Walmart reinforces financial priorities: growth, leverage and returns; Company lowers fiscal 2014 capital plan from current year

• Wal-Mart Stores, Inc.’s (Walmart) fiscal year 2014 capital plan will range from $12.0 to $13.0 billion, a reduction from the current year range. The three operating segments are projected to add between 36 and 40 million retail square feet next year, which is approximately flat to the August 2012 updated fiscal 2013 forecast of 36 to 39 million retail square feet.
• The company’s ongoing disciplined approach to capital allocation allows Walmart to add relatively the same retail square footage with a reduced capital expenditure plan.
• The fiscal 2014 capital plan also includes:
  • investments in technology and innovative processes to drive additional operational excellence, expense leverage and productivity; and
  • investments in global e-commerce initiatives, including development of a global technology platform.
• The company is on track to achieve its five-year commitment of reducing operating expenses as a percentage of sales by 100 basis points (FY 13 through FY 17). Walmart continues to invest the savings realized through various leverage initiatives into lower prices for customers.
• Walmart U.S. will reduce its fiscal 2014 capital plan from fiscal 2013, while balancing its expansion between supercenters and smaller formats. The segment will add approximately 125 supercenters and continue to accelerate the rollout of Neighborhood Markets, with a goal of 95 – 115 small formats next year.
• Sam’s Club will leverage efficiencies to add more new clubs and remodels next year in its approximately $1.0 billion allocation, which is essentially flat with the current year.
• Walmart International’s capital plan is relatively flat at $4.5 to $5.0 billion, delivering growth of 20 to 22 million square feet next fiscal year. The current year’s projections were updated in August.
• The company provided guidance of 5 to 7 percent sales growth and 3 to 4 percent retail square footage growth for next fiscal year. Operating expenses are forecast to continue to grow less than the rate of sales growth.

BENTONVILLE, Ark.--(BUSINESS WIRE)--Wal-Mart Stores, Inc. (NYSE: WMT) today outlined its financial priorities for next fiscal year ending Jan. 31, 2014 at its annual conference for the investment community and reinforced its focus on growth, leverage and returns. The company’s plans include a reduction in capital expenditures that will drive comp and new store growth, operating leverage and productivity initiatives and expansion in global e-commerce, including acquisitions.

“We remain committed to capital discipline in our new store growth. Next year, we are allocating 60 percent of our funding to developing our higher growth markets and 40 percent to developed markets”

“Our momentum in delivering strong results continues, and we are investing for the future by creating an even stronger business,” said Wal-Mart Stores, Inc. President and CEO Mike Duke. “Strong business fundamentals are driving our top line and bottom line results. We are delivering on the productivity loop and being even more disciplined about our operating expenses and capital spending. We have a deliberate approach to how we will grow, how we will deliver further operating leverage and continue to deliver strong returns to our shareholders.

“We will continue to expand our physical presence through a variety of formats across our markets, while also investing in initiatives to enhance our operational excellence and further new e-commerce opportunities,” Duke added.

The company reaffirmed its most recent capital expenditure forecast of $12.6 billion to $13.5 billion for the current fiscal year. The fiscal 2014 capital plan will range from $12.0 to $13.0 billion. The capital expenditure budget covers growth for comp and new stores, logistics and supply chain expansion, investments to drive productivity and reduce expenses, and global e-commerce expansion.

Walmart also confirmed that it remains on track to meet its commitment of reducing operating expenses as a percentage of sales by 100 basis points over five years, beginning with the current fiscal year. Savings continue to be realized through lower expenses and productivity initiatives, and the savings are reinvested in lower prices and improved international profitability.

Charles Holley, executive vice president and chief financial officer, outlined the investment plan for fiscal year 2014.

"We manage our capital expenditures with the same discipline we manage operating expenses,” said Holley. “We identify ways to further reduce our construction costs for new stores, as well as remodels. We are improving our real estate process and adding relatively the same square footage with fewer dollars. Investments in new initiatives drive further operating leverage through business processes, shared services and technology. Additionally, we are investing in our expanding global e-commerce business.

“Walmart plans to grow total company sales 5 to 7 percent in fiscal 2014, which is projected to increase net sales by $23.0 to $33.0 billion. We expect to increase retail square footage by 3 to 4 percent next year, which would add another 36 to 40 million square feet around the world,” Holley said. “Operating expenses will continue to grow less than the rate of sales growth.”

