Wal-Mart decides to pull out of Germany

28 July 2006

FRANKFURT – The world biggest retailer Wal-Mart Stores Inc said Friday it was pulling out of Germany and selling its stores to Metro AG after it battled for to make a profit in Europe’s biggest economy.

Germany’s biggest retailer is to buy 85 hypermarket stores from Wal-Mart but did not give a price for the acquisition of the outlets which generated sales of about 2 billion euros ($2.54 billion) last year.

“We have not achieved a turnaround,” A Wal-Mart spokeswoman said.

In a statement Michael Duke, Wal-Mart vice chairman said: “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.”

Metro also did not provide any details of the “significant synergies” it said it expects to result from the purchase.

However shares in the German-based retailer rose 3.7 percent to 45.42 euros after the Mal-Mart purchase was announced.

“With this acquisition we complement our store network and increase our power in the German market,” Metro chief executive Hans- Joachim Koerber said.

“Through the strengthening of our market presence we will generate significant synergy effects. It is also a clear commitment that we believe in the hypermarket business as an effective sales format,” he said.

The acquisition now has to be cleared by monopoly authorities but Metro said that it was confident that the deal could be finalised this year.

The decision by the Arkansas-based Wal-Mart to sell out of Germany’s hard-pressed retailing market comes almost a decade after it first entered the country.

However, in recent years retailing in Europe’s biggest economy has been through a protracted period of stagnation with the sector hit by high unemployment, intense competition and low wage growth.

DPA

Subject: German news