BENTONVILLE, Ark. — Wal-Mart Stores confirmed widespread industry speculation last week that it will open medium- and smaller-sized stores beginning next year in urban areas and small towns where supercenters are not practical, though it did not provide a lot of details.
Medium-sized stores will fall in the range of 30,000 to 60,000 square feet — similar to the company's Neighborhood Market units — while smaller stores will range below 30,000 square feet, Bill Simon, president and chief executive officer of Walmart U.S., told the company's 17th annual investors conference here.
He said the company expects to open between 30 and 40 medium- to smaller-sized stores next year — at a relatively low cost, he noted — as part of a learning process “so we can be ready to roll them out.”
With more smaller stores opening in the U.S., Simon said the company will talk more about growth in the number of doors being opened than overall square footage growth, which will be lower year-over-year with the smaller footprints.
Simon said the medium-sized stores will not necessarily have a standard supermarket assortment. “We plan to build the assortment based on the needs of specific markets, as we've done with Neighborhood Market,” he explained.
“We've gained a lot of experience with Neighborhood Market, and we've become very efficient with stores of that size and made great strides in profitability, with EBITDA comparable to that of competitive boxes of the same size.
“So after years of development, we are now prepared to accelerate the growth of medium-sized stores.”
He was less specific about smaller formats. “Most markets around the globe have been successful with smaller stores, and we have tons of institutional knowledge [from Wal-Mart's international experience] and will continue to learn more.”
Simon said Wal-Mart has no plans to expand its 15,000-square-foot Marketside format — a four-store operation in Phoenix.
“That is different from the stores we will open. Those stores are about what's-for-dinner-tonight, and we were pleased with the products that were developed there, which are now available at our supercenters, where they will be worth hundreds of millions of dollars.
“As a result, we didn't feel we needed to move the Marketside format forward.”
Simon said the Neighborhood Market format became a more attractive expansion vehicle over the last couple of years, partly as a result of improved pharmacy shares and a new merchandising approach.
“In addition, we originally had one market manager typically overseeing eight supercenters and two Neighborhood Markets, which meant most gave their attention to the eight, not the two. Once we made some structural changes, operations at the Neighborhood Markets improved,” Simon said.
Regarding smaller formats, he said the company sees “hundreds, or maybe thousands, of opportunities for smaller stores, including some that will be used to fill-in markets we've already developed.
