Walmart Lays Out Plans At Annual Analysts' Meeting
By Sam Lewis
More initiatives with less money is one approach the world’s largest retailer is taking toward expansion
Walmart held its annual analysts’ meeting on Tuesday, Oct 15 where the company’s executives laid out optimistic plans for the upcoming year. The company also downplayed the impact the U.S. government furlough is having on retail, while boasting its disciplined retail efforts.
First, Walmart plans to build more stores using less money. The company will trim around $200 million of its projected 2015 capital expenditures, ranging from nearly $12 million to $13 million dollars. The company plans on adding up to 37 million square feet of retail space throughout the world in the coming year, with more than half of it being devoted to Walmarts within the U.S. Included in this expansion are small format stores aimed to fill key markets and funds to construct its planned retail ecosystems. The company plans to build 120 to 150 small format stores in 2015. Even though small store formats will be ramped up in the coming year, Walmart supercenters will remain a mainstay for the company, with 115 supercenters in the planning for next year. The supercenters will take on a new role as distribution centers for the small format stores.
Countering that point, Walmart plans to close around 50 of its underperforming stores in Brazil and China. This is projected to boost international productivity, along with revenue, during the fourth-quarter. However, overall the company is expanding globally, with plans to add about 13 million square feet of retail space overseas, spending $4.24 billion to do so.
Next, the world’s largest retailer is planning on big expenditures in technology in the next two to three years. Walmart will invest significantly in mobile, social, and delivery infrastructures to impact their designed ecosystem and create an omni-channel experience for the customer. “The biggest opportunity we have is winning the intersection between physical and digital retail around the world,” president and CEO Mike Duke says in his opening remarks in the meeting. “We’ve never been more connected across the company on e-commerce, and our results demonstrate this.” Duke Continues, “We’re spending in a disciplined manner by setting up a more streamlined real estate process. We continue to improve our sales per square foot and Wal-Mart will continue to grow through new stores and e-commerce, while expanding our logistics and fulfillment network in critical markets.”
Walmart also downplayed any effect the government shutdown has had on the company. Instead, the company redirected the focus to the furlough not helping the retail climate improve. CEO of Walmart U.S. Bill Simon says that consumers are resilient and have acclimated to disruptions —increased pay roll taxes and prices in gasoline, along with an abundance of natural disasters in the last few years — that might deter sales. With the shutdown over, the impact should be minimal.
And what analysts meeting would be complete without discussions regarding revenue, earnings, and forecasts for the upcoming year? Walmart indicates that sales for the year will range between $475 billion and $480 billion. This would mark a 3 to 5 percent increase from last year. During the first half of this year, the retailer brought in $231.1 billion, meaning it will have to speed things up a bit to meet forecasts. However, with the holiday season — accounting for nearly 40 percent of some retailers’ yearly sales — approaching, it is unlikely that the company won’t meet its forecast revenue total. Of the projected total, $10 billion is expected to stem from online sales, while e-commerce is forecasted to represent $13 billion of the retailer’s sales in 2014, according to Walmart’s global e-commerce chief Neil Ashe.