Wal-Mart hits trouble in Germany

All is not going quite according to plan for the Wal-Mart retail chain, as it forges ahead with its expansion into Europe. Its aim of owning 20 per cent of outlets by 2003 is starting to meet resistance in Germany, where it gained its first foothold three years ago.

All is not going quite according to plan for the Wal-Mart retail chain, as it forges ahead with its expansion into Europe. Its aim of owning 20 per cent of outlets by 2003 is starting to meet resistance in Germany, where it gained its first foothold three years ago.

Der Spiegel news magazine has portrayed the Wal-Mart offensive as the second American invasion. Rumoured takeover bids may eventually liberate German consumers, who have long suffered under the yoke of boorish shop assistants. But the unions and retail lobby are on the defensive, claiming further incursions could cost thousands of jobs.

When Wal-Mart first set foot on German soil in December 1997, observers believed that its purchase of 21 discount stores from the Wertkauf chain was a mere test of the European market. But with the acquisition of a further 74 stores just months later, Germans began suspecting more expansionist motivations.

Wal-Mart slashed prices on staple goods such as flour, milk and sugar, putting competitors under enormous pressure. Even discounters large by European standards felt dwarfed by Wal-Mart, whose annual net profits of $5.3bn (£3.6bn) surpass the total turnover of many German retailers.

Cheerful staff, pumped up by US-style motivation training, were an additional draw. Yet Wal-Mart is said to be losing $200m per year on its German operations - a figure it is determined to change.

The retailer's 95 stores in Germany are busily being remodelled into American-style supercentres. On Thursday, Wal-Mart Deutschland announced that in the coming three years it expected to open 50 new locations.

By 2001, said spokeswoman Susanne Müller, the company should break even. To reach its target for acquisitions, Wal-Mart is rumoured to have approached some of Germany's leading discount chains. The American colossus is now said to be intensively wooing Metro AG, Germany's leading and Europe's third largest retailer.

While the German retailer is denying the talks with Wal-Mart, merger speculation has helped to stage a recovery in Metro's battered share price.