Wal-Mart Stores Inc is embracing a disciplined approach to expansion as it responds to a challenging global economy and increasing consumer demands for more convenience.
The world’s largest retailer said it is closing some stores in China and Brazil to boost productivity in those markets, while accelerating the expansion of small stores in the US at a faster pace than that of its supercenters. It aims to tether these small stores to supercenters, which will act as mini warehouse hubs for their smaller cousins.
The plans, announced at the retailer’s annual analysts’ meeting on Tuesday, come as the discounter aims to cut costs in the face of increasing pressure from expanding competition. That includes online retailers like Amazon.com, as well as dollar stores, which have been rapidly adding locations and winning customers with low prices and easy access.
The company raised its forecast for online sales by the 2015 fiscal year, but its sales forecast for the current fiscal year came up short.
Wal-Mart expects to roll out the new distribution strategy in the first of three markets in March, although it declined to say where. It is testing some of the aspects of the plan in areas like Gentry, Arkansas, where it operates a Wal-Mart Express store, which is less than a tenth the size of a typical supercenter.
The retailer operates more than 4,000 stores in the US, most of them supercenters. However, it is seeing its smaller stores like Neighborhood Markets, which currently number about 300, and Walmart Express, which operates 20 locations, as vehicles for growth.
For this fiscal year and the next combined, it plans to add about 300 more smaller format stores — particularly its Neighborhood Markets — and add 240 more supercenters in that time period.
Globally, Wal-Mart plans to spend US$11.8 billion to US$12.8 billion in capital expenditures for its fiscal year that ends Jan. 31, 2015. That is down from US$12 billion to US$13 billion in the current fiscal year and US$12.9 billion last year.
Wal-Mart expects total sales of US$475 billion to US$480 billion this year, compared with the average analyst estimate of US$481.78 billion, according to a FactSet survey.
In an address to investors, Wal-Mart CEO Mike Duke described the economy as “tough and unpredictable.”
He said that the partial US government shutdown has also weighed on shoppers and the company is watching developments closely.
“The government shutdown is on the minds of our customers,” he said.