Scott reiterates plan for tempered growth, better profit

BENTONVILLE, ARK. —When Wal-Mart announced plans earlier this year to scale back its U.S. expansion, the retail industry breathed a collective sigh of relief. Wal-Mart had come to its senses, and after years of disappointing investors the company planned to stop cannibalizing its own stores, pressuring returns and hindering operations by opening stores more rapidly than was warranted by market conditions.

Instead of opening 270 supercenters this year, Wal-Mart in June indicated it would open between 190 and 200 supercenters during the current year, followed by 170 units in subsequent years. That’s still a lot of new stores, especially considering Wal-Mart already operates about 2,400 domestically, so it was welcome news to the retail industry, as well as Wal-Mart’s long-suffering shareholders, that top executives further reduced supercenter growth targets when they gathered last month with members of the financial community for the retailer’s 14th annual analysts meeting. Wal-Mart disclosed it would open 140 supercenters annually, rather than the 170 originally slated to open in 2009 and beyond. In addition, many of those units are likely to be 175,000-square-foot and 143,000-square-foot prototypes that are easier to locate and more palatable to communities than the 195,000-square-foot prototype that has been the preferred expansion vehicle in recent years.

While Wal-Mart’s scaled back rate of supercenter expansion brings a more rational level of square footage expansion to the United States, those who compete against the company hardly have cause for celebration. That’s because a Wal-Mart less focused on breakneck new store growth, presumably will be better able to focus on operations and a higher level of execution regarding its merchandising, marketing and supply chain initiatives.

According to Wal-Mart president and ceo Lee Scott, the company has rebounded from a low point during the second quarter when Scott said he was more concerned about the business than at any point during his seven-year tenure as ceo. Now, Wal-Mart is executing well its merchandising strategies in food, electronics and health, and expects to apply the thought processes that lead to success in those areas to more troubled categories such as apparel and home. Wal-Mart put new merchandising executives in charge of those two divisions earlier this year.

The big test for Wal-Mart comes this holiday season as fuel prices and the weak housing market continue to weigh on consumer confidence about the economy. Despite what is expected to be a challenging environment, Scott told analysts he feels good about Christmas. “I’m excited and I’m optimistic about it,” Scott said, adding that Wal-Mart will have great merchandise that is relevant to what customers want today and that new in-store Christmas shops are going to be awesome.

Store visits by Retailing Today showed that the Christmas shops, which are normally the area of the store reserved for holiday decor, are now being cross-merchandised with electronics and entertainment items such as DVDs and gaming consoles. Plans also call for product demonstrations.

The biggest difference this year, though, is that Wal-Mart will have Santa present in all of its stores and available for photos Nov. 24 to 25, Dec. 1 to 2 and Dec. 8 to 9. The exteriors of select stores also will be adorned with large bows to give them a more festive look.

“The integration of the plan between store operations, merchandising and marketing is at the highest level it has ever been in the history of the company, focused on this fourth quarter,” Scott said. “Our customers are going to like the Christmas shops and they are going to love the pricing they see at Wal-Mart this season.”

Pricing is a familiar message for Wal-Mart, but the big difference this year is that the company has adopted a new marketing slogan and appears to again be embracing the concept on which it was founded, which calls for merchants to act as agents for the customer. Accordingly, pricing initiatives have been developed, such as the $4 generic drug program, featured recently in a television campaign and called out with extensive in-store signage.

That is the best example, but other initiatives such as a price rollback on 16,000 items for the back-to-school season and the company’s early season price rollbacks on toys and other gift items demonstrated a renewed commitment to price leadership.

“It is our mission to save people money so they can live better, and it is our business model of every day low prices that supports it,” Scott said. “No other retailer in the world is better, or will be better, at what we do than Wal-Mart.”