CFO offers new insights on an intriguing opportunity

Walmart CFO Charles Holley participated in the Citi Global Consumer Conference this past Tuesday, and he had the challenge of appearing just one week after Walmart released first-quarter results. Given the timing, it would have been reasonable to expect that he wouldn’t have a lot of new information to share, and while he certainly covered a lot of familiar ground, there was one area that stood out.

Holley went into greater detail regarding the company’s acquisition of 147 Netto stores in the U.K. than Walmart International president and CEO Doug McMillon did during the company’s first-quarter conference call. McMillon noted the company expects to complete the conversion of the stores to a new Asda small format this year at a cost of more than 100 million British Pounds. Holley elaborated on the stores’ square footage, product assortments and shared video that captured the extent of the conversion process in a time lapse format. http://your.asda.com/netto.

The Netto stores, six of which have already been converted, are about 8,500 square feet compared to a typical Asda stores which ranges from 20,000 to 100,000 square feet. As part of the conversion process the merchandise assortment is expanded from 1,800 items to 10,000 items.

“If you can imagine, that is going to be a big difference for the customers that are used to shopping in those areas,” Holley said. “They are going to have a much, much broader assortment of product. They are going to have the same very low Asda prices which are much lower than they would have seen at Netto.”

The developments in the U.K. and the speed at which the Netto units are converted is worth watching due to potential implications for the U.S. market. Walmart has the potential to achieve meaningful growth if it can figure out how to expand in urban areas and one possibility is to follow the Netto model. Basically, execute a real estate transaction that could give the company hundreds or possibly thousands of urban locations and then leverage the small format conversion expertise acquired in the U.K. to rapidly open food stores that double as pick-up locations for merchandise ordered online.

It could happen.