FAYETTEVILLE, Ark. (FNS) -- Wal-Mart Stores, Bentonville, Ark., gave a big vote of confidence to its Neighborhood Market format, stressing that the concept will become a major player for the company.
"We're not huge yet, but we will be," said Tom Schoewe, Wal-Mart chief financial officer, referring to the mass retailer's conventional supermarket format. "We are testing Neighborhood Markets just as we did supercenters to make sure we have everything right."
Schoewe was speaking to shareholders at Wal-Mart's annual meeting, a six-hour event at the Bud Walton Arena on the campus of the University of Arkansas here that began at 6 a.m. with the blare of a rock band and featured scores of cheers and testimonials as the Goodyear blimp flew overhead.
Earlier, Schoewe was quoted in a "shareholder souvenir edition" of the Benton County (Ark.) Daily Record as saying that the current group of 20 Neighborhood Markets is "very, very successful, but we're still in the process of discovering what kind of store works best."
"They're not all alike," he told the newspaper. "The stores in Oklahoma City don't look just like the ones in northwest Arkansas. We are still experimenting with size, flooring, fixtures and lighting."
At the meeting, Wal-Mart said its commitment to the Neighborhood Market concept remains strong, as it continues to tweak the existing format, perfecting the ultimate prototype.
Twelve more Neighborhood Markets will be added by the end of the year, primarily in the Texas market, Wal-Mart said. Currently, seven of the stores sell fuel, a service that has proven to be key in driving traffic, according to the company, and all future Neighborhood Market locations will offer fuel centers, wherever possible.
An industry analyst who attended the meeting, Deborah Weinswig, food and drug analyst, Bear Stearns, New York, said, "We continue to believe that the Neighborhood Market format has the potential to lead to meaningful increases in Wal-Mart's share of the U.S. food market.
"Although no indications were given as to how many Neighborhood Markets will be installed in 2002 and beyond, we see management's intention to expand the food distribution network by four units this year and five units next year, as an indicator that a full Neighborhood Market rollout may occur sooner rather than later.
Wal-Mart is spending $9 billion this fiscal year in a growth campaign for the Neighborhood Markets, supercenters, conventional discount stores and clubs, about 16,000 shareholders were told at the meeting.
"As our competition gets tougher, we must accelerate growth," said Lee Scott, Wal-Mart chief executive officer. "This year's program calls for approximately 40 new Wal-Mart stores, 170 to 180 new supercenters, 40 to 50 Sam's Clubs, and 15 to 20 Neighborhood Markets."
Last year's capital program totaled $8 billion -- and included 41 Wal-Mart stores, 167 supercenters, 13 clubs and 12 of the neighborhood units.
Food continues to be a core growth driver at Wal-Mart, company executives said. Food and consumables as a percent of sales has increased steadily over the past five years, representing 33.4% of sales in 2000, up from 29.8% in 1995.
At the meeting, management reiterated its commitment to increase the square footage devoted to foods at Wal-Mart discount stores, an initiative it began in 1999 by expanding a modest 23 stores. An expanded food selection will be offered at a total of 205 discount stores by the end of this year, 500 by the end of 2003. To support the growth in food, a total of 10 fresh-food distribution centers and 23 nonfresh distribution centers will be added by the end of 2005.
At Sam's Clubs, the format is being re-worked, and a new prototype store opened last week in East Plano, Texas.
"We are committed to adding new stores and clubs -- and to remodeling existing units," Scott said. Noting "unparalleled" future growth for Wal-Mart, Scott and other company officials told the audience that there still is plenty of room for new stores -- especially overseas.
Scott pointed to "unbelievable" improvements in the firm's international division where the company plans to open 100 to 110 new units this year. Projects are scheduled to open in each of the existing nine countries and will include new stores and clubs as well as relocations of a few existing units, he noted.
In Germany, where two new stores will open this year, Scott declared the company's performance is improving. "We are back on track," he said. "We are going to be a success there."
In the United Kingdom, where the first three supercenters are a "giant success," according to Scott, three more such units will open this year.
In answer to a question, a company official said that gas stations will be installed at clubs at the rate of 70 to 80 per year for the next several years. Currently, there are 105 gasoline units in place at Sam's Clubs.
Shareholders were told that the most popular inquiry on Walmart.com is "finding where the nearest store is. We provide a map so that they don't get lost," said Jeanne Jackson, chief executive of the unit.