Wal-Mart Plans To Grow By Shrinking Store Size

A few weeks ago, Wal-Mart Stores, Inc. presented its growth plans for the fiscal year ending January 31, 2010 at its annual conference for the investment community. The company plans to add about 38 million square feet globally compared to the 44 million square feet it added the prior year. Wal-Mart plans to increase global square footage by about 37 million square feet in fiscal year 2011. Future stores will be eight percent smaller, and cost 16 percent less to build.

In the U.S., Wal-Mart will “continue to focus on further improving the returns of its supercenter format” through remodeling existing stores and accelerating the growth of new stores. This year, Wal-Mart expects to add 15 new Sam’s Club stores, and between five and ten new Sam’s Club stores in fiscal year 2011.

Wal-Mart International plans “aggressive investment… in growth markets such as China and Brazil.” The world’s largest retailer expects to add about 23 million square feet in fiscal year 2010 in its international stores, and about 25 million square feet in fiscal year 2011. Acquisitions are not included.

“Our plan for growth is clearly intended to increase shareholder value,” said Tom Schoewe, executive vice president and chief financial officer. “In the U.S., we’re building new stores and accelerating the pace of our remodels because they have been so successful at winning and retaining customers.”

“We’re stepping up growth in our International operations to take advantage of growing economies and opportunities in emerging markets, such as China and Brazil,” Schoewe said.

Wal-Mart’s Project Impact initiative

Wal-Mart U.S. will complete Project Impact remodels this month at more than 30 percent of its 3,538 stores. By the end of fiscal year 2012, about 70 percent of Wal-Mart U.S. stores are expected to be updated through Project Impact. A September issue of Time magazine called Project Impact a “massive store and strategy remodeling effort.”

According to the Time article, Project Impact has three goals:

• Cleaner, less cluttered stores
• Friendlier customer service
• Hone in on categories where the competition can be killed

“They’ve got Kmart ready to take a standing eight-count next year,” said retail consultant Burt Flickinger III, managing director for Strategic Resources Group. “Same with Rite Aid. They’ve knocked out four of the top five toy retailers, and are now going after the last one standing, Toys R Us. Project Impact will be the catalyst to wipe out a second round of national and regional retailers.”

Supermarkets will also be impacted by Project Impact. “It’s the second twist of the knife. For most supermarkets, the first twist was all the supercenters getting built, but now there’s just that much more competition from them,” said David S. Rogers, president of DSR Marketing Systems.