×

The next place Wal-Mart is about to get more aggressive

Watch out, U.K. retailers — Wal-Mart is coming for you.

After playing second fiddle to the company's U.S. business as it retooled itself, international chief David Cheesewright said Wal-Mart's U.K. division is ready to transition from a steady operator focused more on profits into one that's ready to gun for market share.

The first step in that process is stealing a page directly from its big brother's playbook — investing more of its money so that it can sell merchandise to consumers at a lower price. In the first half of the year, the division invested £250 million ($360 million) into lowering prices — investments that are starting to show up on its store shelves, Cheesewright said.

Promotional signs display the price of merchandise as shoppers browse goods inside an Asda supermarket, operated by Wal-Mart Stores in London.
Simon Dawson | Bloomberg | Getty Images
Promotional signs display the price of merchandise as shoppers browse goods inside an Asda supermarket, operated by Wal-Mart Stores in London.

"You can expect that we will shift the balance from protecting profit to protecting share," he told reporters ahead of the company's annual meeting with shareholders, being held in Arkansas on Friday.

Wal-Mart has struggled in the U.K., as food deflation and a hyper-competitive low-price environment have eaten into its revenue. In the recently ended quarter, as 10 of the company's 11 markets posted positive comparable sales, the U.K.'s same-store sales dropped 5.7 percent.

Cheesewright said the company was "very disappointed" with the performance at its Asda supermarkets, where trends began to decline more rapidly in January.


"When all four of the players in the main space are now appearing to be a kind of ... low-cost retailers, I think you're going to get ... some real pressure on price," he said.

Though Cheesewright said his division would not hesitate to dispose of poorly performing formats that have little hope for a turnaround and do not play a key role in its strategies, he clarified there are no plans to dispose of Asda. He added that the division remains profitable.

In addition to its changes in the U.K., Wal-Mart's international division is forging ahead with the expansion of its Sam's Club stores in China. The company currently operates a dozen of these locations in the Asian nation, though it has been working on changes to its assortment and footprint. These include bringing in imported foods, and scouting out space at malls.

Finding real estate for a store that requires a 30-foot ceiling can be challenging in China, where space is limited. When a landlord builds a mall, they could squeeze three floors of tenants into the space that would be required for just one Sam's Club. So to prove the format could be a profitable anchor for landlords, Wal-Mart invested in three malls there, with the first recently opening in Zhuhai.

"They always struggled with the mechanics and some of the financials," Cheesewright said, referring to landlords there. "What we're now seeing is a lot more interest."

The company plans to open 115 stores in China over the next three years, with Sam's Club playing an integral role in those openings.