Wal-Mart predicts sales will grow faster next year

Reuters

* Wal-Mart closing some 50 stores in Brazil and China

* Walmart U.S. to open more small stores than large ones

* Walmart U.S. to use supercenters to ship to small stores

* Sees sales growth 3-5 percent next year

* Shares end session down 31 cents at $74.37

By Jessica Wohl

Oct 15 (Reuters) - Wal-Mart Stores Inc expectsslightly stronger sales growth next year as it makes changessuch as opening more smaller U.S. stores and shutting 50 poorlyperforming stores in Brazil and China, executives said onTuesday.

The world's largest retailer sees a "tough" and"unpredictable" economy around the world, Chief ExecutiveOfficer Mike Duke said, a week after the International MonetaryFund trimmed its outlook for global growth.

Wal-Mart expects its overall sales to rise to $475 billionto $480 billion this fiscal year, a gain of about 1.9 percent to3 percent over last year's $466.11 billion. For fiscal 2015,which begins in February, it is targeting 3 percent to 5 percentgrowth, Chief Financial Officer Charles Holley said at thecompany's meeting with investors and analysts in Arkansas. Themeeting was also webcast.

Positive economic signs such as a declining unemploymentrate, along with Wal-Mart's efforts such as better merchandisingplans, new stores and ecommerce plans, makes the companyconfident it can grow sales faster next year, Holley said.

Still, U.S. customers remain under pressures from higherincome taxes, gas and food prices, plus the government shutdown,and they are trying to stick to budgets.

Wal-Mart is not waiting for the holiday season to getaggressive on pricing. Walmart U.S., its largest business byfar, is promoting low prices on everything from Kraft's Velveeta cheese and PepsiCo Inc's Doritos chips toProcter & Gamble Co's Pampers diapers and Bounty papertowels this month, while Sam's Club will have another discountbooklet for members starting on Oct. 30, as both chains try toboost sales early in the fourth quarter.

More than 1 million people have already signed up forholiday layaway, which allows Walmart U.S. shoppers to put itemson hold and pay for them over time. Four of the top five itemson layaway are devices including Google Inc Nexustablets, HP's HP 2000 laptop, the Hisense Sero 7 tabletand Fuhu Inc's nabi 2 Kids' tablets, Holley told reporters.

FURLOUGH IMPACT

Walmart U.S. feels pretty good about its profit but is notsatisfied with its sales, Simon said.

Same-store sales at Walmart U.S. unexpectedly fell 0.3percent in the 13-week period that ended in late July.Same-store sales at the bottom 10 percent of its large U.S.supercenters were down 7.5 percent in that period, he added.

Walmart U.S. said it is testing using its supercenter storesas "cross docks" to supply nearby smaller stores, a move thatcould help it keep goods in stock and cut costs. The system isset to roll out in the first of three unnamed markets in March.

Using the back room of a supercenter as a "little miniwarehouse" for daily deliveries to smaller stores wouldeliminate the need to send 53-foot trucks from distributioncenters to smaller stores, Walmart U.S. CEO Bill Simon said.

"I think it's a fundamental shift in their real estatestrategy" to look at things market-by-market rather thanstore-by-store and is a "sophisticated development," saidStewart Samuel, program director at IGD, who attended Tuesday'smeeting.

Those types of efforts, plus continued investment inecommerce, should pay off over time, Samuel said. Wal-Mart,which is opening more ecommerce fulfillment centers and fillingsome orders from stores, expects $13 billion in ecommerce salesin fiscal 2015, up from $10 billion or more this year.

Thousands of federal workers have been furloughed in theimpasse over the U.S. budget and Walmart U.S. CEO Bill Simonsaid that if people were not getting paid, they were notshopping as much. Sam's Club CEO Rosalind Brewer said that justover 40,000 people came to shop at its warehouse clubs after thechain waived its usual fee for those who could not accessmilitary commissaries closed in the shutdown.

Wal-Mart shares ended the day down 31 cents, or 0.42percent, at $74.37. Through Monday, the shares were up 10percent this year, underperforming the 19.7 percent gain in theS&P 500.

SLOWING INTERNATIONAL GROWTH

Bentonville, Arkansas-based Wal-Mart is still committed totrying to grow operating expenses at a slower rate than sales.Overall, capital spending is set to be $12 billion to $13billion this year and $11.8 billion to $12.8 billion next year.

The company is closing about 50 under-performing stores outof hundreds it has in the major emerging markets of Brazil andChina, said Walmart International Chief Executive Doug McMillon.The company said the stores set to close represent about 2percent to 3 percent of its sales in each of those markets,although it is still opening new stores as well.

For the first time, Walmart U.S. plans to open moresmaller-format stores than supercenters. Walmart U.S. plans toopen 235 to 265 stores in fiscal year 2015, about 120 to 150 ofthem small stores. It is planning for about 245 openings thisyear, slightly above an earlier forecast.

Wal-Mart now plans to open 34 million square feet of newstore space this year, down from its original forecast of 36million to 40 million square feet. For next year, it targeted 33million to 37 million in new store space, with more than half ofthe space being added in Walmart U.S., which will open moresmaller stores than larger ones. The pace of growthinternationally may continue to slow.

Rates

View Comments (2)