Wal-Mart Stores Inc. (WMT) told Wall Street what it wanted to hear: Growth in capital spending will slow to 2 to 4 percent in fiscal 2008, down from 15 to 20 percent in fiscal 2007. Growth in square footage is hardly likely to slow at all. The company projects a 7.5 percent gain in fiscal 2008, compared with 8 percent in 2007. The stock opened strong, jumping more than 5 percent in early trading, and it remains up more than 3 percent as of mid-day.

Tables A shows that in recent years, capex had grown more rapidly than sales, especially when compared to industry peers.

Table A

But Table B leaves one to wonder how much value Wal-Mart’s has been getting from its efforts. Its returns on investment continue to improve and remain above industry averages, but the company’s margin of victory is narrowing despite the heavy spending.

Table B

Note: TTM = Trailing 12 months

So it’s not surprising to see investors welcoming the company’s intent to focus on capital efficiency.

But in assessing the likelihood of success, consider some mixed messages.

• While the pace of spending is slated to slow dramatically, growth in square footage is target to remain pretty much intact. We’ll ultimately want to hear more about how that seemingly contradictory set of outcomes will occur.
• What, exactly, is the company’s image likely to be going forward? We’ve heard before how Wal-Mart wants to go upscale, and Dow Jones reports it plans to make a special push in this regard this holiday season with Sam’s Club. An experiment with new employee uniforms may represent a step along these lines. Yet renewed price wars, as Wal-Mart is pursuing with some generic drugs and in a holiday-season toy initiative are also taking place.
• What, exactly, is Wal-Mart’s global vision? It’s making a big push in China but had to retrench in Germany and South Korea.

This morning, Wal-Mart talked the return-on-investment talk. But there are still some issues that need to be clarified before it walks the walk.