American big-box retailer Walmart, Inc. (WMT) and its membership-only chain Sam’s Club are the latest company to face China’s anger. According to a Wall Street Journal report, China has warned the retailer of severe consequences against its decision to remove products that were produced in the country’s Xinjiang province. Shares of Walmart rose 1.1% to close at $144.69 on December 31.
Missing Xinjiang Products
On Friday, China’s anti-corruption agency Central Commission for Discipline Inspection (CCDI) issued a strong statement against Walmart. The CCI warned the retailer of losing out on its big market if it continued to be stupid and short-sighted. Walmart had a total of 434 stores and Sam’s Club outlets in China as of January 2021.
Earlier in December, Chinese consumers said they were unable to find products produced in Xinjiang on Walmart and Sam’s Club websites. Last week, several consumers shared pics of their conversations with the retailer’s online support agents, who said the products were “out of stock”. This was followed by strong reactions from both the consumers and the Chinese authorities, with threats to boycott Walmart and Sam’s Club stores from the Chinese market.
Earlier, the U.S. government had accused that certain Muslim minorities in the Xinjiang region are facing forced labor and genocide at the hands of the Chinese authorities. Although China has disregarded both accusations, on December 23, U.S. President Joe Biden signed a law banning all imports from the region.
Walmart is the latest American company to face China’s wrath after global chip maker Intel Inc. (INTC) was forced to apologize to the Chinese people after it sent a letter to its suppliers, asking them to stop sourcing from Xinjiang.
In March last year, European clothing brand H&M Hennes & Mauritz AB Class B faced similar criticism and saw its revenue drop from the Chinese market, after it gave out a public statement that it would stop buying from Xinjiang.
The CCDI showed its discontent with harsh and critical statements, and said “China is Walmart’s second-largest overseas market if they want to stand firmly in the Chinese market, they need to show enough sincerity and attitude, respect the facts, distinguish right from wrong, respect China’s principles and the feelings of Chinese citizens… If not, Chinese citizens and consumers will use their actions to respond resolutely.”
The CCDI also called Walmart’s responses a “self-deceiving excuse” and said that companies like H&M, Intel, and Walmart were “using their own actions to hit their face”.
Wall Street Take
Some of the Top Analysts from Wall Street research firms have awarded the Walmart stock a Strong Buy consensus rating. This is based on 14 Buys and 3 Holds. The average Walmart price target of $172.53 implies 19.2% upside potential to current levels. Shares have gained 3.4% over the past six months.
TipRanks data shows that financial blogger opinions are 89% Bullish on WMT, compared to a sector average of 72%. Walmart earnings report for the fourth quarter of fiscal year 2021 is scheduled for February 17, 2022.