Wal-Mart Says Sales Growth Will Slow
New York, With its U.S. sales growth expected to slow further during the next three years, Wal-Mart Stores executives told analysts Tuesday that the chain will open fewer stores at home and instead boost its expansion overseas.
“These are pretty trying times for us in an unusual macroeconomic environment,” Tom Schoewe, executive VP and CFO, Wal-Mart Stores, said on the first day of Wal-Mart’s two-day annual analyst and investor meeting, held in Rogers, Ark.
Schoewe said the retailer expects overall sales to grow about 9% this year, slower than last year’s increase of 11.7%. He expects it will further slow to between 5% and 8% growth over the next two years.
Schoewe said Wal-Mart will slow U.S. square footage growth to 6% this year from an 8.8% increase last year, and will further reduce that pace to five- to 6% growth over the next two years.
Total capital spending for the current fiscal year 2008 is projected to be approximately $15 billion, down from a June forecast of $15.7 billion. The original projection was $17 billion. Looking forward, total spending will flatten. For 2009 and 2010, the company has budgeted between $13.5 billion and $15.2 billion in U.S. capital expenditures.
In terms of new stores, Wal-Mart will open between 190 to 200 new U.S. supercenters this year, down from its typical expansion rate of about 280 a year. The company is cutting new U.S. store investment significantly to between $4.9 billion and $5 billion over the next two years from its current level of between $6.7 and $7 billion.
Wal-Mart will continue to accelerate its investment in its International operating segment during the next two fiscal years. Schoewe said Wal-Mart would invest between $3 billion and $3.6 billion to open new stores overseas over the next two years.
David Abella, an analyst at Rochdale Investment Management in New York, which manages $2.5 billion in assets including Wal-Mart shares, told the Associated Press that Wal-Mart’s reduced plans for U.S. store growth are positive news.
“I think focusing on cash flow and profitability is what they need to do at this point,” Abella said.
Roberto Cavalli to spearhead H&M’s latest one-off line
STOCKHOLM, SWEDEN —Some may call H&M a shopping mecca for fashionistas on a budget. And anyone who has shopped there knows that it’s impossible to try on just one item—which explains why most customers walk around with a bundle of clothes over their arms. Yet, when the company introduces guest designers, H&M transforms from a fashion-forward retailer to a mad house with lines out the door and customers in the ‘I-want-it-all’ shopping mode.
On Nov. 8, H&M will unveil yet another partnership with a luxury designer—Roberto Cavalli. The Roberto Cavalli at H&M Collection will launch in about 200 H&M stores worldwide. The Italian designer has produced a line for men and women unlike anything previously created. “We chose Roberto Cavalli because he is different from all the others [guest designers],” said Jennifer Uglialoro, spokeswoman for H&M.
Cavalli is know for sensual, glamorous style fit for celebrities, and while working with H&M he was able to embody the essence of his luxury line at mass level. “His style is perfect for this pre-Christmas collection, which is supposed to draw its inspiration from supposed to draw its inspiration from the New Year’s Eve Party of the glitzy young red carpet stars,” added Uglialoro.
The collection includes 25 women’s wear pieces, 20 men’s wear pieces, lingerie and accessories—all striving to create a dazzling effect for both day and night. For women, the focus is on animal prints and lurex (metallic yarns), making the garments perfect for anyone looking to mimic red carpet style. “I think that customers will be surprised to know that you can purchase high fashion evening wear at H&M prices,” said Uglialoro. On the other hand, the men’s collection features discreet colors like black, midnight blue, brown and white, showing that sexy comes in solids as well.
In general, Cavalli has a gift for fashioning his work in a way that enhances customers’ physical assets with colorful prints, embellishments and inimitable styles, moving away from the mainstream of everyday basics. The Roberto Cavalli collection represents an exuberant, successful lifestyle, stated Margareta van den Bosch, head of design for H&M. His other collections include Just Cavalli for a young audience, Class Cavalli and the Angels and Devils collection for boys and girls.
Bringing in designers to work on one-off exclusive collections for H&M is nothing new. The company has been graced by fashion visionaries like Karl Lagerfeld (2004), Stella McCartney (2005) and Viktor & Rolf (2006). “It is a great way of offering our customers something quality and high fashion at the best price,” said Uglialoro. By the looks of the success from past partnerships, it doesn’t appear that H&M will stop introducing new designers anytime soon.
Annual sales in Texas grow more than 99 Cents Only
CITY OF COMMERCE, CALIF. —After hitting a tough stretch when it branched into Texas in 2003, the 99 Cents Only chain continued to rebound this fall as it celebrated its 25th anniversary.
The chain officially commemorated the opening of its first store in Westchester, Calif. on Aug. 9, 1982, with an in-store event that included invitees like Tyra Banks and featured a promotion that sold Apple iPhones for 99 cents to the first nine customers.
As it celebrates 25 years in business, the 255-store chain also continues to report strong earnings as its store base in Texas stabilizes. For its most recent quarter ended June 30, it reported earnings of $3 million and continued a streak of positive quarters that started in 2006.
“Although we’re reporting a slight increase in our quarter-over-quarter earnings for the third quarter in a row, we’re not satisfied with these slight improvements,” said 99 Cents Only president Eric Schiffer. “We’re working toward a significant reduction in our operating costs as we continue to grow.”
It’s also reporting better results in Texas, which is home to 43 outlets and a new smaller-format store. The five stores it opened in Texas during fiscal 2007 averaged 17,800 square feet, compared to 26,400 square feet for its older stores. And the new store it opened in San Antonio in late March produced the best first-day sales results of any store opened so far in the state.
Texas has been a problem for 99 Cents Only, with stores not performing to expectations because of tougher competition and none of the name recognition it enjoys in its home state of California. And though sales there are improving, they still have a long way to go to achieve sales similar to those in older markets. Annual sales per square foot in Texas stores increased from $110 to $120 for the year, but were well below the $284 per square foot for non-Texas stores.
After opening just 19 stores in fiscal 2007, 99 Cents Only is planning to expand its store base by about 15% per year through 2010 as it ramps up expansion in its core markets and looks for opportunities in other states.