Walmart slows growth plans

20 August 2012

NEW YORK: Walmart, the retail giant, is scaling back its expansion plans in markets like Brazil and China, instead allowing existing stores in these countries to focus on best practice execution.

Speaking to the Financial Times, Charles Holley, Walmart's chief financial officer, argued the pace of growth in this area had been simply too rapid. "Clearly we'd gotten ahead of ourselves," he said.

"We still feel very positive about those two countries ... It's all about us right now," he added. "[We want to] let them catch their breath."

As such, the organisation reduced its estimates of the new store square footage it would require this year by around 30%, broadly equivalent to the space taken up by 120 of its Supercentres in the US.

Doug McMillon, the CEO of Walmart International, expanded further on this topic, arguing the need to implement its "Every day low prices" (EDLP) strategy was more important than opening branches in Brazil.

"We decided to slow down our new store growth in Brazil to ensure we are building a solid foundation to grow comp sales and to have EDLP in place," he said.

When discussing China, a vital and rapidly-growing retail market, McMillon also revealed that the eagerness to enhance its store network had led to certain sub-optimal outcomes.

"In China, as with the rest of our markets, our customers want stores that are easy to shop, easy to get into and out of and are convenient for their lives," he said.

"In the past, we may have been too flexible and accepted stores that were located on too many levels or had difficult configurations. We now will open fewer stores this year than our original plan with only about half the new store square footage than we had forecast."

A similar decision has been taken regarding Mexico, partly due to a new approvals process that was instituted in response to accusations Walmart paid bribes to attain store permits several years ago.

"Our goal is to achieve profitability and returns that are more balanced and to do that, we must improve operational and sales productivity in some of our emerging markets," added Mike Duke, its CEO.

Data sourced from Financial Times, Reuters, Seeking Alpha; additional content by Warc staff