Believing good things come in smaller boxes, Walmart said yesterday that it would build as many as 300 more small-format stores in the coming year — about twice as much as it had previously planned to open — and to “invest aggressively in e-commerce” to be “more nimble and flexible,” in the words of new CEO C. Douglas McMillon. Its focus, he said, will be “connect with customers on their terms.”
The retailer currently operates 346 Neighborhood Markets and 20 Walmart Express stores. The new total of smaller-format stores “would account for just 14% of Wal-Mart's planned total U.S. store count of 4,500, and would remain well behind competitors such as Dollar General, which has 11,000 U.S. stores, and Family Dollar Stores, which has 7,000,” the Wall Street Journal’s Shelly Banjo and Michael Calia point out.
Some analysts are urging Walmart to speed things along by acquiring one of those chains. Family Dollar would be the better fit, says Credit Suisse analyst Michael Exstein, Market Watch’s Andrea Chang reports. But asked about the possibility, Walmart U.S. president and CEO Bill Simon said the company currently doesn't see a suitable target, Banjo and Calia report. “While we always look at opportunities to acquire,” he said, “it's hard to find what we need.”
Not that Walmart thinks that those big boxes are passé. It also plans to open about 115 supercenters in the U.S. in 2014, according to a press release dedicated to its real estate strategy. “Customers appreciate the broad assortment of our supercenters for their stock-up trips as well as our small store formats for fill-in trips,” said Simon in the release.
Unfortunately for all marketers, the company has a rather bleak view of consumer spending in the U.S. It says it will “continue to be hurt by ‘reductions in government benefits, higher taxes and tighter credit,’ and said its own healthcare costs were rising as more employees joined its insurance plan,” Barney Jopson reports in Financial Times. As a result, it “forecast profits for the current quarter that were below analyst expectations, estimating that earnings per share would be $1.10 to $1.20.”
Simon said that “cuts to the federal Supplemental Nutrition Assistance Program, or food stamps, crimped the company’s results,” Elizabeth A. Harris reports in the New York Times, as did “an exceptionally ferocious winter with multiple storms.”
Retail Metrics founder Ken Perkins tells Harris the main problem is “the plight of its core consumers, who are still struggling with stagnant wages and have been left out of areas of economic growth, like rising stocks and home values.”
The company also says “it’s looking at supporting an increase in the federal minimum wage, breaking with business and industry groups that oppose such a measure, Bloomberg’s Renee Dudley reports. Spokesman David Tovar tells her that it is “weighing the impact of additional payroll costs against possibly attracting more consumer dollars to its stores.”
Presumably, its employees are also its customers, and that’s a sizable customer base in itself. All told, Walmart has nearly 11,000 retail units under 71 banners in 27 countries and employs 2.2 million associates around the world — about 1.3 million of them in the U.S.
Retail Metrics’ Perkins also maintains that “most of the higher-income consumers who went to Walmart during the height of the recession have mostly vanished from its aisles,” the Times’ Harris reports, “and the company has had trouble making lasting inroads with those customers.”
For those upscale consumers who would dress for Walmart as “House of Cards” VPOTUS Frank Underwood does when he ventures into the subway (no spoiler alert necessary), there’s always online, of course.
“McMillion emphasized that the company's global online sales, including acquisitions, topped $10 billion, a 30% increase over last year,” report USA Today’s Kim Hjelmgaard and Jayne O'Donnell report in their stock roundup.
“While it's small in comparison to total revenue, it's the fastest-growing part of our business,” said CFO Charles Holley said. And the company sees itself as positioned “at the intersection of physical and digital retail, which is a competitive advantage,” McMillon said in his opening remarks.
Which means that those hoity-toity consumers can order a 70-inch HDTV online and simply head to the back of the store, hat pulled down and receipt in hand, for free "Site to Store" pickup. No need to mix it up with the hoi-polloi on the checkout lines.