The expansion of The Wal-Mart

Wal-Mart Stores Inc., the world's biggest retailer, plans to more than double its stores in China in the next five years to tap the growing personal wealth of the country's 1.3 billion people.

The expansion will help the Bentonville, Arkansas-based company broaden its reach beyond its current 84 stores across 46 Chinese cities into smaller cities, where competition is less fierce. Wal-Mart expects the growth to help it garner 20 percent of China's retail market, said Terrence Cullen, vice president of its China operations.

``The Chinese market is huge,'' Cullen said in an interview today in Singapore. ``No real market leader has emerged and our eyes are on market leadership of some sort. What we'll see is aggressive organic growth, probably accelerating each year.''

Overseas retailers have been expanding in China as the nation opens its domestic market to foreign competition. Per- capita disposable income in towns and cities rose 12.1 percent last year and the country's retail sales increased 14 percent.

``Retail demand is growing,'' said Paul Tang, chief economist at Bank of East Asia Ltd. ``Retailers are responding to the Chinese government's 11th five-year plan to boost consumer demand. The overall economy growth is also quite good, and it all helps to increase consumer confidence.''

`Many Possible Targets'

Wal-Mart has opened 12 stores in mainland China so far this year, on track to beat 2006 openings of 15, the company said. The retailer sped up its expansion earlier this year by acquiring a 35 percent stake in China's Trust-Mart. Wal-Mart said at the time that the move may lead to its taking ownership control of Trust- Mart's more than 100 hypermarkets.

Cullen denied a report in the U.K.'s Daily Telegraph that Wal-Mart is buying all or part of Beijing Hualian Hypermarket Co. to expand in China. The newspaper said Wal-Mart had asked Credit Suisse Group to manage the planned bid.

``There are lots of rumors, but I can tell you we are not buying them,'' he said. ``There are many possible targets we are looking at, but we don't have anything at the moment.''

Hualian spokeswoman Li Yiping also denied the report.

Overseas expansion has become key for the retailer as its U.S. growth slows.

`Steep Prices'

``The quickest way to do it is to buy into local retailers - - it all depends on what price they have to pay for it,'' said Anthony Teoh, a Hong Kong-based analyst who covers retailers at South China Finance & Management Co. ``When you're looking at the valuations in the retail sector, foreigners have to pay pretty steep prices.''

The U.S. company faces rising competition as retailers flock to the world's most populous country. Carrefour SA, Europe's largest retailer, this month increased its target for new stores in China, where it plans to open 20 to 25 outlets a year, up from the previous forecast of 20.

Sales in China for Wal-Mart climbed 30 percent last year to 15 billion yuan ($1.98 billion), a government-affiliated industry group said in March. Carrefour boosted China sales 53 percent to 24.8 billion yuan, according to the China Chain Store & Franchise Association. Beijing Hualian Group, the parent company of listed Beijing Hualian Hypermarket, had sales of 21.2 billion yuan, according to the report.

Wal-Mart and Carrefour's sales gains in their home markets have slowed. Last year, Wal-Mart's sales at stores open at least a year, considered an important gauge of retail performance, rose 1.6 percent, the least in at least 27 years. Carrefour's second- quarter sales in France were unchanged, while jumping 14 percent in Asia and 35 percent in Latin America.

Wal-Mart exited unprofitable operations in South Korea and Germany in 2006 to concentrate on the fast-growing China and Latin American markets.

China's share of world consumer spending may almost triple to 14.1 percent by 2015, from last year's 5.4 percent, according to Credit Suisse. That would surpass the share of consumer spending in the U.K., Germany and Japan, according to the research. China's 2006 retail sales grew 14 percent to $770 billion, equivalent to one quarter of the U.S. market.

source:bloomberg.com