Walmart and China

February 20, 2012

Walmart is taking a 51% stake in Yihaodian, a leading Chinese e-commerce website, in a significant move by the U.S. retailer to boost its online presence in China.

Walmart did not disclose financial details for the partnership, which Neil Ashe, president and chief executive of Walmart Global e-commerce, said would help deliver a "superb customer experience" to consumers in China.

"This is testament to how seriously Walmart is developing their e-commerce platform in China. Having a controlling stake obviously gives them a much more direct say in how Yihaodian expands," said Torsten Stocker, an analyst with the Monitor Group.

Founded in 2008, Yihaodian is one of the fastest growing companies in China, selling more than 180,000 products ranging from grocery items to consumer electronics and apparel. Yihaodian, in which Walmart already held a minority stake, runs logistics centers in Shanghai, Beijing, Guangzhou, Wuhan and Chengdu and is able to offer same-day and next-day delivery. The Chinese consumer e-commerce market is dominated by homegrown online retailer Taobao.

Walmart remains a relative novice in e-commerce in the United States where the market is led by Amazon. Online sales account for a tiny percentage of Walmart's total U.S. revenues, but in the past year it has sought to boost its in-house expertise by acquiring two U.S. technology companies: Kosmix, which specializes in organizing information from social media sites such as Facebook, and Small Society, which develops apps for mobile shopping.

While Walmart's website sells dried and packaged food as well as general merchandise for delivery across the US, its only involvement in selling fresh food online is a small pilot program launched in San Jose, California, last year.

Walmart has more than 350 stores in China, where it has been making steady progress. In the three months to the end of October it reported a 16.1% increase in China sales from the previous year, but although individual shoppers were spending more money on each trip, visitor numbers were down 7.1%.

The company this month appointed Greg Foran, a 30-year industry veteran, as the chief executive of its China business. Mr Foran will take over next month. His predecessor, Ed Chan, stepped down in October, the fourth senior-level departure for the China business in six months.

In October, Walmart China closed its stores in Chongqing for a fortnight after the local government found it had mislabeled ordinary pork as organic. "Monitoring Walmart is as effective as punching cotton," Tang Chuan, head of enforcement at the Chongqing Administration of Industry and Commerce, told Xinhua news agency at the time.

Mr Ashe said that, in addition to helping Walmart's e-commerce goals in China, the increased investment in Yihaodian would "further contribute to China's domestic consumption, help stabilize prices, and advance expansion in the middle and western regions" of China -- a nod to Beijing's oft-repeated desire to make progress on these goals in the current Five Year plan.

Wal-Mart to aggressively roll out smaller stores

September 21, 2010

NEW YORK  — Wal-Mart Stores Inc. is planning an aggressive push into urban markets with a new small format that’s a fraction of the size of its supercenters.

The expansion, expected to be spelled out next month at the retailer’s meeting with analysts at its headquarters in Bentonville, Ark., is aimed to pump up sluggish U.S. sales.

Real estate executives said that over this past summer, the world’s largest retailer has been scouring for small locations, around 20,000 square feet, in urban areas including New York City, San Francisco and other cities. That size is larger than a typical drugstore but smaller than a supermarket.

“I see this as a smart move, instead of coming into a market as a 900-pound gorilla,” said Faith Consolo, chairman of real estate firm Prudential Douglas Elliman’s retail leasing division. She noted that Wal-Mart has been talking to landlords and brokers.

“They’re on an aggressive roll,” she added. “This is a creative time. Everyone is thinking out of the box.”

She noted that in New York City, Wal-Mart has been looking in Queens and the lower part of Manhattan.

Since 2008, Wal-Mart has been testing smaller stores called Marketside. They now total four and average 15,000 square feet. The format focuses on fresh food. And the discounter now has almost 200 Neighborhood Market by Walmart stores, which offer a mix of fresh food, pharmacy, beauty, stationary and pet supplies and are about 42,000 square feet.

Wal-Mart has been shrinking its supercenters, which carry a wide assortment of food and general merchandise, to about 150,000 square feet from 195,000 square feet. But the company has maintained that it plans to use smaller formats in urban markets.

In a note to investors Monday, Brian Sozzi, analyst with Wall Street Strategies, said he believes the new 20,000-square-foot stores would likely fuse the Marketside and Neighborhood Markets formats.

