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Wal-Mart to expand China store network by nearly a third after growth stalls

Stock MarketsApr 29, 2015 02:22AM ET
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© Reuters. A shopping cart full of products is seen as a customer shops at a Wal-Mart store in Beijing

By Matthew Miller and Adam Jourdan

BEIJING/SHANGHAI (Reuters) - Giant U.S. retailer Wal-Mart Stores Inc (N:WMT) plans to expand its footprint in China by nearly a third by opening 115 new stores by 2017, the firm's chief executive said, in a renewed push to lure China's grocery shoppers despite slowing growth.

"Our aim is to become an integral part of China's economy," Chief Executive Doug McMillon said at a news conference in Beijing on Wednesday. "China is a top priority."

Wal-Mart's new push in China comes as global supermarket firms seek ways to tackle slowing growth in the world's second-biggest economy. Wal-Mart in February said its China net sales declined 0.7 percent for the quarter ended Jan. 31, with comparable same-store sales falling 2.3 percent.

As well as new stores to boost sales, the world's biggest retailer will close some under-performing stores and seek to tap into the faster-growing online grocery market through its service. McMillon said he was excited by prospects for a platform that offered 8 million products at end-2014, up from just 18,000 items in 2011.

The Bentonville, Arkansas-based retailer said the 115 new stores will be opened in cities such as Shanghai, Shenzhen and Wuhan between 2015 to 2017, without saying how much it would invest in the new outlets. It had 411 stores in China at the end of January this year, according to its annual report: The retailer said on Wednesday it will remodel more than 50 of these this year at a cost of more than 370 million yuan ($60 million).

Scott Price, head of Wal-Mart's Asia operations, said the retailer would close an unspecified number of poorly performing stores after shutting 29 outlets in China last year. Commenting on recent sales trends, Price said, "There is some softening in retail sales but we've gained share ... in the hypermarket channel."

Wal-Mart, France's Carrefour SA (PA:CARR) and Britain's Tesco PLC (L:TSCO) have all seen sales growth slip over the last five years, losing market share to local rivals, according to a report published on Tuesday from consumer analytics firm Kantar Worldpanel.

Average same-store sales growth dropped into negative territory last year, according to an analysis of six major grocers by consultancy OC&C.

CEO McMillon also addressed ongoing investigations into Wal-Mart's accounting by the company itself and government agencies. He said the company was investing in improving systems and processes to bolster compliance with the U.S. Foreign Corruption Practices Act.

"Being compliant with the law," McMillon said, "That's a high priority for us." For the year ended Jan. 31, Walmart spent $173 million on investigations and compliance programs, after spending $282 million a year earlier.

Wal-Mart to expand China store network by nearly a third after growth stalls

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