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WAL-MART TO ADD 500 STORES IN 2005

BY BRANNON BOSWELL

In 2003, 290 of Wal-Mart’s Supercenters generated sales in excess of $100 million. Thus, the company is focusing on the concept as its biggest growth engine for 2005, CEO Lee Scott told Wall Street executives at the retailer’s annual analyst’s day event.

Among the 500 new stores the Bentonville, Ark.-based behemoth plans to open next year, there will be about 250 Supercenters. Wal-Mart’s smaller discount store format will account for about 45 of the new stores, Sam’s Club will represent roughly 40 and Neighborhood Markets about 30. Wal-Mart also plans to remodel about 360 Wal-Mart and Sam’s Club stores next year. In addition, the retailer will open nearly 170 new international stores in markets where it already operates.

Further, Wal-Mart is reviewing potential acquisitions for its entry into Russia, said John Menzer, president of the company’s international division, at the analyst’s meeting. In all, Wal-Mart plans to grow its 655 million square feet of retail space by about 8 percent next year.

Cannibalization of existing stores is not a concern for Wal-Mart, executives say. The retailer conducted a survey of about 500 Wal-Mart stores that were negatively affected by newer Wal-Mart units opening nearby. According to the company, the research shows that while sales did fall at the existing stores after the new stores opened, those existing stores saw their sales rise higher than before after a two-year period. Therefore, having the two stores operating near each other actually boosted Wal-Mart’s overall share in those markets, the retailer says.

Inside the stores, Wal-Mart plans to pursue several promising growth avenues in 2005, says Tom Coughlin, vice chairman. Financial services such as check cashing, money transfers and private label credit cards will be introduced, he said. Sam’s Club will open stores earlier (7 a.m.) so that their business members can shop before the aisles become crowded. Sam’s will also allow customers to fax and e-mail orders for later pick-up at the stores. In addition, Wal-Mart is considering the installation of gas stations on outparcels near its stores, Coughlin says.

As part of the company’s effort to improve its public image Wal-Mart is working on its “195” prototype, which strays from the bland big-box standard. The first 195 store, in Muskogee, Okla., features more-elaborate exterior architecture, a warmer color palette and a layout that offers greater differentiation between various departments, especially the food center and the pharmacy sections, says Mike Duke, president of Wal-Mart Stores USA.

The company has about three years’ worth of equally ambitious future growth plans already approved internally, according to Deborah Weinswig, a Citigroup Smith Barney analyst who attended the meeting. Energy prices, she notes, are the main economic concern among Wal-Mart’s core customers.