NEW YORK (AP) — Wal-Mart executives are expected to detail how the world's largest retailer plans to turn around its Brazil and China operations and report on its expansion efforts in Canada at an annual pep rally Wednesday for its international workers.
The international parlay, however, will likely be overshadowed by published allegations of bribery in its Mexico operations, which threatens to thwart momentum in its international business, Wal-Mart's fastest-growing division.
Wal-Mart Stores Inc., based in Bentonville, Ark., had said earlier this month that it plans to slow store expansion in Brazil, where shoppers, accustomed to big discounts, haven't readily accepted its "everyday low price" strategy. In China, the company is working on making its stores more productive.
The half-day meeting, to be held at a University of Arkansas arena in Fayetteville, Ark., is part of a week of events leading up to Friday's shareholders' meeting.
In late April, The New York Times reported that Wal-Mart allegedly failed to notify law enforcement after it found evidence that officials authorized millions of dollars in bribes in its Mexico operation in exchange for speedier building permits and other favors. Mexico is Wal-Mart's largest international operation. Regulatory scrutiny could slow store expansion growth.
Since the bribery allegations surfaced, it's been reported that federal authorities in both the U.S. and Mexico are investigating Wal-Mart for potential violations of a law that forbids companies from bribing foreign officials. Investor groups are planning to vote at Friday's meeting against the re-election of several board members including CEO Mike Duke, who was head of the company's international business at the time of the 2005 probe. What's worrisome is that the company disclosed earlier this month that its own probe in Mexico is widening to include other countries.
Wal-Mart, which operates in 27 countries under 69 different banners outside the U.S., has been increasingly counting on its international business to drive overall growth as its U.S. business. While its U.S. business has been roaring back after more than two years in a slump, the company sees more limited opportunities on its home turf. For the fiscal year ended Jan. 31, the company's international division revenues rose 15.2 percent to $125.87 billion. The division's revenue followed with a 15 percent rise for the first quarter.
Wal-Mart's international business now accounts for 28.4 percent of the company's net sales, up from 26 percent in the previous year. The company's U.S. namesake business accounts for about 60 percent of net sales, while Sam's Club accounts for about 12 percent.
Wal-Mart has said that it doesn't plan any major acquisitions overseas this year, but instead is focusing on expanding the number of stores, particularly in Latin America, Asia and Canada. The company has said it plans to add 30 million to 33 million square feet of real estate overseas this year, up from 23 million last year.
That's after spending roughly $4 billion acquisitions over the past few years, including the purchase of 39 Zellers locations in Canada, a majority stake in South Africa and its acquisition of Netto food chain in the United Kingdom. It also acquired a stake in fast-growing Chinese online retailer Yihaodian.
Still, Wal-Mart has acknowledged it needs to fix its businesses in Brazil and China. Wal-Mart has seen customer traffic decline in Brazil. The company had opened 51 new stores in Brazil over the past 12 months, bringing its total to 531. Executives will likely offer more details on its store pullback in that country.
In Wal-Mart's China operations, the company closed three discount test stores to focus on its performance of its supercenters and Sam's Clubs. The stores in China have seen a decline in customer counts and a decline in operating income.
Overall, Wal-Mart's has successfully exported its "everyday low price strategy" to the United Kingdom, Japan, Canada, Mexico and Central America. But it's in the planning stages for South Africa, Argentina, China, Chile and India. Company officials will likely offer more details on when it plans to implement the pricing plan in the remaining countries. It has acknowledged for some countries, it's been a challenge.
Meanwhile, Wal-Mart is ramping up its expansion in Canada, the most aggressive move since it entered that country in 1994. The discounter plans to spend more than $750 million over the next year to open, move or remodel 73 retail stores including former Zellers locations. It operates 333 stores in Canada, but aims to have 375. Competitor Target prepares to open 125 to 135 stores at former Zellers locations this year.
