Wal-Mart has asked their investors to exercise patience as it prepares to cut back on its plans for superstores and make the shift to e-commerce operations to take advantage of the shift in consumer spending to online shopping and using smaller stores which are closer to home.
The group stated that its annual e-commerce sales could reach $35bn by the start of 2018, which would be an increase of $10bn on last year. However, it issued warnings that there is a rough time ahead for sales and profits as it commences with its new strategy.
Wal-Mart adjusted its sales growth figures for the current fiscal year to figures between 2% and 3%, down from a previous 3% to 5%. It attributed this decline to a stronger dollar, which cut into their overseas gains upon exchange, and lower food-stamp payments.
Its chief executive, Doug McMillon, told investors that they can tolerate these long-term plans, but require patience. He is aware that it will result in short-term pressure on the company. The company said it has not noticed any change in the overall economy weakness or in its customer base, but it does not see an improvement over the next year.
The group’s shares decline by 3.6% to $75.20 mid-week.
The massive retailer has been on the bad side of trends within the US as they see consumers favoring conveniently located smaller stores or using the internet for their shopping. In response to this, the chain stated that it would only build about half as many supercenters next year and would rather move its investments to e-commerce.
It plans to erect around 60 to 70 supercenters and around 200 to 220 smaller stores during the next fiscal year. It had planned to build around 300 smaller stores during the current year, but that target has been missed and has been re-calculated to 240.
The company has plans to spend between $1.2m and $1.5m on e-commerce next year. This is an increase of $400m over last year. It plans to build two new 1.2million sq ft warehouses during next year, to speed up shipments and to handle online orders. The two centers, to be based in Bethlehem, Pa. and Atlanta, will add to the three existing warehouses which were built for the processing of online orders.
Due to a decline in shopper numbers, the group has not seen a sales growth in the US, with the exclusion of closed or new stores, since 2012.
Its 400 Neighborhood Markets have shown an increase in sales of 5.6% for the three-month period ending July 31, with the exclusion of closed or newly opened stores.
Sales for its 3400 supercenters experienced a decline of 0.3% for the same period.
The retailer’s Sam’s Club unit will decrease the number of store opening by 50% next year. It plans to open nine to 12 stores during next year, a decline compared to 20 during this year.
