Wal-Mart Considers Changes To Stores as a Rival Emerges

Wal-Mart said yesterday that it was considering new store sizes and types in the United States but played down the possibility of acquisitions as it faces slowing sales growth at its older stores and new competition from British rival Tesco.

The world's largest retailer said it was hiring managers for a team to consider new formats beyond the four established U.S. types. Those are Wal-Mart discount stores, Supercenters that combine groceries and general merchandise, Sam's Club membership stores and Neighborhood Market grocery stores.

The prospect of acquisitions was raised by an ad on Wal-Mart's Web site for a senior director of "multi-format strategies" whose responsibilities would include to "assess the strategic implications of any possible M&A [mergers and acquisitions] on our overall portfolios."

Wal-Mart spokesman John Simley noted that the reference to possible acquisitions came after a long list of other responsibilities for the job, most of which involve evaluating the market and finding opportunities for growth from new store types.

"The fact is, two months ago we posted a number of middle-management-level positions to evaluate our existing formats with the aim of achieving better customer relevance," Simley said.

Analysts said it made sense for Wal-Mart to look at new formats, such as smaller stores, but that it was not likely to go on an acquisition spree. "Wal-Mart has been building things from the ground up for a long time," said Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which manages $9.6 billion in assets and holds about 42,000 Wal-Mart shares.

Sam's Club has bought some rival stores to complement its growth, but the bulk of Wal-Mart's U.S. growth has been through building new stores, she said.

Robert Buchanan, retail analyst at A.G. Edward & Sons, a St. Louis brokerage and consulting firm, noted that the head of Wal-Mart's U.S. stores, Eduardo Castro-Wright, came from Wal-Mart in Mexico, where the retailer has six or seven formats, and therefore is experienced with running various types of stores.

Buchanan said the timing was right for looking at new formats because of the imminent opening of Tesco's first U.S. stores in Southern California, Arizona and Nevada. The British grocery giant plans to open 30 stores called Fresh & Easy Neighborhood Markets, which are smaller than typical supermarkets. "Wal-Mart is always trying new things," Buchanan said.

Wal-Mart, headquartered in Bentonville, Ark., might make a smaller acquisition in the next two or three years, Buchanan said, but added, "I don't see them going on a buying spree."

Wal-Mart's sales at stores open at least a year, a key measure among retailers, have been slowing and in the latest quarter rose a slim 1.9 percent.

Edwards, the analyst, said retailers as an industry are looking at smaller, more niche-oriented stores as shoppers apparently tire of big boxes. Wal-Mart could be expected to look at smaller options, too, she said.

"In retail you always have to do something new and different to keep the attention of the consumer," Edwards said.

Wal-Mart shares rose 8 cents yesterday to $43.82.