Walmart Stores Inc. (WMT) plans to buy more floor space in China as it moves to expand operations in the country.
Company officials revealed that the retail giant aims to open Sam’s Clubs in 17 Chinese provinces over the next five years.
Sam’s Club is a chain of membership-only retail warehouse clubs owned and operated by Wal-Mart Stores Inc.
Walmart launched its first Sam’s Club in China on June 10, 2010. The club is expected to commence its operations from the second half of 2011 and has a good chance of generating 1000 new jobs directly or indirectly in the neighboring areas.
Walmart stepped into the Chinese market for the first time through its Supercenter and Sam’s Club in Shenzhen in 1996. Currently, Walmart runs various kinds of stores in China including Super centers, Sam’s Clubs, and Neighborhood Markets. As of August 5, 2010, Walmart had 189 units in 101 cities and created over 50,000 job opportunities across China.
The world’s largest retailer invested $500 million in Chinese e-retailer 360buy.com in December 2010 to expand its online consumer base and serve customers with comfort. It opened “compact hypermarkets”, which are small stores that are easy and cheap to build and aimed at the rural and poorer sections of China.
Management expects the number of outlets in tier-one cities of China to account for more than 18% of the total number of outlets of the company in the Asian nation by 2014. Management also announced that the company will close its acquisition of the Chinese supermarket operator Trust-Mart in fiscal 2011.
Walmart, however, is expanding globally and Walmart’s Canada operation plans to open three more super centers in the province of Quebec this year. By January 2012, Wal-Mart is expected to have 333 stores, including 164 super centers, in Canada.
We remain encouraged by the significant presence of Walmart in the international market, customer loyalty and its strong balance sheet. However stiff competition from Costco Wholesale Corporation (COST) and Target Corp. (TGT) concerns us.
Currently, we maintain a ‘Neutral’ rating on the stock. Further, Walmart holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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