Wal-Mart Express: Wal-Mart’s Answer to Dollar Stores?

by Trefis Team
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Wal-Mart (NYSE:WMT) recently opened its first ‘Wal-Mart Express’, a smaller 15,000 square-foot store. That’s a fraction of the size of its Supercenters, which average 185,000 square feet in area. Through these store openings, Wal-Mart aims to compete with Dollar Stores that are increasing their foothold in the United States. Wal-Mart also competes with other big-name retailers like Target (NYSE:TGT), Costco (NASDAQ:COST), Amazon (NASDAQ:AMZN) and Best Buy (NYSE:BBY).

Our price estimate for Wal-Mart stands at $74.46 implies just about 40% upside to the market price.

Wal-Mart Express: The Right Road for Wal-Mart?

Wal-Mart Express carries everything consumers might need at the spur of the moment, from milk and eggs to DVDs. All locations have a pharmacy while some will also sell gasoline. All stores offer check-cashing services and accept food stamps. Wal-Mart plans to open about 15 to 20 Walmart Express locations this year, in rural municipalities in northwest Arkansas and North Carolina but also in urban markets in Chicago.

According to a report by the Associated Press, [1] Walmart Express is sized to fit into cities where space is at a premium and in rural areas that can’t support a superstore. The first store, opened in rural Gentry, Arkansas. Wal-Mart is also experimenting with a prototype for urban markets in Chicago which is expected to open this summer.

Dollar Stores Heightening Competition

Dollar-store chains have quickly expanded and pose intense competition to Wal-Mart. They aim at opening stores closer to customers’ homes, a big advantage in times of high gas prices. According to a Credit Suisse analyst, the average round trip to a dollar store is six miles vs. 30 miles for a typical Wal-Mart trip. These stores have enjoyed strong revenue growth as they’ve lured more shoppers with bargain prices and wider selections.

We believe Wal-Mart’s focus on Wal-Mart Express could provide a big boost to Wal-Mart’s topline growth. This could also help Wal-Mart build on its already established image as the world’s largest low cost retailer and gain an edge in this market.

See our complete analysis for Wal-Mart stock here

Notes:
  1. See: Walmart Express Takes Aim at Dollar Stores, June 8, 2011 []
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