Wal-Mart adding smaller stores

Retailer makes moves to retake market share

By Mae Anderson
Associated Press / October 14, 2010

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NEW YORK — Wal-Mart, known for its giant stores and global omnipresence, is shifting gears to think small: focusing on small and medium-size stores that it plans to open in small towns and urban markets as it seeks to jump-start sluggish US sales.

The world’s largest retailer is also bringing back “Action Alley’’ — wide aisles filled with palettes of discounted merchandise — and offering same-day pickup for online purchases in some areas.

Wal-Mart Stores Inc., despite $405 billion in annual sales, is struggling to hold on to market share as stubbornly high unemployment and tight credit continue to squeeze most Americans.

Company executives also outlined plans to expand internationally and draw more customers to Sam’s Club warehouse stores at an investor meeting in Rogers, Ark., yesterday.

CEO Mike Duke predicted a rise in fourth-quarter revenue in its US stores open at least one year. That figure has fallen for five straight quarters.

To refocus on those middle- and lower-income consumers — households with annual incomes less than $70,000, who make up 68 percent of Wal-Mart shoppers — US CEO Bill Simon said yesterday the chain will more aggressively display discounts on some items featured in its main aisles rather than discounting as much throughout the store.

It also is restocking some items it dropped and resuming displaying canned vegetables by type rather than brand. And it is focusing on classic clothing styles, offering more plus sizes and more basics like socks and underwear. “In this environment we should be thriving and we’re gearing up to do that,’’ Simon said.

Wal-Mart is also shifting money it had been spending on remodeling existing stores toward opening smaller new stores. It plans to open 185 to 205 new stores in the next fiscal year, compared with 153 stores in the current year, but with the same increase in square footage, 11 million, and similar capital expenditure, $7.5 billion to $8 billion. In total Wal-Mart Stores expects to spend $13 billion to $14 billion in capital expenditures in the current fiscal year, $1 billion less than previously forecast. It expects to spend $13.5 billion to $14.5 billion in the next fiscal year.

In the current fiscal year, Wal-Mart expects overall revenue to grow 4 percent to 6 percent while square footage growth increases 3 percent to 4 percent.

The average size of its largest-format store has shrunk to 180,000 square feet from 195,000 square feet. Simon said the company is accelerating opening medium-format stores, which are 30,000 to 60,000 square feet.

And Wal-Mart will test 30 to 40 even smaller stores over the next two fiscal years, mostly in urban areas. About half of those will probably be in its “Neighborhood Market’’ format that emphasizes fresh produce, food and dairy products. Wal-Mart currently operates 2,843 large-format stores in the United States and 181 smaller neighborhood stores.