Wal-Mart spurs small-store growth
NEW YORK -- Wal-Mart is accelerating the expansion of small stores, particularly its Neighborhood Market stores, as it looks to compete with a variety of rivals from dollar stores to drug chains.
"This gives us the opportunity to build more stores for less money," Bill Simon, president of Wal-Mart’s U.S. division told Wall Street analysts at a meeting near its headquarters in Bentonville, Ark.
Simon said it plans to have 500 Neighborhood Market stores and 12 Express stores by fiscal 2016.
As of the end of July, Wal-Mart had 10 Express stores and had ramped up its Neighborhood Market concept to 217 locations.
Investors cheered the news, sending Wal-Mart’s stock up $1.28 to $75.42 Wednesday.
The focus on small stores is part of Wal-Mart’s overall strategy to continue increasing sales while becoming more efficient with its capital expenditures across the globe. Its U.S. namesake business is roaring back, thanks to re-emphasizing rock-bottom low prices, and officials says they want to apply that same discipline to how it approaches its store expansion.
In its international business, which accounts for about a quarter of its business, Wal-Mart reiterated that it will be slowing expansion growth in China and Brazil as it works hard to make those stores more productive. And while it won’t miss an important opportunity to make an acquisition overseas, it’s primarily focusing on existing markets.
"We have a lot of invested capital, and we need to generate returns there," said Wal-Mart International President and CEO Doug McMillon.
Wal-Mart expects total company sales to increase anywhere from 5 to 7 percent for fiscal 2014.
Overall, Wal-Mart plans to add from 36 million to 39 million square feet globally this fiscal year and from 36 million to 40 million next year. It will cut capital spending by 4.2 percent next year to a range of $12 billion to $13 billion. That’s down from an estimated $12.6 billion to $13.5 billion for the current fiscal year.
In the U.S., the company plans to add 125 supercenters next year, unchanged from the current year. But Wal-Mart aims to add from 95 to 115 small format stores, up from a projected 80 for fiscal 2013.
Simon noted that Wal-Mart’s small stores, which range from 10,000 square feet to about 55,000 square feet, compete well with a broad variety of merchants.
Neighborhood Market store have generated a 5 percent increase in revenue at stores open at least a year for the first half of this year. That’s more than double the growth rate of the Wal-Mart’s average store.
Express stores are less than one-tenth the size of Wal-Mart supercenters and offer groceries, general merchandise like tools, and pharmacies. Neighborhood Markets are more than twice the size of Express stores and offer perishable food, household supplies and beauty aids as well as a pharmacy.