Walmart announces FY2013 global capital expenditure program of $13 to $14 billion; Company sets five-year commitment for greater operating expense leverage

  • Walmart U.S. delivers three consecutive months of positive same store sales.
  • FY12 capital expenditures, including acquisition-related expenditures, will range from $13 to $14 billion.
  • FY13 capital expenditures are expected to be flat with updated FY12 guidance.
  • New stores will add between 45 and 49 million square feet worldwide next fiscal year.
  • Walmart plans to grow next year's sales by 5 to 7 percent.
  • Walmart will leverage operating expenses for the current fiscal year and will reduce operating expenses as a percentage of sales by more than 100 basis points over the next five years.
  • International investment continues to prioritize growth of emerging markets.

BENTONVILLE, Ark., Oct 12, 2011 (BUSINESS WIRE) -- Wal-Mart Stores, Inc. (NYSE: WMT) today announced that its Walmart U.S. operating segment has delivered three consecutive months of positive same store sales. The company also announced its growth plans for next fiscal year at its annual conference for the investment community. Comparable store sales growth remains the first growth priority for the company's three operating segments, along with new store growth through disciplined, more productive capital spending. The company also outlined a goal to reduce operating expenses as a percentage of sales significantly during the next five years. The savings will be invested into lower prices for U.S. customers and improved international profitability.

Walmart U.S. President and CEO Bill Simon told the investment community that same store, or comparable store sales, have been positive on the 4-5-4 retail calendar for three consecutive months starting in July. The company will disclose Q3 comp sales on the 4-5-4 calendar in its third quarter earnings release on Tues., Nov. 15.

At the meeting, the company also updated its capital spending forecast for the current fiscal year ending Jan. 31, 2012 to between $13.0 and $14.0 billion, which includes acquisition-related expenditures. Walmart expects to hold capital spending for next fiscal year within the same range. The company forecasted sales growth between 5 and 7 percent for fiscal year 2013.

"We continue to prioritize growth, leverage and returns in our commitment to increase shareholder value," said Wal-Mart Stores, Inc. President and CEO Mike Duke. "We will grow comparable store sales across our three operating segments, and we will leverage innovation, systems and processes to improve our overall productivity."

Two years ago, under Duke's leadership, the company re-energized the productivity loop, a process in which an everyday low cost structure enables everyday low prices for its customers.

"When we close this fiscal year, we will have leveraged operating expenses as a percentage of sales for two consecutive years," said Charles Holley, Wal-Mart Stores, Inc. executive vice president and CFO. "We will build on this accomplishment and commit to reduce operating expenses as a percentage of sales more than 100 basis points over the next five years. This will allow Walmart U.S. to invest in price and widen the price gap between our competitors and us. It also will help enable our International segment to improve operating margins in the emerging markets."

"Our business model is built on our promise that Walmart customers can count on us to deliver low prices every day across a broad assortment," Holley explained. "This in turn leads to customer loyalty and higher sales. These growth and leverage initiatives will contribute to our strong earnings growth."

Capital Expenditure Details for FY2013

Projected capital expenditures are as follows:

Capital Expenditure Detail

(US$billions)

Actual

Projected

FY12 -

FY13

% Change*

FY11 FY12 FY13
Walmart U.S. $7.3B $6.5 - $7.0B $6.0 - $6.5B -7.4%
Walmart International $3.9B $4.0 - $4.5B $4.5 - $5.0B 11.8%
Sam's Club U.S. $0.7B ~$1.0B ~$1.0B Flat

Corporate & Other

$0.8B ~$1.0B ~$1.0B Flat
Total Company (without acquisitions) $12.7B $12.5 - $13.5B $12.5 - $13.5B Flat
Post Acquisition Capital ~$0.5B ~$0.5B
Total Company (with acquisitions) $12.7B $13.0-$14.0B $13.0 - $14.0B

*Projected capital expenditure growth rates are based on the midpoint of the specified range and assume currency exchange rates remain stable.

