Company Focuses on Free Cash Flow & Returns
BENTONVILLE, Ark., Oct. 23 -- Wal-Mart Stores, Inc. (NYSE: WMT) today updated its plans for growth for the current fiscal year, and provided details about its worldwide expansion plans. The strategic plan outlined today centers on the Company's capital efficiency model to improve free cash flow and to provide stronger returns for Wal-Mart Stores U.S. and the Company. The plan allows Wal-Mart to better serve its customers and continue to increase sales. Wal-Mart defines free cash flow as net cash provided by operating activities, less capital expenditures.
"We continue to focus on increasing operating cash flow, in addition to moderating capital expenditures," said Tom Schoewe, Wal-Mart Stores, Inc. executive vice president and chief financial officer. "This strategy will increase free cash flow, allowing Wal-Mart to fund strategic acquisitions and provide returns for our shareholders through dividends and share repurchase."
Total capital spending for the current fiscal year 2008 is projected to be approximately $15 billion, down from $15.7 billion last year. Looking forward, total capital spending will flatten. Wal-Mart will continue to accelerate its investment in its International operating segment during the next two fiscal years. New store growth remains part of the Wal-Mart Stores U.S. strategy and more emphasis will be placed on relocating and expanding existing discount stores to supercenters during the same time periods. Declines in capital spending at Wal-Mart Stores U.S. will be offset by increases at Wal-Mart International, resulting in worldwide spending of $14 to $15 billion in each of the next two years.
The Company provided the following projected details on its capital spending for all purposes:
Capital Expenditure Detail (US$ billions)
Actual Projected FY08-FY10
FY07 FY08 FY09 FY10
Total Wal-Mart & Sam's U.S. $12.2 $10.3-10.8 $8.7-9.9 $8.3-9.2
Total International $3.5 $4.4-4.6 $4.8-5.3 $5.3-5.8
Total WMT Inc. $15.7 $14.7-15.4 $13.5-15.2 $13.6-15
The Company expects to add 48 to 49 million square feet globally, which is an increase of 6 percent in fiscal year 2008 over fiscal year 2007. During each of the following two fiscal years, Wal-Mart expects to increase square footage between 48 million and 52 million square feet, an increase of 5 to 6 percent.
Additional Square Footage Detail for Growth
Actual Projected FY08-FY10
FY07 FY08 FY09 FY10
Additional U.S. Sq. Ftg. 45M 29M 25-27M 20-22M
Additional Int'l Sq. Ftg.* 17M 19-20M 24-25M 28-30M
Additional WMT Inc. Sq. Ftg.* 62M 48-49M 49-52M 48-52M
* Without acquisitions.
Wal-Mart U.S. Focused on Supercenters
Wal-Mart is executing the plan announced June 1, 2007 to moderate its U.S. supercenter growth. The Company expects to open 195 supercenters in the United States this year, down 30 percent from the 281 opened during last fiscal year. Projections for next fiscal year and the following year call for 170 and 140 supercenters respectively, including expansions and relocations.
Eduardo Castro-Wright, Wal-Mart Stores U.S. president and chief executive officer, pointed out that supercenters have a higher rate of return than any other format in the United States and the Company will continue to focus on building the supercenter brand.
"As part of this effort, the Company will focus on expansions and relocations of existing discount stores to supercenters, which will result in building fewer new stores. We also are building smaller supercenters, particularly in more condensed trade areas in established markets," Castro-Wright said. "And, we will concentrate on markets with the greatest growth potential."
Sam's Club to Grow at Similar Rate
Sam's Club will continue its expansion at a rate similar to fiscal year 2008, with approximately 25 new, expanded or relocated U.S. facilities per year in fiscal year 2009 and fiscal year 2010.
"Our Sam's Club growth will focus on markets with the highest potential to serve both small businesses and Advantage or individual members," said Doug McMillon, Sam's Club president and chief executive officer. "Our goal is to optimize the number, size and location of our clubs to maximize capital efficiency for the Company in the club format."
Actual Projected Growth of U.S. Units
FY07 FY08 FY09 FY10
Wal-Mart Discount Stores 15 7 0 0
Supercenters 281 195 170 140
Neighborhood Markets 12 22 25 25
Total Wal-Mart Stores U.S. 308 224 195 165
Sam's Club 32 26 25 25
Total U.S. Units 340 250 220 190
Both the Wal-Mart U.S. supercenter and Sam's Club's units include expansions and relocations. In the United States, the Company plans to add two cross-dock facilities to its Sam's Club logistics network in fiscal year 2009. These distribution centers are expected to add approximately 100,000 square feet of distribution space to support its U.S. locations. There are no plans to build distribution centers for Wal-Mart Stores U.S. during the next two years.
