Skip navigation

WAL-MART TO ACCELERATE SUPERCENTER EXPANSION

SPRINGDALE, Ark. -- Wal-Mart Stores plans to accelerate the pace of supercenter openings next year, scheduling 200 to 210 additional locations, "with similar growth planned for the next five years," according to Tom Coughlin, president and chief executive officer of the company's Wal-Mart Stores division and Sam's Club USA.Analysts polled by SN agreed that the growth of the supercenters was a threat

SPRINGDALE, Ark. -- Wal-Mart Stores plans to accelerate the pace of supercenter openings next year, scheduling 200 to 210 additional locations, "with similar growth planned for the next five years," according to Tom Coughlin, president and chief executive officer of the company's Wal-Mart Stores division and Sam's Club USA.

Analysts polled by SN agreed that the growth of the supercenters was a threat to traditional operators and that Wal-Mart's relatively slow rollout plans for its smaller Neighborhood Market food-and-drug combo format was good news for supermarket companies.

Wal-Mart supercenters will number 1,258 by the end of the year, compared with 1,569 discount stores. "Supercenters will be our main growth vehicle as we go forward," Coughlin said, "and by the end of this year, supercenters will account for the largest percentage of sales in the division."

Wal-Mart also plans a slightly accelerated growth rate for its Neighborhood Market format next year, with 20-25 units scheduled to open during 2003, compared with 19 scheduled openings this year. The company said it expects to have 50 Neighborhood Markets in operation by the end of its fiscal year in January.

While it speeds up supercenter growth, Wal-Mart plans to slow the growth rate of Sam's Clubs while it returns to its roots by putting more emphasis on serving the clubs' small business customers, Kevin Turner, president and CEO of Sam's Club, said. "The box is not broken -- we're just shifting our focus."

During the transition period, Sam's will not focus on opening a lot of new clubs, Turner said, with plans for 40 to 45 new clubs next year, compared with 50 to 55 this year. "Our focus will not be on becoming the dominant club but on being profitable at a lower volume rate," he said.

Coughlin and Turner were among the speakers at Wal-Mart's ninth annual analysts' conference, which was held here a few miles from its headquarters in Bentonville, Ark.

Jonathan Ziegler, San Francisco-based managing director for Deutsche Banc Alex. Brown, New York, who attended the event, told SN he was relieved that Wal-Mart "does not plan to use Neighborhood Markets as an offensive weapon for the near term, though I am concerned about the acceleration in the growth of the supercenter format.

"When you put the two [formats] together, I'm concerned about the deflationary impact on more traditional food retailer from Wal-Mart's type of price-aggressive, market-share-taking operations. Obviously Neighborhood Markets don't have the same return on capital that supercenters do, but I thought Wal-Mart might expand using both pistols."

Meredith Adler, managing director for Lehman Brothers, New York, who also attended the conference, said it was good news that Wal-Mart is not greatly accelerating the growth of Neighborhood Markets "because those stores are a direct competitive threat to traditional supermarkets, and while supercenters are also a threat, there are more points of differentiation between supercenters and supermarkets."

Adler estimated there could be 2,000 more supercenters operating before opportunities for the stores slow down.

Adler also said Wal-Mart is thinking about moving from dedicated distribution centers to facilities that combine food and general merchandise but segregate fast- and slow-moving categories, "but that will be an evolutionary process," she said.

Neil Currie, executive director for UBS Warburg, New York, who said he monitored the conference over the Internet, said the continued growth of supercenters "will keep pressure on the industry because, while the percentage growth for Wal-Mart is about the same, it represents a lot more food capacity coming into the marketplace."

During his presentation Coughlin said most of the supercenters scheduled for next year -- encompassing approximately 140 relocations or expansions of discount stores and the balance in ground-up stores -- will open during the first three quarters of the year, he pointed out.

Taking the number of store conversions into account, the number of supercenters is expected to overtake the discount-store count during 2003, Coughlin pointed out.

He said Wal-Mart is on schedule to open 192 supercenters this year, including 59 more scheduled to open in the next four months. The company also plans to add six food distribution centers to the 25 facilities it currently operates, with new facilities planned for Alabama, Arizona, Nebraska, Ohio, Texas and Virginia.

Lee Scott, president and CEO of Wal-Mart Stores, said the company plans to spend $11 billion on capital expenditures next year, compared with $10 billion this year. In addition to the supercenters, Neighborhood Markets and Sam's Clubs, he said the company expects 45 to 55 discount stores and 120 to 130 stores in the international division.

During his presentation on Sam's Clubs, Turner said the decision to put more emphasis on serving small business customers returns the clubs to their original philosophy. "We're in business first to serve small businesses with their wholesale needs; second, to serve their personal needs by offering treasure-hunt merchandise; and third, to make sure our Advantage [individual] members benefit from the first two.

TAGS: Walmart