Inside This Issue - News
Walmart to push smaller stores
October 22nd, 2012
ROGERS, Ark. – Walmart is ramping up its small-store rollout, with plans to add 95 to 115 Neighborhood Market units next year. That would be up from a projected 80 additions in the current year.
“This gives us the opportunity to build more stores for less money,” Bill Simon, president of the company’s U.S. division, said at Walmart’s annual analysts meeting.
He said the discounter plans to have 500 Walmart Neighborhood Markets by fiscal 2016, generating some $10 billion in annual sales, or $20 million per store. At the end of July, it had 217 of the outlets as well as a dozen smaller Walmart Express stores. Additional Express units will depend on results of a density test, but the format’s sales in the first half of this year were above plan.
Same-store sales at Neighborhood Markets, which are about one-fourth the size of Walmart Supercenters, rose 5% in the first half, more than double the growth rate of the average Walmart store.
Chief financial officer Charles Holley said the return on investment at the Neighborhood Markets — which offer perishable food, household supplies and beauty products as well as a pharmacy — has approached that of Walmart Supercenters. The company plans to add 125 Supercenters in the United States next year, the same number as this year.
“We think our business has a lot of momentum,” Holley told reporters. “We are going to do more with less.”
Executives say the discounter had a strong back-to-school season and is gaining market share globally. They also are optimistic about holiday sales, citing hefty orders for key items such as tablet computers. A launch of holiday layaway sales a month earlier than last year has helped raise expectations. The chain already has $400 million worth of merchandise on layaway, half of last year’s total, with the season barely begun.
The company forecasts that total sales will rise by 5% to 7% in fiscal 2014, which starts in February.
The chain plans to add about the same square footage next year as it did in the current fiscal year but at a lower cost. The goal is to add 36 million to 40 million square feet of space overall for fiscal 2014,. But capital spending will drop around 4.2%, to $12 billion to $13 billion.
Walmart also for the first time has issued an e-commerce projection, announcing a forecast of $9 billion in online sales by fiscal 2014.
Domestically, the company has turned around its performance by changing its mix and maintaining low prices storewide, thanks to reduced costs. The upshot has been gains in same-store sales since late last year.
Executives said they will continue to cut expenses so they can lower prices. Price cuts worth $6 billion are expected over the next several years in the U.S. business.
“Walmart is strong, and we are getting stronger,” said president and chief executive officer Mike Duke. “We have momentum in our business that’s producing top-line and bottom-line results. We’re delivering on the productivity loop and being even more disciplined about operating expenses and capital spending. We’re making investments that are creating a better business. I believe that the combination of momentum, investment and discipline will continue to deliver growth, leverage and returns for our shareholders.”
He said the Walmart U.S. business is “in a very good place” and making progress on a number of fronts that are driving strong comp sales. He added that he was impressed by both the plan and the energy he’s seeing throughout the organization “to give America the absolute best possible Christmas.”
Duke also sees momentum in the “leadership Walmart is providing on issues like sustainability, economic empowerment of women, nutrition and hunger, and agriculture.”
Saying that he was personally committed to discipline in how Walmart spends money, Duke praised the company’s 11 quarters of leveraging expenses and credited the productivity loop with “savings, lower prices and more sales across our business.”
“Now you’re going to see us bring the same increased discipline to our capital expenditures that we have been bringing to operating expenses,” he added.