Wal-Mart sharpens low-price focus

By @ibtimes on

The snow blowers are coming back to Wal-Mart stores in Minnesota.

Wal-Mart Stores Inc is adding about 8,500 items to its U.S. discount stores, including some snow blowers, as it continues to try to recover from a disastrous decision to cut down on product offerings that drove shoppers away.

Powerful snow blowers seem like a key item to keep in stock in Minneapolis, where residents need to uncover their driveways and sidewalks from about 50 inches of snow each winter.

But a couple of years ago, Wal-Mart decided to take some snow blowers, ice-fishing gear and other goods out of its Minneapolis-area stores.

Eliminating that merchandise was part of an effort the world's largest retailer kicked off in late 2008 to get rid of items nationwide that were not top sellers and promote deep discounts on other more popular goods.

The project largely failed, as shoppers who could not find basic goods at Wal-Mart turned to dollar stores and other competitors for everything from fishing lures to fabric.

It didn't resonate, said Duncan Mac Naughton, chief merchandising officer for Wal-Mart's U.S. discount stores.

Now, Wal-Mart is going back to founder Sam Walton's strategy, touting low prices all the time on a wider assortment of goods.

Losing a customer is a terrible thing to do and getting them back is the hardest thing in the world, said Sanford Bernstein analyst Colin McGranahan. It's an important step in their remerchandising strategy, but how significant an impact this has on their traffic I think remains a question mark.

The commitment is the first major effort unveiled by Mac Naughton since he started his new role in January.

If the customer wants it, it's going to go in the store, he said. If we don't have the right snow blower selection, we're going to have the right one.

Wal-Mart's U.S. discount chain must also show investors that it can reignite growth. Its sales at stores open at least a year have fallen for seven consecutive quarters -- a sharp contrast to the growth seen during most of the recession, when shoppers sought out its stores for low-priced goods.

The issues that we've seen over the past couple of years are ultimately correctable, said Morningstar analyst R.J. Hottovy.

Wal-Mart shares gained 28 cents to close at $52.82 on the New York Stock Exchange on Monday.

ITEMS REAPPEARING, EMPHASIZING PRICE GUARANTEE

The company is putting about 11 percent more items on the shelves in an average store, raising the height of some displays and making other tweaks to fit in the goods.

Small tags say It's back! near items that reappeared in stores, while other signs read Low Prices. Every day. On everything. and Coupons? We gladly accept them.

Mac Naughton said so-called rollbacks may still be used from time to time for promotional prices.

The renewed focus on price and assortment comes as shoppers evaluate spending habits in the face of higher costs.

Sixty percent of Americans have changed their behavior in response to soaring gasoline prices, while 48 percent made changes due to higher food costs, according to a recent survey from the American Institute of Certified Public Accountants.

With higher gas prices our customers can come with confidence and know they're getting the best price in the marketplace with the broadest assortment, Mac Naughton said.

The moves, being promoted with an advertising campaign that kicks off on Monday, may help Wal-Mart restore confidence among shoppers, but should not have much of an impact on its bottom line, analysts said.

Wal-Mart's new advertising line, Low Prices. Every Day. On Everything. adds to the Save money. Live better. line it has used for years.

Smaller rival Target Corp , whose same-store sales have increased in most of the past seven quarters, has used the line Expect More. Pay Less. since 1994.

Wal-Mart is training its store managers to check competitors' advertisements and prices daily so they can match any lower prices nearby stores are offering. The campaign does not apply to online prices.

Also on Monday, Wal-Mart priced $5 billion in bonds in four series. All four series priced at lower yields than early estimates, suggesting there was strong demand for the double-A rated retailer.

Wal-Mart offered $1 billion of three-year bonds yielding 40 basis points above comparable U.S. Treasuries, $1 billion of five-year bonds at 57 basis points over Treasuries, $1 billion of 10-year bonds at 75 basis points over Treasuries, and $2 billion of 30-year bonds at 110 basis points over Treasuries.

(Reporting by Jessica Wohl; Additional reporting by Christopher Reich, senior analyst at Thomson Reuters IFR; Editing by Matthew Lewis, Maureen Bavdek and Richard Chang)

Join the Discussion