Walmart Announces Capital Strategy to Drive Global Growth; Next Year's Capital Spending to Increase Slower Than Sales

In the fiscal year ending Jan. 31, 2011, the company expects to add approximately 32.5 million square feet globally, compared to approximately 34 million square feet added in the prior year. Walmart expects to increase global square footage between 34.5 and 35.5 million square feet in fiscal year 2012.

Oct 14 2010 --- Wal-Mart Stores, Inc. has presented its global plans for growth of its operating segments for the current and next fiscal year at its annual conference for the investment community.

The company lowered the high end of its range for the current fiscal year 2011 forecast for capital spending by $1 billion. Total capital spending for the current fiscal year ending Jan. 31, 2011 now is projected to range from $13 to $14 billion, down from the previous range of $13 to $15 billion. Last fiscal year, the company spent $12.2 billion on capital projects. Total capital spending for next fiscal year, ending Jan. 31, 2012, is projected to range from $13.5 to $14.5 billion, an increase of approximately 3.7 percent based on the midpoint of the two ranges.

"Our financial priorities of growth, leverage and returns drive our decisions on capital investment," said Charles Holley, executive vice president, finance and treasurer. "We are positioning our company for the next generation Walmart, which means that we will grow internationally and in the United States. We believe our capital strategy strikes the right balance between growth and return on investment.

"We expect to grow total company square footage between three and four percent next fiscal year, which means that square footage and capital spending will grow at approximately the same rate. Overall sales growth is forecasted between four and six percent," Holley said. "In the United States, we will shift more capital toward new stores, including supercenters and smaller formats. We are lowering remodeling costs through greater efficiencies, so the total capital commitment for Walmart U.S. next year will be flat with the current fiscal year.

"Because of Walmart International's concentration on growth in emerging markets, capital expenditures for the segment will increase slightly more than 13 percent next year compared to the current fiscal year," Holley added. "Capital for the other operating segments, and corporate overhead, are projected to be flat next year compared to this year."

Walmart U.S. and Sam's Club include operations in the 50 states and Puerto Rico. Projected capital expenditures are as follows and exclude the impact of future acquisitions.

In the fiscal year ending Jan. 31, 2011, the company expects to add approximately 32.5 million square feet globally, compared to approximately 34 million square feet added in the prior year. Walmart expects to increase global square footage between 34.5 and 35.5 million square feet in fiscal year 2012.

Capital expenditures for Walmart U.S. next year will be flat when compared to the current year, as will square footage growth. But stores and sales are projected to grow, according to Bill Simon, Walmart U.S. president and CEO.

"Over the next few years, we will introduce new formats to help us enter new markets. Walmart U.S. will move toward a three-format portfolio, which will drive expansion to urban markets and small towns, as well as fill in gaps in existing markets," Simon explained. "The large format is our supercenter, which sells a broad assortment of groceries and general merchandise. We have integrated efficiencies into our supercenter design that have allowed us to decrease the average square footage for our supercenter format. The medium format, between 30,000 and 60,000 square feet, will be based on the needs of an individual market. The small format, which is less than 30,000 square feet, will be targeted to urban markets and small towns.

"We also are allocating capital to continue converting discount stores to supercenters, which add no square footage, but are expected to increase sales," Simon said. "Of the 155 to 165 supercenters we will add next year, 45 to 50 will be new units, with the remainder conversions. Neighborhood Markets will make up the bulk of the medium format stores, and there will be some pilots of the small store format included in next year's plan."

By the end of the current fiscal year, more than 550 U.S. stores will have been remodeled. Walmart U.S. plans to remodel more than 500 stores next fiscal year.

"Remodeling costs will be lower next year, due to changes in design and schedules. The time to remodel a store will decrease by 40 percent, and with fewer disruptions, traffic and sales will improve sooner," Simon added.

"We are very excited about the additional growth opportunities that we have in the United States," said Simon. "We will have growth in geography, growth in formats and growth in multi-channels."

Walmart International continues to aggressively invest in organic growth with multiple formats from supercenters to small grocery stores and cash and carry units. New stores are expected to add 21 million square feet of space this fiscal year and between 23 and 24 million square feet next year.

"Our capital investment for next year will drive new store growth with particular emphasis in the emerging markets of China, Brazil and Mexico," said Doug McMillon, Walmart International president and CEO. "Through a combination of comparable store sales, new store square footage and continued earnings performance, we will continue to shape our international portfolio to drive both growth and improving returns. We will also continue to evaluate acquisitions to enter priority markets and to build scale in existing markets."

Sam's Club's plan for capital spending next fiscal year is similar to the current year. Sam's will continue to spend approximately $1 billion per year in capital, with the majority committed to remodeling. Sam's plans to add between 7 and 12 new, expanded, or relocated clubs next year in the United States. Remodels are expected to be completed on 60 to 70 clubs next year.

"We are on schedule to complete remodeling at 65 clubs this year. Member feedback on our remodeled clubs has been very positive, and we plan to remodel our clubs at approximately the same rate next year," said Brian Cornell, president and CEO, Sam's Club. "Our commitment to improving the member experience continues to lead to positive comparable sales growth in our business."