Published on: October 14, 2010Walmart revealed at an investors meeting yesterday that it plans to jump-start its 2012 growth plans by opening between 30 and 40 small format and medium format stores, many of them in urban markets that to this point it has been unable to penetrate.
The medium-sized stores will be along the lines of the Neighborhood Market format that Walmart has been toying with for years; the smaller urban stores will be modeled on bodega stores that the company has used to great success in Latin America.
According to the Bloomberg story, Bill Simon, the new CEO of Walmart’s US stores division, told the meeting that the company sees a “true need” for units smaller than its supercenters, and that “after years of development we are now prepared to accelerate growth” of smaller stores. Simon said that he foresees hundreds of such stores being built in the long term.
However, coverage of the investors meeting suggests that the true need for small stores may reside at Walmart headquarters, where there are concerns that its stores have not been able to capitalize on the recession to the extent that might have been anticipated. As the Financial Times writes, “The push for new customers comes after five quarters of comparable sales declines at its US stores.”
Bloomberg writes that “adding urban markets may help the retailer add about $80 billion in sales, or about 20 percent of last year’s revenue, according to Neil Currie, an analyst at UBS Securities LLC in Stamford, Connecticut.
The Wall Street Journal characterizes the Walmart moves as “an effort to push back against the dollar chains and other competitors nibbling at its customers.
“The prospect of Wal-Mart stores dotting America's biggest cities would change the urban landscape and the profile of the world's largest retailer, known for its blocky suburban edifices stocked with low-cost goods. The new stores, roughly a quarter to a third the size of a supercenter, largely will sell groceries.”
MarketWatch reports that the company projects that capital spending will stay fairly steady: “Wal-Mart said it now expects capital spending for the fiscal year to range from $13 billion to $14 billion while fiscal 2012 capital spending is projected at $13.5 billion to $14.5 billion.”
Among the cities being targeted by Walmart for expansion are Chicago and New York - both of which have had traditional resistance - often fueled by unions and community activists, but sometimes by competitors - to the world’s biggest retailer and its big box stores. Some of that resistance is crumbling, however, with Chicago agreeing to allow Walmart to build stores and New York Mayor Michael Bloomberg saying he has no problem with Walmart coming to town.
- KC's View:
- There are at least some rumblings out there in the investment community about how Mike Duke’s continued occupation of the CEO office at Walmart might be dependent on this strategy working. I have no idea of things are that serious, but I don’t think that the company can spend a lot of time putting this strategy into place...and there already have been reports about teams of real estate experts fanning out around the country to land competitive locations that could change the face of Walmart.