“Wal-Mart needs to have a store concept that brings in customers more than once every two weeks when paychecks are distributed,” he wrote. He added that using the Marketside Stores as a vehicle for growth is too limiting, and that Neighborhood Markets are too big to enter cities.

Wal-Mart spokesman Steven Restivo said Monday that “while we have not shared an exact size of the small format … we continue to evaluate a wide range of stores sizes across the country and will consider any format that puts us closer to our customers.”

Bill Simon, the new president and CEO of Wal-Mart’s U.S. business, told investors last week at a Goldman Sachs retail conference, said that “we will have a healthy mix of supercenters and small formats, including our grocery format, Neighborhood Market and smaller formats,” he continued. He added that in particular, Wal-Mart is looking to open stores that are similar to the formats in Mexico, Central America, and Latin America.

“We are going to beg, borrow, steal and learn from them as quickly as we can, because it is important for our urban strategy,” he added.

Wal-Mart, which now has more than 4,000 stores in the U.S. has hit a wall in the U.S. The company just reported its fifth straight quarterly decline in revenue at stores opened at least a year, considered a key indicator of a retailer’s health.

Wal-Mart benefited during the recession as affluent shoppers traded down to cheaper stores. But stubbornly high unemployment and tight credit are still squeezing its main U.S. customers, lower-income workers who are having even more trouble stretching dollars to the next payday because of tight credit and an unemployment rate stuck at almost 10 percent. The discounter’s own merchandising gaffes have also contributed to the company’s revenue figure’s decline.

Wal-Mart’s rival Target Corp. is set to spell out more details of its urban strategy on Friday to the media at its headquarters in Minneapolis. Target had told analysts in January that it plans to open in the next few years smaller stores of 60,000 to 100,000 square feet. That compares with its current average of 125,000 square feet. But real estate executives including John Bemis, head of Jones Lang LaSalle Inc.’s retail leasing team, say Target also is looking at 20,000-square-foot locations.

“I think 20,000 makes more sense than 80,000 square feet,” Sozzi said.

For further information, visit: http://www.cleveland.com/business/index.ssf/2010/09/wal-mart_to_aggressively_roll.html

Consumers Are Not The Only Ones Cutting Back

June 16, 2009

Consumers aren’t the only ones cutting back.

Retailers are reining in their spending — with most broadline players slashing millions from their budgets as they try to counter withering sales. Although some, such as Wal-Mart Stores Inc., continue to pump money into their businesses to grab market share, the majority are drastically slimming down within their business models.

And if consumer spending doesn’t bounce back, retailers will have to start making more drastic and ultimately transformational changes that could reshape the industry, said experts.

Sears Holdings Corp., Macy’s Inc., Dillard’s Inc., J.C. Penney Co., Saks Inc., Nordstrom Inc., and Target Corp. cut a collective $668 million in selling, general and administrative expenses in the first quarter, pushing their SG&A expense down 6.3 percent from a year earlier. That means fewer dollars supporting brands and driving foot traffic, the axing of information technology projects and cramped cross-country plane rides for executives who can’t afford to be seen in first or business class as they lay off workers.

“From travel to supplies to benefits to marketing to information technology, we’re leaving no stone unturned,” said Stephen I. Sadove, chairman and chief executive officer of Saks, which reduced first-quarter expenses by $44 million, more than it planned to cut for the whole year. “How we have always done it is irrelevant. We’re approaching every area of the business asking how should we do it going forward.”

Saks rival Neiman Marcus last week revealed plans to reduce expenses by $125 million a year. “Our team has done an excellent job of decreasing their spend,” said Burt Tansky, president and chief executive officer of Neiman Marcus. “We are undergoing a comprehensive process that we believe has been thoughtful and significant.”

About 60 percent of planned expense reductions already have been realized. Neiman’s cut $38 million from selling, general and administrative expenses in the most recent quarter versus its 2008 counterpart.

Sears, which has 3,900 doors under its namesake and Kmart brands and has been criticized in the last few years for not investing enough in its stores, is the industry’s most aggressive cost cutter. The firm surprised Wall Street with first-quarter earnings after it reduced advertising spending by $107 million and payroll and benefit expenses by $84 million.

Cuts are even being made in the off-price channel, despite the competitive advantage that comes from having a value orientation during the downturn. Earlier this year Stein Mart Inc. laid off 178 assistant managers, while the rest of its managerial staff took a 5 percent pay cut and store associates’ hours were cut by 17 percent. Like other retailers, the company stopped paying shareholders a dividend, eliminated its stock buyback plan and halted contributions to employees’ 401(k) retirement plans.

