Wal-Mart to Sell 85 Stores in Germany

Wal-Mart Stores Inc. said Friday that it planned to sell its 85 stores in Germany to rival Metro, a move that effectively ends a nearly decade-long effort by the world’s largest retailer to crack the market in Europe’s biggest national economy.

Terms were not disclosed, but Wal-Mart said it expected to incur a loss before taxes of about $1 billion related to the deal in its second quarter.

It would be the Bentonville, Ark.-based company’s second international withdrawal this year. Wal-Mart pulled out of the highly competitive South Korean market in May. The retailer is concentrating on expanding in China and Central America.

“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,” Michael Duke, a vice chairman of Wal-Mart, said in a statement.

The stores, which had sales of 2 billion euros ($2.55 billion) in 2005, will be incorporated into Duesseldorf-based Metro’s Real Hypermarket brand.

Wal-Mart has more than 6,500 stores in the U.S. and 14 other countries and serves 176 million customers a week.

It entered the German market in 1997 with the acquisition of the Wertkauf and Interspar hypermarket chains. But Wal-Mart had troubled winning over German consumers, said Sy Schlueter, chief executive of investment house Copernicus in Hamburg, Germany. National discounters such as Lidl and Aldi Einkauf put the heat on Wal-Mart’s sales, he said, by offering the same products at competitive prices.

Furthermore, Schlueter said consumers rejected some of Wal-Mart’s signature features, including stores outside of town centers, employees required to smile and heartily greet customers, and baggers at checkouts.

“Wal-Mart wasn’t here to prove their business model works, they were here to make money,” Schlueter told Dow Jones Newswires. “Apparently even their patience is not unlimited.”

At its annual meeting last month, Wal-Mart trumpeted its expansion abroad. Wal-Mart’s total sales amounted to $312 billion last fiscal year, with its international division seeing sales rise 11%.

But analysts said the sophistication of South Korea’s $26-billion discount market proved too difficult for Wal-Mart, which failed to attract customers because they were dissatisfied with its food and beverage offerings.

Wal-Mart also has struggled in Japan, known for its finicky consumers, but has lately boosted its investment there. In the last year, the company finished its push to gain a majority share of Seiyu in Japan. It also has acquired stores in Brazil and entered a partnership with a retail chain in Central America.

Wal-Mart’s stock rose 93 cents to $44.46 on Friday.