Retail giant Wal-Mart Stores Inc. (WMT) buys the idea “small is profitable” and gears up for opening mid-sized Walmart Market stores immediately. Management has also announced that the company plans to open 90 to 100 stores in the year ending in January and 300 by fiscal 2013, up from 185 presently.
These mid-sized Neighborhood markets are more like traditional grocery stores, which enjoys same returns as the supercenters and entails lesser hassles in being approved and constructed.
Wal-Mart is getting even smaller with Wal-Mart Express, an apt way to regain its businesses that was lost to the dollar stores. Wal-Mart, the world’s largest retailer, opened its first "Walmart Express" store in Gentry, Arkansas, about six miles from the nearest Wal-Mart supercenter, in early June.
Walmart Express stores, occupying an area of 15,000 square feet, are roughly one-tenth the size of a Walmart supercenter and sell everything from fresh and frozen food to sheets and towels.
Walmart is opening Walmart Express outside of its home state for the first time in the small town of Richfield, North Carolina. Walmart is set to open in the Chatham neighborhood on Chicago’s South Side.
The projects are designed to reverse a sales slump in the U.S. that has lasted for eight straight quarters now. Wal-Mart had made some bad decisions in the past few years in the face of recession, and has been trying to reverse situation at its earliest opportunity.
Keeping this in mind, the company has embarked upon an experiment to create smaller sized stores, which would help cut costs and boost profit margins. It has been found that these small stores are more profitable than warehouse-sized shopping centers.
Moreover, continuously declining in-store traffic and stiff competition from dollar chains and drug stores, is forcing the company to scale down its super centers.
Wal-Mart is cashing on the popularity of dollar stores and other local drugstores that mushroomed during the recession as consumers were unable to pay higher prices for goods. If this strategy is adopted for the long term then mid-sized stores could be seen swarming throughout the U.S.
Currently, we maintain a Neutral rating on the stock. Further, Walmart holds a Zacks #3 Rank, which translates into a short-term Hold rating.
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