Tue, Oct 18, 2011 - Page 10 News List

Walmart China’s CEO resigns

REVOLVING DOOR:The resignations of Ed Chan and Clara Wong are the second round of resignations in five months, but were not related to a scandal over pork, the firm said

Reuters, SHANGHAI and HONG KONG

The head of Wal-Mart Stores Inc’s China business has resigned citing personal reasons, after the world’s largest retailer ran into trouble with Chinese authorities, leading to store closures and employee detentions.

The departure of Walmart China chief executive Ed Chan (陳耀昌), along with Walmart China senior vice president of human resources Clara Wong (王渝佳), is another setback for Walmart, which is facing stiff competition from local firms in the strategically important market.

The company, which recently celebrated its 15th anniversary in China, closed more than a dozen stores in central China last week following allegations they sold -regular pork as organic pork over the past two years.

Authorities in Chongqing have arrested two Walmart China employees and detained 37 others over the incident.

Both resignations announced yesterday were for personal reasons and had “no correlation” with the investigations in Chongqing, Walmart Asia spokesman Anthony Rose said.

“We have used the last few days to put in place corrective actions in our stores,” Rose said, adding that the stores would reopen by Tuesday next week.

This is the second round of top-management resignations at Walmart China in less than five months.

In May, its chief financial officer and chief operating officer resigned “to explore other opportunities,” the company had said.

“It’s really hard to say whether this [Monday’s resignations] is a consequence of that [pork scandal],” Monitor Group China retail analyst Torsten Stocker said.

“It might be, but I think at the end of the day, it is still not clear what really happened in Chong-qing,” he said.

STRUGGLE

After entering China in 1996, Walmart’s expansion gathered steam in 2007, when it bought a 35 percent stake in Taiwanese hypermarket chain Trust-Mart. It has 353 stores in China.

Walmart’s market share in hypermarkets was 11.2 percent last year, in second place after China’s Sun Art Retail Group (高鑫零售), but spending for the expansion has weighed on its profitability.

The company competes with French hypermarket chain Carrefour, Britain’s Tesco, Germany’s Metro AG, China’s Sun Art and China Resources Enterprise (華潤創業).

China’s hypermarket sector is forecast to grow at a compounded annual rate of 10.1 percent between last year and 2015, according to Euromonitor, but price competition is particularly tough in that segment.

Walmart Asia chief executive Scott Price, who will also serve as interim China head, said China was a strong market for the group.

“China is a very important market for Walmart and China’s 12th five-year plan will provide strong opportunities to the retail industry,” Price said in a statement yesterday.

UNDER SCRUTINY

Major Western firms are under scrutiny from China’s state media and face criticism over issues including food safety and garment quality. Some executives complain privately that their companies are subject to stricter enforcement than local firms.

This summer, oil company ConocoPhillips was roundly criticized by Chinese media over a June oil spill off China’s east coast. The State Oceanic Administration has threatened to sue ConocoPhillips, but not its state-owned partner, CNOOC (中國海洋石油).

Last week, European luxury group Gucci said it had replaced two managers in southern China after former workers at a store released an open letter alleging employee abuse.

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