Wal-Mart looks to buy land in China to build stores

0
26

Wal-Mart is building its seventh Sam’s Club outlet in the northeastern port city of Dalian, on the first plot of land it bought in the country, said Ed Chan, chief executive officer of the company’s China operations.

“When the location is suitable and site is available and meet our needs, we’ll go and work with the government directly to acquire” the land-use rights, Chan said today at an investors’ conference broadcast on the company’s website.

China’s soaring real-estate prices are seeing some foreign retailers switch their business model in the country from leasing property to acquiring land and building their own stores. Tesco Plc (TSCO) this month formed a $280 million joint venture with HSBC’s Specialist Investments Ltd. and Metro Holdings Ltd. to develop three shopping malls in China.

Inter Ikea, a mall developer part-owned by Sweden’s Ikea Group, plans to spend about 5 billion yuan ($763 million) to build a shopping center in Beijing to which the furnishings chain’s second store in the city will be connected. It is to be the biggest investment by Ikea and Inter Ikea in the world.

Premier Wen Jiabao said on March 5 that China will “resolutely” press ahead with controls on the property market to curb speculation. About 40 Chinese cities said they will cap new home prices below annual economic and disposable per-capita income growth after local governments were ordered to submit home price control targets by the end of March.

The Chinese government is intensifying efforts to keep housing affordable after prices gained 19 consecutive months to December. Spending on affordable housing gained 15 percent last year to 13.6 billion yuan, according to a report by the finance ministry.

Wal-Mart, based in Bentonville, Arkansas, is speeding up its store openings in China, where it had 329 outlets at the end of its fiscal year in January. The China operations generated $7.5 billion revenue, or 1.8 percent of the company’s $420 billion total, during the year, according to Scott Price, chief executive officer for Asia.

Wal-Mart rose 0.2 percent to $52.36 in New York trading yesterday. The stock has lost 5.8 percent in the past year.

The retailer will increase its penetration in smaller Chinese cities, Chan said today, with the proportion of stores located in tier one cities falling to 18 percent in 2014 from 20 percent last year.

China will be the world’s largest grocery market by 2014, Roland Lawrence, Wal-Mart’s chief financial officer in the country, said at the same briefing.

The company will have Sam’s Club outlets in 17 Chinese provinces in five years, from four provinces now, said Sandy Tam, a vice president with Wal-Mart China. Sam’s Club is a membership division of Wal-Mart that offers warehouse shopping services.

Chan reiterated today that the company will close its purchase of Chinese supermarket operator Trust-Mart in the 2011 fiscal year. The U.S. retailer delayed the closing of the deal to May this year so that some conditions in the contract could be fulfilled, it said in December.

LEAVE A REPLY

Please enter your comment!
Please enter your name here