Walmart Growth Plan Changes

Straight from the Morning News:

Wal-Mart To Cut New Store Growth, Focus On Remodels

By Kimberly Morrison
THE MORNING NEWS

Wal-Mart Stores Inc. said Monday it plans to scale back on U.S. store growth and focus on improving stores and merchandise.

Eduardo Castro-Wright, chief executive of Wal-Mart's U.S. division, told analysts gathered at the retailer's annual investor meeting that the company would build 191 stores this fiscal year, trimming even further in fiscal 2010 with 142 to 157 new stores.

The company first began reducing capital expenditures in the last fiscal year, opening 218 stores in the year ended Feb. 17. The retailer plans to spend as little as $5.8 billion this fiscal year, down from $9.1 billion last year.

"Remodels are taking center stage here," said Castro-Wright.

Wal-Mart also plans to accelerate growth of smaller-format stores and drive efficiencies through inventory, logistics and merchandising.

"There is no doubt in my mind that this is Wal-Mart time," said Lee Scott, Wal-Mart's chief executive. "This is the time that Sam Walton built this company for."

Three years ago, Scott outlined a plan to improve stores, merchandising and management. Scott said the completion of the plan, coupled with a renewed focus on low prices, has afforded the company relative success in the marketplace.

"I wasn't sure what it would be like to see you here today given what you've been through," Scott told the crowd of Wall Street investors gathered for the two-day conference at the John Q. Hammons Center in Rogers. "It is one of the few times we feel better about things than you do."

Wal-Mart continues to see its core lower-income customer facing mounting headwinds. Credit as a form of payment is down 7.4 percent from a year ago and rural customers are coming less frequently and spending about 4 percent more than a year ago.

The retailer is also picking up higher-income customers. Stores categorized as high-income with an average household income of more than $65,000 is up 2 percent, Castro-Wright said.

For cash-strapped shoppers, the retailer is planning aggressive price cuts through the holidays and a marketing campaign designed to address the economic hardships of families.

Steve Bratspies, the retailer's category marketing executive, premiered one of the new holiday spots showing a mother heartened by seeing her children get everything they want on Christmas morning, accompanied by the tagline "Christmas costs less at Wal-Mart."

The campaign will be coupled with in-store "gift destinations" featuring $5 and $10 items.

Beyond the holidays and after the economy improves, the retailer doesn't plan to lose the affluent consumer it is finally attracting to its stores. Jack Sinclair, executive vice president of grocery merchandise, said he plans to make improvements to the fresh offerings in produce and bakery, and gain market share in beauty and pet categories through better presentation and more convenient adjacencies.

Andrea Thomas, Wal-Mart's senior vice president of private grocery brands, said the company will re-launch private grocery label Great Value in the first quarter. Thomas said the company has tested more than 5,500 own-label products against national brands and is reformulating 1,200 of them.

"The new design has a much better brand billboard and more appetizing photography," Thomas said.

Shares of Wal-Mart (NYSE: WMT) closed Monday at $49.07, down $1.73. For the past 52 weeks, the share price has ranged from a $42.50 low to a $63.85 high.

AT A GLANCE

Notables

"I feel so confident, and I hope it doesn't come across as arrogant," Eduardo Castro-Wright, Wal-Mart's chief executive of the U.S. division, about the retailer's performance.

"Increasingly, customers are choosing to dine in at home," said Linda Hefner, executive vice president of the home division. "We expect cookware, cutlery and bakeware are going to be very important categories for us."

Bill Simon, chief operating officer, said Wal-Mart will remodel two-thirds of its base fleet in the next three years.

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