Wal-Mart looks to int'l, supercenters for growth

BENTONVILLE, AR — With "no short or mid-term limit" on its growth, Wal-Mart feels that it can sustain its annual square footage growth rate of 8 percent, with its supercenters playing a large role.

"We're investing back into the company at an extraordinarily rapid rate," said Lee Scott, ceo, at the annual analyst meeting, and it has plenty of room to grow worldwide, where Wal-Mart holds only a 3 percent market share of the "formal economy."

Additionally, Scott felt the economy will improve this holiday season — though not significantly.

Next year the company will add 50 million square feet — which was the size of the whole company back in 1985 — said Tom Schoewe, executive vp and cfo, with capital expenditures upward of $12 billion, most of which is geared toward new stores and distribution centers.

"We'll be a growth company for a long time," said Scott.

In the short term, Scott thinks this holiday season will be better than last year's — but not great. "We'll see modest improvement in this fall in holiday sales." And he had no sense of things turning dramatically better or worse. Regardless, "we can run our program in that kind of environment."

The biggest damper on economy is the price of fuel, he said, since many Americans live paycheck to paycheck and 20 percent to 25 percent of Wal-Mart's customers don't use a bank. But once better times arrive, "we'll be ready for it," he said.

With 220 to 230 units scheduled to open next year, its supercenter format plays a crucial part in its growth strategy, and last year it pulled ahead of the discount store format in terms of sales.

The "bang for our investment buck leans heavily toward the supercenter," Schoewe added.

Many supercenters open at $100 million a year, Scott said. But the retailer would rather have two supercenters operating at $80 million or $90 million a year each in an area than a single store bringing in $120 million or $140 million. And Wal-Mart is finding that it can place supercenters as close as three or four miles apart.

And though it is satisfied with its Neighborhood Market format, there is a higher return from a supercenter, said Scott. It is currently building its first California supercenters, an important state for the company, he said.

However, it's not backing away from its other formats. Discount stores find opportunity in the urban areas, such as in the Los Angeles area in Baldwin Hills, as well as "redevelopment projects," such as its unit in Massapequa, NY. It has also found that combination units — like the Sam's Club and Supercenter unit in Glendale, AZ — also thrive.

For next year, it plans to open 50 to 55 discount store units, 35 to 40 Sam's Clubs, 25 to 30 Neighborhood Markets, and three new regional DCs.