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Walmart China’s Ranks Suffer Double Blow

Walmart’s business in China has hit an unexpected bump with the sudden resignation of two senior executives at a time when it is facing increasing competition in the country.

A Chinese customer leaves after shopping at Beijing's first Wal-Mart supercenter October 14, 2006 in Beijing, China. Wal-Mart workers in China have set up unions at all 62 Chinese outlets in what a senior Chinese trade union official described on October 12th as a breakthrough for organized labor.
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A Chinese customer leaves after shopping at Beijing's first Wal-Mart supercenter October 14, 2006 in Beijing, China. Wal-Mart workers in China have set up unions at all 62 Chinese outlets in what a senior Chinese trade union official described on October 12th as a breakthrough for organized labor.

The world’s largest retailer by sales said that Roland Lawrence, its chief financial officer in China, and Rob Cissell, its China chief operating officer, had both resigned “due to personal reasons to explore other opportunities”.

Walmart is looking to China and other emerging markets to offset the flat performance of its US business, where it has limited growth potential, but in several foreign countries it has found the going tough.

Its annual sales of $7.5bn in China are still a small proportion of its global revenue of roughly $420bn, but it says year-on-year sales in China are growing at a double-digit rate and most analysts give it decent marks for its performance.

However, its business has progressed slowly.

In a sign of the difficulty many foreign retailers face in converting China’s potential into profits, Walmart made its maiden profit in China only in 2008, 12 years after first entering the country.

The company did not name replacements for the two men who resigned, who were both senior vice-presidents, and would not comment on the circumstances of their simultaneous departures or the implications for its China business.

The US company was an early foreign entrant into the Chinese grocery market in the 1990s along with Carrefour of France, but the market remains fragmented and neither company has built a market share of more than 6 per cent, according to analysts.

Tesco of the UK is a more recent arrival. Walmart now has about 330 stores in more than 120 cities in China.

Yuval Atsmon, a consultant at McKinsey, said the China businesses of many foreign retailers were feeling a lot of pressure from head offices, but that it had proved hard to replicate their success in home markets partly because the cost of opening new stores was relatively high.

In South Africa, its desired entry point into Africa, Walmart has been dogged by resistance from unions and some government departments to its proposed $2.4bn purchase of a 51 per cent stake in Massmart.

Last December it closed a Russia office opened to pursue acquisitions after a local rival struck a $1.65bn deal to buy a discounter, Kopeika, that had been seen as a potential partner.