Beaten Wal-Mart checks out of Germany

Asda owner Wal-Mart is ending its loss-making business in Germany, just two months after leaving South Korea in what analysts welcomed as a move to focus resources on more profitable international markets like China and Latin America.

The US company said yesterday it planned to sell its 85 stores in Germany to rival Metro AG, ending a nearly decade-long effort by the world’s largest retailer to crack the market in Europe’s biggest economy.

Terms were not disclosed, but the Arkansas-based retailer said it expected to incur a loss before taxes of about £560 million related to the deal in its second quarter.

The total cost of the German experiment is not known because Wal-Mart does not report individual financial results for each of its international markets. Wal-Mart has said over the years that its German operations were not profitable.

“They’ve been losing money there for years,” said Robert Buchanan, head of retail analysis at AG Edwards & Sons.

Wal-Mart entered the German market in 1997 with the acquisition of the Wertkauf and Interspar hypermarket chains. But Wal-Mart’s German stores, which employ 11,000 people, have struggled to break into the local market.

Sy Schlueter, chief executive of investment house Copernicus in Hamburg, said Wal-Mart had trouble winning over German consumers, who tended to be very price-focused and would rather drive to a different store if they knew they could buy something cheaper.

National discounters such as Lidl and Aldi put the heat on Wal-Mart’s sales, he said, by offering the same products at competitive prices.

Schlueter also said consumers rejected some of Wal-Mart’s signature features, like out-of-town stores, employees required to smile and heartily greet customers, or baggers at checkouts.