Wal-Mart Scales Back SuperCenter Growth
By Brent Felgner, Playthings -- TWICE, 6/1/2007 12:52:00 PM
Fayetteville, Ark.—The country's No. 1 retailer is cutting back some of its growth for the remainder of the year. At its annual shareholders meeting earlier today, Wal-Mart 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 the mammoth retailer would open between 190 and 200 SuperCenters this year, compared with the 265 to 270 originally planned.
The announcement 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 performance to date 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 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,” he 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 talk to you and put some perspective on the numbers we just talked about,” he said. “After this year, 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 your 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 home. But while noting new, often better quality merchandise initiatives, he also reinforced its 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.
Playthings is a sister publication to TWICE.
