Walmart is seeking a Heathrow base, sparking rumours of a fresh assault on the Continent. Where is the US giant likely to strike, asks Ian Quinn

American strategy in Europe was high on the agenda this week, but President Obama’s was probably ­easier to second-guess than the ­curious reports that US retailing superpower Walmart was scouting around for a Heathrow base from which to launch new mergers and acquisitions across the Continent.

With a chequebook to match its superpower billing and huge strength in the US and Latin America, the return of the biggest supermarket multinational to Europe, on paper, casts a volcanic ash-style shadow over the market.

Yet in mainland Europe at least, its track record is chequered. It is just five years since Walmart retreated from its initial foothold, Germany, carrying its tail between its legs. So where might it be looking for its return?

History and reputation suggest the company might go for a bold swoop, and struggling French hypermarket giant Carrefour, or at least some of its operations, have been touted as a potential target. Committed to an expensive revamp of its western European stores, Carrefour has been looking to sell or merge some of its assets, including discount chain Dia, which operates in countries including Spain, Portugal and France, and is currently lined up to be listed on the stock markets.

Walmart has previously been linked to a bid for Carrefour both as a whole and for some of its individual divisions, including China but a lock, stock and barrel move on the company is seen as a cultural and regulatory car crash waiting to happen.

“Carrefour is very much under pressure and it’s got big stores. You think of Walmart and you think big stores,” says one analyst. “But while France has the hypermarkets it’s certainly not a market where a brash American approach will go down well.”

The Walmart machine has rolled on elsewhere in the world, with more than 300 stores in China launched since it moved there in 1996, and it is looking to make a major strategic move into South Africa, although its takeover of Massmart has also become embroiled in controversy over its ­impact on local companies.

The culture clash was seen as a major reason for its failures in Europe. In 1997, two years before its raid for Asda, Walmart snapped up 85 stores from German chains, only to sell them to the Metro group, reportedly for a huge loss, in 2006.

Walmart has also twice seriously explored expansion in Russia, beating its second retreat just last year.

In the meantime rivals such as Tesco, using its UK base as a fulcrum, has expanded into countries such as Poland, Slovakia, Turkey and Hungary, giving it a massive head start on its US rival.

Retail experts are nonplussed by Walmart’s reported interest. “I would be very surprised if Walmart is looking at a major new acquisition in Europe,” says another analyst. “There could be some more consolidation and some of Carrefour’s operations could be a launch pad back into Europe, but not on a major scale.

“The simple fact is, it’s not a great place for them to come looking for growth. Asda is showing them that in the UK.”

One senior former Walmart ­executive also expressed major doubts over its potential to hit back in Europe. “I do find it hard to understand,” says the source. “They were in Germany and failed. There are a lot of deep scars in Walmart over Germany and I can imagine some very interesting conversations in the boardroom if people start suggesting it goes back.

“I don’t think there’s any way they would go into France or Spain because it will regard them as mature markets. Clearly there are opportunities in central Europe, but Walmart’s history is to look at big markets and the biggest is Russia. But it looked at Russia in 2004 and 2009 and pulled out both times. I think they see a lot more opportunities in Latin America and the Far East than in Europe.”

Andy Bond, former Asda chief executive and chairman, who is still working with the company as an adviser on its Massmart strategy, believes it would be “unfair” to describe Walmart’s track record in Europe as a failure. “You certainly couldn’t call Walmart’s decision to buy Asda a mistake,” he says.

And rivals underestimate Walmart at their peril, adds one analyst. “Maybe everyone is wrong in thinking gee whiz it’s Walmart it must be looking for a big strategic move. It may be looking at a ­different model.”

Walmart’s biggest investment in Europe since the Asda deal came with the Leeds retailer’s takeover of nearly 150 Netto stores this year, and last year it pursued a similar strategy, opening a raft of smaller outlets in the US, as it has also done in Mexico and Latin America. When it comes to a Netto-style model in Europe, potential targets for Walmart include the Portugal-based Jeronimo Martins as well as a series of co-operatives run in ­central Europe.

But an ex-Walmart source poured doubt on the idea. “The ­attraction of Netto was that it was a bolt-on for Asda. Going into mainland Europe again would be different and we mustn’t forget that the operation in Germany was run by an Asda team. Yes, there were a lot of Americans, but there were also a lot of Asda people. It didn’t work any more than bringing over Americans worked.”

Closer to home
Another theory is that the Euro mission is a red herring and that Walmart’s sights may be set on ­further acquisitions within the UK.

The US company and its Asda subsidiary are unlikely to leave such a potentially valuable target as Iceland to a Morrisons or Sainsbury’s without a fight.

However, such a deal could be handled out of Asda’s Leeds HQ, with no need for Walmart to parachute in a London team. Likewise with Home Retail Group, which runs Argos and Homebase.

Sources also suggest Walmart/Asda has decided that growth in the online non-food area in Britain can be achieved organically, without taking on either a company with 800 stores or a major player in the hugely struggling DIY business, described by one as a “poison pill”.

It’s little wonder experts are scratching their heads.

Walmart in Europe

1997 Walmart plants the stars and stripes in Germany, entering into competition with German discounters and acquiring a network of 85 stores
1999 an audacious £6.7bn raid for Asda in the UK
2004 A “feasibility team” is dispatched to Russia to look for opportunities, but returns empty handed
2006 Walmart sells its German operation to rival retailer Metro, reportedly for a $1bn loss
2009 Walmart sets up Russian office but pulls out a year later for a second time
2011 Asda takes over bulk of former Netto chain in UK, after OFT inquiry