TENNESSEE SITE FIGHT: ON THE FENCE

Wal-Mart Still on Fence about Mall of Memphis Site [Memphis Daily News]

At some point in September, a group of Wal-Mart executives will hunker down at a private meeting in Memphis to strategize about various opportunities for the retail giant in the city.

The company recently has been active here on several new fronts. Wal-Mart sold a parcel of land on Hickory Hill Road this month, for example, to an Arkansas-based oil company that is buying up land it leases from Wal-Mart for its gas stations. This spring, Wal-Mart also filed a $7.1 million building permit to build one of its Supercenters on part of the 95-acre site once home to the Mall of Memphis.

Lurking in the background at that meeting next month in Memphis, though, almost assuredly will be the overall company’s performance of late, which has caused many a furrowed brow among shareholders and company analysts. Wal-Mart’s stock price, which is down 9.2 percent year-to-date as of Aug. 23, hit a 52-week low of $42.92 on Aug. 16.

Cautionary non-spending

Evidence suggests that broad uncertainty in the economy is one reason Wal-Mart has not yet pulled the trigger at the Mall of Memphis site. As plum an economic development prize as it would be for the city, the company’s plan has yet to be given the official green light from the top brass at its Bentonville, Ark., headquarters.

It’s not difficult to speculate why.

A report on Wal-Mart’s recent performance, published by an analyst from the Chicago-based Morningstar Inc. investment research firm, tied weak estimates for the rest of this year through 2008 partly to - no drumroll needed - mortgage woes and the pervasive credit crunch.

“Management,” the analyst report also read, “said sales were slowing at the end of every pay period, suggesting that a large percentage of its customers are simply running out of discretionary spending cash.”

The report goes on to blast everything from the drabness of some stores to the retailer’s dependence on cost-cutting and ultra-efficient inventory management to help get over its slump - at the expense of a “more pleasant shopping experience”.

Another bad sign - Wal-Mart recently posted sluggish same-store sales numbers for July. The retail chain, according to Reuters, posted a 1.9 percent rise in July same-store sales. Wal-Mart rival Target Corp., on the other hand, beat analyst expectations by posting a 6.1 percent rise.

Same-store sales figures are used in the retail world to distinguish between growth that comes from new stores and the performance of existing stores. Wal-Mart breaks down its store data to the state level, and company information shows the retail giant operates 99 Supercenters in Tennessee.

‘Getting our act together’

Meanwhile, the imminent strategy session in Memphis, said Wal-Mart spokesman Dennis Alpert, will be a scouting trip of sorts.

“It’s just our folks getting together to meet, seeing what’s going on in the Memphis market, kind of getting our act together,” he said.

“We just had kind of a shifting of responsibilities, as we always do. Like, every year or so we shake things up and move people around. So this is about just kind of gathering to talk about what’s going on in West Tennessee.”

Wal-Mart is not only one of the largest employers in Memphis, but - according to the city’s most recent Comprehensive Annual Financial Report - the chain employs almost as many people as the Memphis municipal government. Both have about 6,600 employees in Memphis.

A $250,296 warranty deed was filed last week in which Wal-Mart Real Estate Business Trust sold a parcel at 2858 Hickory Hill Road to Murphy Oil USA Inc., according to The Daily News Online, http://www.memphisdailynews.com. Murphy Oil Corp. announced in May that its subsidiary, Murphy Oil USA, has an agreement with Wal-Mart to buy land the company now leases from the retail giant.

As for overtures the company has made about transforming the old Mall of Memphis site - Alpert said it’s still a question of even “if.”

“The last word I got was that they’re evaluating it from a business perspective and trying to decide what makes most business sense for the company,” he said. “It’s still not a definite thing at this point.”

Schematics filed with the city-county Department of Construction Code Enforcement reveal what the retail giant is at least thinking about for the site. The company’s plans show a typical Wal-Mart property in the works - a mercantile building measuring between 170,000 and 190,000 square feet.

The retail renaissance many real estate professionals believe Wal-Mart’s development at that site would spur, though, will have to wait a little longer, it seems.