By  on October 24, 2007

Wal-Mart Stores Inc. said sales growth would slow during the next several years as it reduces U.S. expansion to make long-term investments abroad.

To improve returns, Wal-Mart will build fewer new stores in the U.S., reduce corporate expenses and overhaul merchandising, human resources and financial software systems.

"We have an opportunity to grow profitably and reverse that trend of declining ROI [return on investment]," chief financial officer Tom Schoewe told financial analysts Tuesday at the company's annual investor presentation in a convention center near Wal-Mart's Bentonville, Ark., headquarters.

In merchandising — an area where the retailer has been inconsistent the last several years — Wal-Mart is focused on low prices and major brands across the store.

Apparel remains a problem. In the last three months, apparel comps have been down 7.4 percent compared with Kohl's, which is up 1.3 percent, and J.C. Penney, up 1.9 percent.

"Today everyone is suffering in the apparel business, not just us," said Eduardo Castro-Wright, chief executive officer of Wal-Mart U.S., citing warm weather and cuts in discretionary spending related to tightening of consumer credit.

As a result, Wal-Mart is getting even more conservative in its approach, barely mentioning fashion in its presentation Tuesday. Instead, the apparel team is embracing a mission to be the market's dominant source of low-cost apparel staples.

"We are focusing on our basics and essentials," Castro-Wright said.

Basics priced $10 and under make up more than half of Wal-Mart's apparel sales and will continue their prominence in coming seasons, said Dottie Mattison, senior vice president and general merchandise manager of women's apparel. "Wal-Mart is about price leadership. Helping our customer take care of the family, exerting our scale...to deliver key items for the family, at $10 and less."

After Schoewe delivered the strategic overview, financial analysts pressed him during a question-and-answer session to justify the decision to rein in spending on the U.S., the world's largest consumer market, in order to invest in countries such as Japan, where Wal-Mart has been challenged in efforts to make a profit.

The $345 billion retailer has struggled with a stagnant stock price and decreasing returns on its U.S. business, where stores have been coping with operational gaffes and a core customer under pressure from gas prices and lack of wage growth.

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