Wal-Mart quits Germany, focuses on China
Ap, Germany
Wal-Mart Stores Inc. is ending its loss-generating business in Germany just two months after leaving South Korea in what analysts welcomed as a move to focus resources on expanding in more profitable international markets like China and Latin America.Wal-Mart said Friday it plans to sell its 85 stores in Germany to rival Metro AG, ending a nearly decade-long effort by the world's largest retailer to crack the market in Europe's biggest economy. Terms were not disclosed, but the Bentonville, Ark.-based retailer said it expects to incur a loss before taxes of about $1 billion related to the deal in its second quarter. The total cost of the German experiment is not known because Wal-Mart does not report individual financial results for each of its international markets. Wal-Mart has said over the years that its German operations were not profitable. "They've been losing money there for years," said Robert Buchanan, head of retail analysis at A.G. Edwards & Sons. Wal-Mart entered the German market in 1997 with the acquisition of the Wertkauf and Interspar hypermarket chains. But Wal-Mart's German stores, which employ 11,000 people, have struggled to break into the local market. Sy Schlueter, chief executive of investment house Copernicus in Hamburg, said Wal-Mart had trouble winning over German consumers, who tend to be very price-focused and would rather drive to a different store if they know they can buy something cheaper. National discounters such as Lidl GmbH and Aldi Einkauf GmbH put the heat on Wal-Mart's sales, he said, by offering the same products at competitive prices. Further, Schlueter said consumers rejected some of Wal-Mart's signature features, like stores outside of town centers, employees required to smile and heartily greet customers, or baggers at checkouts. Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which manages $8.2 billion in assets and holds 51,000 Wal-Mart shares, said Wal-Mart can use the money it was spending in Germany to fund expansion elsewhere. "At some point it feels really good to stop beating your head against the concrete. That's a good thing, because it means that they're being much more logical about their growth and taking into consideration shareholder returns," Edwards said.
| 
