US retailing giant Wal-Mart Stores, which owns the Asda supermarket group in the UK, has thrown in the towel in Germany.

It is pulling out after almost a decade with a loss of $1 billion (£540 million) and has agreed to sell its 85 stores to local rival Metro for an undisclosed sum.

Michael Duke, a vice chairman of Wal-Mart, said in a statement: "As we focus our efforts on where we can have the greatest impact on our growth and return on investment strategies, it has become increasingly clear that in Germany’s business environment it would be difficult for us to obtain the scale and results we desire."

The US retail giant has struggled to capture market share ever since entering the crowded German retail market in 1997. It has been hurt by cut-throat competition, tepid consumer spending, and been frustrated by Germany’s tight labour and trade laws.

In May the chain pulled out of South Korea to focus on more promising growth opportunities in China and South and Central America, as it lobbies for permission to build stores in India.

Duesseldorf-based Metro said it would book a one-time gain from the acquisition as the assets are worth more than the purchase price. The stores, which had sales near $2 billion in 2005, will be incorporated into its 550 Real Hypermarket brand.

Wal-Mart, which has more than 6,500 stores in 14 other countries and serves 176 million customers per week expects to incur a pretax loss related to the transaction of approximately $1 billion.

Its German stores generated sales of around €2 billion in 2005. Wal-Mart is estimated to have lost as much as $250 million a year from the operation.

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