REAL ESTATE

Cinemark to open new 14-screen theater at Presidio Junction

BY CSA STAFF

Fort Worth, Texas — The Weitzman Group/Cencor Realty Services announced that Cinemark Holdings will construct a 14-screen, all-digital movie theater that will feature the company’s new Cinemark NextGen design concept.

Cinemark has entered into an agreement to purchase 10 acres in Presidio Junction, a 300-acre master-planned mixed-use development of LNR Property LLC, located eight miles north of downtown Fort Worth, Texas.

Slated to open in summer 2012, the new Cinemark NextGen theater will offer stadium-seated auditoriums with state-of-the-art viewing environments, as well as the Cinemark XD Extreme Digital Cinema auditorium.

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How high is up in China

BY CSA STAFF

With 329 stores in China producing $7.5 billion in sales annually, Walmart has experienced dramatic growth since it entered the market in 1996 with two stores. Last year, the company pursued its most aggressive expansion to date with the opening of 49 stores, and at a meeting for financial analysts earlier this week in Shenzhen, China, senior executives detailed plans to get a lot bigger.

How much bigger wasn’t exactly clear, as the company stopped short of providing company specific targets, but Walmart China president and CEO Ed Chan and CFO Roland Lawrence made it clear Walmart is well positioned to serve China’s rapidly expanding middle class.

While China’s rise to become the world’s second largest economy and the migration of its population to urban centers are well documented trends. However, Lawrence put those developments in context of what it means for a retailer whose bread and butter is serving the mass market. He noted that the year Walmart entered the market there were 42 million household that would have been classified as middle class but by the year 2025 there will be an estimated 295 million households classified as middle class.

The migration to urban areas will result in eight cities in China with populations greater than 10 million people. Lawrence and Chan referred to these cities as tier one markets and noted that of even greater significance is the expectation that China will have more than 200 cities with populations in excess of one million people. These are the markets Walmart expects to target in the years ahead as Lawrence noted the Chinese retail industry is forecast to grow at a double digit pace for the next 30 years.

Speaking of Walmart China’s emphasis on smaller tier two, three and four cities, Lawrence said, “This fortuitously aligns our strategy with that of the Chinese government and the growth patterns that are happening in these cities. This is a key strategic advantage of Walmart to be a first mover in many of these locations.”

Aside from simply opening new stores and growing at the overall pace of the market, Walmart has an opportunity to improve profitability by increasing its private label penetration rate beyond the current 3.5% and improving consumer awareness of its low price value proposition. According the Chan, Walmart conducts price comparisons with 51 other companies and it is the lowest price but consumer research show that no single retailer in China is recognized as being the low-price leader in the market.

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The new East and the old West

BY CSA STAFF

Walmart’s past and future collided this week in a stark juxtaposition of events. While the company’s lawyers were engaged in oral arguments before the U.S. Supreme Court stemming from events in the past, senior executive of the international division were gathered with financial analysts in a hotel ballroom in Shenzhen, China to discuss the future.

The issue before the Supreme Court relates to a bygone era when Walmart’s approach to its U.S. business was dramatically different than it is today and women were paid less and received fewer promotions. The result was allegations of sex discrimination on the part of a handful of female workers, which were vigorously disputed by Walmart. As plaintiffs’ lawyers sought class action status Walmart continued its vigorous defense, and now 10 years later Supreme Court is being asked to determine whether current and former female employees can be certified as a class.

Walmart’s approach to matters of personnel and promotions has come a long way during the past decade, but litigation by its nature is backward-looking, as the parties attempt to resolve differences related to historical events. Conversely, it was all about the future at the analysts’ meeting in Shenzhen where senior executive of the international division, including president and CEO Doug McMillon, detailed growth strategies for an international division that is poised to one day surpass the U.S. division’s sales and profits.

It’s got a ways to go since Walmart U.S. had sales of $260 billion, but international is growing more rapidly and opportunity is more abundant. Walmart International ended the most recent fiscal year with 4,573 units in 15 countries that generated sales of $109 billion and an operating profit of $5.6 billion. According to McMillon, that makes Walmart International a good business, but he wants to make it great.

“What we’ve got to do is continue to drive some growth in really profitable markets like Mexico and Canada where we have terrific returns and continue to drive growth in a country like the U.K. that is our largest revenue country and then simultaneously lift other international markets like Brazil and China to a higher level of profitability without slowing down the growth so the portfolio has a better return,” McMillon said during the meeting. “That is what we are focused on doing.”

The formula for global growth hinges on four components. Growing same store sales at existing store while continuing to open new stores will be key growth drivers as will a heightened emphasis on e-commerce and multichannel capabilities. Then there is the issue of acquisitions in new and existing markets and the ongoing emphasis on what Walmart refers to as majoring in the majors.

“If you want to know where we are interested in going to next as it relates to new markets just do the math on big markets with high growth rates,” McMillon said. “It’s that simple. What we are looking for is the size of the opportunity, the growth rate of the opportunity and our ability to gain share.”

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