From the Associated Press:
Wal-Mart Stores Inc. will slow the pace of new store openings next year in what analysts called a nod to Wall Street calls for greater focus on rekindling faltering sales and earnings growth at its existing 6,700 stores worldwide.Wal-Mart also told analysts Monday, the first day of its two-day investor meeting, that it would reduce the rise in capital spending next year, helped by a flattening in inflation of construction and land costs and by opening fewer new stores.
Wal-Mart said it remains committed to expansion. But analysts said the change was a step toward meeting Wall Street expectations that Wal-Mart, after years of rapid growth, now focus on improving sales and profitability at existing stores to revive a dormant share price.
The share price has hovered mostly below $50 since early 2001, and for five years failed to match 2001 highs over $60.
"It's somewhat of a shift. Is it a major earthquake shift? No. But it's the start of a shift where they could indeed move to capitalize on what has already been built," said retail analyst Don Gher from Coldstream Capital Management, which manages about $1 billion in assets, including Wal-Mart shares.Fund manager Patricia Edwards said even a small move was a welcome step in the right direction.
"They need to focus on building the business they have instead of starting new ones," said Edwards, a portfolio manager and retail analyst at Wentworth Hauser & Violich, which manages $8.2 billion in assets and holds 51,000 Wal-Mart shares.
Bentonville, Ark.-based Wal-Mart has been expanding its retail space at 8 percent per year, but that number will be 7.5 percent next fiscal year, the company said. Its fiscal year runs through Jan. 31.
Wal-Mart expects to open 305 to 330 U.S. stores in fiscal 2008, which starts Feb. 1, compared to 332 to 340 this year. Wal-Mart International, operating in 13 countries in Latin America, Asia and Europe, will open between 320 and 330 new stores next year after 270 to 275 this year.
Wal-Mart remains committed to growth, but real estate projects "are now being subjected to a more rigorous prioritization process," Wal-Mart Vice Chairman John Menzer told analysts.
Wal-Mart sales at stores open at least a year, known as same-store sales, have been trailing those at smaller rivals such as Target Corp. Last month, same-store U.S. sales were up 1.3 percent at Wal-Mart and 6.7 percent at Target.
In response, Wal-Mart is remodeling about 1,800 of its roughly 2,000 Supercenters, which combine a discount store with a full grocery section, to make them more appealing by adding amenities such as wider aisles, faux wood floors, cleaner restrooms and trendier merchandise in electronics, apparel and home furnishings.
September sales were affected in part by disruption from those remodeling efforts, said Eduardo Castro-Wright, head of the Wal-Mart's U.S. stores.
Castro-Wright told analysts that same-store sales so far this month were running about 1 percent higher, saying remodeling and slower sales of women's apparel kept the number down.
Castro-Wright said the temporary disruptions were worthwhile because remodeled stores showed higher sales than before. The company plans to have 1,200 stores remodeled before the holiday shopping season starts next month and the other 600 next year.
Castro-Wright also noted he's confident that declining gasoline prices soon will lift sales, noting that consumers don't immediately react to a change in gasoline prices. He noted that Wal-Mart's customers didn't curtail their spending immediately following big jumps in gasoline prices.
Posted by Laura - October 24, 2006 10:09 AM - In The News