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Opponents Cheer Wal-Mart Slow Down

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Halloween Growth Forcast Very Scary

by Al Norman

Wal-Mart holds a Wall St. analyst's meeting every October---right before Halloween---to announce its growth projection plans for the year. Wal-Mart opponents applauded the company's announcement this week that it would continue to slow down the production of new stores. But even with the slow-down, the pace of superstore growth in America is still pretty scary.

The giant retailer builds stores so close to one another that it has become famous for cannibalizing its own sales. Last year at this time, Wal-Mart said that its total capital spending in the United States for the year ending January 31, 2008, would be roughly $10.8 billion---a drop of 15% below comparable spending in 2007 of $12.2 billion. The company said that in 2009 capital spending on American stores would "flatten" to $9.9 billion, and fall to $9.2 billion by 2010. That means Wal-Mart's spending on new stores in America would fall by almost 25% in three years.

Translated into square footage, Wal-Mart's footprint for new stores in the
U.S. will be choppped in half from 45 million new square feet in 2007, to 22
million by 2010. Between 2007 and 2010, new superstore growth will have been sliced in half--from 280 stores, to 140.

This week at Wal-Mart's two-day analyst's marathon, the retailer indicated it will continue to cool off store growth to 142 to 157 new stores. Wal-Mart says its capital spending on U.S. stores will not exceed $6.4 billion, significantly below its projections issued last year. In 2010, capital spending in the U.S. will top out at $6.8 billion. Just one year ago, Wal-Mart estimated capital spending in the U.S. would hit $9.2 billion by 2010. Based on these latest projections, 2010 spending is now projected to come in 26% lower than just last year.

All of this backsliding is excellent news to citizen's groups who are fighting Wal-Mart stores in unprecedented numbers. Wal-Mart's skid downwards began in June of 2007, when the company abruptly told shareholders at its Fayetteville Annual Meeting that new store production was being pared back. Long criticized by Wall Street insiders for 'cannibalizing' its own stores, and eating into its own 'same store sales,' Wal-Mart pleased the analysts---and community activists---by stepping hard on the brakes.

The concept of Wal-Mart new store growth being hacked in half by 2010 was
not imagineable a couple of years ago. The future for Wal-Mart seemed unlimited. But the company has clearly super-saturated many markets, and become its own most dangerous enemy. It has also been carrying more than 200 'dead stores' in its inventory---many of them built in the 1990s. Opening supercenters meant shutting down their "old" discount stores, sometimes just right across the street from each other. A more environmentally wasteful business plan has never been seen in the history of American retailing.

Wal-Mart's very anemic same store sales numbers proved how redundant the pace of new store growth had become. Last year Tom Schoewe, Wal-Mart's chief financial officer, said that new store locations would be chosen to "reduce impact on existing units and drive higher returns." Wal-Mart needs to convince Wall Street that the "cannibal years" are over---but the company continues to propose new supercenters located as close as two miles apart. Apparently the new growth strategy and small superstore prototype hasn't reached the Wal-Mart Realty level yet.

Approximately 3 out of 5 new Wal-Mart projects will run into forceful citizen opposition this coming year. Wal-Mart does not like to talk about this at its analyst's meetings---but these citizen groups seriously delay stores, and contribute to the slow-down in new store production. Any announcement by Wal-Mart of a slow-down in new superstore development is greeted with a sigh of relief in those communities that don't want these huge boxes. Still, even with the cutback in production, Wal-Mart in 2010 will be opening a new superstore every 2.6 days.

That's a frightening thought this Halloween for a nation that is already sprawling with these inefficient, unsustainable monuments to consumer waste.

Al Norman is the founder of Sprawl-Busters. He has been fighting big box sprawl for 15 years. His website is