Wal-Mart is accelerating the expansion of small stores, particularly its Neighborhood Market stores, as it looks to compete with a variety of rivals from dollar stores to drug chains.
“This gives us the opportunity to build more stores for less money,” Bill Simon, president of Wal-Mart’s U.S. division, told Wall Street analysts gathered at a meeting near its headquarters in Bentonville, Ark.
Simon said it plans to have 500 Neighborhood Market stores and 12 Express stores by fiscal 2016.
As of July, Wal-Mart had 10 Express stores and had ramped up its Neighborhood Market concept to 217 locations.
On another topic, Wal-Mart is testing a same-day delivery service in select markets for customers who buy popular items online during the holiday shopping season.
The news comes as the world’s largest retailer faces increasing competition from online giants like Amazon.com, which is also testing same-day delivery service in 10 markets.
Wal-Mart’s tests started this month in northern Virginia and Philadelphia. The program rolled out to Minneapolis on Tuesday. It plans to test the service in San Francisco and San Jose, Calif., later this month or in early November.
On the subject of small stores, part of Wal-Mart’s overall strategy is to continue increasing sales while becoming more efficient with capital expenditures worldwide. Its U.S. namesake business is roaring back, thanks to re-emphasizing low prices, and officials say they want to apply that same discipline to store expansion.
In its international business, which accounts for about a quarter of revenues, Wal-Mart reiterated that it will be slowing growth in China and Brazil.
Small stores range from 10,000 square feet to about 55,000. Neighborhood Market stores have generated a 5 percent increase in revenue at stores open at least a year for the first half of this year. That’s more than double the growth rate of Wal-Mart’s average store.
Express stores are less than one-tenth the size of Wal-Mart Supercenters and offer groceries, general merchandise such as tools, and pharmacies. Neighborhood Markets are more than twice the size of Express stores and offer perishable food, household supplies and beauty aids as well as a pharmacy.
Wal-Mart shares are up more than 24 percent since early this year.
Wal-Mart said that it has increased its investment in radio advertising by 50 percent for the holiday season compared with last year.