A day after declaring that it will curtail openings of its traditional U.S. stores and focus more on remodeling existing locations, the world's largest retailer by sales laid out a vision for growth during the second half of a two-day conference with investment analysts.
Wal-Mart officials forecast that they will add approximately 19% less square footage in the coming year compared with a year earlier, with much of the reduction coming from the U.S. In all, Wal-Mart expects to add 34 to 36 million square feet of retail space in the fiscal year starting in February, compared with 42 to 43 million square feet of retail space globally in the current fiscal year, ending Jan. 31.
Wal-Mart, which has benefited from the global downturn thanks to its economies of scale and lower prices, reiterated it felt well-positioned to prosper in the current economy.
"This company will emerge from this time a tougher competitor," Wal-Mart Chief Executive Lee Scott said.
Still, company officials detailed plans to transform into a different kind of discount retailer by focusing more on smaller stores than in the past. Wal-Mart has been executing that shift for the past three years, officials noted, well before the economy soured.
Analysts generally seemed to approve Wal-Mart's moves. Some predicted that by focusing on sprucing up older locations, the retailer may be poised to hold on to some of the new customers it has attracted during the downturn.
"The strained consumer environment has driven sustained traffic from core customers and new traffic from affluent shoppers, which could prove sticky if executives are able to maintain and enhance the customer experience," Goldman Sachs analyst Adrianne Shapira wrote in a note to investors.
Wal-Mart stock rose 11%, or $5.50, to $55.17 Tuesday in 4 p.m. New York Stock Exchange composite trading.
Over the next five years, Wal-Mart said it will devote 53% of its international spending to emerging markets such as Brazil and India, up from 33% in the previous five years, with the remainder going to mature markets such as Canada and the U.K.
Wal-Mart also said it remains committed to succeeding in Japan, a plan that was criticized by analysts a year ago. The retailer said it is on pace to post its first operating profit in Japan this fiscal year.
Though Wal-Mart said it remains bullish on international expansion, overall capital spending, including adding new stores and remodeling existing ones, was projected to rise only slightly, to $4.8 to 5.3 billion in the year ending January 2010, from the current year's $4.5 billion to $4.8 billion.