Expansion Curtailed

NEW YORK (AP) — Wal-Mart Stores Inc. cut its revenue outlook for its current fiscal year as it announced it is scaling back its expansion plans for its supercenters next year and stepping up investments in its online operations.

The world's largest retailer, blaming an overall tough economy, now expects annual sales to be up 2 to 3 percent for its fiscal year ending in January. That is down from its earlier guidance of sales growth at the low end of a 3 to 5 percent range.

Wal-Mart's diminished outlook increases concern about prospects for the critical holiday shopping season that kicks off late next month. It also comes on the same day that the government reported that September retail sales retreated from the prior month.

Wal-Mart is a barometer of consumer spending and its challenges reflect the continued struggles of its low-income shoppers who still feel squeezed by stagnant wages and reduced government food stamp benefits. It's also being tripped up by its own merchandising mistakes. 

As a result, Wal-Mart's namesake business, which accounts for 60 percent of its total business, hasn't reported growth in a key sales measure in six straight quarters.

Wal-Mart's shift away from its supercenters toward small stores and online also underscores how it must respond aggressively to a new era of shopping: Consumers are increasingly moving to mobile devices, while at the same time they're seeking the convenience of small stores.

It marks a big shift for Wal-Mart, which rose to power by rapidly expanding its supercenters that sell everything from pharmacy items to apples and jeans. The company said that it will add between 26 million and 30 million net retail square feet worldwide next year, a decrease from this year's expected 32 million to 34 million square feet. 

The company said it now plans to open 60 to 70 supercenter stores during its next fiscal year, down from the planned 120 this year. As a result, it's reducing its estimated range for capital spending next year to $11.6 billion to $12.9 billion, down from the expected $12.5 billion to $13 billion.

It's also conducting a major review of its U.S. Wal-Mart business and will update investors on its plans early next year, executives said.

"We'll give customers the choices they want and need by integrating digital and physical retail," said Doug McMillon, Wal-Mart's CEO and president, who took over the reins from Mike Duke in February. "We won't be just a store on the street. We'll support our customers' lives with them in the driver's seat, to save them money and time."

McMillon said that while Wal-Mart is facing some economic headwinds, he also noted there's a lot of room to improve store operations.

In the short term, that means keeping items that shoppers want in stock and speeding up checkout lines. Wal-Mart said it will open more cash registers than ever this holiday shopping season. It also needs to get better with its prices.

"There's no excuse for us not to be doing better," McMillon said.

Note:  Years ago, the A&P Grocery Store Chain rapidly expanded like Walmart and after several years, the curtailed expansion too and eventually went bankrupt because the "overhead" ate them up...