NEW YORK | Wal-Mart is accelerating the expansion of small stores, particularly its Neighborhood Market stores, as it looks to compete with a variety of rivals from dollar stores to drug chains.
“This gives us the opportunity to build more stores for less money,” Bill Simon, president of Wal-Mart’s U.S. division told Wall Street analysts gathered at a meeting near the giant retailer’s headquarters in Bentonville, Ark.
Mr. Simon said it plans to have 500 Neighborhood Market stores and 12 Express stores by fiscal 2016.
As of the end of July, Wal-Mart had 10 Express stores and had ramped up its Neighborhood Market concept to 217 locations.
Investors were buoyed by the news, sending Wal-Mart’s stock up $1.28, or nearly 2 percent, to $75.42 in trading on the New York Stock Exchange Wednesday.
The focus on small stores is part of Wal-Mart’s overall strategy to continue increasing sales while becoming more efficient with its capital expenditures across the globe. Its U.S. namesake business is roaring back by featuring rock-bottom prices, and officials say they want to apply that same discipline to how the company approaches its store expansion.
In its international business, which accounts for about a quarter of its business, Wal-Mart reiterated that it will be slowing expansion in China and Brazil as it works hard to make those stores more productive. And while the company says it won’t miss an important opportunity to make an acquisition overseas, it’s primarily focusing on existing markets.
“We have a lot of invested capital, and we need to generate returns there,” said Wal-Mart International President and CEO Doug McMillon.
In the U.S., Mr. Simon said, Wal-Mart’s small stores, which range from 10,000 square feet to about 55,000 square feet, compete well with a broad variety of merchants.
Neighborhood Market stores have generated a 5 percent increase in revenue at stores open at least a year for the first half of 2012. That’s more than double the growth rate of Wal-Mart’s average store.
Express stores are less than one-tenth the size of Wal-Mart supercenters. They offer groceries, pharmaceuticals and general merchandise like tools. Neighborhood Markets are more than twice the size of Express stores and offer perishable food, household supplies and beauty aids as well as a pharmacy.
The news comes as Wal-Mart’s shares are up more than 24 percent since early this year. That’s been fueled by a sustained turnaround of its namesake business in the U.S.
Wal-Mart last year began adding back 10,000 products and refocusing on keeping prices low throughout the store, backing the strategy with TV campaigns. It has done that by cutting expenses and passing some of the savings on to customers. As a result, starting late last year, it’s been able to turn around a more-than-two-year slump in revenue at stores opened at least a year. The metric is considered a key indicator of a retailer’s health.