Wal-Mart: Vendors will foot the bill for inventory
Home & Textiles Today Staff -- Home Textiles Today, November 14, 2001
Bentonville, AR — After closing the books on another record-breaking quarter and poised to break the $200 billion sales mark this fiscal year, Wal-Mart continues to look for ways to pare its costs and boost profitability.
And inventory costs are now on its radar.
In recorded remarks to discuss third quarter results yesterday, executive vp and cfo Tom Schoewe said the company is looking toward the day when vendors foot the bill for inventory.
"Payables for the corporation as a percentage of inventory rose to approximately 65 percent, and our goal remains to have 100 percent of our inventory financed by our suppliers," Schoewe said. "This does not mean that we're going to be waiting for months to pay our suppliers. Rather, it means increasing our inventory turns to a point where we have sold the merchandise before we have to pay for it."
While he did not disclose the current average for inventory turn, he did note that in-stocks are now above 99 percent in the Wal-Mart division, which includes supercenters, discount stores, the Neighborhood Market grocery/pharmacy concept and walmart.com.
Wal-Mart also remains determined to drive down price, even though the strategy is pulling down margins in the short term.
"The domestic promotional environment continues to result in increased competitive markdowns. Reinforcing our value statement, it is the right thing to do long term for our customers, and clearly is driving market share gains," he said.
By the end of the third quarter, the company had rolled back pricing on $7 billion in sales, and plans to end the year with nearly $10 billion in rollbacks.
President and ceo Lee Scott noted that the aggressive price focus has resulted in a sales rebound for the company.
"Our customers have returned to the stores. They continue to spend cautiously and show a preference for value," Scott said. "Although this has resulted in slower growth in the size of the ticket, the weaker economy has attracted additional customers making more frequent visits, and sales are running at pre-Sept. 11 levels."
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