WAL-MART SEES PROFITS IN '95 FOR WOOLCO, PACE ACQUISITIONS
Byline: Thomas J. Ryan
SAN FRANCISCO--Wal-Mart Stores Inc. expects its two big recent acquisitions--99 Pace units from Kmart Corp. and 122 Woolco stores from Woolworth--to turn a profit next year. Speaking at Montgomery Securities investment conference, Donald G. Soderquist, Wal-Mart's vice chairman and chief operating officer, said the chain plans to slow its rapid expansion of Sam's Club in 1995 in order to focus on profitability. The company plans to add nine or 10 new Sam's Clubs next year, and relocate another four to six stores in 1995. It will add 21 units this year, bringing it up to 438. Soderquist expects the 1995 profit at Pace stores, all of which have been converted to Sam's, will help the overall operation return to the black. He noted these PACE stores lost $100 million with Kmart. Soderquist attributed Sam's weak sales trends--down 2.8 percent in the seven-month period ending August--to disinflation, heightened competition and some overbuilding. Nonetheless, he still sees a bright future for the warehouse concept. "There are questions about the industry, but as long as you can provide a product at a 7 to 8 percent margin across the board and keep expenses down, there is a great opportunity to make some money," said Soderquist. Sam's Clubs also plans to focus more on the business customer, catering to areas such as motel, restaurant, heating and air conditioning businesses rather than the retail shopper. "We don't want to eliminate the retail customer, but our primary focus will be the business market," he said. Soderquist also expects the 122 Canadian Woolco stores acquired in March to be profitable next year, noting that the company spent $275 million converting the units. He said Wal-Mart's goal "at the minimum" is to double the sales per square foot in those stores."This may be the best acquisition that Wal-Mart has ever made," he added. Plans call for seven new stores in Canada next year. Turning to the Wal-Mart discount stores, Soderquist said the company will open 100 new units and expand or relocate another 100 in 1995 in the U.S., as reported. He noted that the chain's same-store sales grew 11.6 percent in the seven-month period ending in August. Soderquist said the company is "still extremely pleased" with the expansion of its private label business, though he maintained that the chain intends to stay a "name-brand company." In other expansion plans, as reported, the company also plans to add 100 supercenters, in 1995. These units combine groceries and general merchandise. Next year Wal-Mart is expected open three Sam's and one supercenter in Brazil, and two Sam's and one supercenter in Argentina. By the end of this year, it plans four smaller Sam's Clubs--at 10,000 to 20,000 square feet--in Hong Kong, and will open two Sam's Clubs in China in 1995. The company plans to add about 12 Sam's and 12 supercenters in Mexico, as it expands into smaller markets. --Fairchild News Service
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