Wal-Mart Opens More Smaller Grocery Stores To Boost Sales

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Wal-Mart Stores, Inc. (NYSE:WMT), the world’s largest retailer will be opening more smaller grocery and convenience-type stores this year to boost its sales amid strong competition.

The retail giant posted its fifth consecutive quarter of negative sales results in the United States excluding newly opened or closed stores in May. It was also the sixth quarter for Wal-Mart Stores, Inc. (NYSE:WMT) to suffer a slowdown in customer traffic.

For the fiscal ended January 31, the retail giant’s return on investment declined 17%, which resulted to the lowest bonuses received by its executives in several years, according to report from Wall Street Journal.

Wal-Mart CEO aims to move fast

Doug McMillon, the chief executive officer of Wal-Mart Stores, Inc. (NYSE:WMT) is moving swiftly to improve the sales performance of the company and strengthen its competitiveness against rivals particularly Amazon.com, Inc. (NYSE:AMZN).

According to WSJ, McMillon instructed his top executives to read the book entitled “The Everything Store,” which contains information about Amazon.com, Inc. (NYSE:AMZN) and its founder Jeff Bezos, who also studied the business model of Wal-Mart Stores, Inc. (NYSE:WMT) while building his company.

McMillion implemented urgent instructions to speed up new store concepts and online sales strategies to be able to regain market share from its competitors such as Amazon.com, Inc. (NASDAQ:AMZN) and the fast growing discount retailers, according to the executives of the retail giant.

During Wal-Mart’s shareholder’s meeting, McMillon said, “We need to move fast. That’s why we are piloting so many new ideas.”

Wal-Mart’s smaller grocery and convenience-type stores

The smaller grocery and convenience-type stores of Wal-Mart Stores, Inc. (NYSE:WMT) have an area of 10,000 to 40,000 square feet compared with the 200,000 square feet size of its superstores.

The retail giant is also planning to build free-standing liquor stores in some states like Florida where retailers are prohibited from selling alcohol inside grocery stores. The company aims to double its alcohol sales by 2016.

Some investors are worried about McMillon’s strategy of embracing smaller grocery and convenience-type stores. They think the smaller formats and its online sales would cannibalize its traditional format and hurt profit.

Scott Mushkin, an analyst at Wolfe Research commented, “You’re basically saying thousands of supercenters are going the way of the horse and buggy. It’s a scary thing.”

He added, “Doug isn’t there to make next quarter or next year’s earnings. He’s there to try to bring Wal-Mart into the 21st century.”

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