Walmart Announces Capital Strategy to Drive Global Growth; Next Year's Capital Spending to Increase Slower Than Sales

- Walmart expects capital spending of between $13.5 and $14.5 billion for fiscal year 2012

- Company lowers top end of fiscal 2011 capital expenditure guidance by $1 billion

- Walmart U.S. increased capital efficiency of remodeling and new stores, focuses growth on three-format portfolio

- International investment continues to prioritize growth of emerging markets

- Company committed to maintaining high level of returns on capital

Oct 13, 2010, 15:58 ET from Wal-Mart Stores, Inc.

BENTONVILLE, Ark., Oct. 13 /PRNewswire-FirstCall/ -- Wal-Mart Stores, Inc. (NYSE: WMT) today presented its global plans for growth of its operating segments for the current and next fiscal year at its annual conference for the investment community.  

The company lowered the high end of its range for the current fiscal year 2011 forecast for capital spending by $1 billion.  Total capital spending for the current fiscal year ending Jan. 31, 2011 now is projected to range from $13 to $14 billion, down from the previous range of $13 to $15 billion.  Last fiscal year, the company spent $12.2 billion on capital projects.  Total capital spending for next fiscal year, ending Jan. 31, 2012, is projected to range from $13.5 to $14.5 billion, an increase of approximately 3.7 percent based on the midpoint of the two ranges.  

"Our financial priorities of growth, leverage and returns drive our decisions on capital investment," said Charles Holley, executive vice president, finance and treasurer.  "We are positioning our company for the next generation Walmart, which means that we will grow internationally and in the United States.  We believe our capital strategy strikes the right balance between growth and return on investment.  

"We expect to grow total company square footage between three and four percent next fiscal year, which means that square footage and capital spending will grow at approximately the same rate.  Overall sales growth is forecasted between four and six percent," Holley said.  "In the United States, we will shift more capital toward new stores, including supercenters and smaller formats.  We are lowering remodeling costs through greater efficiencies, so the total capital commitment for Walmart U.S. next year will be flat with the current fiscal year.

"Because of Walmart International's concentration on growth in emerging markets, capital expenditures for the segment will increase slightly more than 13 percent next year compared to the current fiscal year," Holley added.  "Capital for the other operating segments, and corporate overhead, are projected to be flat next year compared to this year."

Walmart U.S. and Sam's Club include operations in the 50 states and Puerto Rico.  Projected capital expenditures are as follows and exclude the impact of future acquisitions.  

Capital Expenditure Detail (US$ billions)

Segment 

Actual

Projected

FY 11 – FY 12

YoY % change *

FY10

FY11

FY12

Walmart U.S.

$6.6

$7.5 - 8.0

$7.5 - 8.0

Flat

Walmart International

$3.8

$3.5 - 4.0

$4.0 - 4.5

~ 13%

Sam's Club U.S.

$0.9

~$1.0

~$1.0

Flat

Corporate

$0.9

~$1.0

~$1.0

Flat

Total

$12.2

$13.0 - 14.0

$13.5 - 14.5

3.7%

* Projected capital expenditure growth rates are based on the midpoint of the specified range and assume currency exchange rates remain stable.

In the fiscal year ending Jan. 31, 2011, the company expects to add approximately 32.5 million square feet globally, compared to approximately 34 million square feet added in the prior year.  Walmart expects to increase global square footage between 34.5 and 35.5 million square feet in fiscal year 2012.  

Square footage growth (excluding any acquisitions) is projected as follows:

Square Footage Growth by Segment (in millions) (net)

Segment

Actual

Projected

FY10

FY11

FY12

 Walmart U.S.

14

11

11

 Sam's Club U.S.

(1)*

0.5

0.5

 Walmart International

21

21

23 - 24

 Total Company

34

32.5

34.5 - 35.5

* Sam's Club closed 12 clubs in fiscal year 2010.

Projected Walmart U.S. and Sam's Club units include expansions, relocations and conversions.  Given the conversion of traditional Walmart discount stores to supercenters (without any change in square footage to the actual unit), the number of supercenter units will continue to increase, as the number of discount stores declines.  Unit growth in the United States is projected as follows:

Total U.S. Unit Growth (gross)

Format

Actual

Projected

FY10

FY11

FY12

 Large formats (>60,000 sq. ft.)

135

152

155 - 165

 Medium and Small formats (< 60,000 sq. ft.)

