Wal-Mart makes big bet on China

The retail giant's investment in Chinese e-commerce company Yihaodian is a hint of more to come.

By Jonathan Berr Feb 20, 2012 12:20PM
Image: Price tag (© Hill Street Studios / Blend Images/Getty Images)Wal-Mart Stores (WMT) is betting big on China because growing its U.S. business has proved to be a vexing challenge.

The world's largest retailer announced Monday it is buying a controlling stake in the Chinese online shopping company Yihaodian to further solidify its position in the world's most populous country. Two weeks ago, Wal-Mart appointed Greg Foran to run its China operations as it overhauls the business after a series of scandals, including "a pork mislabeling issue last year that forced it to temporarily shut a dozen stores in central China," according to Reuters.  

Shares of Wal-Mart have surged about 20% in the past six months as investors have figured that the retailer will benefit from an economic rebound in the U.S. The company, which reports quarterly results Tuesday, may find that its potential for growth is greater outside the U.S. China's economy is expected to grow at 8.4% this year, which is slower than earlier forecasts but roughly four times what economists expect from the U.S. This trend has been evident in Wal-Mart's recent quarterly results.

Wal-Mart U.S. sales in the nine months ended October 2011 rose 1.2% to $191.4 billion, while international sales rose 16.1% to $90.4 billion, fueled in part by China's growing middle class.  Wal-Mart's U.S. same-store sales rose 1.3% in the third quarter, beating the company's forecasts and analysts' expectations. These results represented an improvement -- when Bill Simon was named the head of Wal-Mart's U.S. operations in 2010, the retailer had seen four straight declines in same-store sales. 

For its fourth quarter, ended Jan. 28, 2012, Wal-Mart expects U.S. comparable-store sales will have increased from flat to 2%. That's why China remains so critical.

Jonathan Berr owns no shares in the companies listed here.








 

Tags: WMT
117Comments
Feb 20, 2012 12:51PM
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Walmart should just move all it's stores to china. 
Feb 20, 2012 12:53PM
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aaah how we love walmart...another company guilty of north americans losing jobs

to manufacturers in china.      wake up and buy canadian and usa made articles pleeze

people
Feb 20, 2012 12:50PM
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good! now the Chinese can get a taste of their inferior products
Feb 20, 2012 12:55PM
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All planned out. In early 1970’s both political parties endorsed and released “Workforce 2000” plans starting with the Fortune 500 companies. Workforce 2000 and NAFTA is Americas contribution to the new global economy. Jack Welch, then CEO of GE designed the model and the rest of the big leaguers followed in his foot steps. I remember it well working for a large aerospace company in So. Cal.
We attended a four hour presentation on how America was going to change. We were to become a service oriented country. How labor intensive work was going to be out sourced. How Chinas average pay scale was a whopping .35 cents per day. The man hours it took us to build one large airplane would be an equivalent cost to the most expensive BMW motorcar. Were all our stock holder excited. The Demographics of America were also explained. Guess what? The Hispanic communities was going to be the major population in the LA basin area. That’s right. See where we are today. All part of the plan and don’t forget, all endorsed by both political parties. Then the whipshooding began. Jack Welch implemented a theme called, “Keeping the Ideas Coming”. Ref. March Fortune 500 article. With the threat, or inevitable loss of our jobs, he started a manipulation cooptation strategy to pick the employees brains and make them think they could compete and save their jobs/asses. The CEO’s, corporate leaders and politicians are raking in all the benefits.
So when I hear and read about this new economy BS, remember our government has it all under control. The part I have trouble with is if people are not working and or making half of what they use to make, income tax revenue will drop as well. How dose a tax system expect to sustain and pay for basic services, afford a healthcare program and frequent handouts to the world in trouble?
In 1992 United Auto Workers union, (UAW) predicted that only 4% of the American workers will be represented by a union. Police, fire services and a few more government jobs will be represented to show the world America is still labor friendly.
As Americans Change so to speak and our earning power diminishes Americans will eventually take what they can get. Just like other third world counties did. Its Americas turn to become the stepchild.
And now Obama has brought in Jeffrey Immelt CEO from GE. Immelt cut his teeth under Jack Welch and Harry Stonesypher. GE was the model corporation which has led to American’s loosing their jobs. Amazing how everything predicted is coming to pass.
Wal-Mart has become the new commissary to America.
Feb 20, 2012 1:28PM
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Bye bye, Wal-Mart.  I don't expect to be setting foot in your stores anymore.  Maybe had you invested in America, you might have stood a chance.  Now, Traitors, so long.  You have lost this persons business.
Feb 20, 2012 12:49PM
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so  does this mean everything sold in a chinese Wal-Mart will be made in America ? lol

