Wal-Mart Invests in Makeovers

The U.S. division of Wal-Mart Stores said last week it plans to invest more in remodels this year and next and to remodel all U.S. stores over the next five years while reducing the number of new-store openings. The plan also includes converting existing discount units into supercenters without expanding the box, the company said. In addition, as part of its new three-year plan,

BENTONVILLE, Ark. — The U.S. division of Wal-Mart Stores here said last week it plans to invest more in remodels this year and next — and to remodel all U.S. stores over the next five years — while reducing the number of new-store openings.

The plan also includes converting existing discount units into supercenters without expanding the box, the company said.

In addition, as part of its new three-year plan, called Project Impact, the U.S. division intends to focus on price separation to improve its market share in groceries, by widening the price gap with conventional supermarkets, and to relaunch its Great Value private-brand line with improved value and quality early next year.

Speaking here last week at the company's 15th annual analyst and investor meeting, Tom Schoewe, executive vice president and chief financial officer, said Wal-Mart expects overall capital spending for the fiscal year ending in January 2010 to be in the range of $13 billion to $14.5 billion, compared with an estimated $13 billion for fiscal 2009.

Analysts said the company appears to be aligning itself well for the future.

“We believe that Wal-Mart is gaining mindshare with consumers and should be well-positioned to maintain its strong performance when the environment improves,” said Deborah Weinswig, an analyst with Citigroup Global Markets, New York, in a research report.

Spending in fiscal 2010 will be allocated as follows:

  • For Wal-Mart U.S., between $6.3 billion and $6.8 billion, compared with $5.8 billion to $6.4 billion this year. The company said it will open between 125 and 140 supercenters, 17 Neighborhood Markets and no new discount stores, compared with 166 supercenters, 23 Neighborhood Markets and two discount stores this year.

  • For Sam's Club U.S., between $700 million and $1 billion, compared with $800 million to $1 billion this year. The company said it will open between 15 and 20 new clubs.

  • For international projects, between $4.8 billion and $5.3 billion, compared with $4.5 billion to $4.8 billion this year.

  • For other corporate projects, between $1.2 billion and $1.4 billion, compared with $1 billion to $1.2 billion being spent this year.

Wal-Mart U.S. expects Project Impact initiatives to be installed, along with remodeling activities, at 70% of its stores by fiscal 2012, with the balance scheduled for remodeling in the following two years, Eduardo Castro-Wright, president and chief executive officer of the division, said.

New stores will be smaller, the company said — in the range of 140,000 to 170,000 square feet — compared with 200,000 square feet or more at existing units.

According to Castro-Wright, some remodels will involve conversions to supercenters of existing discount stores of 120,000 to 140,000 square feet, within the existing box — “something we haven't done in the past, though we are testing it now,” he said.

Jack Sinclair, executive vice president, grocery, said Wal-Mart will become more competitive with conventional operators on pricing.

“The price gap is already widening, and we are working on widening the gap further in key markets,” he said.

In an effort to gain grocery share, Wal-Mart intends to reinforce its price image “by displaying grocery products with authority — by featuring bold displays of single products with single price points whose value is very clear to customers,” Sinclair said.

Wal-Mart U.S. also plans to improve its fresh offerings — which the company sees as a growth category, he noted — “by creating more space for produce and bakery; by emphasizing product and price; and by providing better sight lines for greater appeal to all the senses,” he added.