7

1

30 - 40

 Sam's Club

15

9

7 - 12

 Total U.S. Units

157

162

192 - 217

Walmart U.S. Details

Capital expenditures for Walmart U.S. next year will be flat when compared to the current year, as will square footage growth.  But stores and sales are projected to grow, according to Bill Simon, Walmart U.S. president and CEO.  

"Over the next few years, we will introduce new formats to help us enter new markets.  Walmart U.S. will move toward a three-format portfolio, which will drive expansion to urban markets and small towns, as well as fill in gaps in existing markets," Simon explained.  "The large format is our supercenter, which sells a broad assortment of groceries and general merchandise.  We have integrated efficiencies into our supercenter design that have allowed us to decrease the average square footage for our supercenter format. The medium format, between 30,000 and 60,000 square feet, will be based on the needs of an individual market.  The small format, which is less than 30,000 square feet, will be targeted to urban markets and small towns.

"We also are allocating capital to continue converting discount stores to supercenters, which add no square footage, but are expected to increase sales," Simon said.  "Of the 155 to 165 supercenters we will add next year, 45 to 50 will be new units, with the remainder conversions.  Neighborhood Markets will make up the bulk of the medium format stores, and there will be some pilots of the small store format included in next year's plan."

By the end of the current fiscal year, more than 550 U.S. stores will have been remodeled. Walmart U.S. plans to remodel more than 500 stores next fiscal year.

"Remodeling costs will be lower next year, due to changes in design and schedules.  The time to remodel a store will decrease by 40 percent, and with fewer disruptions, traffic and sales will improve sooner," Simon added.

"We are very excited about the additional growth opportunities that we have in the United States," said Simon.  "We will have growth in geography, growth in formats and growth in multi-channels."

Walmart International Details

Walmart International continues to aggressively invest in organic growth with multiple formats from supercenters to small grocery stores and cash and carry units.  New stores are expected to add 21 million square feet of space this fiscal year and between 23 and 24 million square feet next year.  

"Our capital investment for next year will drive new store growth with particular emphasis in the emerging markets of China, Brazil and Mexico," said Doug McMillon, Walmart International president and CEO.  "Through a combination of comparable store sales, new store square footage and continued earnings performance, we will continue to shape our international portfolio to drive both growth and improving returns.  We will also continue to evaluate acquisitions to enter priority markets and to build scale in existing markets."

Sam's Club

Sam's Club's plan for capital spending next fiscal year is similar to the current year.  Sam's will continue to spend approximately $1 billion per year in capital, with the majority committed to remodeling.  Sam's plans to add between 7 and 12 new, expanded, or relocated clubs next year in the United States.  Remodels are expected to be completed on 60 to 70 clubs next year.

"We are on schedule to complete remodeling at 65 clubs this year.  Member feedback on our remodeled clubs has been very positive, and we plan to remodel our clubs at approximately the same rate next year," said Brian Cornell, president and CEO, Sam's Club.  "Our commitment to improving the member experience continues to lead to positive comparable sales growth in our business."

Wal-Mart Stores, Inc. (NYSE: WMT) serves customers and members more than 200 million times per week at more than 8,600 retail units under 59 different banners in 15 countries. With fiscal year 2010 sales of $405 billion, Walmart employs more than 2 million associates worldwide. A leader in sustainability, corporate philanthropy and employment opportunity, Walmart ranked first among retailers in Fortune Magazine's 2010 Most Admired Companies survey. Additional information about Walmart can be found by visiting www.walmartstores.com. Online merchandise sales are available at www.walmart.com and http://www.samsclub.com/.

