Wal-Mart to decrease inventory
Posted on Saturday, June 3, 2006
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FAYETTEVILLE — Wal-Mart plans to add several hundred Supercenters this fiscal year and store a lot less inventory.
Wal-Mart plans to add 270 to 280 Supercenters, 15 to 20 Neighborhood Markets, 15 to 20 Sam’s Clubs, 20 to 30 discount stores and 220 to 230 international stores in fiscal year 2007, Tom Schoewe, executive vice president and chief financial officer for Wal-Mart Stores, said at the annual Shareholders Meeting on Friday. "Clearly, this is a growth company," Schoewe said. "I’m really, really proud and believe that we have delivered on the promises we made to Wall Street."
Wal-Mart added 267 Supercenters in fiscal year 2006. Schoewe said the aggressive Supercenter growth is part of a plan to increase Wal-Mart’s market share, as well as add 8 percent of square footage each year.
Additions of 60 million square feet — or about 8 percent growth — are scheduled for fiscal year 2007, which ends Jan. 31, 2007. More than one-third of the growth will take place in other countries, Wal-Mart President and CEO Lee Scott said. Twenty-three stores are slated to open in Canada, 18 to 20 in China and 50 in Central America, he said. He noted that the company is also eyeing India. "Wal-Mart’s market place is the world," Scott said. "If we’re not in a country, then we have an opportunity to go there," Schoewe said.
Last fall, in the company’s fourth quarter, Wal-Mart acquired 525 stores in Japan, Brazil and Central America.
The additions caused Wal-Mart debt percentage to rise to 42 percent of its capital, a number Schoewe said the company will reduce to 40 percent by the end of the fiscal year.
The acquisitions also caused capital spending to increase faster than sales, Schoewe said. He said earnings are growing faster than sales and reported the last quarter as "one of the strongest quarters we’ve had in a long, long time."
Schoewe reported steadily increasing sales at $312.4 billion in fiscal year 2006, up from $285.2 from fiscal year 2005. He said earnings increased to $2.68 per share, up from $2.41 per share in 2005. The Wal-Mart annual report recorded that the company’s liabilities exceeded its assets by $5 billion.
Wal-Mart plans to balance the cost of business growth by reducing its inventory costs.
The 2006 fiscal year marked the first time in three years Wal-Mart had reached its goal of having inventory grow at half the rate of sales growth, Schoewe said.
Schoewe said Wal-Mart has reduced inventory on its top shelves and in backrooms, trailers and warehouses. Lowering inventory also decreases transportation and storage costs, Scott said. "It’s been a major thrust of ours," Scott said of reducing inventory.
Schoewe said the Remix transportation system and radio-frequency-identification systems are also being implemented to reduce inventory. "Our goal is to have the right product in the right place right when our customers need it," Scott said. "And we have the logistics to accomplish that."
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