Posted on April 11, 2008

Wal-Mart, the nation’s largest big box store, has recently been knocked down by a one-two punch of deepening recession and declining sales growth. According to Al Norman, the founder of Sprawl-Busters, Wal-Mart has abandoned 45 superstore projects over the last 10 months, and citizen groups have killed another 19. This loss – 64 stores in all – is unprecedented, and suggests that the retailing giant may have hit a wall in the United States.

Norman notes that same-store sales growth has been steadily dropping over two decades, from 13% in 1987, to 5% in 1997, to an anemic 1.9% in 2007. Perhaps the biggest reason is that new stores are now cannibalizing the sales of existing stores in the same chain.

Here’s what the company has told shareholders: "As we continue to add new stores in the United States, 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 [...]. We expect that this effect of opening new stores on comparable store sales will continue during fiscal 2008...."

Wal-Mart still sees lots of growth potential internationally, especially in China and India. But public resistance also has spread, according to Norman, to Indonesia, Japan, and Germany.

Wal-Mart’s stock today trades at $55 per share – almost exactly its price five years ago. In other words, if you factor out inflation, the stock has been losing value. The flattening of domestic growth and growing uncertainty surrounding global expansion begins to open up the big-boxer to a knock-out blow from the desertion of its investors.

For more information, see Al Norman’s article, "Wal-Mart Cancels 45 Superstore Projects," published by The Huffington Post.

By Michael H. Shuman