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Wal-Mart to cut costs by reducing store growth


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Wal-Mart to cut costs by reducing store growth

Wal-Mart Stores Inc. will limit its brick-and-mortar store growth in the United States, among other cost-saving measures, while it invests in e-commerce growth, executives said Oct. 10 at the company's Bentonville, Ark. headquarters.

"We are not where we want to be from an expenses standpoint," said Brett Biggs, Wal-Mart's CFO, during the annual investor meeting.

The big-box retailer will open fewer than 15 super centers and fewer than 10 Neighborhood Market locations in the United States during fiscal 2019, Wal-Mart announced in a press release before the investor meeting Oct. 10. In fiscal 2017, Wal-Mart opened 111 U.S. stores and 216 in fiscal 2016, according to a regulatory filing with the SEC.

Instead, Wal-Mart U.S. will prioritize remodeling existing stores and "digital experiences," the company said.

"If you think about super centers, they are largely built out," said Wal-Mart President and CEO Douglas McMillon during a Q&A with analysts at the investor meeting. "The choice we're making right now is to put the assets, the investments, towards e-commerce rather than that kind of opportunity."

Biggs also told analysts that Wal-Mart will use "zero-based budgeting," a measure where every expense must be justified for each new period, in different segments of the company. The company said it anticipates expenses as a percentage of sales to be lower in the next fiscal year, down from its current 21%.

Wal-Mart also said it expects to see a 40% spike in e-commerce sales in fiscal 2019, although Marc Lore, CEO and president of Wal-Mart U.S. e-commerce, declined to break down where that growth has come from in the past, between, or any of the company's digital platform acquisitions. Lore also said Wal-Mart is cutting "last mile" delivery costs by passing along those costs in the form of a fee to third-party crowd-sourcing tech companies like Uber Technologies Inc. and Deliv.

Wal-Mart's price per share hit $84.73 by midafternoon Oct. 10, up 5.2% on the day. Before the investor meeting, Wal-Mart announced a new $20 billion share repurchase program, which the company expects to utilize over a two-year period.