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After Early Errors - Friday BUSINESS After Early Errors...

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Friday, August 14, 2009 BUSINESS AUGUST 14, 2009 After Early Errors, Wal-Mart Thinks Locally to Act Globally By MIGUEL BUSTILLO SÃO PAULO -- Having powered its way to the top in U.S. retailing, Wal-Mart Stores Inc. has struggled to extend its dominance across the globe. But the world's largest retailer is learning in Brazil and elsewhere that the most successful ideas don't necessarily flow from its headquarters in Bentonville, Ark. That has it tailoring inventories and stores to local tastes -- and exporting ideas and products pioneered outside the U.S. Traffic-choked São Paulo, for instance, proved inhospitable to the kind of vast stores with which Wal-Mart dominates in American suburbs. At the same time, the local-market savvy of Brazilian retailers that Wal-Mart acquired has proved invaluable. Wal-Mart Goes Local in Brazil View Slideshow "What we have learned in the past couple of years is that one size does not fit all," says Anthony Hucker, a British retail veteran now tasked with taking winning Wal-Mart store formats and expanding them globally.
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Wal-Mart's challenge abroad is to cater to local tastes for native products that are not popular elsewhere, while still making the most of the global purchasing might that lets its squeeze down its costs. Finding new frontiers for expansion has become crucial for Wal-Mart. The company reported nearly flat second-quarter earnings Thursday, including a 1.2% decline in sales at U.S. stores open for at least a year. But Wal-Mart said it notched a significantly stronger performance abroad. The company estimated its foreign unit posted a 13% rise in profits for the quarter and a 11.5% increase in sales, if currency fluctuations are taken out of the equation. And though Wal-Mart's stock rose smartly last year, as its low prices appealed to recession- strapped shoppers, it has slid 7% in 2009 on skepticism about how well it will prosper when the economy and consumers bounce back. The big retailer has been gradually boosting its international spending in recent years, even as it reduces overall capital expenditures. It has estimated it will spend up to $5.3 billion on foreign expansion projects in the fiscal year that began Feb. 1. And that figure doesn't include its splashiest new move, the acquisition of a controlling stake in Chile's largest grocery chain, Distribucion y Servicio D&S SA. Wal-Mart's international division already includes some 3,700 stores and provides nearly a quarter of the company's $401 billion in annual sales. In all but one of the 14 foreign countries where Wal-Mart International does business, executives say, its sales are growing faster than that country's retail market. Yet Wal-Mart wants its international business to be much more. It has stepped up spending in China, has struck a retail partnership in India, is exploring possibilities in the Middle East and is planning a move into Russia soon.
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Though it puts the Wal-Mart name on many of its stores abroad, it also uses some 60 other names, often those of local retail chains it has acquired. In Brazil, a market Wal-Mart entered in
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