Analysts welcomed a move announced Tuesday by Wal-Mart Stores Inc. to cut back on spending to build new stores and tighten cost controls as sales growth slows during the next three years.
Chief Financial Officer Tom Schoewe told investors and analysts at a conference that he has trimmed plans for capital expenditures for the second time this year to about 15 billion U.S. dollars from a June forecast of 15.5 billion dollars. The original projection was 17 billion dollars.
Increased free cash flow, or the money left over after a company pays its expenses including capital expenditures, could make Wal-Mart shares more attractive by funding higher dividends, new technologies or acquisitions, analysts said.
"Strong free cash flow is the key to corporate flexibility and potential growth. The highest quality companies, in my opinion, are able to self-finance their future growth from their free cash flow," said Patricia Edwards, managing director and retail analyst at Wentworth, Hauser and Violich in Seattle, which manages about 12 billion dollars in assets and holds about 35,700 Wal-Mart shares.
Wal-Mart, which is finding fewer places to build new stores and faces tougher competition from other retailers, said sales will continue to slow after years of strong double-digit growth. Schoewe said sales growth will fall to 9 percent this fiscal year from nearly 12 percent the year before and then be between 5 and 8 percent the next two years.
Wal-Mart is also faced with tougher economic challenges as its shoppers struggle with higher food and gas prices and a widening credit crunch.
"No doubt that our work has been made more difficult by the current economic environment," said Eduardo Castro-Wright, head of Wal-Mart's U.S. stores.
Schoewe said Wal-Mart is focused on using the tremendous cash flow generated by its U.S. and international stores more efficiently, including building fewer giant Supercenter stores and managing corporate costs better.
Source:Xinhua/agencies
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