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NEW YORK – Wal-Mart's stumbles won't prevent it from reaching half a trillion dollars in sales in about five years, according to Retail Forward analysis.
The chain is still vulnerable to the vicissitudes of consumer behavior and paid a price for losing its focus on low prices this past holiday season, said Steve Spiwak, Retail Forward economist, in an audio forum on Wal-Mart held this week. But despite a rocky start to the holiday 2004 season, the Bentonville, Ark.-based retailer illustrated how quickly it can respond to its mistakes and managed to squeeze out a 2.6 percent comp store gain in sales.
During the audio forum, the Columbus, Ohio-based management consulting firm looked beyond Wal-Mart's recent results to predict where the world's largest retailer will be by the year 2010.
"Wal-Mart will be even more successful by 2010 than it is today," said Sandy Skrovan, the firm's Wal-Mart analyst, adding that the retailer now is all about disrupting entire businesses, not incremental change. "It took Wal-Mart 42 years to get as big as it is today, but it will take only five years to double its current size."
Skrovan noted that five years ago, Wal-Mart generated about $150 billion in annual sales. This year, it will likely hit $285 billion. "By 2010, Wal-Mart will be a half-trillion-dollar company," she predicted.
It will do this by adding more stores, primarily supercenters which provide the company its best return on investment. The plan is to grow retail square footage by 8 percent per year. Skrovan expects Wal-Mart will be operating 3,100 supercenters by 2010, which is very feasible since two-thirds of Wal-Mart's current supercenter fleet is located in just 15 southern states.
Eventually, conventional Wal-Mart discount stores will be displaced by supercenters, says Skrovan. By 2010, only half as many -- approximately 700 – Wal-Mart discount stores will be in operation.
Neighborhood Market expansion is expected to continue taking a back seat to supercenter growth, she added. The new Urban 99 supercenter prototype allows the retailer to enter metro markets where real estate is scarce and more expensive than in its traditional markets.
Sam's Club is approaching saturation, Skrovan said, predicting that only about 100 or so net new wholesale clubs will be opened by Wal-Mart over the next five years.
Wal-Mart already is the largest retailer in food, general merchandise, health and beauty care, apparel, home textiles, and toys, yet Skrovan said the retailer has plenty of room to grow in other categories, including baby supplies and baby care; and home, office, and school supplies. Wal-Mart also currently controls 20 percent of all single copy magazine sales, and two large publishers -- Time Inc. and American Media -- have launched publications for Wal-Mart, so a move into publishing is not so far-fetched either, she added.
-- Don Longo, director of editorial and content development, VNU Business Media Retail Group