Capital Expenditure Details for Fiscal Year 2014

Projected capital expenditures are as follows and exclude the impact of future acquisitions:

Capital Expenditure Detail (US$ billions)
Segment	Actual FY 12	Projected		FY 13 – FY 14 YoY% Change
		FY 13	FY 14
Walmart U.S.	$6.2	$6.0 – 6.5	$5.5 – 6.0	-8.0%
Sam’s Club U.S.	$0.8	~$1.0	~$1.0	–
Walmart International	$5.3	$4.6 –5.0	$4.5 – 5.0	-1.0%
Corporate	$1.2	~$1.0	~$1.0	–
Total	$13.5	~$12.6 – 13.5	~$12.0 – 13.0	-4.2%

For fiscal 2013, Walmart expects to add between 36 and 39 million square feet globally. In fiscal 2014, the company plans to add between 36 and 40 million square feet, similar to projections for the current year. Net retail square footage growth (excluding any future acquisitions) is projected as follows:

Retail Square Footage (Net) (in millions)
Segment	Actual FY 12		Projected
			FY 13	FY 14
Walmart U.S.	9.6		14 – 15	15 – 17
Sam’s Club U.S.	0.4		~1	~1
Walmart International	42.2	*	21 – 23	20 – 22
Total	52.2		36 – 39	36 – 40
*Amount includes approximately 19.2 million related to the acquisitions of Massmart and Netto in FY 12.

Projected Walmart U.S. and Sam's Club U.S. units include new stores, expansions, relocations and conversions. Given the conversion of traditional Walmart discount stores to supercenters (without any change in square footage to the actual unit), the number of supercenter units will continue to increase, as the number of discount stores declines. Unit growth in the United States is projected as follows:

Total U.S. Unit Growth (Gross)
Format	Actual FY 12	Projected
		FY 13	FY 14
Walmart U.S. large formats	122	~125	~125
Walmart U.S. small formats	27	~80	95 – 115
Total Walmart U.S.	149	~205	~220 – 240
Sam’s Club	9	14	12 – 20
Total U.S. Units	158	~219	~232 – 260

Walmart U.S. Details

Walmart U.S. has a disciplined approach to capital expenditures that will enable it to deliver more square footage with fewer dollars in fiscal year 2014.

“Our disciplined capital approach will allow us to do more with less,” said Bill Simon, Walmart U.S. president and CEO. “We intend to achieve lower costs in real estate and construction, while delivering slightly greater square footage growth next year compared to this year. Our goal is to reduce the average cost of supercenters by approximately 10 percent by fiscal year 2016.”

Walmart U.S. will continue to accelerate the rollout of Neighborhood Markets and estimates that it will build between 95 and 115 small format stores in fiscal year 2014. Walmart expects to operate more than 500 Neighborhood Markets by fiscal year 2016.

“Supercenters remain our primary driver of growth and returns. Because we see increased momentum in comp and total sales and traffic performance, we will continue to accelerate the rollout of Neighborhood Markets,” Simon said. “Our small format provides a competitive advantage that allows us to rapidly fill in new markets and compete more effectively with grocery, dollar and drug store competitors.”

Sam’s Club Details

Sam’s Club will open more clubs next year with relatively flat capital funding. Sam’s Club expects to add 10 to 15 new clubs next year on approximately $1.0 billion in capital spend. In addition, Sam’s expects to remodel slightly more clubs, but at 10 percent lower cost.

At the meeting, Sam’s Club president and CEO Rosalind Brewer discussed a pilot program in 76 Texas clubs that tests a framework for additional member benefits and higher membership fees.

“This membership pilot is designed to enhance the value of a Sam's Club membership and generate a stronger membership fee income stream,” Brewer said. “We’re confident that the combination of our new club growth with enhanced merchandise quality and value benefits will contribute to ongoing momentum in our business.”

Walmart International Details

Walmart International continues to invest in organic growth across its markets. Capital expenditures will range from $4.5 to $5.0 billion in fiscal 2014. New stores are expected to add between 20 and 22 million square feet next year, in line with the current fiscal year projection of 21 to 23 million square feet.

