Walmart Reveals Growth Plans through 2013
Wal-Mart Stores, Inc. announced that its Walmart U.S. operating segment has delivered three consecutive months of positive same store sales. The company also announced its growth plans for next fiscal year at its annual conference for the investment community.
Comparable store sales growth remains the first growth priority for the company's three operating segments, along with new store growth through disciplined, more productive capital spending. The company also outlined a goal to reduce operating expenses as a percentage of sales significantly during the next five years. The savings will be invested into lower prices for U.S. customers and improved international profitability.
Walmart U.S. President and CEO Bill Simon told the investment community that same store, or comparable store sales, have been positive on the 4-5-4 retail calendar for three consecutive months starting in July. The company will disclose Q3 comp sales on the 4-5-4 calendar in its third quarter earnings release on Tues., Nov. 15.
At the meeting, the company also updated its capital spending forecast for the current fiscal year ending Jan. 31, 2012 to between $13 and $14 billion, which includes acquisition-related expenditures. Walmart expects to hold capital spending for next fiscal year within the same range. The company forecasted sales growth between 5 and 7 percent for fiscal year 2013.
"We continue to prioritize growth, leverage and returns in our commitment to increase shareholder value," said Wal-Mart Stores, Inc. President and CEO Mike Duke. "We will grow comparable store sales across our three operating segments, and we will leverage innovation, systems and processes to improve our overall productivity."
Two years ago, under Duke's leadership, the company re-energized the productivity loop, a process in which an everyday low cost structure enables everyday low prices for its customers.
"When we close this fiscal year, we will have leveraged operating expenses as a percentage of sales for two consecutive years," said Charles Holley, Wal-Mart Stores, Inc. executive vice president and CFO. "We will build on this accomplishment and commit to reduce operating expenses as a percentage of sales more than 100 basis points over the next five years. This will allow Walmart U.S. to invest in price and widen the price gap between our competitors and us. It also will help enable our International segment to improve operating margins in the emerging markets."
"Our business model is built on our promise that Walmart customers can count on us to deliver low prices every day across a broad assortment," Holley explained. "This in turn leads to customer loyalty and higher sales. These growth and leverage initiatives will contribute to our strong earnings growth."
In FY12, Walmart expects to add between 36 and 39 million square feet globally. This includes 1 to 2 million square feet of post acquisition investment related to the company's Massmart acquisition. In FY13, Walmart plans to add between 45 and 49 million square feet. This is inclusive of 4 to 5 million square feet of post acquisition investment, which includes further square footage growth in the Massmart operations, as well as square footage acquired from the recent purchase of the Zellers assets in Canada. The capital for Netto will be entirely devoted to remodels and will not add to any incremental square footage in either FY12 or FY13.
Forecasts for Walmart U.S. and Sam's Club units include expansions, relocations and conversions.
Walmart U.S. Details
For fiscal year 2013, Walmart U.S. will decrease its capital spending by approximately $500 million versus the previous year, to a range of $6 to $6.5 billion. The forecast covers new stores, remodels, logistics and technology infrastructure and is designed to add between 210 and 235 new units that will expand its retail space by approximately 14 to 15 million square feet.
The forecasted increase in Walmart U.S. square footage from FY12 to FY13 is the result of a larger percentage of new supercenters compared to prior years, as well as growth in the number of medium and small format stores.
"Beyond our priority of comp sales growth, supercenters remain the primary growth vehicle for Walmart U.S. and the company will reduce construction costs on the new stores through value-engineering initiatives," said Simon. "We have identified a large number of potential Neighborhood Market opportunities, and we plan to open between 80 and 100 medium to small formats next year."
Walmart U.S. will continue to review the success of its Express format. Currently, five Walmart Express stores are open and plans call to add six more before the end of the fiscal year.
"The rollout of Walmart Express is predicated on the review of our pilot program, and the opportunity to build greater scale in a particular market," Simon said. "We will continue to pursue a balanced approach to market share growth in low, medium and higher share markets. In addition, we continue to reduce the cost and scope of our remodel program to increase efficiency and to minimize customer disruption."
Walmart U.S. will increase the productivity of its capital allocation.
"We also will bring down the cost of building in all of our operations and we will continue to reduce the cost of remodels," said Simon. "For next year, Walmart U.S. will build more square footage with fewer dollars. We plan to decrease U.S. construction costs by 10 percent and will further gain leverage on our remodeling costs."
Walmart International Details
Capital expenditures for the current fiscal year in Walmart International will range from $4 to $4.5 billion before acquisitions in FY12 and will rise to a range of $4.5 to $5 billion before acquisitions for FY13. New stores, without any impact from acquisitions, are expected to account for between 26 and 28 million square feet next year as compared to an additional 24 to 25 million square feet projected for this year.
"We continue to prioritize our investment in the emerging markets of China, Brazil and Mexico," said Doug McMillon, Walmart International president and CEO. "We remain focused on driving growth and improving our overall returns. We will build scale in existing markets and continue to evaluate acquisitions to enter additional large, higher growth markets."
Sam's Club
Sam's Club plans to spend approximately $1 billion in capital in FY13, flat with the current fiscal year. For fiscal year 2013, Sam's Club expects to add between 10 and 15 new, expanded or relocated clubs within the U.S., with approximately half of its capital committed to remodeling.