All of this feeds into a vicious economic cycle, where the slowdown in consumer spending prompts businesses to cut workers, increasing the ranks of the unemployed and further weakening spending. Department stores alone eliminated a total of 10,800 jobs in February, March and April, according to government statistics that adjust for seasonal variations in workforce. Last month, the department store channel actually added 4,500 positions, although specialty stores cut 3,300 jobs.

But to every cost-cutting trend, there are exceptions.

Wal-Mart and, to a lesser extent, Kohl’s Corp., actually spent more in the first quarter, investing in their businesses in hopes of grabbing market share while most of the competition is biding its time and many are slimming down their store portfolios.

Wal-Mart upped its operating, selling, general and administrative expenses by $386 million in the first quarter. That spending increase is almost exactly what Macy’s and Sears, the two biggest cost cutters, stripped away.

“This is still Wal-Mart’s game,” said Dean Hillier, consultant and a partner at A.T. Kearney. “They are definitely taking advantage of the circumstances. The market is certainly heading their way and it seems to be sticking somewhat. The others are in a tougher spot and therefore are having to do what they need to do to eke out their profitability.”

Retailers have tried to hide their newfound austerity from consumers by working on inventory controls and cutting corporate staff while attempting to maintain the shopping experience. But chains are now tiptoeing up to cost cuts and other changes that could change the character of the industry. Both Neiman’s and Saks, for instance, said their customers want to spend less while not switching to other brands, and the retailers are trying to accommodate them by urging brands to develop lower entry-level price points.

“If Saks were to go to a lower price-point item on the same brand, would that reduce the brand impact for Saks as a company?” wondered Hillier. “Retailers are pushed into a position now, quite frankly, where they have to take risks with their business. They’ve got to start placing strategic bets. This is a new reality that retailers are dealing with.”

The next cost-saving step for retailers would entail bigger, deeper cuts and strategic moves, such as the shuttering of whole divisions, he said. That’s already occurred for a number of specialty stores, and last month Abercrombie & Fitch Co. indicated it might join them, saying it was undertaking a strategic review of its fledgling Ruehl unit.

A survey by Credit Suisse showed cash capital spending at 80 retailers fell 14.4 percent last year, the first decline since 2002. Spending by specialty apparel retailers dropped 24.2 percent to $3.71 billion and is slated to fall another 34.8 percent this year. Mall anchors cut expenditures by 22.4 percent to $4.26 billion in 2008 and plan to slash another 37.4 percent this year.

Despite the decline in spending, apparel specialty stores are expected to increase their gross selling space by 1.9 percent this year to 784.2 million square feet, while mall anchors add 1.2 percent for 506 million square feet — even as analysts at Credit Suisse say both sectors already have too much selling space.

“Capacity is not coming out of the soft-lines space fast enough,” Credit Suisse said of the apparel specialty stores. “We believe many retailers in this group are now faced with structural issues, primarily that they have too many stores, and would expect a decrease in square footage in 2010 as retailers come to this realization.”

Chains wanting to save money need not look at just their own operations. They can also take new approaches with their suppliers.

The savings so far, as large as they’ve been, are just the tip of the iceberg, said David McTague, executive vice president of partnered brands at Liz Claiborne Inc.

“They haven’t even started yet; it should be in the billions of dollars,” McTague said at the company’s annual meeting.

Together, he said, retailers and vendors can move product more efficiently from factory to selling floor and better manage inventories.

The financial stress of the moment could help set new directions on both sides of the supply/retail divide.

“Hopefully it means that they’re open to a much more collaborative relationship,” McTague said. “It’s a zero-sum game. All of us are trying to move profit dollars. It’s forcing everyone to be a lot more creative.”

For now, though, major changes appear to be mostly in the future. The more immediate question is whether retailers are cutting wisely. And there’s plenty of room for error.

“Some retailers have cut too far because they’ve cut from the top down,” said Antony Karabus, ceo of Karabus Management, noting a 10 or 15 percent across-the-board cut will trim some areas too much and others not enough.

Spending varies across the industry, meaning each company will have to cut in its own way.

According to the Karabus SG&A Retail Benchmark study, which looked at spending across 68 chains for the fiscal year ended January 2008, merchandising expenses range from 0.8 percent to more than 3 percent of sales. Supply chain costs range anywhere from 1.2 percent to 3.5 percent of sales.

