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Wal-Mart Stores, Inc. : Wal-Mart Invests $16.3M in China Food Safety

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05/09/2013 | 01:25pm CEST

BEIJING--Wal-Mart Stores Inc. (WMT) is investing 100 million yuan ($16.3 million) to strengthen food-safety management in the retailer's China-based stores, as Chinese officials crack down on violations in response to public outrage over a string of food scandals.

The Bentonville, Ark., retailer plans over the next three years to use the investment to expand food inspection, supply-chain management and supplier training, it said in a statement.

Mobile food-safety labs, which Wal-Mart has been pilot testing for the past six months in China, will be expanded to run third-party food-quality tests at 70 stores across China's southern Guangdong province, up from 33 stores, the statement said.

The move comes just after the retailer has come under fire in China. According to a report Wednesday in China's state-run Xinhua news agency, officials in the southern city of Nanning accused Wal-Mart of using expired eggs in baked goods sold to consumers.

A Wal-Mart spokesman said the retailer is paying close attention to the situation in Nanning and is cooperating fully with authorities to investigate the matter. "At this time we have no evidence at all confirming this problem," the spokesman said.

Chinese authorities are conducting a food-safety crackdown. Police recently arrested 904 people on suspicion of selling adulterated and mislabeled meat products, according to a report from Xinhua. The adulteration included injecting water into meat and treating rat, mink and fox meat with chemicals in order to pass them off as beef and mutton, the report said.

Consumer trust in the food industry remains shaky even years after six babies died and 300,000 others were poisoned by drinking milk tainted with the industrial chemical melamine in 2008. The chemical was used to mimic the properties of protein in milk and enable producers to make higher profits by passing off more liquid as milk.

Wal-Mart has heightened its food-safety practices in China since a 2011 scandal in which officials in Chongqing accused the company of mislabelling regular pork as more-expensive organic pork. The incident led to the temporary closure of 13 stores, the arrest of two employees, the detention of 35 others and a fine of 3.65 million yuan ($575,000).

Since then, Wal-Mart has overhauled management at its stores in Chongqing and implemented a new food-safety compliance system in the company's stores across the nation.

Wal-Mart executives said Thursday that the retailer aims to help push change in China's food industry.

The retailer also aims to improve food safety practices in its stores by increasing employee training, hiring more retail compliance experts to its existing team of 30 and adding a fresh-food testing center to its current six, the statement said.

China is an important growth market for Wal-Mart. The retailer is No. 3 in market share in the country, according to the most recent data from market research firm Euromonitor International. That's behind No. 2 China Resources Enterprise Ltd., which operates 4,100 stores under 10 different retail brands, and No.1 Sun Art Retail Group Ltd., a joint venture between Taiwanese conglomerate Ruentex Industries Ltd. and France's Groupe Auchan SA.

Wal-Mart announced plans in April to invest 500 million yuan ($80 million) to remodel 50 of its 380-plus stores in China and said it will open 30 new stores in the country this year. The company projected it would open stores in cities such as Xinyu, in eastern Jiangxi province, and Shantou, in southern Guangdong province, in the next six months.

Write to Laurie Burkitt at laurie.burkitt@wsj.com

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Financials ($)
Sales 2019 515 B
EBIT 2019 21 949 M
Net income 2019 9 608 M
Debt 2019 48 896 M
Yield 2019 2,21%
P/E ratio 2019 26,75
P/E ratio 2020 19,36
EV / Sales 2019 0,63x
EV / Sales 2020 0,61x
Capitalization 278 B
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Average target price 103 $
Spread / Average Target 8,7%
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NameTitle
C. Douglas McMillon President, Chief Executive Officer & Director
Gregory B. Penner Non-Executive Chairman
Brett M. Biggs Chief Financial Officer & Executive Vice President
Jeremy King Chief Technology Officer & Executive VP
Clay Johnson Enterprise Chief Information Officer & EVP
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