Wal-Mart focuses on smaller stores

Posted by Josette Dunn on 15th October 2010

* Wal-Mart to open 30-40 “small” and “medium” format stores
* Top end of capex spending forecast lowered
* Spending on international operations to rise

Wal-Mart has revealed plans to open smaller stores in the US, targeting urban markets and small towns.The move is part of the retailer’s strategy to move to a “three-format portfolio” in the US, with small stores of less than 30,000 square feet which will “drive expansion to urban markets and small towns, as well as fill in gaps in existing markets”, said Wal-Mart US president and CEO Bill Simon.

Wal-Mart plans to open 30-40 small and medium format stores in its 2012 financial year, with its food-orientated Neigborhood Markets making up the bulk of the medium-format stores, while the company will pilot some small stores.

“The large format is our supercenter, which sells a broad assortment of groceries and general merchandise. We have integrated efficiencies into our supercenter design that have allowed us to decrease the average square footage for our supercenter format. The medium format, between 30,000 and 60,000 square feet, will be based on the needs of an individual market,” said Simon.

Additionally, the company said it has lowered the high end of its capital spending range for the 2011 fiscal year by US$1bn. Total capital pending is now projected to range from $13-14 bn, down from the previous range of $13-15bn.

The company said that for the 2012 fiscal year it is planning to invest $13.5-14.5bn in capital expenditure, growing total company square footage by 3-4%.

The company is set to focus its capital expenditure budget on developing emerging markets, said Charles Holley, executive vice president, finance and treasurer. “Because of Wal-Mart International’s concentration on growth in emerging markets, capital expenditures for the segment will increase slightly more than 13 percent next year compared to the current fiscal year. Capital for the other operating segments, and corporate overhead, are projected to be flat next year compared to this year.”

Internationally, growth will be focused on China, Brazil and Mexico, but it has not ruled out other market entries. “We will also continue to evaluate acquisitions to enter priority markets and to build scale in existing markets,” said Wal-Mart International president and CEO Doug McMillon.

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