Wal-Mart executives painted a rosy long-term picture on Tuesday (Oct. 15) during the company’s 20th annual investor conference in Bentonville. They also played down any real impact of the U.S. government shutdown and played up their effort at retail discipline.
The retail giant said it plans to build more stores with less money, shaving some $200 million out of its 2015 capital expenditure projections which range between $11.8 billion to $12.8 billion.
The company will add between 33 million and 37 million net retail square feet worldwide next year, with more than half of the increase driven by Walmart U.S. This includes accelerated small format openings as it seeks to fill in key markets and build out its new retail ecosystems. While Wal-Mart plans to ramp up small store openings and expand e-commerce fulfillment centers, the cash cow supercenter will still be a mainstay, and used more regularly as distribution centers tethered to nearby smaller formats.
Technology is the other key area of expenditures in the next two to three years as the retailer continues to invest in mobile, social and delivery infrastructure that will impact the entire Wal-Mart ecosystem.
“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," CEO Mike Duke said.
Walmart U.S. will build approximately 120 to 150 small format stores next fiscal year in addition to 115 supercenters. Sam’s Club will add roughly 20 new sites next year.
On the flip side, Wal-Mart said it is closing about 50 underperforming stores in China and Brazil which will create a small charge in the company’s fourth quarter. Overall, Walmart International plans to add roughly 13 million square feet of space, spending some $4.24 billion.
The company forecasts that net sales for this fiscal year will range between $475 billion and $480 billion. Through the first half of this year, total revenue was $231.1 billion, which means the retailer will need to pick up the pace in the back half of the year, not likely a problem as these sales will include back-to-school and Christmas.
Wal-Mart said it’s planning a major Black Friday blow out and has already had more than 1 million consumers take advantage of its layaway program. The retailer is also investing big in marketing for this holiday season with some 25 billion ad impressions spread out over mobile, social and traditional channels between Black Friday and Christmas.
The retailer downplayed any major impact from the now two-week government shutdown, except to say it wasn't helping anyone. Bill Simon, CEO of Walmart U.S., said consumers are resilient and have grown used to disruptions of one form or another from higher payroll taxes, volatile fuel costs and a plethora of natural disasters in recent years.
Wal-Mart's prediction for sales growth next year is a little more ambitious at 3% to 5%, given it has seen nearly flat to negative comps overall this year and continues to talk about lingering economic uncertainty around the world. That said, Wal-Mart plans to grow topline revenue anywhere from $14 billion to $24 billion next year, roughly $3 billion of that is expected to come from e-commerce and the bulk linked to new store growth, said Charles Holley, chief financial officer.
Walmart International CEO Doug McMillon gave an update on the company’s efforts to streamline its compliance protocol which is costing the company $155 million this year. That does not include the $155 million the retailer is paying lawyers in its multiple Foreign Corrupt Practices Act investigations.
He said the retailer has more than 1,000 professionals on its payroll who work on nothing but compliance issues. That includes a senior ranking official in each market who oversees and is accountable for ongoing compliance with all laws and regulations. The internal compliance protocol that is being implemented across all markets involves 14 key areas — everything from anti-corruption and money laundering to food safety and ethical sourcing.
The company gave no information beyond this fiscal year in regards to projected costs of the FCPA probes. McMillon simply said that it will take as long it takes, cost what it costs and lead where it leads.
“I am very proud of what we have done in recent times to shore up and unify the company’s compliance protocol,” he said.