Wal-Mart U.S., which has had five consecutive quarters of negative same-store sales, is making changes to grow the top line and earnings per share.
Wal-Mart will return to its Every Day Low Prices strategy and move away from aggressive price rollbacks where customers grabbed the bargains, but bought little else. The elimination of 300 brands to make room on shelves, partly for private label, is also being addressed after customers complained and took their business elsewhere. About 25 percent of the stockkeeping units that had been removed are being returned. The retailer has also returned to a tried-and-true strategy, Action Alley, a thoroughfare jam-packed with promotional items.
“We’re focusing on the core customer who needs Wal-Mart more than ever and needs the basics,” said Mike Duke, chief executive officer of Wal-Mart Stores Inc., speaking at the 17th annual meeting for the investment community in Bentonville, Ark., which ended late Wednesday. “We expect to see positive sales results in this fourth quarter.”
Wal-Mart in 2011 will roll out 30 to 40 smaller-format stores of between 30,000 square feet and 60,000 square feet. Capital expenditure for 2011 is expected to be in the range of $7.5 billion to $8 billion, on par with this year.
Duke said international will be increasingly important in driving growth at Wal-Mart Stores. “We want to make some strategic acquisitions in large high-growth markets,” said Doug McMillon, president and ceo of international. “We need more scale in Japan and Argentina, and Chile could be bigger. We’re not just thinking about brick-and-mortar stores. We’re thinking about e-commerce and a multiplatform perspective.”
McMillon said Wal-Mart will enter South Africa and sub-Saharan Africa through the locally operated Massmart, which will be acquired via its Asda subsidiary in the U.K.
Wal-Mart is investing in Mexico, its largest foreign market, and Brazil, which will host the 2014 FIFA World Cup and 2016 Olympics.
Wal-Mart Canada has been able to achieve something Wal-Mart U.S. never could. After years of negotiating with Canadian bank regulators, the first Wal-Mart Canada Bank was unveiled with its first product, a Wal-Mart MasterCard. By the end of the year, there will be 124 SuperCenters in Canada, up from 66. High-density stores with smaller formats are being tested.
Capex for Wal-Mart International in 2011 is expected to be $4 billion to $4.5 billion, a 13.3 percent increase from this year.
Sam’s Club has performed better than Wal-Mart U.S. stores, with revenue rising 3.4 percent. Brian Cornell, president and ceo, said the company “needs to pause on new club openings,” and digest its remodeled Project Portfolio stores. Sam’s capex is expected to remain at about $1 billion for 2011, which is unchanged.
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