Wal-Mart scales back US store growth

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Wal-Mart Stores Inc. plans to dramatically scale back expansion of its U.S. supercenters, while investing more in e-commerce in an effort to pursue customers where they are shopping.

The discounter told investors at its annual analysts meeting Wednesday that it plans to open 60 to 70 supersized stores during its next fiscal year, down from the planned 120 this year. It’s also conducting a major review of its U.S. Wal-Mart business and will update investors on its plans early next year, executives said.

The company is aiming to revive business at Wal-Mart discount stores, which have not recorded growth in sales at locations open at least a year for six straight quarters. The business, which accounts for 60 percent of the company’s total sales, have been plagued with broader issues, including a slowly recovering economy that hasn’t benefited its low-income shoppers.

Wal-Mart also is wrestling with changes in shoppers’ behavior. Customers are increasingly heading online to research and buy, at the same time they’re wanting to shop at small stores for convenience. But Wal-Mart has also been tripped up by its own mistakes like being out of stock on items shoppers want.

“There’s no excuse for us not to be doing better,” Doug McMillon, the company’s new CEO and president who took over the reins from Mike Duke in February. Under his stewardship, he’s been accelerating the company’s push to redefine its role in a fast-changing retailing environment.

In the short term, perking up sales at its U.S. Wal-Mart business means keeping items that shoppers want in stock and speeding up checkout lines. This holiday shopping season, Wal-Mart says it will open more cash registers than ever. It also needs to get better with its prices.

In the long term, the company is dissecting every part of its business as it continues to test and learn what works. One big change: Wal-Mart has ended its program of tethering its small stores with its supercenters. The purpose was to use the big stores as distribution hubs to supply goods for the smaller locations. But Wal-Mart said the model wasn’t sustainable.

“I really believe our future is bright,” McMillon said. “There are so many ideas percolating around.”

Greg Foran, the former Wal-Mart Asia chief who recently became head of the U.S. Wal-Mart division, told investors that when he first started his new job he asked managers to send him three ideas for how it could improve business. He received 3,000 emails and noted that he’s been taking action. One area is improving the freshness of its produce.

But the big change is how Wal-Mart is taking a hard look at its fleet of more than 4,000 stores in the U.S.

Foran told investors that supercenters, which average about 180,000 square feet and carry general merchandise, food and pharmacy items, are still important. But Wal-Mart needs to think about how they should look.

As for its smaller stores, the company also plans to add 180 to 200 Neighborhood Markets next year, from 170 stores scheduled for this year. It’s reducing growth of its smaller Wal-Mart Express stores. It plans to open 20 stores next year, down from the expected 70 this year. Wal-Mart Express stores are about 12,000 square feet, while the Neighborhood Markets average about 40,000 square feet.

It’s also rebranding Wal-Mart Express stores to Neighborhood Markets while reducing its offerings in seldom-purchased items such as shower curtains and stocking more items that shoppers want every day such as diapers.

The company plans to add 9 to 12 Sam’s Clubs in its next fiscal year, down from the planned 20 new clubs for this fiscal year.


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