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Why Wal-Mart Needs to Build Much Smaller Stores

A Walmart Neighborhood Market store in Chicago on Aug. 15, 2013
A Walmart Neighborhood Market store in Chicago on Aug. 15, 2013Photograph by Scott Olson/Getty Images

“Walmart has a long history of embracing change. And this year, we’ll certainly make some changes to improve our business. These changes will be made with a filter on increasing customer relevance.”

That was how Doug McMillon, Wal-Mart Stores’ new chief executive officer, introduced his plans for 2014 in a prerecorded call (PDF) on Thursday. What followed were the details of just how tough 2013 was for the world’s biggest retailer. The company’s net sales grew 1.6 percent to $473.1 billion, and its operating income decreased 3.1 percent to $26.9 billion. In the U.S., Wal-Mart’s comparable store sales, an important measure of a retailer’s health, declined 0.6 percent. Company executives have given all sorts of reasons for the slow sales in the U.S.: Some customers are still having a hard time financially; the government reduced food-stamp benefits; the weather was terrible, and the flu season wasn’t.