In FY12, Walmart expects to add between 36 and 39 million square feet globally. This includes 1 to 2 million square feet of post acquisition investment related to the company's Massmart acquisition. In FY13, Walmart plans to add between 45 and 49 million square feet. This is inclusive of 4 to 5 million square feet of post acquisition investment, which includes further square footage growth in the Massmart operations, as well as square footage acquired from the recent purchase of the Zellers assets in Canada. The capital for Netto will be entirely devoted to remodels and will not add to any incremental square footage in either FY12 or FY13.

Forecasts for Walmart U.S. and Sam's Club units include expansions, relocations and conversions. Square footage growth is projected as follows:

Square Footage Growth by Segment (Net)

(in millions)

Segment Actual Projected
FY11 FY12 FY13
Walmart U.S. 11 10 - 11 14 - 15
Sam's Club U.S. 1 1 1
Walmart International (without acquisitions) 21 24 - 25 26 - 28
Total Company 33 35 - 37 41 - 44
Post acquisition investment* 1 - 2 4 - 5
Total Company (with acquisitions)

36 - 39 45 - 49

*Stores acquired this fiscal year through Netto and Massmart acquisitions added approximately

19 million square feet. Additional capital investment will fund square footage of 1-2 million this year.

Total U.S. Unit Growth (Gross)

Format Actual Projected
FY11 FY12 FY13
Large Format (>60,000 sq. ft.) 153* 117 - 120 130 - 135
Medium & Small Formats (<60,000 sq. ft.) 1 25 - 30 80 - 100
Sam's Club 9 8 - 10 10 - 15
Total U.S. Units 163 150 - 160 220 - 250

*Includes 43 remodeled conversions to supercenters

Walmart U.S. Details

For fiscal year 2013, Walmart U.S. will decrease its capital spending by approximately $500 million versus the previous year, to a range of $6.0 to $6.5 billion. The forecast covers new stores, remodels, logistics and technology infrastructure and is designed to add between 210 and 235 new units that will expand its retail space by approximately 14 to 15 million square feet.

The forecasted increase in Walmart U.S. square footage from FY12 to FY13 is the result of a larger percentage of new supercenters compared to prior years, as well as growth in the number of medium and small format stores.

"Beyond our priority of comp sales growth, supercenters remain the primary growth vehicle for Walmart U.S. and the company will reduce construction costs on the new stores through value-engineering initiatives," said Simon. "We have identified a large number of potential Neighborhood Market opportunities, and we plan to open between 80 and 100 medium to small formats next year."

Walmart U.S. will continue to review the success of its Express format. Currently, five Walmart Express stores are open and plans call to add six more before the end of the fiscal year.

"The rollout of Walmart Express is predicated on the review of our pilot program, and the opportunity to build greater scale in a particular market," Simon said. "We will continue to pursue a balanced approach to market share growth in low, medium and higher share markets. In addition, we continue to reduce the cost and scope of our remodel program to increase efficiency and to minimize customer disruption."

Walmart U.S. will increase the productivity of its capital allocation.

"We also will bring down the cost of building in all of our operations and we will continue to reduce the cost of remodels," said Simon. "For next year, Walmart U.S. will build more square footage with fewer dollars. We plan to decrease U.S. construction costs by 10 percent and will further gain leverage on our remodeling costs."

Walmart International Details

Capital expenditures for the current fiscal year in Walmart International will range from $4.0 to $4.5 billion before acquisitions in FY12 and will rise to a range of $4.5 to $5.0 billion before acquisitions for FY13. New stores, without any impact from acquisitions, are expected to account for between 26 and 28 million square feet next year as compared to an additional 24 to 25 million square feet projected for this year.

"We continue to prioritize our investment in the emerging markets of China, Brazil and Mexico," said Doug McMillon, Walmart International president and CEO. "We remain focused on driving growth and improving our overall returns. We will build scale in existing markets and continue to evaluate acquisitions to enter additional large, higher growth markets."

