Wal-Mart's China syndrome a symptom of international woes
By Nandita Bose and Adam Rose
MUMBAI/BEIJING (Reuters) - Wal-Mart Stores Inc, famed for its low prices, has stumbled in the one major market where consumers say price is less of a driver in their buying decisions: China.
There, consumers say they want food that is safe and authentic, and, after 17 years, Wal-Mart is changing its approach, closing some big-box stores that never quite caught on with locals. Instead, it's focusing on private-label products and imports, putting its stamp on quality and safety.
"We're closing some stores because we got enamored with growth," said Raymond Bracy, head of corporate affairs at Walmart China. "We're not going to do that again. We're focusing on quality first."
Getting China right is crucial for Wal-Mart's international ambitions. The world's largest retailer ranks third in China behind Sun Art Retail Group Ltd and state-backed China Resources Enterprise Ltd, according to Euromonitor. Brazil and India are proving challenging, too.
"If you went out and asked members or customers, 'What's your single biggest worry?' they'll tell you trust and authenticity," said Greg Foran, who took over as Walmart China CEO in 2012. "Once you've got their trust, the next question they ask themselves is, 'How much is it?'"
Walmart International, which contributes less than a third of net sales, has suffered from aggressive expansion and is a big concern for new CEO Doug McMillon, who previously led the international unit.
The retailer on Thursday forecast lower full-year profit than analysts had expected for fiscal 2015. Walmart International net sales in the fourth quarter dipped 0.4 percent to $37.67 billion, and November-January operating income fell 45.8 percent, hit by store closures in Brazil and China and a charge related to terminated agreements in India.
"We have initiated actions in Mexico, Brazil and China to improve our operating performance and this is a priority for fiscal 2015," David Cheesewright, president and CEO of Walmart International, said in a statement. Continued...