Tuesday, October 24, 2006

Wal-Mart Scales Back Expansion

Source: WSJ.com.

The world's biggest retailer said yesterday that it plans to ratchet down its expansion rate next year and slash its capital spending. Wal-Mart executives, meanwhile, hinted that some of the money previously devoted to expansion might be put to use buying back stock.

Yesterday's announcement sent Wal-Mart's shares climbing more than 5% during the day before closing up $1.91, or $3.9%, at $51.28 in 4 p.m. New York Stock Exchange composite trading, a new 52-week high.

In recent years, Wal-Mart has expanded the square footage of its global portfolio of stores at a consistent 8% clip, translating this year into as many as 615 new stores, including 332 to 340 in the U.S. That relentless expansion, coupled with the appeal of Wal-Mart's low prices, has made Wal-Mart one of the most dominant retailers in history, accounting for 2% of the nation's gross domestic product.

Yesterday, Wal-Mart said it is reining in its expansion rate next year to 7.5% globally and 7% domestically. The company, which is based in Bentonville, Ark., announced at its annual conference for investors that it intends to open 625 to 660 stores in 2007, including as many as 330 U.S. outlets. Wal-Mart currently operates nearly 4,000 stores in the U.S. and more than 2,700 abroad.


Buffett always seems to be able to buy companies at their lows at the right time!

No comments: