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Wal-Mart Cancels 45 Superstore Projects

This article originally appeared on the Huffington Post

According to a list released this week, Wal-Mart Stores has abandoned a record-shattering 45 proposed projects over the past 10 months—often leaving local officials dejected and confused. Another 19 Wal-Mart projects have been killed by local citizen’s groups. In total, the world’s largest retailer has suffered an historic loss of 64 projects.

The list of store cancellations was compiled by Sprawl-Busters, which has maintained a database on Wal-Mart battles for more than a decade. Since June, 2007, the Arkansas-based retailer has delayed or killed its own stores in the following communities:

Aledo, IL; Arlington, WA; Belfast, ME; Bonita Springs, FL; Brooksville, FL; Chico, CA; Concord, CA; Crowley, TX; Derry, NH; Elyria, OH; Fircrest, WA; Garden Grove, CA; Gilbert, AZ; Glen Carbon, IL; Hadley, MA; Hemet, CA; Hilo, HI; Isle of Wight, VA; Knightdale, NC; Lake County, FL; Lakeland, FL; Lawrence, NJ; Lewiston, ME; Liberty, OH; Pennfield, MI; Hillsborough, NH; Kilbuck, PA; La Puenta, CA; Marietta, GA; Marysville, WA; Memphis, TN; Morganton, NC; Neptune Beach, FL; Oakley, CA; Oxford, NC; Portland, OR; Raleigh, NC; Ravalli County, MT; Rutland Charter, MI; Spooner, WI; St. Peters, MO; Sioux Falls, SD; Stoughton, WI; Sunrise, FL; Waukesha, WI.

These store withdrawals usually come with little advance notice, and even less explanation. In September, 2007, for example, when Wal-Mart suddenly folded its tent in Lancaster, Massachusetts—3 miles from the construction site of another Wal-Mart superstore—the company issued a terse, four paragraph press release which stated, “The decision is related to Wal-Mart’s recently announced plans to moderate growth of U.S. supercenters as part of leveraging capital resources through a strategy designed to improve returns and sales within U.S. stores.” Such dense statements left local officials scratching their heads in disbelief—sometimes following months, even years, of lobbying by the retailer to get a project approved.

Up until 10 months ago, Wal-Mart was planning to open a new store in America every 26.5 hours. But all of that changed on the morning of June 1, 2007. On that Friday morning, Wal-Mart stunned 18,000 stockholders assembled in the Bud Walton Arena on the campus of the University of Arkansas in Fayetteville. The retailer announced its growth plan for 2008—in what the New York Times described the next day as a “turning point” for the company.

In their laps, stockholders held Wal-Mart’s 2007 Annual report, which said, under the heading “Future Expansion,” that the company’s “planned expenditures will include the construction of...265 to 270 new supercenters...” But in the weeks between sending their Annual Report to the printer, and their stockholder’s meeting—Wal-Mart popped its own growth bubble.

For several years, Wall Street’s reaction to the retailer’s overly-aggressive U.S. construction forecast had been less than encouraging. In 2005, for example, Bernstein Research Call issued a 13-page report warning stockholders of the downside of Wal-Mart’s superstore plans. The analysts noted that Wal-Mart’s growth “is under siege in several regions of the country from growing opposition by local communities...Local opposition has successfully squashed numerous plans among big box players in different parts of the country.” Bernstein noted that “heightened resistance could negatively impact these retailers by slowing their square footage growth rates.” Even modestly slower long-term square footage growth could have both an earnings per share and valuation impact, researchers said.

Because of grassroots anti-Wal-Mart groups, Bernstein warned, “it is clear that (discount retailers) will need to pursue a substantially larger number of permits going forward to hit their internal square footage targets given the likelihood of many opportunities failing.”

Not only had Wal-Mart suddenly slammed on the brakes for 2008, but the company said it would open “only” 170 superstores per year for the next three years, and 80 supercenter would be deferred into 2009. In its 2007 Annual Report, the company explained, “We are focused on prioritizing capital spending to the projects that produce the highest returns. We want to improve our Company’s return on investment, or ROI, improve our comparable store sales and improve our working capital productivity. The outcome is a focus on the most capital efficient opportunities.”

