Rather than opening as many stores as normal, this year Wal-Mart is limiting its store openings to about 24. Rather than spend big money on more new locations, Wal-Mart will focus its spending on increasing its internet sales, and developing its service businesses, like grocery delivery. Sarah Nassauer and Austen Hufford report:
The strategy is central to Wal-Mart’s plan to fend off Amazon.com Inc. and a sign that executives believe the profitable business based on cavernous stores that Wal-Mart built rapidly for decades won’t grow through expansion.
At an investor meeting on Tuesday at the retailer’s Bentonville, Ark., headquarters, executives said they would open only about two dozen U.S. stores in the 2019 fiscal year. Instead, Wal-Mart will remodel existing buildings and spend on its e-commerce infrastructure and services like home grocery delivery.
Though Wal-Mart’s “supercenters” have long been the most profitable part of its business, Amazon is grabbing a larger percentage of sales of many of the easily shippable products that line the aisle of Wal-Mart’s large-format stores.
Now Wal-Mart must find more ways to pay for the retail battle.
On Tuesday, it outlined plans to lower expenses as a percentage of sales from 21%, where it stands this fiscal year. Wal-Mart has started using zero-based budgeting in some corporate units and has made cost cuts as mundane as printing receipts on smaller strips of paper—a change that has saved $7 million so far this year.
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