Posted on October 24, 2013
BEIJING (Reuters) – Wal-Mart Stores Inc , the world’s biggest retailer, is expanding its China business as it seeks to raise profitability in a slowing retail sector.
Wal-Mart will open up to 110 facilities in China between 2014 and 2016, in addition to the 30 it has already opened this year, it said at a press event in Beijing on Thursday.
Wal-Mart has closed 11 stores and is looking to close 15-30 others over the next 18 months, said Greg Foran, chief executive of Wal-Mart China, in what he called part of a rationalization process.
The U.S. company is tackling tough global economic conditions and a fundamental change in China’s retail sector, as annual sales growth slows and consumers move towards shopping online.
Wal-Mart wants to profit from China’s changing retail landscape by embracing e-commerce, which is expected to record 32 percent composite annual growth between 2012 and 2015, according to Bain & Co.
“Customers are using technology more, and especially here in China,” said Wal-Mart Chief Executive Officer Mike Duke.
“We love customers to understand price, and the safety of the product they’re purchasing. E-commerce is a great enabler allowing Walmart to grow globally.”
Duke said Wal-Mart’s e-commerce business grew about 30 percent in the first half of the year, and that the company is aligned with China’s government strategy that promotes an emerging middle class and urbanization.
Wal-Mart announced last week that it was closing 50 unprofitable stores in Brazil and China as the retailer seeks to ensure sales growth outpaces operating expenses. International sales declined 2.9 percent in the three months ended July 31.
The Bentonville, Arkansas-based retailer competes in China against market leaders Sun Art Retail Group Ltd <6808.HK>, a joint venture between Taiwan conglomerate Ruentex Group and privately held French retailer Groupe Auchan SA, and China Resources Enterprise Ltd <0291.HK>, which in August teamed up with British retailer Tesco Plc .
Last year, Wal-Mart bought control of its Chinese online store Yihaodian, which claims 24 million registered users and provides same-day delivery services to customers.
Wal-Mart operates more than 400 retail hypermarkets, Sam’s Club stores and distribution centers in more than 160 cities throughout China.
(Reporting by Matthew Miller; Writing by Paul Carsten; Editing by Christopher Cushing and Emily Kaiser)