Sam's Club

Sam's Club plans to spend approximately $1 billion in capital in FY13, flat with the current fiscal year. For fiscal year 2013, Sam's Club expects to add between 10 and 15 new, expanded or relocated clubs within the U.S., with approximately half of its capital committed to remodeling.

About Walmart

Wal-Mart Stores, Inc. (NYSE: WMT) serves customers and members more than 200 million times per week at 9,700 retail units under 69 different banners in 28 countries. With fiscal year 2011 sales of $419 billion, Walmart employs more than 2 million associates worldwide. Walmart continues to be a leader in sustainability, corporate philanthropy and employment opportunity. Additional information about Walmart can be found by visiting http://walmartstores.com/default.aspx.

Forward-looking information

This release contains statements that the company believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. Except as noted below, these forward-looking statements are identified by use of the words or phrases "allows," "are based," "are expected," "committed," "committed to reduce," "continue," "continues," "expects," "forecast," "forecasted," "forecasts ... include," "goal," "is projected," "leads to," "plan," "plans," "prioritize," "priority," "projected," "remain," "will add," "will also continue," "will be," "will be invested," "will bring down," "will build," "will ... commit," "will continue," "will contribute," "will decrease," "will expand," "will fund," "will further gain," "will grow," "will have," "will have leveraged," "will help," "will increase," "will leverage," "will not add," "will range," "will reduce," "will rise," "FY 12 - FY 13 YoY %," or a variation of the foregoing words or phrases in these statements, in the descriptions of certain assumptions on which forecasts or projections are based and in captions to certain of the columns contained in the tables included in this release. The forward-looking statements discuss, among other things: management's expectations regarding the capital expenditures (also referred to as "capital spending") in fiscal year 2012 and fiscal year 2013 for the company, its operating segments, corporate and other and for post-acquisition capital and expenditures; management's expectations regarding the growth in square footage for the company and each of its operating segments and through post-acquisition investment in fiscal year 2012 and fiscal year 2013; management's plans for the growth of the company's sales in fiscal year 2013; management's expectations regarding the leveraging of operating expenses for fiscal year 2012; management's plans and expectations regarding the reduction of the company's operating expenses as a percentage of sales significantly and by more than 100 basis points over the next five years and the investment of the savings in lower prices for customers and improved international profitability; management's continuing prioritization of growth in emerging markets by the company's Walmart International operating segment; management's continuing prioritization of growth, leverage and returns and growth in comparable store sales in each of the company's operating segments, along with new store growth through disciplined, more productive capital spending; management's expectations for growth in comparable store sales across its three operating segments and leveraging of innovation, systems and processes to improve the company's overall productivity; management's expectations that the company will have leveraged operating expenses as a percentage of sales in fiscal 2011 and fiscal 2012 and that the company will build on that accomplishment and commit to reduce operating expenses as a percentage of sales more than 100 basis points over the next five years, allowing the company's Walmart U.S. operating segment to invest in price and widen the price gap between the company and its competitors and helping to enable the company's Walmart International operating segment to improve operating margins in emerging markets; management's expectation that its every day low price operating philosophy will lead to customer loyalty and higher sales; management's expectation that the company's growth and leverage initiatives will contribute to strong earnings growth; management's expectations for the year-over-year changes in capital expenditures from fiscal year 2012 to fiscal year 2013; management's expectations regarding square footage growth for the total company and each of the company's operating segments and through post-acquisition investment in fiscal year 2012 and fiscal year 2013, the square footage growth through post-acquisition investment in Massmart and in the company's Canadian operations in fiscal year 2013 and capital expenditures relating to the Netto stores being for remodeling only and not resulting in incremental increases in square footage; management's expectations regarding growth in the number of units in the United States for various formats for the company's Walmart U.S. operating segment and for the company's Sam's Club operating segment; management's expectations regarding a decrease in the capital spending by the Walmart U.S. operating segment from fiscal year 2012 to