Wal-Mart to continue China investment despite feeling the pinch

By RJ Whitehead

- Last updated on GMT

Related tags: Wal-mart

Wal-Mart to continue China investment despite feeling the pinch
Wal-Mart has announced plans to invest RMB500m (US$79.8m) to upgrade its Chinese stores. The statement comes in a bid to play down local media reports that the company’s growth plans were being hit by a spate of store closures.

The American retailer said in a statement that it plans to remodel 50 of its more than 380 outlets, as well as open 30 new stores this year in China. Over the next six months, stores are expected to open in cities such as Xinyu in eastern Jiangxi province, and Shantou in southern Guangdong province.

Wal-Mart also plans to invest in a network of distribution-centres and improve its warehousing network, the statement said, adding that enhancements are aimed at improving food safety and reducing costs.

Media speculation

Prior to the announcement, a portion of the Chinese media had speculated whether Wal-Mart was about to step back from its growth targets. This came after it was revealed that the company would close a number of stores in April because of high rent and labour costs biting into its business plan.

However, Wal-Mart says it will stand by the announcement it made last year to open 100 new stores in China over three years, according to Greg Foran, president and chief executive of Wal-Mart's China division.

"China is one of Wal-Mart's most strategic markets​," said Foran in the statement. "Our aim is to strengthen our business foundation to enable our long-term development in China​."

Wal-Mart currently occupies second place in China by market share behind Sun Art Retail Group, a joint-venture between the Ruentex conglomerate from Taiwan and France's Groupe Auchan.

Lofty targets

Last year, Wal-Mart said it would increase its China head count by 18,000 beyond the 100,000 already employed then by the company. However, it stressed it would slow the pace of investment in China in response to the country’s slowing economic growth. Until recently, Wal-Mart had been opening 50 to 60 stores per year.

The company is not alone in feeling the pinch, with other foreign retailers also slowing down or pulling out altogether. In January, Europe’s Metro announced plans to pull out of the consumer electronics business, while Home Depot said it would close all seven of its big-box home improvement stores in China.

However, Wal-Mart said it will open soon new two new Sam's Club outlets and has completed the remodeling of 31 stores it began last year, the statement added.

Related topics: Business, East Asia, China

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