Walmart Rolls Out Int’l Cap Ex Program

Wal-Mart Stores Inc. has revealed a global capital spending forecast for its fiscal years 2012 and 2013 of between $13 billion and $14 billion, including acquisition-related expenditures. The Bentonville, Ark.-based mega-retailer additionally outlined a goal to considerably reduce operating expenses as a percentage of sales over the next five years. These savings will be invested into lower prices for U.S. customers and enhanced international profitability.

“We continue to prioritize growth, leverage and returns in our commitment to increase shareholder value,” said Mike Duke, president and CEO of Wal-Mart Stores. “We will grow comparable-store sales across our three operating segments, and we will leverage innovation, systems and processes to improve our overall productivity.”

Two years ago, under Duke’s guidance, the company revitalized the productivity loop, a process in which an everyday low-cost structure enables everyday low prices for customers.

“When we close this fiscal year, we will have leveraged operating expenses as a percentage of sales for two consecutive years,” noted Charles Holley, Wal-Mart Stores’ EVP and CFO. “We will build on this accomplishment and commit to reduce operating expenses as a percentage of sales more than 100 basis points over the next five years. This will allow Walmart U.S. to invest in price and widen the price gap between our competitors and us. It also will help enable our International segment to improve operating margins in the emerging markets.”

Added Holley: “Our business model is built on our promise that Walmart customers can count on us to deliver low prices every day across a broad assortment. This in turn leads to customer loyalty and higher sales. These growth and leverage initiatives will contribute to our strong earnings growth.”

Walmart expects to add between 36 million and 39 million square feet worldwide in fiscal 2012, and between 45 million and 49 million square feet in fiscal 2013.

For fiscal year 2013, Walmart U.S. will decrease its capital spending by about $500 million from the previous year, to a range of $6.0 billion to $6.5 billion. The forecast covers new stores, remodels, logistics and technology infrastructure and is designed to add between 210 and 235 new units that will expand its retail space by around 14 million to 15 million square feet. This forecasted increase is the result of a larger percentage of new supercenters compared with prior years, as well as growth in the number of medium and small-format stores.

“Beyond our priority of comp-sales growth, supercenters remain the primary growth vehicle for Walmart U.S. and the company will reduce construction costs on the new stores through value-engineering initiatives,” said Walmart U.S. CEO Bill Simon. “We have identified a large number of potential Neighborhood Market opportunities, and we plan to open between 80 and 100 medium to small formats next year.”

Walmart U.S. will continue to monitor the success of its Express format. At the present time, five Express stores are up and running, and the retailer plans to add six more before the end of the fiscal year.

“The rollout of Walmart Express is predicated on the review of our pilot program, and the opportunity to build greater scale in a particular market,” observed Simon. “We will continue to pursue a balanced approach to market share growth in low-, medium- and higher share markets. In addition, we continue to reduce the cost and scope of our remodel program to increase efficiency and to minimize customer disruption.”

Further, Walmart U.S. will boost the productivity of its capital allocation. “We also will bring down the cost of building in all of our operations, and we will continue to reduce the cost of remodels,” noted Simon. “For next year, Walmart U.S. will build more square footage with fewer dollars. We plan to decrease U.S. construction costs by 10 percent and will further gain leverage on our remodeling costs.”

Capital expenditures for the current fiscal year in Walmart International will range from $4.0 billion to $4.5 billion before acquisitions in fiscal year 2012, and rise to a range of $4.5 billion to $5.0 billion before acquisitions for fiscal years 2013. New stores, without any impact from acquisitions, are expected to account for between 26 million and 28 million square feet next year, versus an additional 24 million to 25 million square feet projected for this year.

“We continue to prioritize our investment in the emerging markets of China, Brazil and Mexico,” said Doug McMillon, Walmart International president and CEO. “We remain focused on driving growth and improving our overall returns. We will build scale in existing markets and continue to evaluate acquisitions to enter additional large, higher growth markets.”

Sam’s Club plans to spend about $1 billion in capital in fiscal year 2013, the same as the current fiscal year. For fiscal year 2013, the division plans to add between 10 and 15 new, expanded or relocated clubs in the United States, with around half of its capital going toward remodeling costs.