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2009-10-27
Bentonville, AR. Wal-Mart Cuts U.S. Store Growth in Half

This week, Wal-Mart unveiled its 'global plans' for growth next year (2011), and buried in the middle of their presentation was the fact that domestically the company will cut its projected square footage growth in half. This is great news for citizens groups opposed to the wasteful expansion of superstores into areas already saturated with big box stores. In a press release dated October 22nd, Wal-Mart described its growth plans for the year that will end on January 31, 2011. The release was part of the company's annual conference with Wall Street investment companies. Wal-Mart's capital spending will rise from $11.5 billion in 2009, and $13.1 billion in 2010, to as much as $15 billion in 2011. "Our plan for growth is clearly intended to increase shareholder value," said Tom Schoewe, Wal-Mart's chief financial officer. "In the U.S., we're building new stores and accelerating the pace of our remodels because they have been so successful at winning and retaining customers." Wal-Mart is referring to an initiative they called "Project Impact," which renovates stores to create wider aisles, new signage, less products on the shelves. Last June, at Wal-Mart's Annual Shareholder's meeting, Shoewe told the crowd, "I'm so proud of the health of your balance sheet." But the growth Wal-Mart talks about is really aimed at its International Division, especially in countries like China and Brazil. In America, growth plans look very different. Wal-Mart says its capital expenditures in the United States will rise from an estimated $6.8 billion in 2010, to $8 billion in 2011. But that U.S. investment represents only 53% of the company's projected capital expenditures for 2011. "We're stepping up growth in our International operations," Shoewe said this week. But the good news for citizens fighting Wal-Mart comes in the company's projection of new store growth. In total, Wal-Mart expects to add another 37 million square feet to its footprint in 2011. That's a drop of -- 14% from the figure of 44 million square feet added in 2010. More interesting is where this 37 million square feet will be built. In America, Wal-Mart's new square footage will drop from 23 million square feet in 2009, to 14 million square feet in 2010, and 11 million square feet in 2011. That means new square footage in 2011 will be only 48% of the square footage growth in 2009. In 2010, Wal-Mart's new store production in America was dramatically cut in half, and in 2011, the projection is only slightly higher than in 2010. This will make the second year in a row that Wal-Mart significantly slows down its new store growth in America. By contrast, the big growth opportunities are in foreign countries, where Wal-Mart square footage grows from 19 million square feet in 2009, to 23 million square feet in 2010, and a projected 25 million square feet in 2011. That's a 31% growth rate in International square footage growth over 2009 levels. In 2011, Wal-Mart hopes to add 127% more space in foreign markets than in the U.S. Overall, Wal-Mart square footage from all divisions will continue to fall below 2009 levels, reflecting the cooling off of the retailer's new store growth.

What you can do: Wal-Mart explains its American strategy this way: "In the U.S., Wal-Mart will continue to focus on further improving the returns of its supercenter format through remodels of existing stores and by accelerating growth of new store designs capable of generating greater returns from current assets. By November 2009, Wal-Mart U.S. will have completed Project Impact remodels at more than 30% of its 3,538 stores. By the end of fiscal year 2012, approximately 70% of Wal-Mart U.S. stores, including newly-constructed stores, are expected to be updated under the Project Impact initiative." In short, Wal-Mart is trying to make its existing stores more profitable, and shifting more of its investments overseas to what it calls "emerging markets." America has become a "saturated market," and lack of good sites combined with increasing opposition from local residents, has turned Wal-Mart's growth plans towards a different direction. Wal-Mart understands that as many as 40% or more of its new store proposals in America will face stiff opposition at the local level. In 2011, if Wal-Mart tries to add 11 million square feet, that would translate into roughly 60 to 70 new supercenters -- a dramatic slowdown in new store locations. Readers are urged to go to Wal-Mart's comment form at http://walmartstores.com/contactus/feedback.aspx and send the following message: "We are so excited that you have cut in half your new store growth in America. We really don't need Wal-to-Wal superstores, and some of our communities have become so saturated with Wal-Marts that you are just cannibalizing your own same stores sales growth. We would encourage you to keep pushing the new store figure down to zero. You say you are a 'leader in sustainability.' How about announcing a 'no new store' commitment for 2012, and make do with the existing stores you have in America. Instead of continuing to abandon hundreds of stores, reuse them, remodel them, and stop building your huge, unsustainable superstores every few miles. What you are doing now is clearly not sustainable or environmentally efficient."










 
 
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