Doubts about Wal-Mart growth plan
Paper says that despite analyst criticism, the retailer will keep pitting new stores against its existing outlets.
NEW YORK (CNNMoney.com) - Wal-Mart will continue its strategy of pitting new stores against existing ones, even though the move has raised eyebrows on Wall Street, according to a report published Thursday. Despite sapping sales of existing stores, the world's largest retailer says it plans to expand the total amount of square footage it operates by eight percent this year and to open 370 new stores, which also includes relocations and expansions, the Wall Street Journal reported. The move, which has weighed on same-store sales ending Jan. 31 to an expansion pace of 3.4 percent, down from nine percent in the late 90s, has prompted calls for change, the paper reported. At the same time, the strategy has delivered a lower return on every dollar spent on expansion, according the Journal. Some have urged the company to scale back its expansion and instead pour money into existing stores, the Journal said. "What hurts the company and ultimately the value of its stock price is if you're paying more for the real estate but getting less and less out of it," Morgan Stanley analyst told Gregory Melich told the paper. Wal-Mart denied requests by the paper to comment on its expansion strategy. But the retail giant has defended the practice in the past, noting that cannibalizing existing stores can help drive overall sales in a particular market, while future population growth will help fuel sales and profit growth over time, the paper said. "It's a near-term hit for long-term opportunity," Goldman Sachs analyst Adrianne Shapira told the Journal. _____________ Wal-Mart is putting the squeeze on vendors -- click here. |
|