November 26, 2014
NEW YORK — Wal-Mart Stores Inc. plans to open more small stores as it links them to its supercenters, which will serve as mini-warehouses for their smaller cousins.
The plans, announced at the retailer’s annual analysts’ meeting, come as the world’s largest retailer aims to cut costs and respond to shoppers’ demands for convenience as it faces 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.
Wal-Mart expects to roll out the new distribution strategy in the first of three markets in March, though it declined to say where. It is testing some of the aspects of the plan in areas like Gentry, Ark., where it operates a Wal-Mart Express store, which is less than one-tenth the size of a typical supercenter.
The retailer operates more than 4,000 stores in the U.S., most of them supercenters. But it’s seeing its smaller stores like Neighborhood Markets, which number about 300, and Walmart Express, which operate 20 locations, as vehicles for growth.
By fiscal 2017, Wal-Mart plans to add 400 more Neighborhood Markets. In comparison, it plans to add another 300 supercenters in that timeframe.
That will market the first time that Wal-Mart is expanding smaller stores at a faster pace than its supercenters. Neighborhood Markets, which offer such items as fresh produce, meat, household supplies and beauty products, average about 38,000 square feet, while Wal-Mart supercenters, which carry food and general merchandise like clothing and home furnishings, average about 182,000 square feet.
Overseas, Wal-Mart said that it’s closing some unprofitable stores in China and Brazil, as it seeks to improve business in those markets.
In the short term, Wal-Mart, based in Bentonville, Ark., is trying to rev up its namesake stores in the U.S., which have seen weaking business because of an uncertain economy.
The company said that heading into the holiday shopping season, it’s trying to make sure the right inventory is in stock and is being more aggressive about discounting across the store.
U.S. Wal-Mart stores, which account for 59 percent of the company’s total sales, reported a 0.3 percent decline in revenue at stores open at least a year in the second quarter. That marked the second straight quarter of declines in a key revenue figure after six consecutive quarters of increases. Revenue at stores open at least a year is considered an important measure of a retailer’s performance because it removes the effect of adding stores.
Adding in Sam’s Club and international stores, revenue at stores open at least a year was flat compared with a year ago. It rose 1.7 percent at Sam’s Club.
In an address to investors, Wal-Mart CEO Mike Duke described the economy as “tough and unpredictable.”
He noted that the partial government shutdown has also weighed on shoppers and the company is watching the development closely.
“The government shutdown is on the minds of our customers,” he said.