WAL-MART GEARS UP TO GREATLY EXPAND ITS SUPERCENTER FORMAT

(Editor's note: The following article concerns Wal-Mart's plans to expand its line of Supercenters from six to 18. Four stores are in Missouri and a new one is being built in Cape Girardeau at Interstate 55 and Route K. Next year it will replace the Wal-Mart store on Silver Springs Road. The 170,000-square-foot supercenters are two and one-half times larger than the chain's average store. The article is from the current issue of a trade periodical, Value Retail News.)

---

Wal-Mart which emerged from relative obscurity in the 1980s to become the nation's largest retailer of the 1990s is accelerating its plans for its biggest gun yet, the Wal-Mart Supercenter.

Wal-Mart executives in early June told the retailer's annual shareholders meeting that a dozen Supercenter openings are on the drawing board.

While Wal-mart officials at the Fayetteville, Ark., meeting didn't specify a timetable, industry observers say it appears likely all of the stores will be up and running by Christmas 1992.

"It's our indication that Wal-Mart will try to open all 12 Supercenters next year," says Robert F. Buchanan, an analyst with Baltimore-based Alex. Brown & Son, a security firm.

"These openings would be atop a base of six at the end of this year, a base that includes a 168,000-square-foot Supercenter in Batesville, Ark., that opened June 4," he says.

With its Supercenter concept, Wal-Mart is betting on a "bigger-is-better" strategy: The Supercenters, which average about 170,000 square feet, are more than five times the size of the chain's smallest store and about two-and-a-half times that of its average, 70,000-square-feet unit.

The Bentonville, Ark.-based retailer has been fine-tuning its large-format concept since spring 1988, when it introduced the first of its combination general merchandise-grocery stores.

A successful 170,000-square-foot Supercenter would generate annual sales of about $70 million, or nearly $412 per square foot, and would post operating profits around $3.6 million, estimates Alex Brown Buchanan.

"The estimated 20 percent return on invested capital ($13-million in building and furniture, fixtures and equipment, excluding working capital), may be enhanced over time," says Buchanan, "as Wal-Mart becomes more dominant in the important food-wholesaling-distribution area.

"A Supercenter's estimated sales and operating profit would compare favorably with the estimated $21 million in sales and $1.4 million in operating profit for a representative 70,000-square-foot store," Buchanan says.

Judging from the out-in-the-boonies store sites of its existing Supercenters in Batesville, Ark; Wagoner, Okla.; and in the Missouri communities of Jefferson City, Poplar Bluff, Farmington, and Washington Wal-Mart Supercenters will be targeting predominantly rural markets. That's true of the four future Supercenter sites announced to date, where existing stores will be replaced with the new format in Claremore, Okla., Rolla and Cape Girardeau, Mo., and in Wal-Mart's hometown, Bentonville.

Wal-Mart executives say, however, that while the supercenter concept is a natural in rural areas that lack substantial, highly focused retail competition nearby, the format also could be adapted to metro areas.

Buchanan estimates that over the next five years Wal-Mart will replace roughly 300 of its standard-sized discount stores with Supercenters (the half-dozen existing Supercenters replaced older Wal-Mart units.)

Clearly, the huge stores could have an enormous impact in any retail market they enter.

They will also help enhance Wal-Mart's reputation for rapid sales growth: by one estimate, 300 Supercenters would contribute roughly $24 billion in FY 1997, compared to the company's total estimated FY 1993 sales of $56-billion.