fiscal year 2013, growth in new units and retail square footage of the Walmart U.S. operating segment in fiscal year 2013, the increase in the Walmart U.S. operating segment's square footage from fiscal year 2012 to fiscal year 2013 resulting from a larger percentage of supercenters compared to prior years and the growth of medium and small format stores, supercenters remaining the primary growth vehicle for the operating segment beyond the priority of comparable store sales growth, the reduction of construction costs on new stores through value-engineering initiatives, the number of openings of medium and small format units by the Walmart U.S. operating segment in fiscal 2013, the continued review of the success of the Walmart Express format and the addition of more Walmart Express stores in fiscal year 2012, the basis for the rollout of Walmart Express, the continued pursuit of a balanced approach to market share growth by the Walmart U.S. operating segment, the continued reduction in cost and scope of the remodel program by the Walmart U.S. operating segment, increased productivity of the operating segment's capital, the reduction in the costs of building in all of such operating segment's operations and of remodels, the building of more square footage with fewer dollars and decreasing construction costs by 10% and gaining leverage on remodeling costs in the Walmart U.S. operating segment; management's expectations regarding capital expenditures of the company's Walmart International operating segment for fiscal year 2012 and fiscal year 2013 and continued prioritization of investment in the emerging markets of China, Brazil and Mexico, the growth in square footage through new store openings in fiscal year 2012 and fiscal year 2013 in the Walmart International operating segment and such operating segment's continued focus on driving growth and improving its overall returns and continuing to evaluate acquisitions to enter additional markets as the operating segment builds scale in existing markets; management's expectations regarding the number of new, expanded and relocated clubs to be added by the Sam's Club operating segment in fiscal year 2012 and the commitment of approximately half of that operating segment's allocated capital to remodeling; and certain assumptions on which certain of such expectations are based. Also included in the forward-looking statements in this release is the information contained in the charts entitled "Capital Expenditure Detail," "Square Footage Growth by Segment (Net)," and "Total U.S. Unit Growth (Gross)," which information relates to capital expenditures to be made and square footage growth and units to be added in the United States during each of fiscal year 2012 and fiscal year 2013. These forward-looking statements and the information in the charts described above are subject to risks, uncertainties and other factors, domestically and internationally, including general economic conditions, including the effects of the current economic situation, competitive pressures, geopolitical conditions and events, inflation, deflation, consumer confidence, credit availability, spending patterns and debt levels, currency exchange fluctuations, unemployment and partial employment rates, personal income and other tax rates, trade restrictions, availability of attractive investment opportunities in non-United States markets, availability of appropriate locations for new or relocated units, local real estate and other laws, ordinances and initiatives that may prevent the company from building or relocating, or that impose limitations on its ability to build or relocate, stores in certain locations, availability of necessary utilities, weather conditions, availability of skilled labor, labor, material and other construction costs, insurance costs, operating expenses, interest rate fluctuations and other capital market conditions, and other factors and risks. The company discusses certain of these matters more fully in its Annual Report on Form 10-K for its fiscal year ended January 31, 2011, and this release should be read in conjunction with that Annual Report on Form 10-K and together with all of the company's other filings, including its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, made with the SEC through the date of this release. You are urged to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release. As a result of these matters, including changes in facts, assumptions not being realized or other circumstances, the actual implementation of the company's operating and other plans by one or more of its operating segments, its actual capital expenditures, unit growth, and square footage growth in one or more of its operating segments, the formats of the units built, the conversion of discount stores to supercenters by the Walmart U.S. segment, and the focus of the company's expansion may differ materially from the anticipated results described in these forward-looking statements. The forward-looking statements included in this release are made only as of the date of this release, and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

SOURCE: Wal-Mart Stores, Inc.

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