Saturday, June 02, 2007

Wal-Mart scales back ‘Supercenter’ stores

Wal-Mart scales back ‘Supercenter’ stores
By Jonathan Birchall in Fayetteville
Copyright The Financial Times Limited 2007
Published: June 1 2007 18:56 | Last updated: June 1 2007 18:56


Wal-Mart, the largest US retailer, said on Friday it was cutting around one third of the new “Supercenter” stores it planned to open this year, in response to growing investor concerns over diminishing returns on its store expansion programme.

Tom Schoewe, chief financial officer, announced at Wal-Mart’s annual meeting that the company had cut the number of “Supercenters” — stores with more than 200,000 square feet — that it hoped to open in its current fiscal year to 190-200, down from its previous target of 265-270. In the future, Wal-Mart will aim to open just 170 “Supercenters” annually.

The move marks a significant strategic shift in the history of Wal-Mart, which has pursued aggressive growth in the US since it emerged on the national scene in the 1980s.

However, the increasing saturation of Wal-Mart’s presence in some areas has led to new stores taking away sales from existing stores, leading to reduced returns on investment even as sales continued to grow, reaching more than $340bn globally last year.

The company has also faced persistent local campaigns against new store openings, led by the UFCW grocery workers’ union which objects to the retail giant’s anti-union stance.

Lee Scott, chief executive, said on Friday “the attacks from our opponents are not working and they are not going to work”.

Wal-Mart is also to increase its share buy-backs by an additional $5bn to $15bn.

Rob Walton, chairman of Wal-Mart and the son of its founder Sam Walton, on Friday reaffirmed the family’s confidence in Mr Scott, who has been blamed for sluggish sales growth and a lagging share price.

Mr Walton told 20,000 Wal-Mart employees and shareholders that “the board and our Walton family have absolute confidence in your leadership”, saying that “few people are as passionate about our company and our mission”.

The Walton family controls almost 40 per cent of the retailer’s shares.

The meeting, which combines formal shareholders’ business with entertainment and pep talks from top executives, is a unique part of Wal-Mart’s corporate culture. This year’s event included an appearance by Jennifer Lopez, as well as tributes to acts of bravery by store employees and the election to its board of Allen Questrom, a veteran US retail executive.

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