BENTONVILLE, Ark. — Walmart is moving forward with what could be characterized as a rollout of its Neighborhood Market format nearly 13 years after the first unit opened in fall 1998. Just don’t call it a Neighborhood Market.
The company has rebranded the small-format food-and-drug combo store as Walmart Market, and as Bill Simon, president and CEO of the company’s U.S. stores division, made clear during an investor presentation yesterday, the financial returns are now comparable to those of the company’s supercenters. That has encouraged the company to move faster with expanding the based of 155 domestic Walmart Market stores.
“There are 180 that have been approved through our real estate committee,” Simon said during a presentation at the William Blair & Company Growth Stock Conference. “We expect to have about 300 of them by 2013. The number for next year is approaching 100 that we’ll be able to put in.”
Simon said the company also was encouraged to move fast because the smaller stores have a shorter development timeline than a supercenter, which means a significant number can be added more quickly.
The ramp-up in expansion has been a long time coming. When the first units opened in the late '90s, the concept was viewed as a growth vehicle, and there was considerable conjecture around how quickly the concept could be expanded. However, the operating model was never quite right, and there were abundant supercenter projects in the pipeline. While Simon asserted that supercenters remain the company’s primary growth vehicle in the United States, the tipping point would appear to be at hand where within a few years ground-up new supercenters will become increasingly rare and small-store openings more commonplace.
Simon referenced providing more details on the Walmart Market expansion in October, which is when the company holds it annual investor conference and reveals its capital expenditures budget for the coming year along with details around square footage expansion and stores openings by format type. Simon broke with tradition a bit by revealing 2012 growth plans for the Walmart Market, but these days investors are clamoring for information on how the company expects to grow given the two-year slide in same-store sales. In addition to the significance of the expansion news, the timing of the disclosure is noteworthy as well. Just two weeks earlier, Walmart held its annual shareholders’ meeting, which was followed by a two-hour meeting with analysts where divisional presidents and CEOs and Wal-Mart Stores president and CEO Mike Duke gave brief presentations and fielded questions.