As per Bloomberg, retail giant Wal-Mart Stores Inc. ( WMT ) has called back its executive Rob Chester to U.S., who was earlier working as the chief compliance officer for Walmart's China operations. Rob Chester will now oversee store-level compliance in the U.S., whereas Paul Gallemore, who is currently serving as chief compliance officer of the company's India operations, will replace Chester in China.
The move came right after Walmart recalled its donkey meat products in China after DNA tests showed traces of fox meat in the same. This further fueled speculations that the recall issue forced the company to move its executive. Walmart however stated that Chester's transfer to the U.S. was just a coincidence and totally unrelated to any specific issues in China. Walmart also stated that Chester's transfer was long overdue.
On Jan 3, Walmart recalled all products from its local vendor DezhouFujude Food Company Ltd., after fox DNA was identified in samples. The company decided to compensate the affected consumers and promised to increase DNA testing in China, going beyond what is legally required in China.
Walmart is trying hard to convince its customers that it is keen on maintaining high food safety standards in China. Last year, Walmart announced its plans to invest 100 million yuan ($16.5 million) over three years to upgrade its food safety measures in China. The company also plans to start a mobile food-inspection program and increase supplier training. However, it has struggled to maintain the set standards, which is denting its reputation. According to Bloomberg, the company had encountered similar issues in China earlier too like mislabeling pork in 2011.
Not only Walmart, Kentucky-based famous restaurateur Yum! Brands Inc. ( YUM ) also faced questions about the quality of chicken supplied to its KFC units in China. Though Yum Brands' KFC division is working to repair its reputation, sales in China continue to decline.
Walmart officials are co-operating with Chinese authorities in their investigation and are leaving no stone unturned to maintain the company's reputation in China.
China is a strategic market for Wal-Mart as the global chain is facing a difficult retail environment in the U.S. following the recent slowdown of the economy. Moreover, amid several legal issues, the grocery giant had to part ways with its Indian joint venture partner, Bharti Enterprises in Oct 2013. Walmart is thus geared to expand its Sam's Club stores in China. Walmart currently has 404 stores in China and has plans to add as many as 110 stores over the next three years in China. Walmart currently holds a Zacks Rank #3 (Hold).