Spend less, build more is Walmart’s new slogan
Walmart said its worldwide capital expenditure budget for the 2014 will range between $11.8 billion and $12.8 billion, roughly $200 million less than the company expects to spend during the current year, even as it adds more selling space.
Despite the modest pullback, due largely to a curtailment of international activity, Walmart is likely to add more square feet of selling space next year than it did this year. The company’s forecast calls for between 33 million and 37 million additional square feet next year compared to the 34 million square feet the company expects to add by the time its current fiscal year ends.
The reason for the shift is an increase in domestic growth and a major pullback internationally. For example, Walmart originally planned to add between 20 million and 22 million square feet of new selling space internationally this year, but that figure is now expected to be 14 million square feet and could fall further next year with forecast growth ranging from 12 million to 14 million square feet.
Making up for a portion of the international decline is Walmat’s U.S. business which will gain between 19 million and 21 million square feet of new space next year after adding 18 million square feet this year, above the company’s earlier forecast range of 15 million to 17 million square feet.
“We’re spending in a disciplined manner by setting up a more streamlined real estate process. We continue to improve our sales per square foot and Walmart will continue to grow through new stores and e-commerce, while expanding our logistics and fulfillment network in critical markets,” said Wal-Mart Stores, Inc., president and CEO Mike Duke.
The 2014 store expansion program, released in conjunction with the company’s 20th annual fall investor conference is consistent with a “growth, leverage and returns,” commitment to investors and what CFO Charles Holley calls capital efficiency.
“We continue to make progress on capital efficiency, finding new ways to reduce construction costs for new stores and remodels and shortening the timeframe from approval to opening. Over the last three years, we delivered more with less, while growing square footage, sales and shareholder returns.”
Despite doing more with less, Holley was quick to add that Walmart isn’t shortchanging investments in technology that will enable the company’s omnichannel vision.
“Technology is our fastest growing area for capital expenditures,” Holley said. “We define technology investments as systems and Global e-Commerce capital dollars. We will increase our technology spend 70 percent from fiscal year 2009 through fiscal year 2014. Next year, investments in this area will increase another 12%.”