Wal-Mart to put focus on smaller stores

Published: Wednesday, October 16, 2013 at 3:55 p.m.
Last Modified: Wednesday, October 16, 2013 at 3:55 p.m.

Wal-Mart Stores Inc. is embracing a disciplined approach to expansion as it responds to a challenging global economy and increasing consumer demands for more convenience.

The world's largest retailer said that it's closing some stores in China and Brazil to boost productivity in those markets, while it is accelerating the expansion of small stores in the U.S. at a faster pace than that of its supercenters. It aims to tether these small stores to supercenters, which will act as mini warehouse hubs.

The plans, announced Tuesday, come as the discounter aims to cut costs in the face of increasing pressure from expanding competition. That includes online retailers like Amazon.com as well as dollar stores, which have been rapidly adding locations and winning customers with low prices.

Wal-Mart expects to roll out the new distribution strategy in the first of three markets in March, though it declined to say where. It is testing some of the aspects of the plan in areas like Gentry, Ark., where it operates a Wal-Mart Express store, which is less than one-tenth the size of a typical supercenter.

The retailer operates more than 4,000 stores in the U.S., most of them supercenters. But it's seeing its smaller stores like Neighborhood Markets, which currently number about 300, and Wal-Mart Express, which operate 20 locations, as vehicles for growth.

For this fiscal year and next combined, it plans to add about 300 more smaller format stores, particularly its Neighborhood Markets. Globally, Wal-Mart plans to spend $11.8 billion to $12.8 billion in capital expenditures for its fiscal year that ends Jan. 31, 2015. That's down from $12 billion to $13 billion in the current fiscal year and $12.9 billion last year.

Overall, Wal-Mart plans to add 34 million square feet in real estate for the current fiscal year, down from the original forecast issued a year ago of anywhere from 36 million to 40 million square feet.

Wal-Mart is trying to rev up its namesake stores in the U.S., which have seen weakening business because of an uncertain economy.

The company said that it expects net sales for the current fiscal year anywhere between $475 billion to $480 billion, which represents growth of 2 percent to 3 percent from last year's $466.11 billion. But the company expects sales to grow faster next year, at 3 percent to 5 percent as it benefits from improving labor market.

Online sales are expected to reach $13 billion in fiscal 2015 — that would mark a 30 percent increase from its upgraded forecast of $10 billion it expects to do this year. In June the company had raised the online sales forecast from $9 billion.

Wal-Mart is preparing for a challenging holiday season. It's trying to make sure the right inventory is in stock and is being more aggressive about discounting across the store.

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