Two executives of Wal-Mart Stores Inc’s China operation, including its head, have resigned for personal reasons, the company said on Monday, the latest setback for the world’s largest retailer in China where it has faced store closures and employee detentions.
The departures of Wal-Mart China Chief Executive Ed Chan and Senior Vice President of Human Resources Clara Wong come a week after the company closed more than a dozen stores in central China following allegations the stores sold regular pork as organic pork over the past two years.
Both resignations were for personal reasons and “have no correlation” with the investigations in Chongqing, Wal-Mart Asia spokesman Anthony Rose said.
Authorities in Chongqing have arrested two Wal-Mart China employees and detained 37 others over the incident.
“We have used the last few days to put in place corrective actions in our stores,” Mr. Rose said, adding that the stores will reopen by Oct. 25. He did not give details of the actions.
“It’s really hard to say whether this (the resignations) is a consequence of that,” said Torsten Stocker, a China retail analyst with Monitor Group.
“It might be, but I think at the end of the day, it is still not clear what really happened in Chongqing,” he said. “Obviously what happened in Chongqing is impacting their business in Chongqing and presumably ought to be having some impact on the grand overall business. Any type of leadership change like this, it’s never a good thing.”
Other major Western firms have recently come under increasing scrutiny from China’s state media, facing fiery criticism over issues including food safety and garment quality, leading some executives to complain privately that their companies are subject to stricter enforcement than local firms.
This summer, oil company ConocoPhillips was roundly criticized by Chinese media for its handling of a June oil spill off China’s eastern coast. The State Oceanic Administration has threatened to sue ConocoPhillips but not its state-owned partner CNOOC.
Last week, European luxury group Gucci said it replaced two managers in southern China after former workers at a store released an open letter alleging employee abuse, including long hours and overly strict rules on eating and using the restroom.
The resignations at Wal-Mart China marked the second departure of senior Wal-Mart executives in China in less than five months. In May Chief Financial Officer Roland Lawrence and Chief Operating Officer Rob Cissell resigned “to explore other opportunities,” the company said at the time.
“Wal-Mart’s problems are similar to other rivals, particularly the foreign operators, including competition for staff,” said Alex Wong a director at Ample Finance Group.
“A relatively high (staff) turnover rate suggested that it has some problem with its incentive plan in recruiting and retaining sales people,” Mr. Wong said.
Wal-Mart Asia CEO Scott Price stressed in a statement on Monday that China is a strong market for the world’s largest retailer.
“We recently celebrated our 15th anniversary in China, and there is a lot to celebrate about our business here,” said Price, who will also serve as interim China head.
“China is a very important market for Wal-Mart and China’s 12th five-year plan will provide strong opportunities to the retail industry.”
Wal-Mart competes with French hypermarket chain Carrefour, Britain’s Tesco, Germany’s Metro AG, China’s Sun Art and China Resources Enterprise in a hypermarket sector that is forecast to grow at a compounded annual rate of 10.1 percent between 2010 and 2015, according to Euromonitor.
After entering China in 1996, its expansion gathered steam in 2007 when the world’s largest retailer bought a 35-per-cent stake in Taiwanese hypermarket chain Trust-Mart. It has 353 stores in the mainland.
Wal-Mart’s market share in the hypermarket space stood at 11.2 per cent in 2010, in second place after Sun Art, but spending involved in the expansion has been weighing on its profitability.