UPDATE 1-Walmart U.S. to use supercenters as distribution hubs
Oct 15 (Reuters) - Wal-Mart Stores Inc plans to use some of its large U.S. stores as distribution centers for nearby smaller stores, a move that could help the chain keep goods in stock and cut costs, Walmart U.S. Chief Executive Bill Simon said on Tuesday.
The plan is being tested and will roll out in the first of three unnamed markets in March, Simon said at the company's meeting with investors and analysts in Arkansas on Tuesday. The meeting was also webcast.
The world's largest retailer sees the economy as "tough" and "unpredictable" around the world, Chief Executive Officer Mike Duke said.
In the United States, the government shutdown is on the minds of the company's customers, Duke said. While Wal-Mart has not yet given specific details of how the shutdown is affecting its business, it was blunt that it is seeing an impact.
If people are not getting paid, they are not shopping as much, Simon said.
But Duke added, "No matter what environment we are in, Wal-Mart will win."
Wal-Mart has already felt pressure from the economy. Same-store sales at Walmart U.S., its largest business, unexpectedly fell 0.3 percent in the second quarter.
Walmart U.S. feels pretty good about its profit but is not satisfied with its sales, said Simon.
Same-store sales at the bottom 10 percent of its large U.S. supercenters were down 7.5 percent last quarter, he said.
Shares of Wal-Mart were up 48 cents, or 0.6 percent, at $75.16 as the meeting continued Tuesday morning. Through Monday, the shares were up 10 percent this year, underperforming the 19.7 percent gain in the S&P 500.
SUPERCENTERS AS DISTRIBUTION HUBS
Walmart U.S. said it is testing using its supercenter stores as "cross docks" to supply nearby smaller stores.
The company's supercenters are the backbone of its business, selling a mix of groceries and general merchandise in stores that are each roughly 182,000 square feet.
Walmart U.S. has also been building smaller Neighborhood Market stores, which are about 38,000 square feet each and operate more like traditional grocery stores. It also has about 20 Walmart Express stores, which are roughly 15,000 square feet.
Walmart U.S. can use the back room of a supercenter as a holding area for goods to be sold at the supercenter and also as a "little mini warehouse" where workers can get items ready for daily deliveries to smaller stores, Simon said.
That would eliminate the need to send 53-foot trucks from distribution centers to the smaller stores, and therefore reduce transportation costs.
For the first time, Walmart U.S. plans to open more of its smaller-format stores than supercenters, Simon said.
Walmart U.S. also talked about opening 70,000-square-foot supercenters, which would cost less to build and operate.