June 25, 2018
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Wal-Mart: A year of taking stock to regain footing

By ANNE D’INNOCENZIO, The Associated Press

NEW YORK — Wal-Mart is in a race against time to give the people what they want before they get comfortable shopping elsewhere.

Shoppers who switched to other stores when Wal-Mart decided to ditch best-selling toothbrush brands, craft supplies and bolts of fabric may be hard to win back.

The company has taken nine months to restore thousands of grocery items, including some best-selling brands, it dumped from its shelves two years ago. The idea was to tidy up stores for the wealthier customers it had won during the recession.

Grocery sales have improved, rising in the low single digits in the first quarter. But overall traffic at its U.S namesake stores has been down and revenue at stores open at least a year has posted eight straight quarters of declines on a year-over-year basis.

Wal-Mart says it will take until the end of the year to restock the rest of the store with items that were culled, from craft supplies to home furnishings. That will go a long way toward restoring Wal-Mart’s ability to provide one-stop shopping, which could be a plus as shoppers make fewer trips to save on gasoline.

“The customer, for the most part, is still in the store shopping, but they started doing some more shopping elsewhere, and we want to bring them back. We know that it’s easy to lose them. ” said Wal-Mart Stores Inc.’s chief financial officer Charles Holley during a Citi Global Consumer Conference last week.

Dollar stores, which benefited from shoppers trying to stretch their dollars in the recession, are continuing to gain new customers and post higher revenue. The trend has accelerated as gasoline prices closed in on $4 a gallon.

Dollar stores more adroitly maneuvered the post-recession economy. They have expanded their inventory, particularly brand names, become more competitive on price and are expanding to new locations. Meanwhile, some wealthier shoppers are trading back up to the mall or higher-end grocery stores such as Whole Foods.

Wal-Mart is increasingly “caught in the middle” between dollar stores and more expensive stores, Wall Street Strategies analyst Brian Sozzi. “Now, it’s trying to return to its roots, but it’s facing old competitors — the dollar stores — that are getting much better.”

Richard Hastings, a consumer strategist with Global Hunter Securities, gives Wal-Mart two years to woo back its U.S. customers before their new shopping habits are imprinted.

But the restocking has taken longer than Wal-Mart predicted. In November, it had said that the merchandise it cut would be restored by this past spring.

Shares of Wal-Mart have tracked closer to its profits than its domestic sales this past year, and its international business has propped up revenue and profits. Wal-Mart shares are up 7 percent over the past 12 months. But they peaked in late January and have lost 5 percent since the company said it would not predict when U.S. revenue at stores open at least a year will begin growing, after setting a target date for last holiday season and missing it.

To address the increasing threat of dollar stores, Wal-Mart will open the first of up to 20 Walmart Express stores planned for this year. These stores are a tenth the size of a Supercenter, or about the size of a typical drugstore. Wall Street analysts and the media are expected to get a first look at a Walmart Express store Thursday. The store, in Gentry, Ark., will open later in June.

Walmart Express is aimed at taking out one of dollar stores’ advantages: proximity to where people live. High gas prices have made that even more important.

For the typical shopping trip, the cost of gas to get to the store now represents 11.4 percent of the cost of a dollar store transaction, while it’s 15.1 percent of a Wal-Mart transaction, according to an analysis by Credit Suisse of average purchases at Walmart and dollar stores. That’s because the average round trip to a dollar store is six miles versus 30 miles for a typical Wal-Mart trip, Credit Suisse analyst Michael Exstein estimates.

That’s not fast enough, Hastings said. Dollar stores are blanketing regions with stores, clustering stores sometimes less than a mile apart and along bus routes. Dollar General Corp., the largest by revenue, plans 625 new stores this year and is expanding into fresh produce.

Dollar Tree said two weeks ago that its customer traffic rose 5 percent in the first quarter and customers spent 2 percent more, on average. Revenue at stores opened at least a year soared 7.1 percent.


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