Wal-Mart ends speculation with Euro entry - reprint of article from 1/5/98

Discount Store News, Oct, 1999

KARLSRUHE, GERMANY, JAN., 5, 1998

Wal-Mart advanced its effort to become a global brand and gained a toehold on the European continent with the recent acquisition of German hypermarket retailer Wertkauf. Terms of the deal were not disclosed, but privately held Wertkauf's 21 stores last year posted sales of approximately $1.4 billion. The acquisition will not have a material impact on earnings in 1998, according to Wal-Mart.

Wal-Mart officials characterized Wertkauf as an "excellent fit" and an acquisition that provides the company with an ideal entry into a new market.

Wertkauf's stores average about 110,000 sq. ft., which is large for Germany, but only as big as Wal-Mart's smallest domestic supercenters.

The deal also caps a record year for Wal-Mart's rapidly expanding international division, which turned profitable during 1996. Profits then accelerated during 1997. Through the three quarters of 1997, international profits were $85 million compared to a $41 million loss the previous year. Wal-Mart has told analysts that Wertkauf is already a profitable operation.

Wertkauf ranks as the 15th largest food retailer in Germany behind such companies as Metro, Rewe, Edeka, Aldi, Tengelmann and Globus.

Wal-Mart will also have to adjust to the peculiarities of German law. Stores are not allowed to open on Sundays and can only stay open until 4 p.m. on Saturdays and 8 p.m. on weekdays ...

Wal-Mart had been rumored to be in talks with nearly every European retailer of note by the time the news broke that it would acquire Wertkauf. Although in the initial months following the acquisition many European analysts were down-playing the competitive threat of its 21-store operation, Wal-Mart followed up with a pair of acquisitions that demonstrated its commitment to Continental retailing. Its acquisition of 74 German Interpar units in early 1999 and of the 229-store Asda chain in mid-1999 created its second largest international division.