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What went wrong in China?


No one said being an international retailer was easy, a lesson Walmart continues to learn the hard way on distant shores. This time the country in question is China, a market where despite having a long history and extensive operations, the company managed to run afoul of local officials who temporarily closed 13 stores because, according to media, reports, some pork products were incorrectly labeled as organic. Walmart has been in China for about 15 years and currently operates 349 stores, consisting of 245 Walmart stores and 104 units that are still branded as Trust-Mart.

While the store closures seems like a harsh penalty for the magnitude of the transgression, it is only the most recent indication that all is not well in China. The Trust-Mart integration has taken longer than planned due to some legal issues, and since May, Walmart has lost or let go its China CFO and COO, and most recently its SVP human resources and the CEO left the company. Now, China is under the leadership of Scott Price who serves as president and CEO of Walmart Asia and also has responsibility for Japan and India.

Price touched on the issue of China briefly during the analysts’ meeting Walmart hosted at its Bentonville headquarters last week, but his comments were primarily focused on assuring those in attendance that the store closures wouldn’t have a material impact on results and that Walmart took the pork mislabeling issue seriously.

We’ve worked very hard over the last 15 years to build a level of trust with our customers,” Price said. “We’ve taken immediate action to put corrective systems in place and are confident we’ll emerge from this much stronger. It would be important to note that we don't see a material financial impact with China results.”

That was it. The matter wasn’t discussed further during the Webcast portion of the day long investor conference, but given the significance of China to Walmart’s long-term growth prospects, any difficulties with the government there have to be concerning to investors. For more on the peculiarities of operating in China, check out what the Financial Times had to say by clicking here.

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