Wal-Mart Upbeat on Asia Drive Amid U.S. Woes

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The retailer, a perennial runner-up to Carrefour in China in termsof sales and stores, is enjoying a huge leap in market share as itadvances with a $1 billion acqusition of local chain Trust-Mart,expected to be fully completed by 2010.
The U.S. household name -- which has roughly 2.1 million employeesworldwide -- is now looking to expand into Southeast Asia as U.S.consumers are squeezed by a soft housing market and tighter accessto credit.
"I foresee international will outpace the U.S. in terms ofpercentage of growth. We should be approaching the $100 billionmark this year for international," Asia CEO Vicente Trius, toldReuters.
Last month, Wal-Mart posted a 17 percent jump in second-quarterprofit to $3.45 billion, on the back of a 17 percent increase ininternational sales to $25.26 billion.
But the discount retailer forecast current quarter results couldmiss Wall Street estimates as consumers worldwide deal with tougheconomic times. Analysts said Wal-Mart's third-quarter outlook waslower than some expected, and warned that tougher times could beahead.
"Although the international business continues to expand itspresence within Wal-Mart's operations, a drop in inflation rates ora strengthening dollar coupled with more difficult comparisons inthe second half of FY09 could start to hold down the acceleratedpace in sales growth Wal-Mart has experienced during the 1st halfof this year," Credit Suisse analysts said in a research note.
On Wednesday, the U.S. behemoth opened its Asian regionalheadquarters in Hong Kong, which will oversee its business inJapan, India, and China.
Wal-Mart, which operates more than 4,000 stores in the UnitedStates and 3,000 stores in 13 other countries, posted $90.6 billionin international sales last fiscal year, about a quarter of overallrevenue.
In Asia, the firm operates 394 Seiyu stores in Japan and more than200 stores in China. It also holds a minority stake in the 102-unitTrust-Mart chain in China and has a joint venture with BhartiEnterprises in India.
Since 2002, Wal-Mart has invested about $2.2 billion in Seiyu,which remains loss-making due to stiff competition. But Trius saidWal-Mart would not back out of Japan like it did in Germany andSouth Korea.
"No way," Trius said regarding a pull-out. "These countrycomparisons are completely wrong. Germany was a consolidatedmarket, but Japan is still fragmented."
Wal-Mart's major competitors include Germany's Metro AG DE> ,France's Carrefour, Britain's Tesco, and a host of local players inseparate countries.
Asked where else in Asia the discount retailer might expand, Triusconfirmed Vietnam, Indonesia, and Thailand are all potentialmarkets.
CHINA STILL GROWING
Wal-Mart, founded in 1962 and based in Bentonville, Arkansas,entered China in 1996, where it competes with international rivalsand local competitors Lianhua, Wumart and Times Ltd for a slice ofthe country's booming $1.3 trillion retail market.
China, which makes many of the clothes, toys and other productssold by Wal-Mart worldwide, has seen inflation surge to its highestlevels in 11 years.
But Trius said Wal-Mart expects improved management of its supplychain will help offset inflationary pressures in China, where itdirectly sources $9 billion in manufactured products a year.
Shares in Wal-Mart have gained more than 25 percent this year,easily outperforming a 13.2 percent loss on the Dow Jonesindustrial average.