Wal-Mart Scales Back SuperCenter Growth
By Brent Felgner -- Gifts & Decorative Accessories, 6/1/2007 10:22:00 AM
Fayetteville, AR — Independent gift retailers might feel like they are getting a bit of a respite this year from the growing competition of retail behemoth, Wal-Mart. At its annual shareholders meeting earlier today, the country's number one retailer said it will curtail SuperCenter growth in the current year by up to 29 percent, following with more modest cuts in subsequent years.
Chief financial officer Tom Schoewe said that Wal-Mart would open between 190 and 200 SuperCenters this year, compared with the 265 to 270 originally planned. In the last several years, the retail giant has increased its offerings of gifts, home accessories and decor products — all at discounted prices — challenging independents for a greater share of market.
The announcement, made during the annual shareholders meeting, was viewed largely as a concession to Wall Street, which has grown increasingly impatient with the company’s slow domestic sales growth coupled with the progress of its new segmentation effort. Following the announcement, Wal-Mart's stock rose about 4 percent, to $49.52, in late morning trading.
Shoewe said that in subsequent years Wal-Mart will open about 170 SuperCenters each year. Because of the savings in capital expense, the company’s board of directors yesterday approved an increase in its share repurchase program to $15 billion from $10 billion. “Unfortunately, our capital spending is growing at a faster rate than sales,” Shoewe explained. “It’s grown at about 19 and a half percent each year. And that’s caused some concern on Wall Street.”
But Schoewe warned the media about reporting it merely as a cutback in Wal-Mart’s plans.
“Before you write the headline that Wal-Mart is pulling back on growth, let me put some perspective on the numbers we just talked about,” he said. “Beginning next year, we’re adding 170 SuperCenters a year. That’s 20 million incremental square feet of SuperCenters each and every year. I think the message you’re hearing here today is that we’ve found a real nice balance between appropriate returns and the growth of our great company.”
Later, CEO Lee Scott reviewed the retailer’s merchandising efforts, particularly the progress it’s made in consumer electronics and efforts to build up its home segment. But while noting new, often better quality merchandise initiatives, he also reinforced Wal-Mart's position on price. "Our customers know today that Wal-Mart is the price leader, and Wal-Mart will stay the price leader. Period," Scott said. "This is not a sprint, it's a marathon."
During the meeting, retailing guru Alan Questrom, credited for the turnaround at JCPenney, was elected to the Wal-Mart board. And chairman Rob Walton took a moment to offer the board and the Walton family’s vote of confidence in Scott’s leadership.
