Wal-Mart to Double Stores in $240B China Market

SHANGHAI – Wal-Mart Stores Inc. (WMT) hopes to post double-digit sales growth in China this year and to double outlets by the end of 2006 as it aims to narrow a gap with Carrefour and others that dominate the $240 billion market.

Wal-Mart, like Carrefour S.A. (search) and Metro A.G. (search) , has been quickly erecting stores across Asia's largest retail market after Japan, a process that accelerated after Beijing dropped a requirement last year that foreign firms find local partners.

Lawrence Lee, regional operations director for eastern China, told Reuters in an interview that the Arkansas-based giant expected to post revenue growth in excess of 10 percent in 2005, though he declined to give specifics.

Chinese government data shows Wal-Mart posted a 31 percent leap in sales in the country to 7.6 billion yuan ($940 million) in 2004 — less that half of what Carrefour raked up that year.

The Hong Kong-born executive added that Wal-Mart did not intend for now to take advantage of new freedoms accorded to foreign players.

"We expect double-digit growth this year, but we have no plans to go solo so far, because our local partner knows the market better," Lee told Reuters after a news conference.

"Our biggest competitors here are Carrefour and local chains such as Hualian," he said, referring to the unit of local leader Bailian Group Co. Ltd. (search) — known also as Brilliance.

"We're confident we will catch up someday. We are in 22 Chinese cities now, and we want to be in every city in the next five to 10 years," he said in an interview as he strolled through the U.S. giant's new Shanghai store.

Wal-Mart's 18,000-square-meter outlet, located outside the city's financial district, is set to open on Thursday. An army of 500 staff were already scurrying around, stocking shelves and mopping floors.

Wal-Mart plans to operate 55 stores in China by the end of this year, versus 43 at the end of last year, and 90 stores by the end of 2006, Lee told reporters.

That's still a fraction of the roughly 5,000 the retailer has worldwide, and it lags the 62 stores that Carrefour maintains.

Hypermarkets stocking everything from personal computers to bicycles and pet food are still a novel concept to many consumers in the world's seventh-largest economy, but slick foreign outlets are fast springing up across the country alongside booming growth.

The Shanghai outlet is its 48th in the country, and the first of three planned in the city. Wal-Mart had previously steered clear of China's richest city, the country's most saturated and intensely competitive retail market.

"Shanghai is the most competitive market in China and we really had to do our homework before opening an outlet here," Lee said.

Overseas retailers have sped up expansion plans after the sector was liberalised in December as part of China's commitments to the World Trade Organization.

But Lee was emphatic that Wal-Mart had no intention of abandoning its joint ventures in China. Its partner in eastern China is Beijing-backed conglomerate CITIC Pacific Co. Ltd., which owns 35 percent of the venture.

That contrasts with Metro — the world's third largest retailer — which increased its shareholding in its China venture to 90 percent from 60 percent in May.

Carrefour, aiming to add 15 hypermarkets a year here, lags Wal-Mart globally but leads in China. Its local sales rose a fifth to 16.2 billion yuan last year, while the number of its stores surged 51 percent to 62.

China is more than a huge domestic market to Wal-Mart. It bought $18 billion worth of goods from China last year. If the company were a country, it would rank as China's sixth-largest export market.

Lee declined to say what impact Beijing's 2.1 percent revaluation of the yuan on Thursday would have on its purchasing, but he added that Wal-Mart's volumes meant it enjoys bigger cost advantages over Carrefour.

"Because we buy so much from China, we have a bigger cost advantage," he said, declining to elaborate.

Still, Wal-Mart could feel the pinch from the revaluation. For instance, it would have had to pay an extra $378 million on its purchases last year, according to a simple currency calculation.

($1=8.11 Yuan)