Wal-Mart Evaluating Home Tweaks

SuperCenter Expansion Trimmed

Brent Felgner, June 4, 2007

Wal-Mart is testing a new home store set utilizing lower center sidecounters (gondolas), intended to further enhance its developing "room solutions" effort and the customer shopping experience.

The nine-store test has been running for about two months in markets that include Dallas and some Ohio locations, according to Beth Schommer, senior vp, gmm, home division.

"Rather than having all tall sidecounters, in those stores we've made some nice backdrops of the tall counters but then the counters in the middle of the 'room' are all low — so she can stand in the middle of the category and see the entire assortment, whether it's bedding or bath or appliances," she told reporters touring a Wal-Mart SuperCenter here in advance of Friday's annual meeting. "It's making it much easier for her to shop."

Schommer did not provide additional details about the effort, its intended duration, or the thinking about whether to expand the test or a possible rollout.

She acknowledged earlier criticism that Wal-Mart's home categories were too spread out over the stores and lacked a cohesive easy-to-shop setting. Over the last year or so, the company has worked to consolidate those segments in a single area of the store, in an attempt to create more logical adjacencies. "We needed to pull together the categories that she would think of together, that would make it easier for her to shop," Schommer said. "In our room solutions in bedding and bath, we've tried to lay it out so our sidecounters tell a brand and price-value message, starting with our good, or opening price point, and working toward our best."

"In home, it's about the value message," She said, as well as accessorizing and colorizing for the customer.

As for the upmarket segment of that value message, Wal-Mart is still assessing which of its store are most appropriate and productive for its premium offerings, the Springmaid Luxury and Hotel programs, both of which appear to have added top-of-the-bed skus this year.

"We'll do those in markets where we feel we have a wonderful customer base for them, where we need to have a premium type, and then, in other stores, we might place a little more emphasis perhaps in the 'better' or the 'good' categories."

Schommer also highlighted the new True Colors bath towel program — a bold and bright line imported from Pakistan that is bleach-resistant. In some area stores here, the bath towel line includes 15 colorways, accessories, and a smaller number of coordinating sheets.

Wal-Mart made a key comment on its expansion rate at the annual shareholders meeting in Rogers, Ark. last Friday.

Wal-Mart said it will curtail SuperCenter growth in the current year by up to 29%, following with additional cuts to previously announced goals for subsequent years.

Tom Schoewe, cfo, said the mammoth retailer would open between 190 and 200 SuperCenters this year, compared to the 265 to 270 originally planned.

The announcement was viewed largely as a concession to Wall Street, which has grown increasingly impatient with the company's slow domestic sales growth coupled with the performance to date of its new segmentation effort.

Schoewe said in years ahead Wal-Mart will open about 170 SuperCenters annually. Because of the savings in capital expense, the company's board of directors yesterday approved an increase in its share repurchase program from $10 billion to $15 billion.

"Unfortunately our capital spending is growing at a faster rate than sales," Schoewe explained. "It's grown at about 19.5% each year. And that's caused some concern on Wall Street."

Schoewe stressed the fact of continued expansion. "After this year, beginning next year we're adding 170 SuperCenters a year. That's 20 million incremental square feet of SuperCenters each and every year. I think the message you're hearing here today is that we've found a real nice balance between appropriate returns and the growth of your great company."

Later, ceo Lee Scott reviewed the retailer's merchandising efforts, particularly the progress in consumer electronics and the attempt to build up home. But while noting new, often better quality merchandise initiatives, he also reinforced the core position on price.

"Our customers know today that Wal-Mart is the price leader and Wal-Mart will stay the price leader. Period," Scott said. "This is not a sprint, it's a marathon."

During the meeting, retailing guru Alan Questrom, credited for the turnaround at JCPenney, was elected to the Wal-Mart board.

And chairman Rob Walton took a moment to offer the board and the Walton family's vote of confidence in Scott's leadership.

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