first of its new Easy Day stores in a nation teeming with potential customers.

Deploying formats ranging from convenience store-sized markets to U.S.-sized supercenters, the world’s largest retailer is expanding its international operations at several times the rate of its stores in the United States, where it scaled back growth last year.

As Wal-Mart increasingly encounters opposition to its stores in U.S. cities it has yet to penetrate, it has mostly found open doors overseas, especially in developing economies where incomes are rising. In the past year, Wal-Mart’s international selling space grew 18 percent while U.S. space was up 4.6 percent.

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13 comments | Jan 28, 2008

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Details of a secret meeting between Wal-Mart executives and top officials in the British government came to light today, giving some insight on the back room deals that have helped Wal-Mart expand internationally. Wal-Mart was having trouble breaking in to the U.K. market due to the country’s strict land use policies. Rather than change its approach to retailing, Wal-Mart instead decided to lodge a complaint with the country’s prime minister: four months after this meeting with Tony Blair, Wal-Mart acquired supermarket chain Asda and officially launched an assault on Great Britain.

It wasn’t the first or the last time Wal-Mart opposed Britain’s efforts to keep sprawl in check. This article from the New Rules Project explains that Wal-Mart’s had a hard time employing its U.S. tactics in the United Kingdom:

From the beginning, Wal-Mart has grown in the U.S. by building massive stores that dwarf all of a town’s existing businesses combined and that are spaced relatively close together across a region. This strategy has been enormously successful, enabling Wal-Mart to overwhelm local economies and drown tens of thousands of small businesses in a sea of over-development.

Wal-Mart has had more difficulty employing this tactic in the U.K., because of Planning Policy Statement 6 ("PPS6"), which requires local governments to steer retail development into town centers and to limit such development on the outskirts unless there is a clear need.

Click here to read more about Wal-Mart’s problems expanding internationally, including failed attempts, riots overseas and foreign opposition to the Arkansas retailer.

Click here for the British reaction to Wal-Mart’s entrance on the U.K. retail scene, or click here to visit Asda Watch, Wal-Mart Watch’s U.K. counterpart.

Wal-Mart did lobby Blair over Asda [Telegraph (U.K.)]

Details of a secret Downing Street meeting held between Tony Blair, the then prime minister, and a senior Wal-Mart executive just months before the world’s biggest retailer pounced on Asda have finally been released, some nine years after the £7bn deal was struck.

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18 comments | Sep 11, 2007

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Looks like Wal-Mart is still feeling the effects of its German retail blunder.

Wal-Mart Lowers 2Q Profit by $153M [Associated Press]

Wal-Mart Stores Inc. reduced its reported second-quarter profit by $153 million due to expenses from selling its German retail operations, the world’s largest retailer reported Monday.

In a regulatory filing, Wal-Mart said the added cost reduced its earnings per share for the quarter that ended July 31 to 72 cents from the 76 cents it originally reported Aug. 14. That compares with 50 cents per share in the year-ago quarter.

Wal-Mart said the late charge came after “recent nonbinding discussions with Metro at the end of August 2007.” Germany’s Metro AG agreed last year to buy Wal-Mart’s German operations.

Wal-Mart called the new charge a “post-closing adjustment.”

Metro bought Wal-Mart’s 85 sites in Germany last year for an undisclosed sum as Wal-Mart quit Germany and South Korea after losses in both markets.

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