Wal-Mart has already acknowledged (PDF) the fact that illegal logging goes on in its wood supply chain. A new investigation by The New Yorker follows lumber from the forests of Russia to the toilet seat aisle of Wal-Mart stores.

Taking six years to eliminate illegal logging from its supply seems like a long time for a company that can get Procter and Gamble to sell concentrated laundry detergent in a matter of months, don’t you think?

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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Rumors about Wal-Mart building in Russia have been swirling about for almost a year already. Bloomberg News’ story today gives the rumor a little more substance.

Wal-Mart May Expand Into Russia Within Two Years, UBS Says [Bloomberg News]

Wal-Mart Stores Inc., the world’s largest retailer, may expand into Russia within the next two years to capitalize on a swelling economy and a dearth of competitors, UBS AG analysts said.

Wal-Mart may follow its past practice of using a joint venture or acquisition to enter the market, UBS analysts including Neil Currie and Svetlana Sukhanova said yesterday in a research report. The bank has a “buy” recommendation on the Bentonville, Arkansas-based company’s stock.

The economy in Russia, the world’s biggest crude-oil and natural-gas exporter, is expanding for a 10th year in a row. Supermarkets and superstores generate less than a third of retail sales, UBS said. The bank cautioned that a takeover of a local company such as X5 Retail Group NV or OAO Dixy Group would be expensive because surging sales have made their shares pricey.

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In February, Wal-Mart “hinted of expansion into Russia”.  While Russia is a tough market for most corporations to crack, the following story suggests the opportunities for Wal-Mart would be incredible.

Chinese toys still popular among Russian gift buyers [Peoples’ Net (China)]

“If possible, I would like to have all these toys,” says a golden-hair boy Andriy Ivanov, 6, who is grabbing a teddy bear almost his height in the French chain supermarket Auchan on the Ryazansk Street, southeastern Moscow.

Most of the toys, from miniature plastic Christmas trees, baskets of glittering trinkets, to The Simpsons dolls piling up at the entrance, have the same brand “Made in China.”

Chinese toy exports to Russia reached hundreds of millions of U.S. dollars in 2006, taking a considerable share of the Russian market, and many Russians prefer Chinese-made toys as gifts for their beloved ones or friends.

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Tesco May Beat Wal-Mart to Russia [Kommersant (Russia)]

The English retailer Tesco, the third largest in the world with expected turnover of $103 billion this year, has announced that it may open stores in Russia. Tesco CEO Sir Terry Leahy announced the chain’s expansion into India and possibly Russia in an interview with the British Times. The company’s headquarters could not provide additional information. Tesco now operates in 13 countries and it plans to double the proceeds it receives from abroad (currently 27 percent) in the next ten years.

Tesco was founded in 1919 and operates over 3000 stores. Its ranks third in the world, after the American Wal-Mart and French Carrefour, in retailing. Carrefour is opening a 12,000 sq. m. store in the Fili shopping center in Moscow next year and Wal-Mart representatives have stated that the chain would like to expand into Russia with a local partner. The Russian X5 Retail Group has announced that it is in negotiations with all three of those retailers.

Russian retailing is growing at between 14 and 16 percent a year, according to various reports, and is expected to maintain that pace through 2010. The Russian retail market was worth $233 billion in 2006, with only 5 percent of the market conducted in “modern format,” compared to 57 percent in Great Britain and 87.4 percent in Sweden. Russia’s five largest retailers control 5 percent of the market. X5’s market share is expected to grow to 5 percent by 2010.

In addition to announcing expansion in China, Wal-Mart is also seeking to extend its reach elsewhere in the world. Here’s a recap of today’s other international news.

From Reuters via the New York Times:

Asda, the British grocer of Wal-Mart Stores Inc., could counterbid for J. Sainsbury should a private equity consortium launch an offer for Britain’s number three supermarket owner, Citigroup analysts believe.

• Click here to visit Asda Watch.
• Click here to learn more about Wal-Mart in the United Kingdom.

Also from Reuters via the New York Times:

India’s ruling Congress party was heading for defeat in polls in the states of Punjab and Uttarakhand on Tuesday, in elections seen as reflecting wider voter concern about inflation and economic reforms…

The government has also taken flak for moves to set up Special Economic Zones (SEZs) by acquiring farmland and to open the retail sector further to foreign players such as Wal-Mart.

From the Economic Times, United Kingdom:

With the PMO calling for a study to assess the impact of large retailers—be it foreign or domestic—domestic retailers are trying to distance themselves from their foreign counterparts. Clearly not very happy at being tarred with the same brush as international chains, they say they should not be treated at par with the likes of Wal-Mart and Tesco.

• Click here to learn more about Wal-Mart in India.

From Reuters:

Russian hypermarket chain Karusel is in sale talks with U.S. retail giant Wal-Mart, two sources close to the Russian company told Reuters on Tuesday."An investment bank hired by the owners of Karusel is holding negotiations with Wal-Mart,” one of the sources said.

• Click here to learn more about Wal-Mart’s international expansion.

What They’re Saying About ‘Better Health Care Together’

• Wal-Mart Watch Blog: What They’re Saying About The ‘Better Health Care Together’ Campaign
  One week after Wal-Mart Watch President Andy Stern, Wal-Mart C.E.O.  Lee Scott and other business and labor leaders announced the “Better Health Care Together” campaign to push for universal health care coverage, the initial reviews are in. Here’s a sampling of the reaction from a wide range of health care experts, elected officials and skeptics:

Wal-Mart Watch In Depth

• Wal-Mart Watch Blog: Wal-Mart Watch In Depth
  The inaugural issue of Wal-Mart Watch’s issue brief, In Depth, focuses on gender discrimination at Wal-Mart and the massive class action lawsuit female employees are waging against the company.

  From the cover story:
  
  

  • On February 6, 2007, The Ninth Circuit Court of Appeals, ruled that Wal-Mart must face a class action lawsuit of 1.6 million female workers who are alleging that they were discriminated against in pay and promotions.
    
    
• Click here (PDF) to read the Spring 2007 issue of Wal-Mart Watch In Depth.

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From the Moscow Times:

The long-awaited entry of a global retail giant into the Russian market appeared to inch closer as a senior executive for Wal-Mart hinted of an expansion into Russia and reports surfaced that the U.S. firm was planning talks with X5, Russia’s biggest food retailer.

“So far, we are currently studying the market, but the decision on how to enter it has not yet been made,” Wal-Mart vice president Mike Bratcher told a Moscow conference Thursday, Interfax reported.

Kommersant reported Jan. 29 that officials from X5 and Wal-Mart were due to hold talks in the United States last week. Wal-Mart could not be reached to confirm these reports.

The food retail market, though it accounts for less than 2 percent of GDP, has seen annual growth of more than 25 percent since 2001. At a time when Russian portfolio investors are getting tired of the instability in the country’s core oil market, the consumer sector’s steady growth has been a welcome source of relief.

• Click here to learn more about Wal-Mart’s international expansion.