Tags: wal-mart | retail | china | brazil | low-price

Wal-Mart to Export Low-price Strategy to China, Brazil

Thursday, 12 April 2012 03:44 PM

Wal-Mart Stores Inc., the world’s largest retailer, plans to push its everyday low price strategy in China and Brazil to accelerate international sales growth that is lagging behind competitors.

Wal-Mart’s Brazilian operations have been moving to an everyday low price strategy -- as opposed to using temporary sales and discounts -- and will start a similar push in China next year, Doug McMillon, president and chief executive officer of the retailer’s international operations, said Thursday at an investor presentation in Toronto.

Chief Executive Officer Mike Duke has been struggling to help the retailer expand its overseas operations as profitably as it does in the U.S. The international unit’s operating margin narrowed last year as its sales rose 15 percent. Bentonville, Arkansas-based Wal-Mart lost market share in Brazil and China and faces new challenges in mature markets such as Canada, where Target Corp. is expanding.

“International is the future, and they’re not doing much,” Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, said in a phone interview before Thursday’s presentation. “China is barely profitable, and margins are going down.”

Wal-Mart rose 0.4 percent to $60.05 at 1:20 p.m. in New York. The shares gained 13 percent in the 12 months through Wednesday.

Brazil’s conversion to everyday low pricing has been encouraging, McMillon told investors. The conversions there and in China will take time, especially the latter, where Wal-Mart is still envisioning how the strategy will work in that market, he said.

‘Locked and Loaded’

“We’re locked and loaded on making sure we get Brazil and China right,” McMillon said. “We have made a lot of progress in Brazil, but we are not executing all the way through the process.”

Wal-Mart believes everyday low pricing can differentiate its stores in Brazil, where retail typically includes sales and special offers, Kevin Gardner, a Wal-Mart spokesman, said in a phone interview. Wal-Mart made the conversion in Japan in 2008 and gained market share there last year.

Chief Financial Officer Charles Holley said last month that the overall retail market in China grew by 16 percent in Wal- Mart’s fiscal 2012 while the company’s sales there advanced 13 percent. In Brazil, sales increased 11 percent compared with a 5.6 percent gain for Wal-Mart.

The retailer said it posted market share gains in South Africa, Argentina, Chile, Mexico, Japan, Canada and the U.K.

‘Growth Engine’

Wal-Mart has said its international operations are its “growth engine” and it plans to add as much as 33 million square feet of store space in those markets this year.

Wal-Mart also said it is going on the offensive against Target, which is entering the Canadian market with a goal of at least $6 billion in sales by 2017.

Wal-Mart is adding a record 73 stores in Canada this year at a cost of $750 million. The company also said in Thursday’s presentation that it has a 11 percent price advantage on its competitors.

“This is always an offensive play,” Shelley Broader, president and CEO of Wal-Mart’s Canadian operations, said at the presentation.

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Thursday, 12 April 2012 03:44 PM
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