October 10, 2012 / 2:32 PM / 8 years ago

Wal-Mart says new stores, ecommerce to boost sales

(Reuters) - Wal-Mart Stores Inc (WMT.N) expects sales to grow throughout this year and next, as the world’s largest retailer keeps enticing shoppers, especially those on limited budgets, with smaller new stores, ecommerce and lower prices.

A Walmart store, that was destroyed by a tornado and later rebuilt, is seen in Joplin, Missouri May 17, 2012. May 22 marks the one year anniversary of a deadly EF-5 tornado that ripped through the town, killing 161 people. REUTERS/Eric Thayer

Wal-Mart also said on Wednesday that it plans to add roughly the same amount of store space in fiscal 2014 as it has planned for fiscal 2013, and will still open more supercenters than smaller stores in the United States, its largest market.

The retailer also touted strong sales at U.S. grocery stores and a big start to holiday layaway sales, Its shares close 1.7 percent higher at $75.42 after jumping to an all-time high of $76.81 during the annual meeting with analysts and investors.

Shares came off session highs after Chief Financial Officer Charles Holley forecast 5 percent to 7 percent sales growth for fiscal 2014. That matched but did not exceed the growth forecast for the current fiscal year 2013 ending in January.

In the year since the last investor meeting, Wal-Mart’s U.S. arm, by far its largest business, has rebounded from a prolonged slump. At the same time, its international operations have come under scrutiny following a New York Times article in April about alleged bribery at its Mexican unit.

Walmart plans to more than double the number of its Neighborhood Market grocery stores in the United States by fiscal 2016, putting more pressure on grocers such as Kroger Co (KR.N), Safeway Inc SWY.N and Supervalu Inc SVU.N.

Smaller than supercenters and focused on groceries, the stores have become more profitable as Walmart has added more. Sales at existing Neighborhood Market stores have grown in excess of 5 percent, or double the overall Walmart U.S. rate, as shoppers find them more convenient.

“They kind of have the keys to the castle now,” Susquehanna Financial Group analyst Bob Summers, who has a “buy” rating on Wal-Mart, said of the Neighborhood Market format.

Walmart should have more than 240 Neighborhood Market stores by the end of fiscal 2013 and more than 500 by fiscal 2016, ultimately adding more than $10 billion in sales, U.S. Chief Executive Bill Simon said.

While Wal-Mart is not planning for a deep decline in GDP or consumer spending, if the economy were to get worse, Wal-Mart believes it is in a good position as it continues to lower costs, improve productivity and cut prices.

“Even if we go into a more difficult economy, all that does is position us even stronger,” CEO Mike Duke said.

Shares of Wal-Mart are up 20.1 percent since just before the New York Times story was published, compared with a 2.4 percent increase in the Dow Jones industrial average .DJI, of which they are a component.


Walmart U.S. is preparing for a strong holiday season, ordering twice as many Apple Inc (AAPL.O) iPads and other tablet computers as last year. It started offering layaway in mid-September, a month earlier than in 2011. Layaway allows shoppers to put certain items on hold and pay for them over time.

Walmart has lined up $400 million in U.S. layaway sales in less than a month, half of the amount shoppers put on hold for all of the 2011 holiday season.

“They could conceivably do 50 percent more layaway this year than they did last year,” which has the potential to add half a percentage point to same-store sales growth, said Summers.

Walmart U.S. has posted four consecutive quarters of same-store sales growth after nine straight quarterly declines, though the pace of growth slowed to 2.2 percent in the second quarter from 2.6 percent in the first quarter. The pace of quarterly same-store sales growth still trails competitors such as Target Corp (TGT.N) and Dollar General Corp (DG.N).

Plans for Walmart U.S. this holiday season include offering sale prices on certain toys on Tuesdays based on weekend feedback from social media. At the Sam’s Club warehouse chain, holiday season plans include selling Children’s Place (PLCE.O) merchandise and the company is testing higher-priced membership fees in Texas along with cash rewards.

Ecommerce is growing with efforts such as letting shoppers buy online and pay in stores with cash, yet is still a small part of the giant company. Wal-Mart’s ecommerce sales should total $9 billion next year, excluding acquisitions, while Wal-Mart rang up nearly $444 billion in total sales in fiscal 2012.

Walmart International plans to add 21 million to 23 million square feet of store space in fiscal 2013, down from an original target of 30 million to 33 million. It plans to add another 20 million to 22 million square feet of store space in fiscal 2014.

Walmart U.S. plans to add roughly 205 stores this year, and about 220 to 240 in fiscal 2014. Sam’s Club plans to open 9 stores this year and 10 to 15 next year.

Overall, Wal-Mart plans to add 36 million to 40 million retail square feet in fiscal 2014 on top of 36 million to 39 million square feet this year. As it cuts costs, capital expenditures should total $12 billion to $13 billion in fiscal 2014, down from $12.6 billion to $13.5 billion this year.

The company plans to give its fiscal 2014 profit forecast in February when it reports first-quarter results.

Editing by Gerald E. McCormick, Matthew Lewis, Tim Dobbyn, Phil Berlowitz and David Gregorio

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