It was a handful of words for what seemed like unimaginable news: "We never managed a turnaround," said a Wal-Mart spokeswoman today, trying to explain the end of her company's German venture. The world's largest retail corporation, growing worldwide as fast as the likes of McDonald's and Coca-Cola, has given up on Germany after an unrewarding eight-year slog. It will sell all 85 franchise stores to its German competitor, Metro Group, which will replace the American stores with hypermarkets run by a Metro subsidiary called Real.

It's a step that Wal-Mart's German chief David Wild still said was unthinkable as late as June this year. "Germany is the third-biggest market for retail goods in the world, after the United States and Japan," he told German newspaper Die Welt am Sonntag. "As a global concern we can't ignore the German market." Wal-Mart, he said, was simply considering closing a few unprofitable stores.

Friday's announcement that Walmart is abandoning its German operation registers as a painful defeat for the retail giant. Elsewhere its formula for selling discount goods has long been an international success story. The American firm operates 2700 stores in 14 countries outside the United States. In the first quarter of 2006 alone, the company's profits rose 6.3%, to a record level of $2.61 billion, and international turnover amounted to $79.61 billion -- 12.3% up on the previous year. Walmart's total group turnover in 2005 was a staggering $312 billion.

In Germany, though, Wal-Mart lost money. The company announced it would incur a pre-tax loss of $1 billion on the German operation. Nationwide losses for 2005 are thought to have run into hundreds of millions of euros. The reason, experts suggest, was an incomplete market strategy. In 1997 Wal-Mart bought 21 stores from the Wertkauf discount chain, then added 74 shops purchased a year later from Interspar. But the rapid expansion was more of a bargain hunt by Wal-Mart than a coherent, fully-developed concept. "Wal-Mart bought whatever stores were for sale and then just hung its name over the door," says Ulrich Eggert, a trend researcher for entrepreneurial consultancy, BBE. "So there was always more Wertkauf or Interspar waiting for customers in those stores than Wal-Mart -- which means two very different retail concepts. Wertkauf stores … were nicely outfitted, large, with fairly good service; Interspar had small, sort of grungy shops."

"85 stores, that's too small"

Wal-Mart never really found a foothold in Germany, a source close to proceedings told SPIEGEL ONLINE. The American-style workers who smiled at people entering the stores or tried to pack items into shopping bags for them at the register -- something Germans are used to doing for themselves -- were not fully embraced by German consumers.

But above all it was Wal-Mart's hectic shopping spree in Germany that doomed it to failure. All other attempts to acquire new stores were unsuccessful, which can be fatal in the discount-store industry. "Eighty-five stores, that's way too small," said one source. "And yet Wal-Mart in Germany has one head office and three distribution centers -- which is the infrastructure of an overgrown retail company."

Last, but not least, the industry is agreed that the success-spoiled Americans stumbled on their own arrogance. Wal-Mart simply underestimated its competition. "They came here and thought they would just roll up the market, just because they're the cheapest," says trend researcher Eggert. But the discount retail sector has a far larger market share in Germany than in other countries -- about 40 percent of the supermarket business -- which means the prices for groceries and other daily goods tend to be about 15 percent below average (Eggert estimates). And, supermarket giant Aldi has long had a reputation for being the cheapest discounter in Germany.