Wal-Mart rethinks 'self-cannibalization'
Execs tell analysts company now wants to develop existing stores to full potential before adding on more locations
By Parija Bhatnagar, CNNMoney.com staff writer

NEW YORK (CNNMoney.com ) - Wal-Mart executives told analysts Friday that the company will implement a "subtle change" to the current expansion strategy of opening new stores near older ones.

While Wal-Mart (Research) refers to its current plan as "market development," some Wall Street analysts have criticized it, calling it a "self-cannibalization" strategy.

At the retailer's annual talk to analysts in Rogers, Ark., John Menzer, vice chairman of Wal-Mart Stores, said the retailer was rethinking its growth gameplan.

"In the past, cannibalization was self-inflicted," Menzer said. "So if we served a market that had a three-store potential and we already had two well-performing stores, we would still open the third store."

"Now we're waiting on the third store," he said. "We want to let the first two stores develop and pick up [sales] volume to get the best returns on our investment. We can do this because we have plenty of projects to pick from."

In a Q&A session with analysts, Menzer hedged about whether Wal-Mart's new plan implies that the world's largest retailer is considering slowing down its square footage growth over the next few years. "We have so many store [locations] in our backlog," he said.

Menzer's presentation was monitored in New York via Webcast.

Wal-Mart already operates more than 2,000 U.S. supercenters that sell groceries, along with more than 1,300 discount stores and 100 other outlets. Such a large fleet of stores has raised concerns about Wal-Mart saturating its home base, with further expansion possibly taking away sales from its own stores.

Indeed, Wal-Mart's sales at stores open at least a year - a key retail measure known as same-store sales - have softened, leaving it behind rival discounter Target Corp (Research).

For its current fiscal year, Wal-Mart expects to add an additional 60 million square feet to its retail space by opening between 270 to 280 supercenter stores, 20 to 30 discount stores,15 to 20 smaller neighborhood market stores and 30 to 40 Sam's Club warehouse locations.


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