In August, Walmart International detailed plans to reduce capital expenditures and growth plans for the current fiscal year. Original forecasts called for square footage growth of 30 to 33 million square feet and capital funding of $5.0 to $5.5 billion. Those estimates were revised downward to square footage growth of 21 to 23 million and capital expenditures of $4.6 to $5.0 billion. The majority of the changes were related to adjustments in Brazil, China and Mexico.

“We remain committed to capital discipline in our new store growth. Next year, we are allocating 60 percent of our funding to developing our higher growth markets and 40 percent to developed markets,” explained Doug McMillon, Walmart International president and CEO. “We will point our investments toward the better performing formats, such as supercenters and discount compact hypermarkets, and we will stop or slow growth in lesser performing formats. In some cases, we have already done this, and it will be reflected in future performance.

McMillon pointed to improvements in engineering and construction that will drive greater efficiencies across markets.

“Our country leadership teams have worked together to narrow our specification ranges in fixtures and equipment,” said McMillon. “This helps us become more capital efficient as we leverage areas such as goods not for resale, with refrigeration and flooring as examples.”

Global eCommerce

Walmart plans to invest more heavily in the four markets that represent the greatest growth potential for e-commerce retail sales. These are the United States, United Kingdom, Brazil and China. The company’s capital commitment includes investments in building and developing a global technology platform and customer applications for mobile and social media. In addition, Walmart has previously announced its intention to increase its current minority position in Yihaodian to 51 percent.

“Our goal is to provide seamless access to customers worldwide,” said Neil Ashe, president and CEO of Walmart Global eCommerce. “We will continue to innovate in ways that will allow us to expand our global platform and strengthen our infrastructure and local fulfillment networks, while taking advantage of transformational mobile capabilities.”

About Walmart

Wal-Mart Stores, Inc. (NYSE: WMT) helps people around the world save money and live better – anytime and anywhere – in retail stores, online, and through their mobile devices. Each week, more than 200 million customers and members visit our 10,300 stores under 69 banners in 27 countries and e-commerce websites in 10 countries. With fiscal year 2012 sales of approximately $444 billion, Walmart employs more than 2 million associates worldwide. Walmart continues to be a leader in sustainability, corporate philanthropy and employment opportunity. Additional information about Walmart can be found by visiting http://corporate.walmart.com, and on Facebook at http://facebook.com/walmart and on Twitter at http://twitter.com/walmart. Online merchandise sales are available at http://www.walmart.com and http://www.samsclub.com.