As retailers lay off workers, many are concentrating their regional field staffs; for instance, giving district managers more stores to oversee or eliminating a layer of management altogether, said Karabus.

For department stores the danger is an increasingly national stance when customers want local flavor and attention — which is what Macy’s Inc. is trying to prevent with its My Macy’s program.

“When you cut expenses as a department store, you’ve still got to make sure that you’re staying relevant to your local consumer,” Karabus said. “What you’re seeing with a number of chains is that they’re cutting significantly to become more national.”

For further information, visit: http://www.wwd.com/business-news/stores-cost-cutting-may-transform-retail-2167503#/article/business-news/stores-cost-cutting-may-transform-retail-2167503?page=2

Renovating Wal-Mart But Keeping Customer Loyalty

June 9, 2009

The bad times have been good for Wal-Mart Stores, and on Friday, the retailer’s new chief executive said he expected sales to continue to be strong, even after the economy rebounds.

“Our customers will stay with us when this economy turns around and they have more discretionary money to spend,” Michael T. Duke, the president and chief executive of Wal-Mart, told attendees at his first shareholder meeting since taking the helm this year. “We are building long-term loyalty to Wal-Mart.”

Like some other retailing executives, Mr. Duke says he thinks the recession has prompted a fundamental change in consumer behavior — a “new normal” in which people are concerned about saving money.

If true, that bodes well for Wal-Mart, which has built its reputation on low prices.

Wal-Mart’s profit was flat for the three months that ended April 30 — $3.02 billion, or 77 cents a share, compared with the same $3.02 billion, or 76 cents a share, a year ago. Still, its sales at stores open at least a year have outperformed competitors, including its primary rival, Target. During the shareholder meeting, which began promptly at 7 a.m., the actor Ben Stiller, the meeting’s host, quipped, “I hear they’re still sleeping at Target.”

Separately, Wal-Mart announced that it would start a new $15 billion program to repurchase shares. The news sent shares of Wal-Mart up 20 cents, to $51.07.

Media tours of Wal-Mart and Sam’s Club stores on Thursday offered some details about how the retailer planned to hold onto its new customers.

Executives said a new store design and remodeling plan would make Wal-Mart stores more pleasant. They also plan to expand thriving departments, like food and electronics.

The most popular items that families buy — groceries, health and beauty goods, pet products and baby products — will be located on the same side of the store, so customers do not have to trek from one end to another. Shelves will no longer be stacked so high, so stores will feel airier and easier to navigate.

There will be more signs pointing out the low prices of items, wider aisles without freestanding product displays, and, in general, fewer brands so consumers are not overwhelmed by 25 different kinds of toothpaste.

The electronics department — a hit with consumers who want brand names at low prices — will be expanded and will offer more hands-on products so consumers can test technology like portable electronics and Blu-ray players. Also, electronics departments will be located on the back wall of stores so consumers see a wall of sleek TVs when they enter.

The food and produce area, which has helped increase sales in this economy, will also be expanded. Signs that say “fresh” will be near store entrances, along with the take-out food, deli and bakery areas so consumers can dash in and out if they want to. That could cut down on browsing and impulse purchases. But executives said the changes were a response to consumer research.

In a question and answer session after Friday’s shareholder meeting, Eduardo Castro-Wright, Wal-Mart’s vice chairman, said the retailer would retain its new customers by doing what it had been doing the last few years: making its stores friendlier and cleaner, and speeding up the check-out process.

Wal-Mart’s annual shareholder gatherings are spectacles: part vaudeville show, part revival meeting. Smokey Robinson, Miley Cyrus, and this year’s American Idol winner, Kris Allen, performed. The basketball player Michael Jordan spoke. On Wednesday night, Wal-Mart invited store employees from all over the world to concerts by the rock group Foreigner and by Chris Daughtry, a former American Idol contestant.

Amid the hubbub, the retailer said it was beginning an initiative to help promote women at Wal-Mart. Mr. Duke said he was “still not satisfied with our progress to date.”

Wal-Mart also used the meeting to highlight its entry into Chile with D&S, a major grocery chain. Additionally, executives said the retailer would continue using its size to achieve supply-chain efficiencies, recruit top talent and continue down the path toward environmental sustainability, a legacy of its former chief executive, H. Lee Scott Jr.

