The consensus of a discussion last week on this site was that Walmart shouldn't acquire Family Dollar or any other retailer to help it speed up its small box strategy. Instead, say our commentators, Walmart should devote greater resources to opening small stores if management sees them as key to the company's growth prospects. It turns out that Walmart thinks the same thing and also last week announced it plans to build 270 to 300 small stores this year, an increase of its previously estimated range of 120 to 150.
Walmart's Neighborhood Market format saw same-store sales grow four percent for its most recent fiscal year, while its big boxes struggled.
"Our small store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail," said Bill Simon, Walmart U.S. president and CEO, in a statement. "This will combine thousands of points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash."
The retailer currently operates 346 Neighborhood Markets and 20 Walmart Express locations. The success of the Express format has led Walmart to announce it would expand locations beyond its three-market test.
"We believe that accelerating our small store expansion will allow customers to choose where and when to shop based on their needs," said Mr. Simon. "Our small store expansion will also strengthen our market share and create greater efficiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience."
Belus Capital Advisors analyst Brian Sozzi expressed concern that Walmart's focus on small stores might keep it from addressing issues such as out-of-stocks in its big box locations.
"Turning a blind eye is a recipe for long-term margin and returns pressure," Mr. Sozzi told CNBC.
How likely is it that Walmart's increased focus on small boxes will keep management from addressing problems with its Supercenter business?