Wal-Mart Says Sales Growth Will Slow
New York, With its U.S. sales growth expected to slow further during the next three years, Wal-Mart Stores executives told analysts Tuesday that the chain will open fewer stores at home and instead boost its expansion overseas.
"These are pretty trying times for us in an unusual macroeconomic environment," Tom Schoewe, executive VP and CFO, Wal-Mart Stores, said on the first day of Wal-Mart's two-day annual analyst and investor meeting, held in Rogers, Ark.
Schoewe said the retailer expects overall sales to grow about 9% this year, slower than last year's increase of 11.7%. He expects it will further slow to between 5% and 8% growth over the next two years.
Schoewe said Wal-Mart will slow U.S. square footage growth to 6% this year from an 8.8% increase last year, and will further reduce that pace to five- to 6% growth over the next two years.
Total capital spending for the current fiscal year 2008 is projected to be approximately $15 billion, down from a June forecast of $15.7 billion. The original projection was $17 billion. Looking forward, total spending will flatten. For 2009 and 2010, the company has budgeted between $13.5 billion and $15.2 billion in U.S. capital expenditures.
In terms of new stores, Wal-Mart will open between 190 to 200 new U.S. supercenters this year, down from its typical expansion rate of about 280 a year. The company is cutting new U.S. store investment significantly to between $4.9 billion and $5 billion over the next two years from its current level of between $6.7 and $7 billion.
Wal-Mart will continue to accelerate its investment in its International operating segment during the next two fiscal years. Schoewe said Wal-Mart would invest between $3 billion and $3.6 billion to open new stores overseas over the next two years.
David Abella, an analyst at Rochdale Investment Management in New York, which manages $2.5 billion in assets including Wal-Mart shares, told the Associated Press that Wal-Mart's reduced plans for U.S. store growth are positive news.
"I think focusing on cash flow and profitability is what they need to do at this point," Abella said.