“Yes, sustainability was personal for Lee,” Mr. Duke said during the question-and-answer session, “but it’s personal for me.”

Wal-Mart surpassed $400 billion in sales for the first time during its last fiscal year. But Mr. Duke’s overriding message on Friday was typical of Wal-Mart’s approach to its business.

“This is not a time to take comfort in our success,” he said. “This is Wal-Mart’s time to look to the future and seize the opportunity to truly lead around the world.”

For further information, visit: http://www.nytimes.com/2009/06/06/business/economy/06walmart.html

Disappointed Retailers of May

June 5, 2009

US retailers suffered a disappointing month of sales in May as shoppers continued to spend conservatively and hunt for bargains.

May was the first month that Wal-Mart, the world’s biggest retailer, opted not to report monthly comparable-store sales. But the company offered its own piece of good news on Thursday, announcing that it would create more than 22,000 new jobs this year in new or expanded US stores.

Wal-Mart, which employs 2.1m workers around the world, has said that will open 142 to 157 new stores in the US this year. It has not said it it will eliminate any store-level workers, but in February it announced that it would eliminate up to 800 jobs at its Arkansas headquarters. Last year the company created 33,000 jobs in the US.

”During this difficult economic time, we’re proud to be able to create quality jobs for thousands of Americans this year,” Eduardo Castro-Wright, head of the company’s US stores, said.

Last month Wal-Mart said it would abandon the retail tradition of reporting monthly same-store sales figures in favour of focusing on its longer term strategy.

Other companies may wish to follow suit, as many offered less hopeful May sales results on Thursday, with high-end stores continuing to be hit the hardest. Nordstrom, the chain of department stores, saw its same-store sales drop by 13.1 per cent in May, worse than analysts predicted. Meanwhile, comparable-store sales at Saks plunged by 26.6 per cent last month, compared with estimates of a 14.2 per cent decline, and sales at Dillard’s dropped by 12 per cent.

One positive surprise was Kohl’s, which saw its same-store sales fall by just 0.4 per cent in May against predictions of a 3.8 per cent slide.

“This is unquestionably a period where consumers are trying to stretch every dollar,” said Ken Perkins, president of Retail Metrics, which tracks comparable-store sales data. “Bargains are king.”

According to Retail Metrics, 66 per cent of retailers missed forecasts last month, while 33 per cent beat estimates. Retailers have been hit as consumers continue to retrench amid mounting jobs cuts. In April the US savings rate reached 5.7 per cent, a 14-year high, while the unemployment rate climbed to 8.9 per cent, the highest level in a quarter century.

Discounters continued to outperform other retailers in May. Comparable-store sales at Ross Stores rose by 4 per cent, and TJX Companies notched a 5 per cent increase. However, Costco, the largest US warehouse club, was not immune from tight spending as its same-store sales were off by 6 per cent, and Target’s sales disappointed again.

Shoppers who avoided “discretionary” items continued to spend on staples and necessities. Rite Aid, the drugstore chain, saw an uptick last month, with same-store sales rising by 0.6 per cent.

One demographic that appears to be less fazed by the recession is teenagers. Bucking the penny-pinching trend was Buckle, a Nebraska-based apparel company, which notched a same-store sales jump of 13.4 per cent in May. It was the company’s 22nd consecutive month of double-digit increases.

“They have their finger on the pulse of what rural teens want,” Mr Perkins said.

For further information, visit: http://www.ft.com/cms/s/0/0b0e0232-5118-11de-8922-00144feabdc0.html?nclick_check=1

Steeper Declines In May Than Analysts Expected

June 5, 2009

Macy’s Inc., Dillard’s Inc. and Saks Inc. reported steeper May sales declines than analysts estimated as rising unemployment prompted U.S. consumers to save instead of spend. 

Sales at U.S. stores open at least a year fell 9.1 percent at Macy’s, the second-biggest U.S. department-store chain, compared with the 8.8 percent average of analysts’ estimates compiled by Retail Metrics Inc. Sales at Dillard’s department stores dropped 12 percent, a bigger decline than the 7 percent analyst projection. Luxury retailer Saks’s sales plunged 26.6 percent; analysts had predicted 14.5 percent, on average.

Consumers are still limiting purchases and allocating leftover funds to necessities rather than discretionary items, according to Brian Sozzi, an analyst at research firm Wall Street Strategies in New York. Sales at higher-end department stores slumped as shoppers cut purchases of handbags, shoes and clothes, forcing the chains to offer more and deeper discounts.