In part due to the company’s pale 1.9% growth in same store sales in 2007, John Menzer, Wal-Mart’s Chief Administrative Officer, admitted, “We also have been focused this year on reducing cannibalization of existing stores via our more strategic selection of U.S. real estate projects.” Same store sales indicates the performance of existing stores by measuring the growth in sales for such stores during a particular period, over the corresponding period in the prior year. Wal-Mart’s same store sales have been dropping for 20 years, but this past year was the worst. The 1.9% growth rate in 2007 compares to 5% in 1997, and 13% in 1987.

Every store site that Wal-Mart proposes is reviewed by its executive-level Real Estate Committee, which looks at a number of benchmarks to see if each unit meets the retailer’s Growth Model: the state of the economy, the local trade area, competition in the area, local demographics, real estate and construction costs, and: “potential impacts on neighboring Wal-Mart stores.” This last metric—the cannibalization factor—has had a major impact on the deep-sixing of many superstore projects this year.

“As we continue to add new stores in the United States,” the company told shareholders, “we do so with an understanding that additional stores may take sales away from existing units. We estimate that comparable store sales in fiscal 2007, 2006 and 2005 were negatively impacted by the opening of new stores by approximately 1% in fiscal years 2007, 2006 and 2005. We expect that this effect of opening new stores on comparable store sales will continue during fiscal 2008 at a similar rate.”

To measure Wal-Mart’s retrenchment another way, the corporation added 42,000,000 square feet of store space in 2007, compared to 39,000,000 square feet in 2006. It’s current growth plan cuts new square footage to 20,000,000 for 2008. As projects get cancelled, square footage growth drops, sales growth slows, all of which can impact earnings and company valuation. The last thing Wal-Mart wants is for investors to see the company for what it really is: a middle-aged corporation choking on its own domestic appetite for growth. If it weren’t for China and India, Wal-Mart’s growth prospects would be problematic. Yet Wal-Mart’s future as a colonial retail empire is far from certain, if places like Indonesia, Germany and Japan are the yardstick.

Sam Walton explained that his growth strategy was “to saturate a market area by spreading out, then filling in...We became our own competition.” He once boasted that Springfield, Missouri, for example, had 40 Wal-Marts within 100 miles. But Wal-Mart has paid a price for competing with itself. Today, the saturation card has been overplayed, and the retailer has been forced to go on a superstore crash diet. While hundreds of sling-shot coalitions have been hurling rocks at this retail Goliath for years, ironically, it is now the giant itself which is reeling from its own self-inflicted excesses.

This has created a wonderful 10 months for anti-Wal-Mart groups in 21 states, who have woken up in their small towns to read that another proposed Wal-Mart superstore has dissolved, as suddenly as the morning mist.

Posted by Al Norman on Monday, March 31, 2008

COMMENTS

The serpent will finally be required to swallow it’s own tail,and the circle will be completed.

ddrb in
Monday, March 31 at 03:22 PM

GROWING NUMBER OF STATES CONSIDERING
A KEY CORPORATE TAX REFORM
By Michael Mazerov

A growing number of states are giving serious consideration to a major reform in their corporate income taxes long advocated by state tax experts. The governors of six states — Iowa, Massachusetts, Michigan, New York, North Carolina, and Pennsylvania — all recommended in 2007 that their states implement this policy, which is known as “combined reporting.” New York enacted combined reporting legislation retroactive to the beginning of 2007 as part of the state’s budget bill for FY2007-08. Michigan included combined reporting in its newly-enacted “Michigan Business Tax,” which will take effect in 2008. And West Virginia enacted combined reporting as well, effective with the 2009 tax year.

Most large multistate corporations are composed of a “parent” corporation and a number of “subsidiary” corporations owned by the parent. Combined reporting essentially treats the parent and most subsidiaries as one corporation for state income tax purposes. Their nationwide profits are combined — that is, added together — and the state then taxes a share of that combined income. The share is calculated by a formula that takes into account the corporate group’s level of activity in the state as compared to its activity in other states.

