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2006-07-30
Frankfurt, Germany. Auf Wiedersehen, Wal-Mart

Wie geht es ihnen,Wal-Mart? Nicht so gut! Two months ago, Sprawl-Busters marked the collapse of Wal-Mart in South Korea, and noted that the retailer's German operations were also revealing ominous cracks. "In 2002, Wal-Mart had 95 supercenters in Germany," we noted, "today it has only 88. We pointed out that Wal-Mart's Japanese holdings were still losing money. When Wal-Mart announced that it was pulling out of Korea, one analyst on Wall Street applauded the Wal-Mart sell-off, noting, "Wal-Mart has no business in our view continuing to waste its time and resources barking up such tiny trees as South Korea." Now, two months after the Korean Kollapse, Wal-Mart has fallen out of another tiny tree. Wal-Mart announced this past week that it will sell off its stores in Germany and take a $1 billion loss. That's a most awkward effort for the company's eight years of investment in Deutschland. "It has become increasingly clear that in Germany's business environment it would be difficult for us to obtain the scale and results we desire," said Wal-Mart's vice chairman Michael Duke, brother of controversial former State Representative from Louisiana, David Duke. The official line on Wall Street is that Wal-Mart was out of synch with German consumers, and never understood their tastes. Wal-Mart also did not fare well in a price comparison with the smaller stores of Aldi and Lidl, two retailers who have followed Wal-Mart to the American market. The German company that is buying Wal-Mart's abandoned stores, Metro, said the Arkansas retailed dumped the stores "at less than asset value." Analysts said Wal-Mart's holdings were not extensive enough to make a dent in Germany's market, and that German consumers could find cheaper merchandise in other outlets. Wal-Mart broke into the German market by taking over two retailers, Wertkauf and Interspar, neither of which was very dominant in the market. That's the same strategy Wal-Mart used in Japan, where it bought Seiyu, the 4th largest retailer in that nation, and in Britain, where Wal-Mart bought Asda, the third or fourth rung down in the market. Wal-Mart apparently thinks the going will be easier in poorer countries like China and India, where it is shifting its focus. The international market now counts for $1 of every $5 in Wal-Mart sales. As siting stores gets harder and harder in the United States, Wal-Mart is turning more of its hopes to 'easy' countries in Asia.

What you can do: Wal-Mart does not tell is shareholders how its international division does by country, but the media has reported that Wal-Mart had been losing hundreds of millions of dollars in Germany since day one. Their investment in the Japanese retailer Seiyu has also been a consistent money loser. There is no word on what will happen now to Wal-Mart's 11,000 Associates. For earlier stories, search Newsflash by "Germany."










 
 
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