Published on: July 28, 2006Wal-Mart announced this morning that it will sell its 85 stores in Germany to Metro Group there, ending its ultimately misguided attempt to break into the mainland European marketplace. Terms of the deal were not disclosed, and the sale is subject to approval by German antitrust authorities.
"As we focus our efforts on where we can have the greatest impact on our growth and return on investment strategies, it has become increasingly clear that in Germany's business environment it would be difficult for us to obtain the scale and results we desire," said Mike Duke, vice chairman of Wal-Mart, in announcing the sale. "This sale positions us to increase our focus on the markets where we can achieve our objectives. We appreciate the contributions our German associates have made to build up our business in Germany. We will work closely with Metro to have a smooth transition."
Wal-Mart’s German stores were estimated to be generating annual sales that were the equivalent of $2.5 billion (US), but the company’s path there has been notoriously rocky as it faced resistance from consumers who seemed immune to the chain’s charms, legal obstacles created by the government, and competition that was able to outflank it because of what seemed to be a better knowledge of local shopping habits.
Metro said it would integrate Wal-Mart’s operations into its Real hypermarket group.
- KC's View:
- While admitting defeat isn’t something that Wal-Mart is particularly good at – after all, it hasn’t had much practice – the bailing out on its German operations has long seemed to be more a matter of “when” than “if.”
It ends up, to our surprise, that the whole world doesn’t necessarily want the American version of discount shopping, and that there are considerable numbers of people out there for whom Wal-Mart is not a positive force for good.
Give Wal-Mart credit for knowing that it had to end this particular venture. The leadership there knew that it simply makes more sense to try to turn its Japanese operations around as well as try and make up ground on Tesco in the US – two tasks that hardly are a walk in the park.