 

Feb 20, 2012 1:18PM
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It seems to be getting harder and harder to do, but I have been putting back on the shelf everything that I can that says "Made in China", to look for something made almost anywhere else, but preferably in the U.S.A. I am fed up with retailers sourcing their products in China, and I am tired of products with lead paint, contamination, and junk that falls apart during the first use. Unfortunately, it is also hard to find quality products made in the U.S.  Why do we continue to allow the import of products from a country that doesn't follow our product standards, doesn't enforce copyright laws, and blatantly vilolates patents? STOP BUYING PRODUCTS MADE IN CHINA! Make the retailers source quality American made products - then maybe the American companies will start producing quality products again...
Feb 20, 2012 1:54PM
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yet another reeason not to shop at Wal mart.

 

My wife and I have been looking for a new sectional couch, I never knew how hard it was to find a quality sectional that WASNT made in china. We ended up purchasing a FlexSteel which is made I believe in Wisconsin, all american made, very solid, very good rep, it cost quite a bit more but at least I dont have to worry about my children laying on cushions that have asbestos in them like all the crap that comes from china...wake up america

Feb 20, 2012 12:51PM
Feb 20, 2012 3:10PM
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I wish they'd sell more American made items!  I buy American when I can, but it truly is hard to find American made products on most store shelves.  Maybe it would help if we all started sending Walmart letters asking (or telling) them to carry more American made products!

Feb 20, 2012 1:04PM
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We can start selling them back their own crap.....how lovely.
Feb 20, 2012 6:42PM
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Well, ThoughisFree, I guess everybody has their price. You pay lower prices at Walmart, but  you're paying a higher social cost.  Lower wages for everyone and a race to the bottom. A first-world country (USA) can never win a labor war with a third-world country , especially if that country(China) has a billion people willing to work for $17 a week. Our cacamamie trade policies (brought on by special interests) make it so we have to pay a 25% tarriff for our goods entering China, while they pay only 2% for their goods entering America. I don't want "free trade" - I want FAIR TRADE!!
Feb 20, 2012 3:15PM
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Another reason to add to the long list of why I don't shop at Wal-Mart.
Feb 20, 2012 1:17PM
Feb 20, 2012 1:52PM
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They might as well have stores in China.  Everything they sell comes from there anyway.
Feb 20, 2012 2:58PM
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Being an older American I can remember when if you bought something that said "Made in Japan" it was cheaply made and you couldn't expect it to last long, so we bouhgt only things that said "Made in America!"  Now we face the same situation with stuff "Made in China." After giving away our technology to the Japanese who eventually overtook just about everything "Made in America" we seem to be facing the same situation with China. Wake up people and smell the roses!!! I find our government mainly responsible for us losing our status in the word and it didn't start recently! We need to stop this or we'll end up as a third world country begging the world for scraps!
Feb 20, 2012 3:03PM
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Buy American, the job you save may be yours! The post below was right, Sam would turn over in his grave. How many steaks can the Walmart family eat. Seriously, there billionares many times over and they keep finding ways to screw the American working man and keep buying cheap/cheaply made foreign products to sell in their stores. I do believe that Americans can still make quality products at a reasonable price if given the opportunity again.
Feb 20, 2012 2:22PM
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On the lines of crap made from china, I read the post about millitary medal's made in china. My grandpa served in Korea as a Marine. Long story short, he was ordering a new belt for his uniform and the new belt had a stamp on the back," made in korea". Where did America go wrong?
Feb 20, 2012 3:39PM
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Walmart* chews up small stores and spit's them out, just to sell china junk to americans, when will this retail monster stop and fall to it's knee's.. If people would stop shopping there the monster will die...
Feb 20, 2012 1:47PM
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Another good reason to not shop at china-mart. They are a perfect example of the us greed.
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