Wal-Mart Cuts Back on Germany Expansion

Wal-Mart Stores Inc. has scrapped plans for a massive expansion in the German market.

The world’s largest retailer said Friday that it would open only two new stores in Germany this year. Wal-Mart had planned to open 50 stores in Germany by the end of 2002.

That goal was set last summer by the retail giant’s top European executive, Allan Leighton, who has since resigned.

Bentonville-based Wal-Mart said the original plans were too optimistic and that competitors have taken up its strategy of bargain-basement prices, encouraging loyal consumers to stick to old favorites.

Wal-Mart said it will “concentrate on existing operations” but may continue to expand in Germany. A spokeswoman declined to say how many stores the company plans to open in Germany by the end of 2002 but said it would be fewer than 50.

Wal-Mart invaded Europe by buying the 21-store Wertkauf hypermarket chain in 1998. The company now has 94 stores in Germany after buying another hypermarket chain.

But many analysts still doubt the operation is turning a profit. Some analysts estimate Wal-Mart is losing $200 million a year in Germany, but that’s a drop in the bucket for a company that has $191 billion in annual sales.

Wal-Mart’s annual sales in Germany are estimated at around $2.8 billion. That compares with about $11 billion for Metro AG, Germany’s leading hypermarket chain.

It appears to be difficult for Wal-Mart to penetrate the market in Germany because Metro is so ubiquitous. Metro has 259 hypermarket stores in Germany in addition to 75 smaller Metro Cash and Carry stores.

Shares of Wal-Mart (NYSE: WMT) were trading at $52.39 today after closing at $51.71 on Friday.