BENTONVILLE, Ark. -- The onslaught of Wal-Mart Supercenters will accelerate this month, with a record number set to open before the year-end holidays.
Industry observers told SN the spate of openings -- in 18 states -- will have the negative effect of adding more square footage. But, they added, it may be beneficial to the industry in the long run by making stronger players sharper competitors and accelerating the attenuation of secondary supermarket operators.
Also, the company said last week it will unveil its newest format here Wednesday -- a 40,000-square-foot food-and-drug store with a drive-through pharmacy called Wal-Mart Neighborhood Market -- that observers said could supplement the company's supercenter rollout by providing towns and larger metropolitan areas.
Wal-Mart here said it will open a total of 32 supercenters this month -- a record number for 1998. Of the 32 openings, eight will be unveiled next week and 24 more will debut Oct. 28 -- a record number of openings for a single day, the company pointed out.
These openings will bring the total number of supercenters to 542 from 510 currently. A total of 95 supercenters have already opened this year.
The October openings will continue to expand the format in Texas, Florida and Missouri, the three states with the highest number of supercenters. Wal-Mart will add a 29th state to its supercenter base when two stores open this month in New Hampshire.
According to Wal-Mart, the two new supercenters in New Hampshire will consist of a unit in Claremont covering 164,200 square feet and another in Somersworth covering 193,600 square feet. Both are to open Oct. 28.
Also included this month are four more stores in Texas, where Wal-Mart already operates 78 supercenters, the largest number in any single state, and six more in Florida, where there are already 38 supercenters, the second-largest statewide number.
The company said once the 32 new locations open this month, it will not open any additional supercenters until after the December holidays, with at least 21 more units due in 11 states in January, including three each in West Virginia, Kentucky and South Carolina and two each in North Carolina, Pennsylvania, Virginia and Missouri -- the state with the third-largest number of supercenters, 36.
By the end of its fiscal year Jan. 31, Wal-Mart said, it expects to have opened 120 to 125 supercenters this year, compared with 97 in 1997.
Wal-Mart also said it plans to open a 620,000-square-foot distribution center in Los Lunas, N.M., early next year, with shipments scheduled to begin in February. Wal-Mart operates six supercenters in New Mexico, with four more due to open this month. The company said the Los Lunas center will supply supercenters in New Mexico, Texas, Nebraska and Colorado before adding customers of Sam's Clubs in Utah and Nevada later in the year.
Jonathan Ziegler, a San Francisco-based securities analyst with Salomon Smith Barney, New York, said the New Mexico facility should enable Wal-Mart to move further West with supercenters.
"With each distribution center having a service radius of about 300 miles, the New Mexico facility paves the way for moves as far west as Arizona, just as the distribution center that opened last year in Olney, Ill., allowed Wal-Mart to expand further into the Midwest and the one that opened in August in Bedford, Pa., will allow for greater growth in the Northeast," Ziegler said.
The company has said it intends to open 100 to 150 supercenters a year for at least the next three years. Asked if Wal-Mart was close to running out of stores to convert or expand, a spokesman said it was not.
According to Ziegler, Wal-Mart's ongoing supercenter expansion is a mixed blessing. "It's certainly square footage the market doesn't need and can't digest, and that would seem like a negative for the industry," he said.
"But offsetting that is the idea that new competition strengthens existing competition. I call it the Toys R Us syndrome -- without competition, companies wind up getting sloppy and end up in trouble.
"So to the degree that Wal-Mart is keeping the supermarket industry sharp, its supercenter expansion is probably good news."
Gary Giblen, managing director for FAC Equities, New York, said, "Wal-Mart's supercenters have improved their perishables operations, but I still think a good supermarket operator will experience no worse a competitive impact from a supercenter opening than it would from any good supermarket opening," Giblen told SN.
"There's a clear consensus among supermarket chief executives that the impact of a Wal-Mart supercenter across the street is no worse than if it was a new Kroger or Winn-Dixie or Albertson's. It's just another store.
"Everyone suffers from competitive openings. But while the stronger operators may lose some initial sales, the weaker players will fall out and things will end up pretty much the same."
Ed Comeau, an analyst with Donaldson Lufkin & Jenrette, New York, said it's difficult to gauge the effect of Wal-Mart's 510 supercenters "because the stores are so dispersed in a number of secondary metro markets and smaller towns.
"Whereas a supermarket operator will target a specific market for entry and then build two or three or four stores there a year, Wal-Mart opens one supercenter in each town or smaller market to gradually surround a major marketplace and heats up competition here and there without having a major impact on a wider area," Comeau said.