Walmart pulls back, slows U.S. store openings

Walmart expects to reduce its rate of new U.S. store openings to a trickle within the next two years as the big-box chain seeks to bolster its online business and improve its foreign operations.

The retailer (WMT) said Thursday that it would open 130 stores in the 2017 fiscal year ending in February and 55 in the fiscal year ending in February 2018.

For a giant company with nearly 4,600 stores nationwide, those projections reflect growth of only 1.1% in 2018 — a far cry from the retailer's 5.1% store growth rate in the 2016 fiscal year, when it added 161 small-format locations and 69 supercenters.

In the 2011 through 2015 fiscal years, the company opened 52, 70, 141, 198 and 316 stores, respectively.

The planned small-format openings in the U.S. include 70 in 2017 and 20 in 2018.

Though Walmart's reputation for low prices and its massive size give the company a significant foothold in the market for everyday items, it is coming under assault from Amazon.com and other digital forces.

Walmart projected that profit would be flat from 2017 to 2018 before growing 5% in 2019. Any signs of a slowdown may prove unnerving to investors who look to the company for steady earnings.

“We are encouraged by the progress we’re seeing across our business and we’re moving with speed to position the company to win the future of retail," Walmart CEODoug McMillon said in a statement. "Our customers want us to run great stores, provide a great e-commerce experience and find ways to save them money and time seamlessly — so that’s what we’re doing."

Walmart also reiterated its 2017 earnings-per-share expectations of $4.29 to $4.49 and projected that capital expenditures would decline from $11.5 billion in 2016 to $11 billion in 2017 and 2018.

The company recently sought to bolster its online presence with the $3 billion acquisition of Internet retailing start-up and would-be Amazon.com competitor Jet.com.

That deal, along with other "incremental U.S. e-commerce operating investments" will "accelerate e-commerce growth," Walmart said in the filing.

Online sales represent about $14 billion to $16 billion of Walmart's approximately $355 billion in annual U.S. revenue, according to Moody's Investor Service. Despite the small percentage, Moody's hailed the retailer's efforts.

"While we think it’s still early yet, we believe that Walmart’s big upfront spend to grow online, among other steps in recent months, is showing early signs of promise," Moody's said in a research note.

Walmart also said it is seeking "a sharpened focus in China," where competitors have taken a savvier approach, and "solid growth" in foreign markets such as Mexico and Canada.

KING


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