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2005-05-08
Bentonville, AR. Wal-Mart Sees 4,000 More Supercenters

Despite the fact that America is already over-built with discount stores -- a fact first admitted to by Wal-Mart's head of real estate back in 1995 -- the CEO of Wal-Mart says his company envisions building another 4,000 supercenters on top of the 1,713 supercenters Wal-Mart had already constructed by the end of fiscal 2005. In his annual message to Shareholders, Lee Scott writes, "In the U.S. alone, we estimate there is room for almost 4,000 more Supercenters." Using the historic average size of a supercenter at 187,000 s.f., that means Wal-Mart will try to force another 748 million square feet of superstores on reluctant communities. The company claims to have added 242 supercenters in 2005, and plans to add 240 to 250 new supercenters during fiscal 2006 -- of which, 160 will be relocations or expansions of existing stores. Sprawl-Busters estimates that in 2006 as many as 33% of the supercenters proposed, or at least 83 stores, will be challenged by citizen's groups, which means that many of the stores posted in 2005 were actually 2004 stores that were delayed, or new locations for stores that were killed at the local level. But if Wal-Mart plans on building at the rate of 250 stores per year, the 4,000 target would mean another 16 years of overproduction.

What you can do: Supercenters being built by Wal-Mart today, which are sometimes 3 to 5 miles from an existing superstore, are not being constructed because of any local consumer need, but because of Wal-Mart's internal need to satisfy stockholders with higher and higher market shares. As Lee Scott told investors, "In some areas, we locate new stores close to existing stores, a fact some have questioned. We take this approach in growing markets for several reasons. First, as the market continues to grow, we are the ones in position to serve customers instead of our competitors. Second, over time total sales from the two stores can almost double the sales of the original store. And third, we can relieve congestion in the first store and create a better shopping experience for our customers." None of these reasons have anything to do with consumer demand. Superstores being built today are what we call "investor stores." They are being built to satisfy investor need for growth in market share, and growth in sales volume. These stores, therefore, are needed to keep the stock price up, not to meet neighborhood shopping needs. Hence, the obvious cannibalization of their own stores, the drop in sales per square foot, and the drop in same stores sales. In the 1980s, same store sales at Wal-Mart were around 15% per year, but today are only 3%. The lackluster performance of Wal-Mart stock may be due in part to the fact that investors are beginning to realize that Wal-Mart's growth today is being done in the investor's name, not really in the customer's name, and this kind of "empty growth" will eventually boomerang back on the company, as more and more stores are fought and delayed, or outright killed.










 
 
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