Wal-Mart Shrinks U.S. Supercenters, Sees Tepid Sales

SAN FRANCISCO (Reuters) - The Wal-Mart supercenter is getting downsized.

Wal-Mart Stores Inc fueled its aggressive U.S. expansion this decade by opening supercenters that on average have more square footage than three American football fields. But at its analyst meeting on Thursday, Wal-Mart said it will rely on smaller, more efficient stores to drive future U.S. expansion and help it penetrate yet untapped urban markets.

While it shrinks the average size of its U.S. stores, its international operations are gaining in importance and will help fuel future sales. It forecast international square footage growth to outpace U.S. growth this fiscal year and next.

One area of business that Wal-Mart made clear it is not changing is its commitment to discount prices and its intention to defend its turf against rivals.

"We watch the competition," CEO Mike Duke said on the second day of its analyst meeting. "We will be the price leader."

On Wednesday, Wal-Mart outlined plans to slash prices every week until Christmas to fend off rivals and keep newly won market share gains. Online competitor Amazon.com Inc on Thursday forecast what could be a blow-out holiday quarter for its business, sending its shares up 13 percent.

Wal-Mart's price strategy pressured its shares as investors worried the discounts would hurt margins. Wal-Mart's treasurer, Charles Holley, said the retailer is being "thoughtful and strategic" about price cuts to protect margins.

But in response to analysts' questions about how Wal-Mart would respond if rivals slash prices, Duke responded multiple times that the retailer intends to be the "price leader."

TEPID SALES GROWTH SEEN THIS YEAR, THEN A REBOUND

Wal-Mart expects sales to grow 1 percent to 2 percent in the current fiscal year, below the 5 percent to 7 growth projection provided at last year's analyst meeting.

Chief Financial Officer Tom Schoewe attributed the shortfall to currency exchange rates and deflationary pressures. Last year, rising food and gas prices helped boost sales figures, but those forces have eased this year.