“Diminished job prospects, wealth evaporation and weak wage growth continues to be at the forefront of consumer psyche, meaning fewer dollars sloshing around the world of retail and lack of visibility into the back half of 2009,” Sozzi said in a June 1 note.

Macy’s fell 44 cents, or 3.3 percent, to $12.88 at 4:05 p.m. in New York Stock Exchange composite trading. Dillard’s declined 71 cents, or 6.9 percent, to $9.65. Saks fell 1 cent to $4.04. The Standard & Poor’s 500 Retailing Index declined 1.2 percent today, and has climbed 20 percent this year.

Saks, based in New York, has cut 1,100 jobs in recent months and said it would reduce merchandise orders 20 percent this year. Cincinnati-based Macy’s has slashed prices to clear inventories.

Retailers that managed to attract some consumer dollars included Aeropostale Inc., Gap Inc.’s Old Navy division and TJX Cos. Their May sales beat analysts’ estimates, helped by lower prices and a focus on value. Kohl’s Corp. and J.C. Penney Co. also exceeded predictions as the budget-conscious opted to shop at lower-priced department stores.

“Kohl’s and Penney’s may be pulling share from both the traditional department stores and from discounters,” Jeffrey Klinefelter, an analyst at Piper Jaffray Cos. in Minneapolis, said today in a telephone interview.

Retail Metrics said today that U.S. comparable-store sales in May dropped 4.4 percent, worse than its projected 3.6 percent decline. Yesterday, the Swampscott, Massachusetts-based researcher said that while housing, construction spending and new factory orders are coming in “less worse” than expected, retailers and consumers remain under pressure as job cuts continue.

May accounts for the smallest portion of retailers’ second-quarter sales, according to Betty Chen, an analyst at Wedbush Morgan Securities in San Francisco.

Wal-Mart Stores Inc., the world’s largest retailer, said on May 14 that sales at U.S. stores and its Sam’s Club membership warehouse division may rise as much as 3 percent in the 13 weeks through July 31. The chain stopped reporting monthly same-store sales as of May 1, citing the difficulty of predicting shoppers’ behavior.

U.S. consumer spending fell for a second straight month in April as concern over rising unemployment and record wealth destruction prompted households to boost savings rates to the highest level in 14 years, according to the Commerce Department. The 0.1 percent drop followed a 0.3 percent decrease in March, Commerce Department figures showed. The savings rate rose to 5.7 percent, spurred by an unexpected jump in incomes linked to the fiscal stimulus.

“Until people feel confident in their employment and feel confident in their ability to maintain their housing situation, they’re going to continue to rebuild their rainy-day fund to the extent that they possibly can, and that translates to higher savings rates,” said Bryan Eshelman, managing director in the retail practice at Alix Partners LP, a consulting firm.

Retailers continue to cut prices. Aeropostale was offering 20 percent off women’s dresses. American Eagle Outfitters Inc. was giving 50 percent off the purchase of a second graphic t- shirt.

Companies in the U.S. cut an estimated 532,000 workers from payrolls in May, according to yesterday’s ADP Employer Services report. Economists surveyed by Bloomberg predict the U.S. unemployment rate for May will rise to 9.2 percent from 8.9 percent in April.

Still, confidence among U.S. consumers jumped in May by the most in six years. The Conference Board’s index surged more than forecast to 54.9, the New York-based research group said May 26.

“There is a bit of unfounded optimism out there,” Eshelman said yesterday in a telephone interview. “Once this economy turns the corner, I think it will turn the corner rather quickly, but the conditions have just not aligned to get to that point.”

The International Council of Shopping Centers said that May same-store sales dropped 4.6 percent, more than its forecast of a 2 percent decline. The New York-based trade group’s figure is based on results at 32 chains.

The comparison to a year ago was difficult because federal tax rebate checks spurred more spending last May, Michael Niemira, chief economist at the ICSC, said today in a telephone interview. June sales may drop as much as 4 percent, he said.

For further information, visit: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0rrp1uLy8B4

High-End Shoppers Turn To Walmart During These Times

June 4, 2009

A 30-something mom heads toward her Infiniti luxury SUV with bedding-in-a-bag she just purchased for her teenage daughter.

The Plano resident was leaving the Wal-Mart on Central Expressway and Spring Creek Parkway, where she said she’s stepped up her shopping – especially for groceries – in the last six months.

