FAYETTEVILLE, Ark. — Wal-Mart Stores Inc. got Wall Street's attention by touting less as more.
The world's largest retailer once reveled in opening stores as fast as it could. But the company has scaled down plans to open new U.S. Supercenters this year as it intensifies the focus on boosting profits from about 3,500 existing U.S. units and trims capital spending that has grown an average of 19 percent for the last decade, outstripping the average 14 percent sales gains for the time period.
Investors liked what they heard at the annual shareholders meeting on Friday, pushing up the stock $1.87, or 3.9 percent, to close at $49.47.
The decision to slow growth, extending a strategy announced last year, is a blunt acknowledgement that the $345 billion retailer is maturing and is entering a new phase in its 45-year history. Wal-Mart stumbled with lagging apparel sales, a stagnant stock price, a slim 1.79 percent gain last year in operating income from the flagship U.S. division and other problems as it tried to move upscale and mold a more stylish image to compete with Target and other rivals.
Board chairman Rob Walton told shareholders that president and chief executive officer H. Lee Scott has the "absolute confidence'' of the board and of the Walton family.
"It hasn't been an easy year this year, but, believe me, things weren't always easy for Mother [Helen Walton] and Dad [founder Sam Walton]. But those bumps shouldn't take away our focus on improving life for customers around the world and shouldn't distract us," he said.
Wal-Mart also is repurchasing as much as $15 billion in stock in another effort to boost earnings per share, which have been disappointing as the stock price dropped more than 25 percent since Scott took over in 2000. The buyback will be partly financed with money from reduced capital expenditures.
Wal-Mart is cutting back to 190 to 200 new Supercenters from the planned 265 to 270, chief financial officer Tom Schoewe said. The company will open an average of 170 a year going forward. Capital spending is projected to drop to $15.5 billion this year from the previous estimate of $17 billion."We need to see Wal-Mart's U.S. returns improve, and we took an important step today," Schoewe said.
Scott reiterated that the mantra of everyday low prices remains the company's core strategy.
"Our customer knows Wal-Mart is the price leader and Wal-Mart will stay the price leader. Period," Scott said during a presentation at the 18,000-seat Bud Walton Arena on the campus of the University of Arkansas here.
Scott pledged to do better in the face of same-store sales in the U.S. division that twice in the last 12 months fell below Wall Street expectations. The agenda includes: improved store standards, clarity in the home department merchandise, more depth of assortment in apparel and scheduling of cashiers to coincide with times of heavy customer traffic. Stores that have had the new scheduling procedure have reported comp-sales gains that are "twice as strong" as stores without the scheduling system, he said. Long lines at checkout have been a major customer complaint.
Chief merchant John Fleming acknowledged that apparel lacked depth in key items, needed better editing of what is presented and required investment in deeper assortments of items that have universal appeal.
Wal-Mart's opponents, including unions and groups, such as Wake Up Wal-Mart, that are critical of the company, are not succeeding, Scott said, adding that "our reputation is improving in the U.S."
The company, responding to allegations by fired marketing officer Julie Roehm, said Scott had not violated Wal-Mart ethics policies. "Lee undernegotiates, overpays and leaves money on the table," said executive vice president Thomas Hyde. "He knows he lives in a fishbowl."
Scott, answering a question on the role of new board member Allen Questrom, the former ceo of J.C. Penney Co. Inc. and Barneys New York, said Questrom "is going to be an adviser, not just in the U.S., but around the world." He said senior managers need advice and are ready to accept it.
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