After Wal-Mart’s succesful move into China, it was to be expected that other large US retailers would see the wisdom of turning to China for growth. After two years of negotiating, Home Depot is buying Chinese home improvement chain HomeWay, taking a majority stake for $100 million.
Retail sales are expected to hit $890 billion by 2009.
To expand its presence in China, Wal-Mart recently bought Trust Mart which has 100 stores in 20 Chinese provinces. Wal-Mart’s sales in China are already $2.6 billion a year.
And, Home Depot has ample reason to follow Wal-Mart’s lead. The home improvement operation’s stock trades at about $38, down from down from $51 five years ago.
Labor unions and a powerful central government will always make doing retail business in China risky. But, Home Depot does not have much choice.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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