A slow ride on the Walmart Express

BENTONVILLE, Ark. — The new small-format Walmart Express stores that opened earlier this month are an interesting concept with intriguing growth potential. But for the time being, and possibly for much longer, competitors need not concern themselves with the small stores.

At least that’s what Walmart wants the marketplace to believe following the opening of the first few of the 15,000-sq.-ft. stores earlier this month in northwest Arkansas.

The product mix is squarely in Walmart’s sweet spot of food and consumables, and from a shoppers’ perspective, the store experience is consistent with the look and feel of a supercenter. Investment analysts and media were given a preview tour of the stores prior to the company’s June 3 shareholders’ meeting, which led to inevitable speculation around how many of stores the company could open and the time frame in which it could open them.

If Dollar General can open 625 new stores annually, which it is doing this year, what would Walmart be capable of?

If a comparable or even greater rate of growth is in the cards, Walmart executives made it clear it will be years before a rollout occurs, with the greatest near-term opportunity being further supercenter expansion.

During a meeting with analysts after touring the Walmart Express, Bill Simon, president and CEO of Walmart U.S., said, “I hope you didn’t take the tour of small stores as an overemphasis on small stores. The supercenter is and will remain our best growth vehicle. The returns on the supercenter are better than anything else we’re building.”

With supercenters as the company’s primary driver of domestic growth, Walmart Express isn’t even the next concept in line, according to Simon. That concept would be the Neighborhood Market, recently rebranded as Walmart Mart, which measures between 30,000 and 40,000 sq. ft.

“That has been a format we’ve been building over 10 or 12 years now, and in the last two or three years have gotten it to be a really good return vehicle for us,” Simon said. “We reported in the first quarter that that format is delivering positive comps in the 4% range, and [we] are very happy with what it’s doing from a sales and a productivity standpoint.”

Even Walmart Stores president and CEO Mike Duke sought to temper expectations around the expansion potential of the Express concept after an analyst raised the issue of how it would take thousands of the small stores to move the needle on financial results given Walmart’s size. Duke agreed and reminded attendees at the meeting that the smallest of the company’s small formats is a long-term project.

“If you look at the way Walmart has built formats in the [United States], we’ve been patient,” Duke said, referring first to the supercenter development and then the initial Neighborhood Markets. “I wouldn’t be counting on in the near term a great deal of impact from the very small stores,” Duke advised analysts.

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