Wal-Mart Slows Down

Wal-Mart Stores Inc. (Bentonville, Ark.) announced it will cut back on new-store spending and tighten cost controls as sales growth slows over the next three years.

Chief financial officer Tom Schoewe told an investors and analysts conference that the retailer has trimmed plans for capital expenditures for the second time this year, to about $15 billion, slightly below a June forecast of $15.5 billion. The original projection was for $17 billion.

He said the retailer would shift capital away from its American stores and into overseas expansion, which will account for the bulk of its growth in the years to come.

Wal-Mart, finding fewer places to build new stores and facing tougher competition from other retailers, said sales will continue to slow after years of strong double-digit growth. Schoewe said sales growth will fall to 9 percent this fiscal year from nearly 12 percent the year before and then be between 5 and 8 percent the next two years.

The more efficient use of the retailer’s enormous cash cache will include building fewer giant supercenter stores. Wal-Mart’s annual square footage growth will decline from 8.8 percent last year to around 6 percent this year and between 5 percent and 6 percent in the next two years, according to Schoewe.

Wal-Mart will build between 190 and 200 supercenters this year and about 170 a year in the future. It had been building around 280 a year.

“No doubt that our work has been made more difficult by the current economic environment,” said Eduardo Castro-Wright, head of Wal-Mart’s U.S. stores.

Schoewe said Wal-Mart still has room for growth and reiterated the retailer’s decision to focus on low prices after its unsuccessful foray last year into more fashion and higher-end products. “Tough times are actually a good time for Wal-Mart,” he said. “Our customers care a lot about price and value, and that’s our business proposition.”

To bolster its home furnishings business, Wal-Mart said it would introduce proprietary licensed lines under the Better Homes and Gardens brand and it will expand its new home layout to more stores in 2008, focusing on new stores and remodels. The new layout features a “room solutions” orientation, navigational signage, lower-profile fixtures and “power walls” for power categories like towels.

“Our home brand portfolio is well-positioned to introduce new brands . . . and grow strong existing brands,” said Linda Hefner, executive vp, home.