“I still buy a lot at Kroger, things like Boar’s Head lunchmeat, but for staples I’m shopping more at Wal-Mart,” she said. The comforter set was an impulse buy, one from Wal-Mart’s new home brands by Better Homes and Gardens. She was happy to talk about her new shopping habits but declined to give her name.

Meet the new Wal-Mart secret shopper: Someone who has become a regular but may not be ready to tell the world.

Wal-Mart knows these new customers are in their stores, and it doesn’t want to lose them when the economy improves. Mostly overnight but while stores remain open, the company is remodeling 650 to 700 U.S. Supercenters, including 15 in Dallas-Fort Worth, this year to make them “cleaner, faster and friendlier.”

For years, the world’s largest retailer has been trying to be cool like Target, to gain the attention of higher-income shoppers and to persuade its grocery clientele to cross over into its home, apparel and consumer electronics aisles.

While the global recession and a stronger U.S. dollar have hit Wal-Mart’s international operations hard, the retailer says it is gaining market share in Dallas and across the U.S.

In June, Wal-Mart’s Dallas-Fort Worth grocery market share hit 40 percent for the first time as Supercenters gained 0.86 percentage points.

This remains Wal-Mart’s biggest market, with 70 Supercenters, 21 Neighborhood Markets, 21 Sam’s Clubs and one original Wal-Mart discount store. Replicating that footprint in other major metro areas leaves Wal-Mart with huge growth potential in the U.S., especially with new shoppers acquiring a taste for Wal-Mart.

Wal-Mart vice chairman Eduardo Castro-Wright recently told analysts that new households represented 17 percent of store traffic growth and 27 percent of U.S. sales growth in February. Those new customers are spending 40 percent more than the average Wal-Mart shopper, and 55 percent of them had incomes greater than $50,000 a year, he said.

“Wal-Mart has proven itself a winner in this tough economy. Shoppers have really resonated with the retailer’s ‘Save money, live better’ brand promise,” said Jennifer Halterman, senior consultant at Retail Forward. “Wal-Mart also is positioning itself to retain shoppers post-economic turnaround with its newly remodeled stores, enhanced portfolio of brands and overall improved shopping experience.”

Wal-Mart’s U.S. sales have increased every month during the recession. In April, traffic increased for the seventh consecutive month, said Todd Slater, analyst at Lazard Capital Markets, in a May research note.

On Wednesday, major chain stores report May results, but Wal-Mart won’t be propping up the group, as it has been. Last month, Wal-Mart said it will stop reporting sales monthly, joining a growing list of retailers reporting sales only with quarterly earnings.

Wal-Mart has slowed its store growth over the last two years and focused on replacing discount stores with larger Supercenters. Average sales at its Supercenters had been declining since 2004, but early estimates indicate improved performance in 2008, Retail Forward’s Halterman said.

Whether Wal-Mart can sustain its recession momentum is a big question mark, hence its aggressive remodeling program, called “Project Impact.” So far, remodeled stores get a sales lift of 0.75 to 1.25 percentage points, Castro-Wright said.

In North Texas, three of the 15 stores scheduled for remodeling in 2009 are done. After that, the pace will continue to be about 15 remodelings per year in the area, said John Murphy, Wal-Mart regional general manager and vice president.

High-volume stores and high-traffic stores, which get the most wear and tear, were redone first, he said.

Consumers can tell their store has the latest interior when the exterior loses the flag blue in favor of a tan facade with the new, no-hyphen Walmart sign punctuated by a yellow starburst.

Stores are being reorganized, grouping together the most popular merchandise. Lower shelves allow clearer sightlines. Brighter wall paint and lighting and easier-to-read signs point to departments with wider aisles.

The difference is jarring for regular customers, who have also noticed what Wal-Mart has told analysts: There’s less inventory in these remodeled stores.

Murphy said he’s heard the complaints, and he’s making adjustments. He said it’s a combination of space issues and priorities. For example, the remodeled stores have more consumer electronics and less hardware.

Shoppers Tuesday evening at the newly remodeled Supercenter at 6001 Central Expressway said the store was cleaner, but they weren’t quite ready to call it friendlier.

Plano resident Terry Millspaw said he “grew up on Wal-Mart” in eastern Oklahoma. “That’s all we had. When I moved here after college in 2003, all my friends kept talking about going to Target.”