Forward-looking statement

This release contains statements that Walmart believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, that are intended to enjoy the protection of the safe harbor for forward-looking statements provided by that Act. Except as noted below, these forward-looking statements are identified by use of the words or phrases “allocation,” “are allocating,” “are expected,” “are forecast,” “are projected,” “balancing,” “budget,” “commitment,” “continue to accelerate,” “declines,” “estimates,” “expect,” “expects,” “forecasts,” “goal,” “growth,” “guidance,” “intend,” “intention to increase,” “plan,” “plans,” “projected,” “reaffirmed,” “to add,” “will add,” “will allow,” “will be,” “will continue,” “will contribute,” “will enable,” “will leverage,” will open,” “will point,” “will range,” “will reduce,” “FY 13 – FY 14 YoY % Change,” or a variation of the foregoing words or phrases in these statements, in the descriptions of certain assumptions on which forecasts or projections are based and in captions to certain of the columns contained in the tables included in this release. The forward-looking statements discuss, among other things: management’s expectations regarding the capital expenditures (also referred to as “capital spending” and the “capital plan”) in fiscal year 2013 and fiscal year 2014 for the total company, for each of its operating segments and their global e-commerce operations and for corporate purposes and the projected percentage change in projected capital expenditures from fiscal 2013 to fiscal 2014; management’s expectations regarding the growth in retail square footage (including percentage growth) for the total company and each of its operating segments in fiscal year 2013 and fiscal year 2014; management’s expectations regarding the unit growth in the United States by operating segment, including for larger and smaller formats within the company’s Walmart U.S. operating segment, and certain goals for growth of units of certain formats; management’s plans and projections for the growth of the company’s sales in fiscal year 2014, including the percentage growth in sales; management’s expectations that the company’s operating expenses will continue to grow at less than the rate of sales growth; management’s expectation that the fiscal 2014 capital plan will include investments in technology, innovative processes and global e-commerce initiatives; management’s expectation that a reduction in capital expenditures will drive comparable store sales and new store growth, operating leverage and productivity initiatives and expansion in global e-commerce, including acquisitions; management’s expectation that Walmart will continue to expand its physical presence through a variety of formats across its markets while also investing in initiatives to enhance operational excellence and further new e-commerce opportunities; management’s expectation that the company’s capital expenditure budget for fiscal 2014 will cover growth for comparable store sales, logistics and supply chain expansion, investments to drive productivity and reduce expenses and global e-commerce expansion; management’s expectation that the number of supercenters units within the company’s Walmart U.S. operating segment will continue to increase, as the number of discount stores within that operating segment declines; management’s expectations that the Walmart U.S. operating segment’s disciplined approach to capital expenditures will enable it to deliver more retail square footage with fewer dollars in fiscal 2014, do more with less and achieve lower costs in real estate and construction; management’s goal to reduce the average cost of supercenters built by the company’s Walmart U.S. operating segment by approximately 10 percent by fiscal 2016; management’s expectations regarding the continued acceleration of the rollout of Neighborhood Markets, for the number of small format stores to be built in fiscal 2014 and for the number of Neighborhood Markets to be operated in fiscal 2016; management’s expectation that the company’s Sam’s Club operating segment will open more clubs in fiscal 2014 with relatively flat capital funding and the remodeling of slightly more clubs in fiscal 2014 at a 10 percent lower cost; management’s expectations regarding to new club growth and enhanced merchandise quality in the Sam’s Club operating segment contributing to ongoing momentum in the segment’s business; management’s expectations regarding the allocation among the Walmart International operating segment’s markets of the funding to be available to that operating segment in fiscal 2014; management’s expectations regarding investments at the Walmart International operating segment being pointed toward better performing formats, the stopping or slowing of growth in lesser performing formats and the implementation of such initiatives being reflected in future performance; management’s plans to invest more heavily in global e-commerce in the United States, the United Kingdom, Brazil and China; the inclusion of investments in building and development of a global technology platform and customer applications in the company’s capital commitment for fiscal 2014; management’s expectation for increasing the company’s investment in Yihaodian to 51 percent; and management’s expectation that the company will continue to innovate in ways that will allow it to expand its global e-commerce platform, strengthen its infrastructure and local fulfillment networks and take advantage of transformational mobile capabilities. Also included in the forward-looking statements in this release is the information contained in the charts entitled “Capital Expenditure Detail,” “Retail Square Footage (Net),” and “Total U.S. Unit Growth (Gross),” which information relates to capital expenditures to be made, square footage growth and units to be added in the United States during each of fiscal year 2013 and fiscal year 2014. These forward-looking statements and the information in the charts described above are subject to risks, uncertainties and other factors, domestically and internationally, including general economic conditions, including the effects of the current economic situation, competitive pressures, geopolitical conditions and events, inflation, deflation, consumer confidence, credit availability, spending patterns and debt levels, currency exchange fluctuations, unemployment and partial employment rates, personal income and other tax rates, trade restrictions, availability of attractive investment opportunities in non-United States markets, availability of appropriate locations for new or relocated units, local real estate and other laws, ordinances, legal restrictions and initiatives that may prevent the company from building or relocating, or that impose limitations on the company’s ability to build or relocate, stores in certain locations, availability of necessary utilities, weather conditions, availability of skilled labor, labor, material and other construction costs, insurance costs, operating expenses, fluctuations in market rates of interest and other capital market conditions, and other factors and risks. The company discusses certain of these matters more fully in its Annual Report on Form 10-K for its fiscal year ended January 31, 2012, and this release should be read in conjunction with that Annual Report on Form 10-K and together with all of the company’s other filings, including its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, made with the SEC through the date of this release. You are urged to consider all of these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this release. As a result of these matters, including changes in facts, assumptions not being realized or other circumstances, the actual implementation of the company’s operating and other plans by one or more of its operating segments, its actual capital expenditures, unit growth, and square footage growth in one or more of its operating segments, the formats of the units built, the conversion of discount stores to supercenters by the Walmart U.S. segment, and the focus of the company’s expansion may differ materially from the expected results and the plans described in these forward-looking statements. The forward-looking statements included in this release are made only as of the date of this release, and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.