As many Americans struggle to keep their financial heads above water, Wal-Mart has repeatedly reported gains as customers hunt for the lowest prices on staple-items such as food.  If you are one of the many people choose where to shop, based solely on price, you’d have to notice the German grocer Aldi.  A story from Ocala.com (Ocala, Fla.) claims that Aldi has lower prices on many basic food-items than Wal-Mart.  From the article: 

“A gallon of Aldi milk goes for $2.79, but $3.48 at Wal-Mart; Crispy Rice cereal at Aldi is $1.59 for a 20-ounce box, but even the off-brand Crispy Rice at Wal-Mart is more, $2.16 for 18 ounces.” “The list goes on: Aldi hamburger buns go for 85 cents, $1.13 at Wal-Mart; 34.5 ounces of coffee is $4.49 at Aldi and $6.74 at Wal-Mart; bananas are 45 cents per pound at Aldi, 64 cents per pound at Wal-Mart.”

Aldi is a ‘bare-bones’ type of store, focusing on low-prices, not appearances.  They got their start in Germany in the 1970’s but have since spread to the U.S. and now operate around 800 retail locations, mainly in the eastern half of the U.S.  They sell off-brand generics, don’t typically use bags, and rarely accept payment other than cash.  But in times like these, more and more Americans care less about brand-identity and more about price. 

Last year, Wal-Mart sold their 85 stores in Germany to a German rival and top retailer, Metro AG, citing losses.  Now a German retailer is beating their prices on generic foods, on Wal-Mart’s own turf.  Look out Wal-Mart, here comes Aldi.

In Portland, Oregon this week, U. S. District Judge Anna Brown held Wal-Mart must face claims by Adidas that footwear manufactured for Wal-Mart bearing two-stripe patterns violates the shoemaker’s three-stripe trademark.

In addition, as part of the copyright infringement lawsuit, Adidas has accused Wal-Mart of false advertising, claiming Wal-Mart mislead customers by marketing a pair of Adidas imitations as “running shoes.” Apparently, the shoes will burst into flames before disintigrating if you actually try and run in them - lawyers for Adidas, in explaining how Wal-Mart’s shoes failed numerous durability tests, have said the shoes are “dangerous” and “not fit to run in.” You can find out more on the false advertising claim here.

Beyond the claim of infringement by Wal-Mart’s two-stripe pattern, Judge Brown must still decide whether Wal-Mart must defend the five remaining claims:

Brown will issue a decision later on whether to keep or reject five other claims in the case before a jury trial begins Oct. 6. They include Wal-Mart’s use of four-stripe designs and a claim by the world’s second-largest sporting-goods maker that Bentonville, Ark.-based Wal-Mart uses false advertising.

Arkansas Democrat-Gazette News In Brief

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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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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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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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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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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.

From Forbes:

German department store and supermarket operator Metro AG said Thursday it swung to a loss in the first quarter after buying stores for Wal-Mart Stores Group Inc. and as the German government boosted the sales tax.

The loss for the three months through March 31 came to euro9 million ($12.2 million), compared with a profit of euro7 million in the same period a year earlier, the company said in a statement. Sales rose 12 percent to euro14.9 billion ($20.3 billion).

Metro bought Wal-Mart (nyse: WMT - news - people )’s 85 sites in Germany last year for an undisclosed sum along with the Polish stores of France’s Geant. That ate into the company’s profit, along with the German government’s decision to increase the value added tax paid by consumers to 19 percent from 16 percent on Jan. 1 in an attempt to control the budget deficit in Europe’s biggest economy.

Metro also said it expects to boost sales by as much as 9 percent in the current year.

Shares in Metro gained 0.9 percent to euro57.61 ($78.30) in Frankfurt.

From Suite 101:

Generating some US$325 billion in revenues during fiscal 2006, Wal-Mart has grown to become the world’s largest retailer. From an international trade perspective, this global behemoth still has a lot to learn.
Many are surprised that Wal-Mart’s operations have contributed to America’s growing deficit. One has to consider that very few of Wal-Mart’s products are made in the United States. In fact, Wal-Mart imports more foreign-produced goods into America than any other single company. As the U.S. dollar weakens, more money flows out to pay for foreign products thus worsening America’s trade imbalance.

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From BusinessWeek:

Want to know how not to do business in Germany? Just ask Wal-Mart. After nine years of trying to make a go of it, the Bentonville (Ark.)-based retailer said July 28 that it will sell its 85 stores to German rival Metro.

Wal-Mart (WMT) will pay dearly for its about-face, which comes amid declining market share at its Asda stores in Britain and follows its retreat from South Korea two months ago. The company is taking a $1 billion hit to quit the market, while a source familiar with the deal said Metro paid as much as $100 million less for the Wal-Mart stores than the value of the real estate, unsold merchandise, and other physical assets.

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From Forbes:

Wal-Mart Stores’ announcement last week that it is selling its German businesses is a positive, but not enough for investors to become more optimistic on the stock, according to a recent Morgan Stanley report.

On Friday, Wal-Mart announced that it is selling its 85 German stores to rival Metro AG, Germany’s leading retail chain, after trying to penetrate that market for nine years. .

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From Deutsche Welle:

Wal-Mart Stores Inc. revealed Tuesday its first earnings drop in a decade owing to its withdrawal from Germany and sluggish US sales at a time of sky-high fuel prices.

The US-based chain said its second-quarter net profit slumped 26 percent to $2.08 billion (1.62 billion euros), after it booked a charge of $863 million for the sale of its German stores to Metro AG.

Excluding the $863 million loss on the sale of the German branch, Wal-Mart’s second quarter earnings per share met Wall Street expectations.

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From International Herald Tribune:

German retailer Metro AG’s Real division said Friday it would reflag 80 percent of Wal-Mart’s former stores in Germany under its own name and close 15 of them by mid-2007.

Metro bought Wal-Mart’s German stores earlier this year, and has already renamed six of them as Real markets. Real said in a statement that it would also close the former Wal-Mart headquarters in Wuppertal by the third quarter of 2007.

“The Real marketing network will be strengthened for the long-term through taking over of most of the Wal-Mart branches,” the statement read.

“These locations are an outstanding geographical and strategic fit for Real and will provide a clear improvement of the company’s position on the German market.”