New York, Oct. 24 - Wal-Mart Stores Inc on Wednesday defended its decision to acquire the remaining shares of its Japanese supermarket subsidiary, Seiyu Ltd, saying Japan is of major strategic importance to the world's largest retailer.
"We are convinced that full ownership by Wal-Mart is the best way to enable Seiyu and Wal-Mart to deliver long-term benefits to all stakeholders," Wan Ling Martello, chief financial officer of Wal-Mart's international business, said at the retailer's analyst meeting, which was broadcast on the Internet.
Earlier this week, Wal-Mart said it would spend up to $878 million to buy out minority shareholders in Seiyu to try to turn around the money-losing chain.
But U.S. investors were not necessarily pleased by the move, questioning why Wal-Mart would put more money into Seiyu. Since 2002, Wal-Mart has invested more than $1 billion in Seiyu but has yet to see anything more than temporary upswings in sales amid tough competition.
Wal-Mart's shares fell 3 percent in New York Stock Exchange trading on Tuesday, the first day of its analyst meeting, after saying it would scale back capital spending and U.S. supercenter store opening plans but increase spending on new international stores.
Many investors were hoping Wal-Mart would use excess cash to pay a higher dividend or boost its stock buyback program.
Wal-Mart Vice Chairman Mike Duke said that by acquiring the rest of Seiyu, Wal-Mart would be able to move faster to improve its operations and supply chain.
"We believe the steps we've taken this week free us up as a company to move faster to capture what is the second largest (retail) market in the world," he said.
Speaking at the meeting later, Wal-Mart Chief Executive Lee Scott said the company's international plans were "more controversial" than he expected, but the international segment will represent a larger part of its business going forward.
"We believe that we are in the right markets," he said.
While Japan has challenges, "we believe that we can and we will succeed in Japan," he said.
EYEING ENTRY TO RUSSIA
Scott said Wal-Mart hopes to be in Russia "at some point in the future."
"Russia is a growing consumer nation," Scott said. "People there are spending as they gain affluence."
Unlike other developing countries where consumers tend to save, Russian consumers have shown a propensity to spend, he said.
"I think it is a wonderful opportunity, and that we have to explore that, and we have to be able to position ourselves to operate," he said.
Duke said the retailer is committed to being in international markets where it can "win" or else it will exit those markets.
To measure if it is winning in a market, he said Wal-Mart must be on a path to being a significant player in the country's retail sector, must have a distinctive position in the marketplace that it can use to sustain its leadership, and the business must generate material shareholder value.
Duke said that next year, 80 percent of Wal-Mart's new store square footage growth internationally will come from Canada, Mexico and China.