General Merchandise/HBC

Wal-Mart Sees 'Next Generation of Retail' in Small Formats (Slideshow)

Doubles growth forecast for Neighborhood Market, Walmart Express

BENTONVILLE, Ark. -- Saying that its "small-store expansion … including fresh, pharmacy and fuel, will help us usher in the next generation of retail," Wal-Mart Stores Inc. announced that it is significantly accelerating its capital plan for U.S. small-store format openings for the current fiscal year.

Walmart Express Small Format

The company said that the initiative is part of a strategy focused on providing the broadest selection of products and convenient access through a digitally connected, multi-format portfolio. It is expanding its original capital forecast provided last October, and now said that it expects to add approximately 270 to 300 small stores during the fiscal year, doubling the initial forecast of 120 to 150 stores.

It said that it will continue its plan to open approximately 115 new supercenters this year.

"Customers' needs and expectations are changing. They want to shop when they want and how they want, and we are transforming our business to meet their expectations," said Bill Simon, Walmart U.S. president and CEO. "Customers appreciate the broad assortment of our supercenters for their stock-up trips as well as our small store formats for fill-in trips. By unlocking this growth opportunity and further combining our supercenters and small store formats with an unlimited selection available through ecommerce, we provide our customers with anytime, anywhere access to our brand."

The small-store "fleet" has continued to deliver positive comp sales and traffic increases each quarter, the company said. Comp sales for Neighborhood Market stores grew approximately 4% for fiscal year 2014, driven by fresh and pharmacy. The Neighborhood Markets are approximately 38,000 square feet in size (traditional Walmart discount stores were 106,000 square feet; Supercenters are 182,000 square feet).

"Neighborhood Market is performing comparable or favorable to leading grocers," said Simon. "Our small-store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail. This will combine thousands of points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash."

Walmart currently operates 346 Neighborhood Markets and 20 Walmart Express stores. The Walmart Express units have performed well, and the company is expanding them beyond the initial three-market pilot. Wlmart Express stores are approximately 15,000 square feet in size.

The company also is testing 2,500-square-foot, college-based convenience store-type retail outlets called Walmart on Campus, and recently announced that it is testing a more traditional c-store.

As a result of its more aggressive plan, Walmart U.S. projects to end fiscal year 2015 with net retail square footage growth of approximately 21 to 23 million square feet across all formats, versus its original projection of approximately 19 to 21 million square feet. The projected capital expenditures and square footage details exclude the impact of future acquisitions.

"We have a healthy pipeline of stores in development, and we systematically work to improve our real-estate and construction processes, reduce building costs and shorten the time needed to open our stores," said Simon. "In addition to providing best-in-class one-stop shopping at supercenters, we believe that accelerating our small-store expansion will allow customers to choose where and when to shop based on their needs. Our small-store expansion will also strengthen our market share and create greater efficiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience."

To fund this additional growth, the company is revising its capital expenditures forecast for the Walmart U.S. segment to $6.4 to $6.9 billion, up from an initial range of $5.8 to $6.3 billion. This reflects the increased small-store growth and the current pipeline of supercenters, which remain an essential part of the company's strategy. In total, across supercenter and small store formats, Walmart U.S. plans to open 385 to 415 units in fiscal 2015, adding considerably to the more than 4,200 stores currently open.

Bentonville, Ark.-based Wal-Mart Stores has 10,942 stores under 71 banners in 27 countries and ecommerce websites in 10 countries, with fiscal-year 2014 sales of more than $473 billion.

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