US retail giant Wal-Mart has announced its intention to compensate for a slow-down in the rate of sales growth by slashing its budget for the opening of new stores and distribution centres.


The world’s largest retailer said yesterday (23 October) that it had “considerably” cut its capital expenditure plans for the next fiscal year, reflecting a drop in expected sales growth.


So far this month, like-for-like sales have increased by just 1% – below the company’s forecast growth of 2-4%.


The company said that next year it will open 600 new stores, half in the US and half overseas, adding around 60m square feet of new selling space, two-thirds of which will be in the US.


“We are still very committed to growth, but our real estate projects are now being subjected to a more rigorous prioritisation process,” said Wal-Mart vice chairman John Menzer.  “This store selection process will enable the company to drive higher returns by focusing on locations that make the most efficient use of capital.”

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Wal-Mart said it intended to increase its capital spending by 2-4% in fiscal 2008. This compares to the 15-20% increase it has forecast for the current financial year.


Tom Schoewe, Wal-Mart CFO, said the group’s capital expenditure growth had outstripped its square footage and sales growth for the past three years, partly because of escalating construction costs.


“Our long-term goal is to continue to have our capital expenditures grow at a rate equal to or less than our sales growth. Additionally, over time, we expect our new capital efficiency model to reduce the impact of cannibalisation,” he added.


Wal-Mart shares closed slightly higher yesterday at US$51.28, up from an opening value of $49.37, as the news eased analysts fears of an imbalance between investment levels and returns.