Wal-Mart plans to slow new store open­ings

Re­tailer to in­vest in on­line sales, tech­nol­ogy and store re­mod­els

Daily Local News (West Chester, PA) - - BUSINESS - By Anne D’In­no­cen­zio AP Retail Writer

NEW YORK >> Wal-Mart Stores Inc. plans to slow its new store open­ings and pour more money into its on­line ef­forts, tech­nol­ogy and store re­mod­els, the com­pany said Thurs­day.

The world’s largest re­tailer com­pleted its more than $3 bil­lion buy­out of the fast-grow­ing on­line re­tailer Jet.com last month, show­ing how heav­ily it’s will­ing to in­vest to boost on­line sales that to­taled $13.7 bil­lion last year — still just a frac­tion of its an­nual rev­enue.

“This com­pany is go­ing to look more like an ecom­merce com­pany,” CEO Doug McMil­lon told an­a­lysts at the com­pany’s an­nual in­vest­ment meet­ing.

Wal-Mart also tem­pered its out­look, say­ing it an­tic­i­pates fis­cal 2018 earn­ings per share be­ing about flat with its fis­cal 2017 ad­justed earn­ings per share. It fore­sees fis­cal 2019 earn­ings per share growth of about 5 per­cent.

The com­pany’s shares fell $2.12, or 3 per­cent, to $69.55 in af­ter­noon trad­ing. Still, the out­look wasn’t as bad as a year ago, when ex­ec­u­tives said earn­ings per share could fall 6 per­cent to 12 per­cent this year be­cause of in­vest­ments in higher salaries and e-com­merce. That day, Wal-Mart shares plunged 10 per­cent.

But Wal-Mart’s flurry of moves — on­line and in the stores — have been gain­ing trac­tion, and its shares were up 17 per­cent this year ahead of the meet­ing.

Like its direct store ri­vals, Wal-Mart is try­ing to be more nim­ble as it fights off com­pe­ti­tion from on­line leader Ama­zon.com. And it faces com­pe­ti­tion from dol­lar stores and tra­di­tional gro­cers like Kroger, which are ramp­ing up pro­mo­tions.

Wal-Mart launched a num­ber of changes, from mak­ing sure its veg­eta­bles look good to clean­ing up its stores to be­ing sharper on keep­ing prices low. The com­pany has 150 fresh food man­agers work­ing to train sales as­so­ci­ates.

The com­pany is also meld­ing on­line ser­vices with its mas­sive fleet of stores. It rolled out a mo­bile pay­ment sys­tem to speed check­outs. And it’s push­ing ahead with on­line gro­cery and pickup ser­vices. Greg Fo­ran, CEO and pres­i­dent of WalMart’s U.S. name­sake busi­ness, told an­a­lysts Thurs­day that by the end of the year, it will have gro­cery on­line pickup ser­vices at 600 U.S. stores.

Wal-Mart had raised its an­nual profit out­look in Au­gust af­ter re­port­ing its eighth straight quar­terly in­crease in rev­enue of stores opened at least a year.

In con­trast, ri­val Tar­get re­ported that a key rev­enue mea­sure was down 1.1 per­cent in the sec­ond quar­ter, af­ter seven straight quar­ters of gains. And it saw fewer cus­tomers in the store for the first time in a year and a half.

Wal-Mart’s on­line sales rose 11.8 per­cent in the sec­ond quar­ter — up from 7 per­cent in the first quar­ter but still trail­ing the 20 per­cent in­creases from less than two years ago. Of­fi­cials said Thurs­day they be­lieve its global on­line sales will be up 20 per­cent to 30 per­cent in the sec­ond half of this year.

Wal-Mart also re­it­er­ated that its earn­ings per share for the cur­rent year on an ad­justed ba­sis would be $4.15 per share to $4.35 per share on an ad­justed ba­sis.

McMil­lon stressed to an­a­lysts Thurs­day that he be­lieves the Jet.com ac­qui­si­tion will help the com­pany at­tract higher-in­come and younger cus­tomers. WalMart plans to in­cor­po­rate some of Jet.com’s tech­nol­ogy that low­ers prices in real time. As part of the deal, Marc Lore, co­founder and CEO of Jet. com, is over­see­ing both the site and Walmart.com.

“I look around and see the vast as­sets,” Lore told in­vestors Thurs­day. “This is the per­fect time to ac­cel­er­ate the busi­ness.”

Fo­ran said that Lore will be work­ing to in­creas­ingly get the store and on­line se­lec­tions to match, so if cus­tomers see some­thing in the store, they’ll know they can find it on­line.

The re­tailer still has plenty of chal­lenges. An­a­lysts ques­tioned whether the price cuts that WalMart is tak­ing will be sus­tain­able as ri­vals re­spond. And they asked ex­ec­u­tives how much profit they would be will­ing to risk. Wal-Mart had said it is spend­ing sev­eral bil­lion dol­lars in its plans to lower prices, but haven’t given any spe­cific de­tails. McMil­lon de­clined to talk about how much far­ther they would be will­ing to go.

Wal-Mart did say Thurs­day it would spend $11 bil­lion on cap­i­tal ex­pen­di­tures this year, and the same for the fol­low­ing fis­cal year. In the fis­cal year ended in Jan­uary, the com­pany spent $11.5 bil­lion on cap­i­tal ex­pen­di­tures. But Wal-Mart said it will be in­vest­ing more of that money in e-com­merce and dig­i­tal ini­tia­tives.

The com­pany also said it plans to open 130 U.S. stores this year, but that’s be­low its fore­cast is­sued last year that it would open 135 to 155 new stores. In its last fis­cal year, it opened 230 U.S. stores. It said it plans to open an­other 55 U.S. stores next year. By type of store, WalMart plans to open 60 su­per­centers and 70 of the smaller-for­mat Neigh­bor­hood Mar­kets this year. For next year, the break­down is 35 su­per­centers and 20 smaller-for­mat stores.


Wal-Mart said Thurs­day that it plans to slow new store open­ings as it looks to pour more money into its on­line ef­forts, tech­nol­ogy and store re­mod­els.

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