Monday, October 29, 2007

All about Wal-Mart

Well, not all about. That would take a blog (or two or three) all by itself. Let's just settle for a bit about their domestic and international growth plans:

When last we met to discuss these issues, I was noting how Wal-Mart seems to be tripping all over itself to change its direction repeatedly (the Sears Syndrome) in the US, while having mixed (at best) success overseas. Nothing new to report on the change of direction question (which means, perhaps, that they've solved the problem), but international operations don't seem to be much improved.

After years of poor performance at its Seiyu operation, which it owned 51%, Wal-Mart is going to try going it alone in Japan. There had been speculation that they might pull out of Japan, as they recently had from Korea and Germany, but this means that they are, almost literally, doubling down.
But Seiyu has struggled amid intense competition from smaller retail chains, as well as from major local companies that are introducing large Wal-Mart-style stores and price-cutting.

The Japanese retailer said in fresh earnings results announced Monday that it expects to book its sixth straight year of losses this year, with a 10.40 billion yen ($90.90 million) loss amid poor sales and ballooning restructuring costs.

And they plan to enter Russia next:

Wal-Mart is looking abroad for stronger growth in the 13 countries where it has stores and hopes to add Russia to a list that already includes China, Britain and Japan, according to the company's chief executive.

Wal-Mart Stores' business has been growing faster internationally than in the United States, accounting for 22 percent of last year's total sales of $345 billion, the chief executive, Lee Scott, said at an annual meeting of investors and financial analysts Wednesday. He said international stores would be "a bigger part of our business."

But the most interesting point in that article is how much they are cutting back on US growth (more on this point here): They had been opening 280 store per year; this year it has been 195; next year 170; then 140. Such cutbacks are inevitable, given the cannabalization effect of new stores, but that means there's that much more pressure to perform internationally -- something they haven't been able to do consistently outside North America.

Manufacturers who have ridden Wal-Mart's coattails in recent years also have tough questions to ask themselves: What will they do for domestic growth as Wal-Mart slows down?, and, will they be Wal-Mart's suppliers of choice overseas, or will they run into local competitors?

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