Wal-Mart slowing spread of stores in U.S.

But company says its international footprint will nearly double through 2010

— Wal-Mart Stores Inc. will scale back its U.S. growth plans by 2010 to about half the new retail space it added in its fiscal year that ended Jan. 31, the company said Tuesday.

The move comes as the world's largest retailer has worked to increase sales in existing stores, but it's been a struggle and has led to the company's stock taking a beating on Wall Street. It fell $1.32 - nearly 3 percent - Tuesday on the New York Stock Exchange to $43.93 a share and is down 19 percent from its high for the past year.

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The Bentonville-based retailer also forecast that its international retail space would nearly double from 2007 through 2010.

Wal-Mart detailed the plans in meetings with retail analysts at the John Q. Hammons Center in Rogers and in a conference call with reporters.

At the analysts' meeting, Wal-Mart executives also fielded pointed questions about their decision, announced Monday, to spend more than $860 million to buy out the shares it doesn't currently own in its Japanesesubsidiary. Seiyu Ltd. Seiyu is on track to lose money for the sixth-straight year.

Tom Schoewe, Wal-Mart's executive vice president and chief financial officer, said the slower U.S. growth is intended, in part, to avoid siphoning off sales from existing stores.

"Obviously, what we're trying to do going forward is toreduce the impact we have on ourselves," he said.

Wal-Mart's latest projections show its U.S. capital expenditures shrinking from $12.2 billion last year to a range of $8.3 billion to $9.2 billion in fiscal 2010. Over the same period, its international capital expenditures are projected to rise from $3.5 billion to a range from $5.3 billion to $5.8 billion.

The new growth plans also mark something of an end to an era: For the first time beginning with Wal-Mart's next fiscal year, the company forecasts building no more of its original-format discount stores.

"Having said that, we're an opportunistic bunch," Schoewe added. A new discount store will be built only if a site the company wanted would not work for a supercenter.

Wal-Mart currently operates more than 4,000 supercenters, discount stores, supermarkets and Sam's Club membership stores in the United States.

He said supercenters, too, are likely to shrink from their peak size of about 190,000 square feet to as small as 145,000 square feet, depending on where new stores are located.

Camille Schuster, a Californiabased retail consultant and a marketing professor, said Wal-Mart's moves appear to be an acknowledgment that the company "may have over-stored itself."

She said she sees potential for greater growth in the company's supermarket-only Neighborhood Market format. Sites are more readily available, particularly in heavily populated areas, and draw less community opposition, she said.

Wal-Mart currently operates 124 Neighborhood Market stores.

Eduardo Castro-Wright, president and chief executive officer of the company's Wal-Mart Stores division, told analysts that while the company's sales in stores open at least a year were "not what we would like it to be," they have trendedup the past two quarters.

"No doubt that our work has been made more difficult by the current economic environment," he said.

The company says many of its core customers are hurt, in particular, by high gasoline prices.

David Abella, an analyst at Rochdale Investment Management in New York, said Wal-Mart's reduced plans for U.S. store growth are positive news.

"I think focusing on cash flow and profitability is what they need to do at this point," Abella said.

Addressing analysts, Wal-Mart officials pointed out that the company's same-store sales in key categories were better than or not markedly different from competitors in the June-August period.

Its best category, compared with others, showed a 4.6 percent sales increase in electronics, while Best Buy Co. Inc. reported a 1.7 percent increase and Circuit City Stores Inc. reported an 8 percent decrease.

In the grocery business, Wal-Mart's same-store sales rose 4.8 percent to Kroger Co.'s 5.1 percent and Safeway Inc.'s 3 percent.

Questioning Wal-Mart executives about the company's Japan move, analysts drew comparisons to Wal-Mart's venture into Germany, which Wal-Mart exited last year.

"We've learned a lot, and the way we've entered Japan is different than the way we entered Germany," Schoewe said.

He said Wal-Mart sent a large contingent to study the Japanese market, including the high cost of doing business there, well ahead of the decision to make its move.

"There's very little that's similar between Japan and Germany," Schoewe said.

He said it's unlikely that Wal-Mart will report sales and earnings country by country, as one analyst requested. Currently, Wal-Mart reports results from its operations in 13 foreign countries collectively.

France's Carrefour SA, the world's second-largest retailer after Wal-Mart, pulled out of Japan in 2005 after four years of losses.

Information for this article was contributed by Marcus Kabel of The Associated Press.

Front Section, Pages 1, 8 on 10/24/2007

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