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Comparable store sales growth remains the first growth priority for the company's three operating segments, along with new store growth through disciplined, more productive capital spending. The company also outlined a goal to reduce operating expenses as a percentage of sales significantly during the next five years. The savings will be invested into lower prices for U.S. customers and improved international profitability.
Walmart U.S. President and CEO Bill Simon told the investment community that same store, or comparable store sales, have been positive on the 4-5-4 retail calendar for three consecutive months starting in July. The company will disclose Q3 comp sales on the 4-5-4 calendar in its third quarter earnings release on Tues., Nov. 15.
At the meeting, the company also updated its capital spending forecast for the current fiscal year ending Jan. 31, 2012 to between $13 and $14 billion, which includes acquisition-related expenditures. Walmart expects to hold capital spending for next fiscal year within the same range. The company forecasted sales growth between 5 and 7 percent for fiscal year 2013.
"We continue to prioritize growth, leverage and returns in our commitment to increase shareholder value," said Wal-Mart Stores, Inc. President and CEO Mike Duke. "We will grow comparable store sales across our three operating segments, and we will leverage innovation, systems and processes to improve our overall productivity."
Two years ago, under Duke's leadership, the company re-energized the productivity loop, a process in which an everyday low cost structure enables everyday low prices for its customers.
"When we close this fiscal year, we will have leveraged operating expenses as a percentage of sales for two consecutive years," said Charles Holley, Wal-Mart Stores, Inc. executive vice president and CFO. "We will build on this accomplishment and commit to reduce operating expenses as a percentage of sales more than 100 basis points over the next five years. This will allow Walmart U.S. to invest in price and widen the price gap between our competitors and us. It also will help enable our International segment to improve operating margins in the emerging markets."
"Our business model is built on our promise that Walmart customers can count on us to deliver low prices every day across a broad assortment," Holley explained. "This in turn leads to customer loyalty and higher sales. These growth and leverage initiatives will contribute to our strong earnings growth."
In FY12, Walmart expects to add between 36 and 39 million square feet globally. This includes 1 to 2 million square feet of post acquisition investment related to the company's Massmart acquisition. In FY13, Walmart plans to add between 45 and 49 million square feet. This is inclusive of 4 to 5 million square feet of post acquisition investment, which includes further square footage growth in the Massmart operations, as well as square footage acquired from the recent purchase of the Zellers assets in Canada. The capital for Netto will be entirely devoted to remodels and will not add to any incremental square footage in either FY12 or FY13.
Forecasts for Walmart U.S. and Sam's Club units include expansions, relocations and conversions.
Walmart U.S. Details
For fiscal year 2013, Walmart U.S. will decrease its capital spending by approximately $500 million versus the previous year, to a range of $6 to $6.5 billion. The forecast covers new stores, remodels, logistics and technology infrastructure and is designed to add between 210 and 235 new units that will expand its retail space by approximately 14 to 15 million square feet.
The forecasted increase in Walmart U.S. square footage from FY12 to FY13 is the result of a larger percentage of new supercenters compared to prior years, as well as growth in the number of medium and small format stores.
"Beyond our priority of comp sales growth, supercenters remain the primary growth vehicle for Walmart U.S. and the company will reduce construction costs on the new stores through value-engineering initiatives," said Simon. "We have identified a large number of potential Neighborhood Market opportunities, and we plan to open between 80 and 100 medium to small formats next year."
Walmart U.S. will continue to review the success of its Express format. Currently, five Walmart Express stores are open and plans call to add six more before the end of the fiscal year.
"The rollout of Walmart Express is predicated on the review of our pilot program, and the opportunity to build greater scale in a particular market," Simon said. "We will continue to pursue a balanced approach to market share growth in low, medium and higher share markets. In addition, we continue to reduce the cost and scope of our remodel program to increase efficiency and to minimize customer disruption."
Walmart U.S. will increase the productivity of its capital allocation.
"We also will bring down the cost of building in all of our operations and we will continue to reduce the cost of remodels," said Simon. "For next year, Walmart U.S. will build more square footage with fewer dollars. We plan to decrease U.S. construction costs by 10 percent and will further gain leverage on our remodeling costs."
Walmart International Details
Capital expenditures for the current fiscal year in Walmart International will range from $4 to $4.5 billion before acquisitions in FY12 and will rise to a range of $4.5 to $5 billion before acquisitions for FY13. New stores, without any impact from acquisitions, are expected to account for between 26 and 28 million square feet next year as compared to an additional 24 to 25 million square feet projected for this year.
"We continue to prioritize our investment in the emerging markets of China, Brazil and Mexico," said Doug McMillon, Walmart International president and CEO. "We remain focused on driving growth and improving our overall returns. We will build scale in existing markets and continue to evaluate acquisitions to enter additional large, higher growth markets."
Sam's Club
Sam's Club plans to spend approximately $1 billion in capital in FY13, flat with the current fiscal year. For fiscal year 2013, Sam's Club expects to add between 10 and 15 new, expanded or relocated clubs within the U.S., with approximately half of its capital committed to remodeling.
Related Stories:
Walmart to Close Marketside Stores
Retail Loyalty Wars: Tesco Grows, Wal-Mart Falls Short