Wal-Mart's Future: World's Largest Retailer Marches Toward $500 Billion in Annual Sales

by Mark Friedman  on Monday, Jul. 2, 2012 12:00 am  

While domestic sales have flatted out, China is a growth market for Wal-Mart, which already employs more than 100,000 in 370 Chinese stores.

It won’t be long before Wal-Mart Stores Inc. of Bentonville generates a half-trillion dollars in revenue in a single year.

It’s close now. For its fiscal year that ended in January, Wal-Mart reported $446.95 billion in revenue, up 5.9 percent from the previous year. And for Wal-Mart’s first quarter of this year, the world’s largest retailer reported revenue of $113.02 billion, up 8.5 percent from the same quarter last year. Its profit was $15.7 billion for the fiscal year that ended in January, down 4.21 percent from a year ago. But for the first quarter, its profit was up 10.1 percent to $3.7 billion.

The future looks bright for continued sales growth for the retail chain, which has more than 4,400 stores in the Unites States and more than 5,600 locations scattered across 26 countries.

“They’ll keep growing because there’re plenty of countries to grow in,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm in New York. “There are plenty of things to add.”

While the fuel of revenue growth is expected to come from its international division, Wal-Mart is positioning itself to boost its disappointing online sales while continuing to tackle some of the few remaining areas in the United States that it’s not in.

“I think you’ll see them going into smaller stores in the United States, at least considerably more than they have in the past,” said Ken Stone, an emeritus professor of economics at Iowa State University, who has studied Wal-Mart since the 1980s.

In June 2011, the company introduced Wal-Mart Express stores, which average about 15,000 SF and offer groceries and general merchandise. By the end of April, Wal-Mart had opened 10 Wal-Mart Express stores.

The smaller outlets give Wal-Mart “flexibility in serving customers, especially in rural and urban areas where shoppers may not have access to larger stores,” the company said on its website.

Another area of sales growth could be Wal-Mart’s Neighborhood Markets. The first of that kind of store opened in 1998. They are about a quarter of the size of an 185,000-SF Supercenter. The company has 168 Neighborhood Markets stores across the country.

“They’ve not had stellar luck with small stores up to this point,” Stone said. But the smaller stores give Wal-Mart a chance to break into some of the larger cities that it hasn’t been able to crack, such as Los Angeles and New York, he said.

Wal-Mart officials, however, have been pleased with the smaller stores, which could compete with the surge of low-price retailers known collectively as “dollar stores” that have been snatching domestic sales from Wal-Mart.

In the United States, Wal-Mart suffered through two straight years of same-store sales declines in fiscal 2010 and 2011 before a modest rebound of 0.2 percent in the fiscal year that ended in January. The trend continued upward in the first quarter of this year with same-store U.S. sales up 2.6 percent.

 

 

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