Wal-Mart looks to Canada for growth

Wal-Mart Stores Inc., which opened its first batch of supercentres in Canada in recent months, aims to use this large-size shopping format as a weapon to bolster its position in the country.

"We have taken a big evolutionary step forward," Mario Pilozzi, president and CEO of Wal-Mart Canada, saidin an address to analysts at a conference on Tuesday. "The supercentres have allowed us to deliver the best assortment."

The investor conference, which focused on the company's 13-year-old Canadian business and was held in Mississauga, Ont.,was broadcast over the web.

Wal-Mart Canada opened seven supercentres since November and plans to open 21 supercentres in the current fiscal year 11 of them converted from existing discount stores, in Canada, Pilozzi said. That compares to eight new discount stores, including three that will be relocated this year.

But Pilozzi conceded, "The industry is strong. Everyone is getting better. Everyone is fighting for market."

With Wal-Mart continuing to struggle with sluggish sales in the U.S., the world's largest retailer appears to be focusing more on its international business to fuel growth. International sales accounted for about 22 per cent of the total business in its fiscal year that ended Jan. 31, 2007, up fromfive per cent in fiscal 1997.

Wal-Mart operated more than 2,700 stores outside of the U.S. last year. According to a recent report by Goldman Sachs analyst Adrianne Shapira, company executives intend to expand international sales to account for 33 per cent of the total business over time.

Nevertheless, Wal-Mart's record in international sales has been a bit uneven, with recent failures in Germany and South Korea. But Canada, which the company entered in 1994 with its purchase of Woolco Stores, which were converted to the Wal-Mart brand, has been a bright spot.

According to the Goldman Sachs report, the Canadian market generated revenue of about $11.6 billion USwith about 290 stores last year. It accounts for about 15 per cent of Wal-Mart's international sales; the United Kingdom's business makes up for about 36 per cent of Wal-Mart's international sales, while Mexico's business accounts for 24 per cent.

Wal-Mart executives said Tuesday said that its own internal research reveals that 80 per cent to 90 per cent of Canadian households shop at Wal-Mart.

Still, according to Diane Brisebois, president and CEO of the Retail Council of Canada, the Canadian market is complex. It has one of the highest immigration rates one of every five Canadians are foreign-born and 50 per cent of the staff at some Wal-Mart stores in Canada are recent immigrants, executives said Tuesday.

Less disposable income

Meanwhile, Canadians, struggling with high taxes, have lower real disposable income compared to their U.S. counterparts, Brisebois said.

Pilozzi acknowledged that the company's initial experience in the Canadian market wasn't easy.

"We were struggling for an identity," said Pilozzi. But the company soon found success in focusing on such elements as product and price; it doubled assortments and focused on national brands like Black & Decker.

Wal-Mart Canada executives said Tuesday they plan to focus more on promoting its everyday low prices, and are improving its merchandising assortments. And the company is considering the possibility of launching a program on English as a second language.

Wal-Mart has also developed 60,000-square foot prototypes in Canada suitable for towns with a population of 5,000.