NEW YORK (AP) – Wal-Mart Stores Inc. is navigating the global economic slowdown by scaling back its store growth and capital expenditures while focusing on remodeling existing locations and creating smaller outposts.

The goal, Chief Financial Officer Tom Schoewe told analysts on its second day of the company’s annual meeting with Wall Street analysts, is to continue to increase its cash flow to invest in its business, while delivering returns to shareholders through dividends and share buybacks.

Wal-Mart, the world’s largest retailer, plans to open a total of 212 stores in the U.S. in fiscal 2009, which ends in January, and from 157 to 177 stores in fiscal 2010. That compares with 243 stores opened in the prior year.

The scaled-down expansion comes as Wal-Mart told analysts Tuesday that total sales growth will moderate to 8 percent in fiscal 2009, below the 8.6 percent pace last year. For fiscal 2010, Wal-Mart predicts sales growth at 5 percent to 7 percent.

Its expansion includes 166 supercenters in the fiscal 2009 year. That’s down from 191 in the prior year. In 2010, the company will open just 125 to 140 supercenters.

The new supercenters, Wal-Mart added, will be smaller and will incorporate sustainable building practices to increase efficiency. Supercenters have traditionally been far bigger than regular Wal-Marts, offering groceries as well as household appliances, clothing and electronics.

Wal-Mart said it will also slow development of its Sam’s Club warehouse stores. For the current fiscal year, it will add 21 new, expanded and relocated clubs. In fiscal 2010, the company will add 15 to 20 clubs. Wal-Mart said 25 new Sam’s Clubs opened in fiscal 2008.

As a result, the retailer will cut its capital spending by about $2 billion to about $13 billion in the current year. The company says it will spend $13 billion to $14.5 billion for the 2010 fiscal year.

“At a time of great economic uncertainty, this company is well positioned to succeed in the future and in the short term, and we believe that we, as a company, will emerge as a tougher competitor,” said Lee Scott, Wal-Mart’s president and CEO. He added, even in these challenging times, the company will not be “defensive” or “passive.”

Many retailers have cut back on their expansion plans due to the downturn in the economy and the consumer spending slowdown amid higher prices for food and other basics, a housing slump and weaker job market. But the financial meltdown that intensified last month has made consumers even more spooked about their financial security, resulting in a further dropoff in spending. Consumer confidence dropped to the lowest level on record in September, according to the Conference Board’s reading announced Tuesday.

Even discount retailer Wal-Mart said in August that it expected slower growth in same-store sales, or sales at stores open at least a year, in its third quarter. Company officials predict that same-store sales will continue at a pace of low single digit increases into next year.

Nevertheless, Wal-Mart has found itself in the right spot as it pushed the right mix of merchandise and marketing to complement its renewed focus on price, which all came together just as the economic slowdown worsened last year. Its “save money, live better” mantra, which is featured in advertising and is at the core of its merchandising strategy, has resonated well with shoppers.

Meanwhile, over the past three years, Wal-Mart has also worked hard on improving efficiencies and return on investment; it has focused on cutting inventory growth to be less than half of sales growth and other financial metrics. As a result, the company’s shares, which had been in a funk for several years, rebounded starting in September 2007, rising about 50 percent to $64 in early September. Shares have taken a hit since the financial meltdown intensified in recent weeks.

Shares rose $5.48, or 11 percent, to close at $55.15 on Monday, the midpoint of their 52-week range of between $42.50 and $63.85.

Across all businesses, from its namesake stores to the Sam’s Club division to business overseas, Wal-Mart is hammering its low price message while improving its product mix. It’s also experimenting with new formats.

Sam’s Club officials told analysts Tuesday that the company plans to open a new Mas Club store that sells products imported from Mexico to cater to Hispanic customers. “Mas” means more in Spanish. Meanwhile, the Sam’s Club division began testing a new concept called Sam’s Club Business Center in Houston, which caters only to small business owners. Doug McMillon, president and chief executive of Sam’s Club, said that at the new format, which does not have such categories as jewelry and pharmacy, business is beating the sales plan.

Sam’s Club is also testing a smaller format for both small business and average consumers in Garden City, Kan. This 100,000-square-foot format would allow Sam’s Club to move into smaller markets.

Abroad, Wal-Mart is shifting its focus to emerging markets from mature markets to fuel growth. Its international business accounted for 24 percent of sales in its last fiscal year.

Mike Duke, vice chairman of Wal-Mart’s international division, noted that over the next five years, 53 percent of the company’s capital allocation will be devoted to emerging markets, with the remainder in mature markets. That compares with 67 percent over the last five years that was devoted to mature businesses such as Britain and Canada.

AP Business Writer Lauren Shepherd contributed to this report.

AP-ES-10-29-08 0500EDT

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