Wal-Mart Lowers Outlook Amid Push To Revitalize Sales

Wal-Mart Stores Inc. appealed to investors for patience Wednesday, as it tries to retool its operations for shoppers who are buying more online and in smaller stores closer to home.

The world’s largest retailer unveiled plans to slash the number of massive supercenters it plans to build in coming years in favor of investing more in e-commerce, which represents the fastest-growing part of its business but continues to generate operating losses.
The company said its yearly e-commerce sales could approach $35 billion by early 2018, up from $10 billion last year. But it warned of a rough stretch for sales and profits as it plows ahead with its overhaul.
Wal-Mart cut its forecast for sales growth in the current fiscal year to between 2% and 3% from a previous range of 3% to 5%, citing lower food-stamp payments and a stronger dollar, which eroded overseas gains when translated into its home currency.
“We have the tolerance to think long term and to be patient,” Chief Executive Doug McMillon told investors. “It will put short-term pressure on the company, but we believe you and others will support it as long as you understand the strategy.”
Citing what it called a tougher-than-expected sales environment, the company said it hadn’t witnessed any change in the general weakness of the economy or its customer base, and that it doesn’t foresee much improvement next year.
“Everywhere I travel, I see tough economies and stretched consumers, and that hasn’t changed through the course of the year,” Wal-Mart International Chief Executive David Cheesewright said Wednesday. The company expects sales to grow 2% to 4% next year.
Wal-Mart’s shares fell 3.6% to $75.20 Wednesday, a rough day for markets overall on mounting concerns about sluggish global growth. In midday trading on Thursday, the stock was off about 2%.
The giant retailer has found itself on the wrong side of trends in the U.S., as shoppers favor smaller and more conveniently located stores or making purchases online. In response, Wal-Mart said Wednesday it would build only about half as many supercenters next year as this year and would shift investment dollars to e-commerce.
“We will change the mix of our capital spend through reductions in areas we have invested in historically to fund investments in new growth opportunities,” Mr. McMillon said. “Overall capital range will be slightly lower than last year with a mix difference toward more e-commerce dollars.”

Wal-Mart said it plans to build 60 to 70 supercenters and between 200 and 220 smaller stores next fiscal year. It aimed to build as many as 300 smaller-format stores this year, but said it would miss that target and now intends to complete 240.
Meanwhile, the company plans to spend between $1.2 billion to $1.5 billion on e-commerce investments next year, up from $400 million last year. It said it will build two new 1.2 million-square-foot warehouses next year dedicated to handling Internet orders and speeding up shipments.
The two distribution centers, in Atlanta and Bethlehem, Pa., add to the three warehouses it built this year to process Web orders.
The retailer hasn’t booked sales growth in the U.S., excluding newly opened or closed stores, since 2012, as its crowds of shoppers have dwindled.
The company has posted much better results for its 400 Neighborhood Markets, where sales rose by 5.6% in the quarter ended July 31, excluding newly opened or closed stores.
Sales at its 3,400 supercenters fell by 0.3% during the same period.
Wal-Mart’s Sam’s Club unit also will cut its store openings in half next year, planning to open nine to 12 stores next year, down from 20 this year.
                                                                By SHELLY BANJO