By requiring corporate parents and subsidiaries to add their profits together, combined reporting states are able to nullify a variety of tax-avoidance strategies large multistate corporations have devised to artificially move profits out of the states in which they are earned and into states in which they will be taxed at lower rates — or not at all. These strategies cost the non-combined reporting states billions of dollars of lost corporate income tax revenue they need to finance essential public services, like education and health care. Households and small businesses, which do not have the opportunities or resources to engage in interstate income-shifting, end up paying higher taxes than necessary to make up for the taxes that large corporations are able to avoid. -(Center on Budget and Policy Priorities,updated September12,2007.)--------------------------------------------------------------------------------------------------------------------- There is a wonderful map of the U.S. on the aforementioned site which illustrates which states have combined reporting,have pending legislation,have no combined reporting,or have had it for many years. It also offers extensive info regarding the PICS and REITS that are rendered void by the combined reporting method .WalMart is used as a specific illustration re:PICS and REITS. .....Out of the 45 sites mentioned as having been cancelled,27 sites are in states that DO have,or have recently enacted, or are in process of adopting the combined reporting method.Only 10 of the states where the remaining 18 projects have been cancelled ,DON’T have combined reporting methods.According to my math, that means ,60% of the cancelled sites are, or would be, in combined tax reporting states.I have tried to be as conscientious as possible in compiling these stats. I certainly would welcome correction if I am in error.In NO way am I saying this is the reasoning behind WalMart’s choice to cancel ANY of these projects. I am merely making an observation.

ddrb in
Monday, March 31 at 04:50 PM

Here is a statistical observation I found

If you want MORE change – like 50 to 100% increase in your Fed taxes – Be SURE and vote for ‘Bama or Horse-Face in November !!! Oh yea – and pack in a Dem Congress so we can be a TOTAL Socialist Country !!

America Asked for Change In 2006 when,.......

1) Consumer confidence stood at a 2 1/2 year high;
2) Regular gasoline sold for $2.19 a gallon;
3) the unemployment rate was 4.5%.

Since voting in a Democratic Congress in 2006 we’ve seen,
1) Consumer confidence plummet;
2) the cost of regular gasoline soar to over $3 a gallon;
3) Unemployment is up to 5% (a 10% increase);
4) American households have seen $2.3 trillion in equity value evaporate (stock and mutual fund losses);
5) Americans have seen their home equity drop by
$1.2 trillion dollars;

6) 1% of American homes are in foreclosure.

America voted for change in 2006, and we got it!

Mark in
Monday, March 31 at 06:18 PM

ddrb in
Monday, March 31 at 08:36 PM

What’s the suprise here, didn’t walmart say awhile back, that they were going to cut back on building stores? Guess it must have been a slow news day.

Charles in Brighton, Tn.
Monday, March 31 at 08:46 PM

@Mark

“There are lies, there are damned lies, and then there are statistics.”

Yes, the Democratic party gained control of Congress in 2006. That the economy has soured since then cannot be solely attributed to Congress - if they can legitimately be blamed at all, which I doubt. The stupid economic policies and foreign policy mistakes of the Bush Administration and their Republican yes-men that have controlled Congress for years.

Spekkio in the End of Time
Tuesday, April 01 at 01:33 AM

Sparkle,

I think you had better READ your Constitution, it is Congress, that is in charge of MAKING LAWS, POLICIES and SPENDING, not the President!! The President can only recommend things, Congress has to PASS them!!

RDS in
Tuesday, April 01 at 10:01 AM

RDS: But the President has the right to veto .

ddrb in
Tuesday, April 01 at 10:30 AM

DDRB: And the congress can over-ride a veto.

mary in
Tuesday, April 01 at 07:42 PM

ddrb,

“But the President has the right to veto”

Right, and what does a ‘veto’ do, it sends the spending bill or ‘law’ back to Congress, thus stopping the spending, unless Congress can overide the ‘veto’ or send one he can ‘pass’!! But, he cannot MAKE and PASS his own laws!!

RDS in
Tuesday, April 01 at 07:45 PM

ddrb,

The economy is sour, mainly because of the current housing problems caused by the sub-prime mortgage crisis!! Guess who regulates the Banking Industry? Clue - ‘It’s not the President’!! Hint - Barney Frank!!

RDS in
Tuesday, April 01 at 07:57 PM

“Hint - Barney Frank!!”

RDS in his usual homophobic state of mind
Tuesday, April 01 at 08:40 PM

“RDS in his usual homophobic state of mind”

I think you are the homophobic one. Barney Frank is Chairman of the Financial Services Committee. Check your facts next time.

mary in
Wednesday, April 02 at 09:18 AM

mary,

“RDS in his usual homophobic state of mind”

Funny how this person knew ‘what’ Barney Frank ‘IS’, but doesn’t know what he ‘does’!! Where is mind at?

RDS in
Wednesday, April 02 at 11:36 AM

correction: should have read, “Where is HIS mind at?”

Don’t want ddrb, pointing out this error!!

RDS in
Wednesday, April 02 at 11:38 AM

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