Wal-Mart is looking to slow down the rate of its capital expenditures and that means it will build fewer new stores in the coming years.
The company's CFO Tom Schoewe said capital spending in fiscal 2008 will likely come in under four percent. That compares to the 15 to 20 percent increase in capital spending Wal-Mart projected for this year.
"In the past three years, capital expenditure growth has been higher than square footage and sales growth," said Mr. Schoewe in a company press release. "During our next fiscal year, we expect that square footage growth will be around 7.5 percent. International square footage is expected to increase approximately 10 percent and U.S. square footage is expected to increase approximately 7 percent."
Even with it slowing down, Wal-Mart expects to open up to 660 new stores here and in foreign markets.
John Menzer, vice chairman of Wal-Mart, said, "We are still very committed to growth, but our real estate projects are now being subjected to a more rigorous prioritization process," Wal-Mart Vice Chairman John Menzer said. "This store selection process will enable the company to drive higher returns by focusing on locations that make the most efficient use of capital."
"Supercenters will continue to be our primary driver for expansion in the United States," Mr. Schoewe said. "Internationally, our unit growth will cover a wide variety of formats, from large units like Wal-Mart supercenters and Sam’s Clubs, to smaller retail locations like Despensa Familiar in Wal-Mart Central America, Bodega Aurrera in Mexico, and Bompreço in Brazil."
The company said it plans to open up to 270 new Supercenters, 10 discount stores, 20 Neighborhood Markets and 30 Sam's Clubs.
Discussion Question: What do you make of Wal-Mart's announcement that it would slow capital expenditures and open fewer new stores during the next fiscal year?