(c) 2009 
Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.Wal-Mart Stores Inc. plans to reduce prices heading into the holiday season in what CEO Mike Duke promised would be an aggressive return to the high-volume discount retailing formula pioneered by company founder Sam Walton.
The world's largest retailer by revenue also said it plans to open smaller U.S. stores with simpler merchandise assortments as it seeks to penetrate urban markets. It will spend between $1.4 billion and $1.6 billion on new U.S. stores in its next fiscal year, down from between $1.6 billion and $1.7 billion this year. The figures exclude Sam's Club stores.
Company executives made sweeping promises, but provided few details, during the start of a two-day analysts' conference on Wednesday. The Bentonville, Ark., retail giant is seeking to assure skeptical investors that its growth plans remain robust.
Wal-Mart is one of the few major retailers that have generated sales and profit gains since the start of the recession. But its stock has fallen 9.7% so far this year as Wall Street has questioned whether the discounter's resurgence will continue when the economy improves.
Mr. Duke asserted that it will. He said Wal-Mart's $400 billion a year in annual sales would become even bigger by cutting prices to attract more consumers, thus expanding sales per store. He also said the company would build new stores in the U.S. and abroad.
While the company fell short of backing up its latest promises with details, it promised to reduce prices on toys, groceries and other hot-selling items by hundreds of millions of dollars through price promotions that will accelerate as Christmas draws nearer.
As evidence of its plans, it cited current promotions, which included a 27% discount on the RipStik skateboard to $49.
Toys "R" Us said Wal-Mart's price moves are not new. "Every holiday season, there is this level of price competition -- we expect it and we prepare for it," said a Toys "R" Us spokesman. "We will once again be very competitively priced."
Some analysts have questioned whether Wal-Mart was veering away from its deep-discounting roots. In the first half of 2009, it matched 2008's earnings in part by posting relatively high gross profit margins.
But company officials said Wednesday that it would leverage the market share gained in the recession, as well as the cost cuts it has made by streamlining its merchandise assortments and inventories. These steps will allow it to offer deals that competitors cannot, executives said.
"We believe we can reduce the cost of goods sold by quite a bit," said Eduardo Castro-Wright, the head of the Wal-Mart's U.S. stores. He said it wants to cut what it pays for private-label goods by 5% to 15%.
Wal-Mart made its intentions clear last week when it began selling hotly anticipated books on Walmart.com for $10, far below their list price. When rival Amazon.com Inc. matched the prices, Wal-Mart lowered its prices to $9. When
Target Corp. entered the fray with $8.99 prices, Wal-Mart went down another penny to $8.98.
Wal-Mart was expected to provide more details about its growth plans Thursday.
Credit: By Miguel Bustillo and Ann Zimmerman
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