He’s noticed that prices have gone up in the last six or seven months, and he’s stopped buying some items, such as individual pizzas that recently spiked from $2.25 to $3.50.

“It looks nice, but they don’t have as much stuff,” said Gail Thompson of Plano, noting that the store is missing the frozen chicken that her two school-age daughters prefer.

Jan Ammons said the store is cleaner and she isn’t used to the new layout, but she’s noticed fewer lines of vitamins, biscuits and ice cream. As for Wal-Mart’s plan for stores to be friendlier, she and other shoppers said it’s not quite there yet.

“The checkout person didn’t say a word to me,” Ammons said.

For further information, visit: http://www.dallasnews.com/sharedcontent/dws/bus/industries/retail/stories/060409dnbuswalmart.3cad825.html

No High Hopes For A Better Christmas This Year

June 4, 2009

May’s disappointing same-store-sales are exacerbating jitters about the all-important Christmas season, as consumers continue to pare purchases at a time when many retailers are planning or booking their orders for the holidays.

With the year nearly half gone and each passing month showing sales declines, Madison Riley, senior partner at retail consulting firm Kurt Salmon Associates, said he didn’t “know if we will see a better Christmas from 2008.”

Without data from Wal-Mart Stores Inc. (WMT), which as of May stopped issuing monthly same-store sales figures, comparable store sales for the other 30 retailers that Thompson Reuters tracks fell 4.8%, compared with expectations for a 4.1% decline.

The poor numbers may force retailers to reduce already spartan inventory plans further to avoid the 2.8% drop in holiday sales they rang up last year and the margin crushing markdowns they had to take to move excess inventory. The Christmas season can account for a third or more of retailers’ annual sales.

Retailers are aware of the risks and are trying to act accordingly, but it is tough given no consistent signs of an economic turnaround.

“We expect our average inventory position for the fourth quarter to be below last year’s fourth-quarter levels, and that our consumer messaging will continue to highlight J.C. Penney’s (JCP) stepped up style and value proposition,” said Darcie Brossart, spokeswomen for the giant department store chain.

Macy’s Inc. (M), at least right now, is sticking to a projection it gave earlier this year for same-store sales to drop 6% to 8% in fiscal 2009, with fall expected to be stronger than spring. “Merchandise and inventories are planned consistent with our guidance,” said spokesman Jim Sluzewski.

As for getting the word out, highly promotional Macy’s is still considering just how dramatic its approach will be. “Holiday marketing plans will be announced shortly before the season begins,” Sluzewski said.

Lead times vary for retailers, with the upper-end generally making commitments sooner, while lower-end retailers have much more latitude.

“We buy very close to need and opportunistically react to market trends in doing so,” said Sherry Lang, senior vice president of investor relations at TJX Cos. (TJX), parent of off-price stores Marshalls and T.J. Maxx.

Wal-Mart representatives declined to discuss the chain’s holiday plans.

In general, though, shoppers should expect less merchandise this year after many retailers went into the 2008 holiday season way overbooked.

The three big months for bulking up on Christmas time inventory are August through October, said J. Craig Shearman, vice president for government affairs at the National Retail Federation.

The majority of merchandise – including apparel, appliances, consumer electronics and home furnishings – comes from overseas, and for each of the three big months for receiving holiday merchandise, cargo traffic is expected to drop in the 16.5% area compared with the year before.

“This gives you insight into (the) inventory retailers are thinking about – less on expectations of less buying,” Shearman said.

Fewer goods in stores does not necessarily mean less discounting, said Craig Rowley, global practice leader for retail at the Hay Group. “We aren’t really seeing sale trends improve enough to support a very robust Christmas.”

Retailers may end up beginning big promotions earlier in the holiday season this year “to prevent massive markdowns at the end,” Rowley said. “Vendors may have a terrible Christmas. If their merchandise isn’t selling in November, we could see cancelled orders.”

What retailers are doing is “staying on top of trend,” Rowley said.

Right now the trend is accessorizing what’s already in the home or the closet, not buying whole outfits, furniture sets or entertainment systems.

“People are looking to supplement and will continue to for the foreseeable future,” said Riley of Kurt Salmon. “They are willing to buy, but still want to pay less for quality and items, like exclusives, that are different from what they already have.”

The retailers that hit it right could actually end up short of inventory, Riley said, but “this Christmas, conservative is the right stance to take.”

For further information, visit: http://online.wsj.com/article/BT-CO-20090604-715048.html