Wal-Mart Stores Inc said it would expand by more than 25 percent in China and renovate existing stores in a bid to reverse sales declines after a series of food scares and accounting missteps.
The world’s largest retailer plans to add 115 stores and spend 370 million yuan (US$59.66 million) renovating about 50 of the more than 400 it has in China, Wal-Mart said in a statement. The new stores are expected to create about 30,000 jobs, the statement added.
Wal-Mart is fighting to win back customers in China after the Bentonville, Arkansas-based retailer shut unprofitable stores last year and cut jobs amid stiff competition from local companies such as Sun Art Retail Group (高鑫零售) and China Resources Enterprise Ltd (華潤創業).
Photo: Bloomberg
The Chinese government’s campaigns to eliminate extravagant spending and graft have cut sales of gift cards and continue to pose challenges, the company said.
“China is a key strategic market for Wal-Mart,” chief executive Doug McMillon said at a news conference in Beijing. “Over the next three years, we will increase investment across our diverse business operations in China.”
Net sales in China fell by 0.7 percent in the fourth quarter last year, while sales at stores open more than a year dropped by 2.3 percent, Wal-Mart’s head of international operations said on a Feb. 19 earnings call.
Wal-Mart said the 115 new stores include both its supercenters and Sam’s Clubs, and it plans to open seven of the members-only stores over the next two to three years. It also plans to introduce an app to allow shoppers to buy items through their smartphones and pick up their purchases or get them delivered.
Wal-Mart was the third-largest hypermarket retailer in China last year, with a 10.6 percent market share, behind French retailer Auchan Group SA and China Resources Enterprise, according to data by Euromonitor International.
Sun Art Retail, backed by Auchan, operates hypermarkets in China under the “Auchan” and “RT-Mart” brands.
Wal-Mart’s China operations engaged for years in some unauthorized sales and accounting practices that made the business appear strong, despite a slowdown in retail transactions and rise in unsold inventory, according to employees and internal documents, Bloomberg reported in December last year.
The company has also beefed up its food safety checks after facing incidents such as fox DNA being found in donkey meat, and in February said that it would assign a veteran employee to a newly created post in China with the goal of improving the retailer’s reputation after accounting, inventory and food safety failures.
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