Wal-Mart International Growing at Faster Rate
Wal-Mart International will continue to have a faster growth rate than the Company's U.S. operations.
"The International growth will be concentrated in emerging markets with strong growth potential, as well as established markets which can deliver consistently strong returns," said Mike Duke, vice chairman responsible for International. "Investments are providing improved returns in Wal-Mart International and unit growth will continue to cover a wide range of formats."
Capital Efficiency Model Drives Real Estate Decisions
"Since late last year, every real estate project around the world has been evaluated based on a tighter capital efficiency model," Schoewe explained. "This model prioritizes locations that make the most efficient use of capital, reduce impact on existing units and drive higher returns. We continue to be very focused on this process."
Additional Shares Repurchased
Schoewe explained that the strategy to improve free cash flow has allowed the Company to accelerate its share repurchase.
Wal-Mart announced on June 1, 2007 that its Board of Directors had approved a share repurchase program that increased the Company's authorization to $15 billion. As of October 19, 2007, the Company had purchased approximately 106.7 million shares, worth approximately $5 billion, since the beginning of the fiscal year, a significant increase over the prior year.
Wal-Mart Stores, Inc. operates Wal-Mart discount stores, supercenters, Neighborhood Markets and Sam's Club locations in the United States. The Company operates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom. The Company's securities are listed on the New York Stock Exchange under the symbol WMT. More information about Wal-Mart can be found by visiting http://www.walmartfacts.com. Online merchandise sales are available at http://www.walmart.com and http://www.samsclub.com.
This release contains statements that Wal-Mart believes are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and 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 "allowing," "allows," "are expected," "expects," "is projected," "plans," "projected," "projections," "will be," "will be offset," "will be placed," "will continue," "will flatten," "will focus," "will increase," "will result," or a variation of the foregoing words or phrases in these statements. These statements discuss, among other things, management's expectations for or concerning: our strategic plan allowing us to serve an increasing number of customers and grow top line sales, certain strategies generating increasing free cash flow to fund strategic acquisitions and provide returns to shareholders through dividends and share repurchase; continued acceleration of investment in our International operating segment; placing emphasis on relocating and expanding discount stores in the United States over a certain period; the offset of declines in capital spending at our Wal-Mart Stores U.S. segment by increases in capital spending in our International operating segment; our capital expenditures for fiscal years 2008, 2009 and 2010; the increase in global square footage in fiscal years 2008, 2009 and 2010; the number of supercenters to be opened in the United States in fiscal years 2008, 2009 and 2010; our continued focus on building the supercenter brand; focusing on expansion or relocation of more discount stores to supercenters and the resulting building of fewer new stores; focusing Wal-Mart U.S. expansion in the United States on markets with the greatest growth potential; the continued rate of expansion of our Sam's Club segment in fiscal years 2009 and 2010; our Sam's Club segment's focus on growth in markets with the highest potential to serve both small businesses and Advantage or individual members; the addition of new Sam's Club distribution centers and the size of those centers; our International operating segment continuing to have a faster growth rate than our U.S. operations; the concentration of our International operating segment's growth in emerging markets with strong growth potential and established markets that can deliver consistently strong returns; and unit growth in our International operating segment continuing to cover a wide range of formats. Also included in the forward-looking statements in this release is the information contained in the charts entitled "Capital Expenditure Detail," and "Additional Square Footage Detail for Growth" and the chart relating to actual and projected growth of U.S. units, which information relates to capital expenditures to be made, square footage to be added and growth in U.S. units during fiscal years 2008, 2009 and 2010. These forward-looking statements are subject to risks, uncertainties and other factors, domestically and internationally, including competitive pressures, geopolitical conditions and events, inflation, consumer confidence, spending patterns and debt levels, currency exchange fluctuations, 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 us from building or relocating, or that impose limitations on our 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. We discuss certain of these matters more fully in that Annual Report on Form 10-K for our fiscal year 2007; this release should be read in conjunction with our Annual Report on Form 10-K and together with all our other filings, including 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. As a result of these matters, including changes in facts, assumptions not being realized or other circumstances, our actual unit growth, retail space growth, the formats of the units built, the growth and rate of growth in our capital expenditure budget and capital expenditures in one or more fiscal years and the focus of our 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 report and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.
SOURCE Wal-Mart Stores, Inc.
-0- 10/23/2007
/CONTACT: Investor Relations, +1-479-273-8446, or Carol Schumacher.
+1-479-277-1498, or Anthony Clark +1-479-277-9558, or Media Relations, John
Simley, 1-800-331-0085, all of Wal-Mart Stores, Inc./
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(WMT)
CO: Wal-Mart Stores, Inc.
ST: Arkansas
IN: REA
SU: ERP
KB-ND
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