This release contains statements that the company believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, and intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. Except as noted below, these forward-looking statements are identified by use of the words or phrases "are expected," "are projected," "committed," "expect," "expects," "forecast," "forecasted," "guidance," "is expected," "is projected," "plan," "plans," "projected," "to increase," "will add," "will be," "will continue," "will drive," "will grow," "will have been," "will improve," "will introduce," "will increase," "will make," "prioritize," "will shift," "FY 11 – FY 12 YoY chg %," or a variation of the foregoing words or phrases in these statements, including in captions to certain of the columns contained in the tables included in this release. The forward-looking statements discuss, among other things, management's expectations for or concerning: capital expenditures (also referred to as "capital spending" and "capex") and capital commitments by the company and each of its three operating segments, including for corporate overhead, in fiscal years 2011 and 2012, year-over-year growth in capital expenditures from fiscal year 2011 to fiscal year 2012, square footage growth for the total company and each of the company's operating segments in fiscal year 2011 and fiscal year 2012, the growth in units by format and total unit growth in the United States in fiscal years 2011 and 2012, the company's capital budget for fiscal year 2012, the company's sales growth for fiscal year 2012, international investment prioritizing emerging markets growth, the growth of the company internationally and in the United States, the shift of capital in the United States toward new stores, including supercenters and smaller formats, the growth in the number of the Walmart U.S. segment's supercenters and decline in the number of its discount stores, the growth of units and sales in the Walmart U.S. segment, the introduction of new formats by the Walmart U.S. segment to help it enter new markets, the movement of the Walmart U.S. segment toward a three-format portfolio, which will drive expansion to urban markets and small towns and the filling of gaps in existing markets, the average size of the Walmart U.S. segment's supercenter format continuing to come down, the targeting of various formats by the Walmart U.S. segment, including based on needs of individual markets, conversions of the Walmart U.S. segment's discount stores to supercenters increasing sales despite not adding square footage, the numbers of supercenters to be added by the Walmart U.S. segment in fiscal year 2012 and the number of those units to be new units and the number to be conversions, Neighborhood Markets making up a particular area of growth in the Walmart U.S. segment, the Walmart U.S. segment including some pilots of the small store format in its plan for fiscal year 2012, the units in the Walmart U.S. segment to be remodeled in fiscal year 2011 and fiscal year 2012, the cost and time to remodel units of the Walmart U.S. segment decreasing in fiscal year 2012, traffic and sales at remodeled stores of the Walmart U.S. segment improving sooner with fewer disruptions from the remodeling of units, the Walmart U.S. segment having growth in geography, formats and multi-channels, the addition of new square footage through opening new stores of the Walmart International segment in fiscal year 2012, the Walmart International segment's capital investment for fiscal year 2012 driving new store growth in fiscal year 2012, with particular emphasis in the emerging markets, a combination of comparable store sales, new store square footage and continued earnings performance continuing to shape the company's international portfolio to drive growth and improving returns, the Walmart International segment continuing to evaluate acquisitions to enter priority markets and build scale in existing markets, capital spending by the Sam's Club segment for fiscal year 2012 being similar to that for fiscal year 2011, the majority of the Sam's Club segment's capital expenditures being committed to remodeling clubs, the number of new, expanded and relocated stores of the Sam's Club segment in fiscal year 2012, the rate and number of remodels to be completed by the Sam's Club segment in fiscal year 2011 and fiscal year 2012, and certain assumptions on which certain of such expectations are based.  Also included in the forward-looking statements in this release is the information contained in the charts entitled "Capital Expenditure Detail," "Square Footage Growth by Segment," and "Total U.S. Unit Growth," which information relates to capital expenditures to be made and square footage and units in the United States to be added during each of the fiscal years 2011 and 2012. These forward-looking statements are subject to risks, uncertainties and other factors, domestically and internationally, including general economic conditions, including the effects of the current economic situation, competitive pressures, geopolitical conditions and events, inflation, deflation, consumer confidence, credit availability, spending patterns and debt levels, currency exchange fluctuations, unemployment rates, personal income and other tax rates, trade restrictions, availability of attractive investment opportunities in non-United States markets, availability of appropriate locations for new or relocated units, local real estate and other laws, ordinances and initiatives that may prevent us from building or relocating, or that impose limitations on our ability to build or relocate, stores in certain locations, availability of necessary utilities, weather conditions, availability of skilled labor, labor, material and other construction costs, insurance costs, operating expenses, interest rate fluctuations and other capital market conditions, and other factors and risks. The company discusses certain of these matters more fully in that Annual Report on Form 10-K for its fiscal year ended January 31, 2010, and this release should be read in conjunction with that Annual Report on Form 10-K and together with all of the company's other filings, including its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, made with the SEC through the date of this release. You are urged to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements. As a result of these matters, including changes in facts, assumptions not being realized or other circumstances, the actual implementation of the company's operating and other plans by one or more of its operating segments, its actual capital expenditures, unit growth, and square footage growth in one or more of its operating segments, the formats of the units built, the conversion of discount stores to supercenters by the Walmart U.S. segment, and the focus of the company's expansion may differ materially from the anticipated results described in these forward-looking statements. The forward-looking statements included in this release are made only as of the date of this release, and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

SOURCE Wal-Mart Stores, Inc.



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