The world's biggest retailer is planning some suitably mammoth moves. When I set out to write this article about Wal-Mart
Let's start with Wal-Mart's latest demonstration of its retailing muscle. The company announced on Oct. 24 that it plans to open up to 600 new stores in the next fiscal year. That would represent approximately 60 million more square feet of retail space, or 8% growth worldwide. Of that total, up to 280 stores will be supercenters, which sell groceries along with general merchandise. Not surprisingly, these locations generate the biggest profits for the company and now outnumber the smaller discount stores. The supercenters offer additional features, including photo processing, auto repair, and even eye care. Talk about one-stop shopping.
On Oct. 25, Wal-Mart also announced initiatives to cut energy usage, reduce waste, and offer lower-priced health care to its employees. Let's not kid ourselves here. The company's main objective is certainly not to improve the world. CEO Lee Scott said that "improving fuel mileage in the trucking fleet by one mile per gallon would save more than $52 million per year." However, if Wal-Mart can improve its bottom line while helping its employees and the environment, I see nothing wrong with that.
Also, in a bit of irony, Wal-Mart took a stance on public policy by advocating an increase in the minimum wage. The company has often drawn fire for its labor practices and employee pay. However, it maintains that it pays its employees at rates above the minimum wage, while trends indicate that its customers can't afford to purchase basic necessities throughout the month. Given its average wage of approximately $10 an hour, Wal-Mart's call to increase the minimum wage above $5.15 would actually place an additional burden on many of its smaller, low-wage competitors.
In yet another announcement, an internal memo to its board of directors was made public. The memo contained recommendations for holding down costs while also providing the company with ammunition to combat critics. To me, however, it looks like a bait-and-switch tactic. For example, one proposal entails reducing the amount of time it takes for part-time employees to become eligible for health benefits from two years to one. However, the company also proposes reducing retirement contributions from 4% to 3%. It also proposed putting health clinics in its stores. That seems generous, right? But, Wal-Mart benefits by eliminating expensive emergency room visits.
It's too early to tell whether Wal-Mart's announcements are simply lip service to try to improve its battered image. However, if the company can cut costs, improve employee relations, and clean up its image, I'd say it doesn't matter too much what its true intentions are.
Although Wal-Mart is likely to encounter more resistance to its efforts to cover more of the landscape, I expect its expansion plans will enjoy considerable success. When combined with the company's aim to improve its business model, those goals could be the beginning of a newer and stronger Wal-Mart.
The company takes a lot of flak for its business practices, but investors should be happy that it's unwilling to sit and watch its stock price continue to disappoint. With its share price falling about 20% in the past year, Wal-Mart is doing all it can to reverse that trend, hoping to prove that even giants can be nimble.
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own shares of Wal-Mart.
